The answer to "crony capitalism" lies in changing the duties of shareholders in law, according to a group of activist investors and advisers in the UK. In an open letter, published in The Times and made publicly available online, governance officials at Aviva Investors, Hermes Fund Managers, Jupiter Asset Management and others said that legal duties on institutional investors to protect the interests of savers have become distorted and misunderstood. The result is that often investors do exactly the opposite of what the law intended. "Company directors have duties designed to encourage the pursuit of 'enlightened shareholder value'," they write. "But this is undermined by a widespread perception that fiduciary shareholders are legally obliged to be unenlightened. Their duty to act in the best interests of savers is widely seen as a duty to focus solely on the maximisation of short-term returns, ignoring anything that cannot immediately be monetised. The folly of such an approach has been amply demonstrated by the banking crisis."
Timed just after the interim Kay Review and just ahead of the annual government budget statement, the letter seeks to exploit a window of opportunity to influence policy
Source document: The investors' letter is a two-page pdf file.
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