Speaking at the National Association of Pension Funds investment conference in Edinburgh last week, Sants called for shareholders to question the effectiveness of company boards and for institutional investors to voice concerns through their voting rights.
He said there was an over-reliance on credit rating agencies, external advice and “a willingness to accept the views presented”.
He said: “Many of you are also too reliant and unchallenging of normal channels of information, for example, annual reports and company announcements. In parallel to regulators taking a more macro-prudential view, long-term investors must assess all risks to a business and be challenging of the inf- ormation offered by a company and perhaps, more importantly, interrogate that which is made freely available.”
When asked whether there should be a more formal obligation on the part of investors to question procedures, Sants said: “I think there is a collective obligation to try to intervene earlier. Whether that should lead to some fiduciary change or statutory change, I think it is an interesting question. I would like to see that behaviour coming to the fore. If the feeling is that it needs some changes in the framework to facilitate it, that is something that should seriously be thought about.”
But a disgruntled conference delegate hit back, saying: “I find it quite staggering that the people responsible for banking regulation can stand at a podium and say that shareholders of a company should be the ones that have greater responsibility to challenge management.
“Surely it is up to the regulator to ensure that the disclosures available to shareholders are sufficient to assess the risks? Similarly, you say we were over-reliant on the credit rating agencies – shouldn’t the regulator be making sure that the information coming out of the rating agencies is reliable? I find it difficult to square your remarks with the recent past.”