Wednesday, April 20, 2011
Trustee failure and the financial crisis
There is widespread agreement in the US, the UK
and the European Union that the failure of shareholders – a majority of whom are trustees – to adequately monitor and to protest the management of portfolio companies (especially in the financial sphere) was a major cause of losses suffered in the Financial Crisis. Pension funds suffered badly in the financial crisis. US pension funds lost around 200 billion Dollars. Other big institutional investors also have been forced to admit gigantic losses: the famous Harvard Endowment Funds lost about 8 billion Dollars or 22% of its assets.
 The U.K. Treasury’s ‘Walker Review’ notesthat “…there appears to have been a widespread acquiescence by institutional investors
and the market in the gearing up of banks’ balance sheets as a means of boosting returns on equity... The atmosphere of at least acquiescence in high leverage on the part of shareholders will have exacerbated critical problems encountered in some instances” (UK
Treasury, 2009, pp. 62-63).
April 20, 2011 in trustees
, fiduciary duty
, financial crisis
, responsible ownership
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