Tough times for shareholders - Matthew Taylor at UK Social Investment Fund event

5 November 2008

Excerpt from Matthew Taylor's speech, 'Tough times for shareholders', at the UK Shareholders Association.

Download full speech transcript (PDF, 42KB)

"This has not been a good year for shareholders.

When I say this I am not just talking about the financial losses – bad as they have been.

Nor am I talking about the process whereby rights issues were pressed onto shareholders, only to be swiftly followed by nationalisation.

I am talking about the failure of shareholders to control their representatives.

The economist John Kay once compared the Anglo-American principal-agent structure to a Soviet state – in which the hostile takeover is the military coup and the AGM the ritualised election. You can see what he means. Take the flow of information, which is managed by incumbents and, except in times of acute crisis, is uniformly favourable. Or the nominal process of accountability through which directors are elected. There are no genuine alternative candidates. Incumbents are invariably re-elected with overwhelming majorities.

The gap between shareholders and managers has always been there. As the markets have boomed, it has got wider. Excessive remuneration was the most flagrant sign of this. It also made itself clear in unreasonable costs and charges, and in the volume of secondary trading.

But it is only in the last few months that we have seen how great that gap really was."