It is my opinion that the activities of asset owners are due for a fundamental change which will have a transformational impact on the capital markets.
As we know, ownership comes with certain rights depending on the financial instrument owned. Ownership also comes with responsibilities. These responsibilities should reflect each owner’s beliefs about the risks affecting their investments and their reputations, and should not end at the minimum standard of responsibility as set out by law. Furthermore, it is not enough that owners articulate their beliefs, they must have the will and the fortitude to act on them.
Ownership without action makes owners complicit in problems when they arise, as was the case with the recent financial crisis in 2008. While the boards of directors and managements of financial institutions failed to oversee the activities of their organizations, owners of financial institution instruments also failed to act as responsible owners. Coming out of the financial crisis, they should have asked themselves what they were doing in the lead-up to the financial crisis, and applied those lessons to ensure that they are doing things differently now. It is not enough to say that the capital markets in the US have recovered since 2008 and that there are stricter laws in place now than there were then, so there is nothing left for owners to do differently. Owners have a responsibility to take action.
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