ICGN calls on G20 to focus on corporate governance

Corporate governance failures allowed the financial crisis to develop, and hence corporate governance reform must be part of the solution, is the message to the G20 leaders gathering  in London, says the International Corporate Governance Network (ICGN)[i] says today in its second statement on the financial crisis. In a letter to Gordon Brown and accompanying statement ICGN chairman Peter Montagnon argues “the right approach now is not to ignore the contribution of governance but to strengthen it….good governance, overseen by responsible shareholders, addresses management of risk in a way that underpins prudential supervision and regulation. It is consistent with open and transparent markets and reduces the justification for recourse to prescription regulation of a type that, all too often, has an underlying protectionist motive.” The lack of emphasis and proposals on corporate governance reform is a matter of regret.

At the heart of ICGN’s proposals lies a call for the responsibilities of institutional shareholders to be strengthened, to ensure that fund managers carry out due diligence on corporate governance before they invest, and to raise standards of disclosure. ICGN also calls for conflicts of interest to be addressed, so that institutional investors focus on their duties to beneficiaries. To support this, investment managers should be rewarded for sustained performance, and not judged on short term benchmarks. ICGN also wants to see independent evaluation of bank boards, and a code of conduct for investors. The statement welcomes the G20 agenda focusing upon improvements in risk management and improving disclosure. “Law and regulation are necessary, but not sufficient to restore market stability and trust. Engaged and responsible shareholders are vital to a functioning market, so the focus must also be on the fiduciary duties of institutional investors, and ensure transparency and accountability right through the investment chain” commented Anne Simpson, ICGN’s Executive Director.

The ICGN’s second statement on the financial crisis, and accompanying letter to the Prime Minister are attached

ENDS

For further information contact:

Anne Simpson, ICGN Executive Director        Kerrie Waring, ICGN Chief Operating Officer

Mobile : + 44 (0) 784 104 0317                       Mobile : + 44 (0) 7815 150 525

Office : + 44  (0) 207 612 7098                      Office : + 44  (0) 207 612 7098

[i] The ICGN is a global membership organisation of more than 450 leaders in corporate governance, including institutional investors responsible for assets of $9.5 trillion. For more details go to:  www.icgn.org