Responsible Investor

Standard Life Investments chief and ISC chair Skeoch counters ‘absent landlord’ investor accusations

RI interview: UK funds CEO heads out to broaden international engagement network of UK institutions.

Keith Skeoch, chief executive of Standard Life Investments, the UK fund manager, and chairman of the UK Institutional Shareholders Committee (ISC) has countered claims – made notably by Paul Myners, UK Financial Services Secretary – that institutional investors contributed to the financial crisis by acting as ‘absent landlords’ rather than engaged shareholders. Speaking to Responsible Investor, Skeoch, said: “I think it is inappropriate to suggest that the Association of British Insurers, the Association of Investment Companies, the Investment Management Association and the National Association of Pension Funds, are absent landlords. They are industry bodies, and working for the views of their members.” The ISC, which is run jointly by the UK’s four big institutional investor bodies was created in the wake of the 2001 Myners Review on institutional investment, although Myners himself recently dubbed it a “rather low profile entity” and has accused institutional investors of adopting a ‘leaseholder’ mentality to the companies they invest in.
Skeoch added: “Given the heat of the last 6-9 months, it is inevitable that people have been casting around for stones to be thrown in various directions.” He said investors could, however, have played a more active role in protecting the financial system from systemic risk, but placed most of the blame for the crisis on regulation: “Investors believe they should be able to rely on some

regulatory premium with regulators assuring that the system in place ensures corporate solvency. We as investors are not privy to regulatory information, but we should be able to rely on the data, regulatory judgement and framework. It’s fair to say that there is plenty of evidence that in the last 18-20 months some of that regulatory framework has failed, notably in the case of the banks. Could investors also have been more forceful in cases such as Royal Bank of Scotland (RBS) and others? Yes, there are things that institutional shareholders could have done to minimise the chances of systemic failure. But these were things that were pretty difficult to do given the various cracks and fault-lines that were embedded in the tripartite system (the UK’s three-pronged financial regulation: Financial Services Authority, Treasury, Bank of England).” Skeoch is spearheading the building of an international network of investors and sovereign wealth funds with an interest in long-term value, in a bid to put some major weight behind their lobbying of companies on important issues and their subsequent voting at annual general meetings. The initiative was trailed in this month’s ISC report on governance, which will feed into the forthcoming UK review of corporate governance in banks by Sir David Walker, former chairman of Morgan Stanley, and the UK Financial Reporting Council’s review of the Combined Code on corporate governance.

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