Friday, September 16, 2011

Responsible Ownership - CECL Conference

Robert AG Monks recorded speech for the Centre for European Company Law (CECL) Conference on Effective Ownership. The Netherlands, September 16, 2011.

September 16, 2011 in responsible ownership , fiduciary duty , ownership , shareholder activism , corporate governance  |  2 comments  | 
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Posted by Steef M. Bartman on Sep 23, 2011 at 6:51 PM
The 4th biennial conference organized by the Centre for European Company Law (\"CECL\"), a cooperation between the Dutch law faculties of the universities of Leiden, Utrecht and Maastricht, was held in Leiden on 16 September last. The conference was devoted to the topical theme of Responsible – sometimes also referred to as “engaged” – Shareholdership. After listening to Robert Monk\'s inspiring recorded message several distinguished European academics tried to find different incentives to steer investors into a more long-term, company oriented attitude, in particular as regards the behavior of proxy advisers and institutional investors.
Koen Geens (Leuven, Belgium) kicked off the conference by inter alia advocating a liquidity test, in addition to a balance sheet test, for paying out dividends in a listed company. He also criticized hybrid financial instruments, such as convertible bonds, as they create no real tier one capital because of their lack of loss capacity when the crisis-push comes to shove. Holger Fleisher (Max Planck Institute, Hamburg, Germany) pleaded for more transparency and accountability of proxy advisors, e.g. by binding them to a code of conduct and obliging them to disclose their conflicts of interests and voting policies on a regular basis, just like credit rating agencies and auditors. Iris Chiu (UCL, London, UK) analyzed the effect of the UK Stewardship Code on institutional investors. She noted that the Code was not clear at all on the meaning of the wider public good that institutional investors officially have to take into account and mentioned that the Code was “peppered with rhetoric”. Matthijs de Jongh (Supreme Court, The Hague, the Netherlands) took a more ex post, judge-oriented approach and tried to strike a balance between the principles of shareholder autonomy and fairness when defining the standard for shareholder behavior. He stressed that a growing factual influence of shareholders in the company should go hand in hand with a growing responsibility toward all other constituencies. In his opinion, good old Aristotle still has all the answers. Jaap Winter (Duisenberg School of Finance, Amsterdam, the Netherlands) once more stated his view that one of the fundamental problems lies in the widespread application of Modern Portfolio Theory (extreme diversification and index tracking) by fund managers. Jaap announced that he is currently involved in a legal experiment, in an attempt to distract companies from the short-term discipline of financial markets, by creating a social cooperative that can be listed. For the content of my own speech at the conference about expropriation of shareholders in a distressed financial institution in the Netherlands, I refer to my contribution further on in this issue of ECL. Finally Pavlos Masouros (PhD, Leiden, the Netherlands) took the audience to the economic sphere of statistics on capital accumulation over time in the western economies and its relation to equity short-termism. He advocated the introduction of loyalty shares in various forms. His speech ignited a lively and fierce debate, in which among others the president of the Dutch Shareholders Association (VEB), Jan Maarten Slagter, participated with great enthusiasm.

This is a part of my editorial to European Company Law journal, issue nr. 6, December 2011. Any reactions to:
Posted by Alex Todd on Sep 21, 2011 at 1:30 PM
Bob, i have a counterproposal in my post \"Humanist Corporate Governance: A universal model for balancing power and aligning interests\" (see I agree with you criticism of institutional investors, but don\'t believe more \"shareholder democracy\" is the solution ( see my recent comments to the Globe and Mail article \"Can shareholders fix broken boards of directors?\" at and for an admittedly Canadian perspective).

A key component of My proposed solution is to empower governance committees with the motivation, knowledge, and resources to assume a more proactive leadership role on their board. For more information and to propose an approach for advancing this agenda, please visit

I am very interested in hearing from you and other informed corporate governance stakeholders. You can contact me directly at
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