Lord Myners has supported calls for reform of the Takeover Code in the UK, but made it clear that “The owners of firms that have lost so much from ill-advised takeovers must generate the momentum for reform”.
Myners was speaking at the public policy think-tank, The Smith Institute, where he laid out his most comprehensive analysis of the financial markets failure to date, together with the UK government’s prescription for reform.
Citing Royal Bank of Scotland Group Plc’s purchase of ABN Amro Holding NV as an example of the need for a review of the takeover regime, the former fund manager asserted that takeovers “frequently fail to deliver on promises and allow no voice for other stakeholders, including employees and key customers and suppliers”. As a solution, he called for the Takeover Panel to undertake a far reaching review of global models of take-over best practice and suggested that there should be a requirement for shareholders, not just the board of directors in bidding companies, to have access to independent advice before making any final decisions on a bid.
While there was nothing particularly new in his analysis, he did throw out a number of questions questions about the the behaviour of institutional investors, notably:
- Why do they spend so much money on active stock selection and so little on governance;
- Why do trustees agree to lend shares that they own to hedge funds and others who might use these shares to drive down the value of their investment?
- Why is trusteeship the last bastion of amateurism in investment?
Without any clear answer, Myners directed much of the blame at the herding mentality and irrationality of “the market” which had overtaken common sense business judgements.
Defending the government’s actions over the past 18 months, he said that “saving the world’s financial system was unquestionably the right thing to do. But in the process of saving it, we protected those very market fundamentalists who caused the crisis from the consequences of their actions.”
Myners said regulatory change by itself could only do so much to improve the system and called for closer involvement from those impacted by the system: “It is time for real discipline from investors, from owners, and from anyone who has something to lose in the marketplace … We should do everything we can to make sure failures of market discipline get the scrutiny and condemnation they deserve.”