Dinner Program - CFA Institute Winter... · •Clarifying roles through organisational role...
Transcript of Dinner Program - CFA Institute Winter... · •Clarifying roles through organisational role...
Shaping a trustworthy, forward-thinking financial industry
18:30 Dinner – Opening & Introductions
Hilko Brouwer – President of CFA Society Netherlands
18:45 Behavioral Ethics: why people don’t always behave ethically
Raghavendra Rau – Sir Evelyn de Rothschild Professor of Finance, University of Cambridge, Judge Business School
Governance: at a crossroads
Jaap Winter - President Executive Board, Vrije Universiteit Amsterdam
Closing remarks
Tom Cummings
22:00 Close
Thank you to our sponsors:
Dinner Program
GOVERNANCE AT THE CROSS-ROADS
THREE THEMES
• Persistent governance themes for public companies
• Shareholders and (lack of) engagement
• Board performance
• Regaining trust
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SHAREHOLDERS DID NOT DISCIPLINE MANAGEMENT
• Walker Review UK, European Commission: Lack of
disciplining by shareholders contributed to excessive risk
taking
• More engagement needed
• Really?
• Shareholders push risk taking, believing they can hedge by
diversifying
• Company cannot hedge in same way
• Recent proposal Shareholder Rights Directive to stimulate
engagement,voting, disclosure of asset management
arrangements 4
WHY ENGAGEMENT BY INSTITUTIONAL INVESTORS IS A MYTH
• Excessive diversification (way beyond level relevant for
reducing risk)
• Prudent person: no concentration
• Follow the market
• Solvency rules, debt over equity
• Excessive focus on liquidity
• Mark to market of liabilities
• Cognitive bias
• Intermediation separates owners from assets
• Fiduciary duty: don’t underperform
• Better conventionally wrong than unconventionally right
• No interest in engagement, unless cheap and effortless (OECD)
• Forcing engagement useless (proxy voting) 5
UNDERSTANDING BOARD PERFORMANCE
• Dominant paradigm agency theory
• Shareholders principals, managers agents
• Non-executives’ key role is to monitor agents
• Independence
• Expertise
• Diversity
• Nr of board seats
• Incomplete grasp of board performance
• Understanding uncertainty
• Navigate
• Direct and adapt
• Key issue on boards in US (Lorsch) and EU (Van de
Loo/Winter): roles of non-executives not clear
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BOARD PERFORMANCE: INSIDE THE BLACK BOX
• Clarifying roles through organisational role analysis, incl
revealing (unconscious) perceptions
• Focus on interaction between executives and non-executives
• Board Reality Questionnaire
• Group Dynamics
• Biases
• Group think
• Personal traits
• Looking good
• Generating sense of responsibility, in action
• Way beyond grasp of regulation 7
REGAINING TRUST
• Knee-jerk response post crisis: regulate more
• More and more rules make us less and less responsible
• Barry Schwarz: more and more rules chip away our moral
skills (and more and more incentives destroy our moral will)
• Absolute horror: EBA and ESMA to develop technical
standards for honesty and integrity (CRD IV)
• What then?
• Need to develop (learn again) conversations that reinforce
personal access to morality, judgement and responsibility
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TWO CONCEPTS GENERATING REAL CONVERSATIONS AND JUDGEMENTS
• Virtue ethics
• Aristotle
• MacIntyre (After Virtue)
• Virtues: acquired human qualities needed to achieve
internal goods of a human practice and protect against
domination of external goods
• Requires reflection and judgement, not routinely following
rules
• Integrity honour your word, also when you will not keep it
• Not normative, but about effectiveness, how to make our
word work
• Requires reflection: what is my word? What does it require
now? Conversation without attack and defence
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IT’S ALL ABOUT PRACTICE
• Aristotle
• Practicing virtues
• Thomas Aquinas
• Practicing prayer
• Peter Sloterdijk
• Anthropotechnik
Denn da ist keine Stelle, die dich nicht
sieht. Du musst dein Leben Ändern (Rilke)
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