Bank shareholders go MIA. One group is conspicuously absent from all the argy bargy over whether there should be a royal commission into bank or corporate culture — and I don’t mean the Turnbull government. No, it’s the group that suffers most from bad culture: shareholders. Yesterday, I detailed a London report on the cost of bad bank culture there from 15 years of bad banking decisions, products, dumb managements, cupidity and worse (and remember the UK government had to bail out its banks in the GFC, taking control of several). But the New City Agenda report found this bad behaviour, products and culture had eroded shareholder value and damaged reputations. The misconduct charges have had a “devastating impact” on banks’ profitability, significantly reducing dividend payouts to shareholders. And there was more about the absence of shareholders — some would argue, the cowardice of shareholders in asserting their rights and standing up to bank management and boards and forcing behavioural change on them. — Glenn Dyer
In Australia. Who are the top five shareholders in our four big banks? Answer: HSBC Nominees, the nominee arm of HSBC (which itself is deeply involved in the rorting in the US and the UK, and lost billions in dodgy deals in America, in and after the GFC) is the largest shareholder in ANZ, CBA, Westpac and NAB. JP Morgan Nominees (the nominee of the big US bank with hardly a stellar track record in and after the GFC, and for dodgy investment stories, such as the billions lost by the “London Whale”) is the second largest holder of shares in the big four banks. National Nominees, part of NAB. Citigroup Nominees is the fourth biggest holder in NAB, CBA and ANZ. Cogent Nominees, which is part of French giant BNP Paribas, is the fourth-largest holder in Westpac. Other fund management or nominees groups make up the top 20 shareholder lists of the big banks. AMP is there for all to see, and smaller holdings include listed investment companies such as Australian Foundation, Milton Corp and Argo Investments. Apart from these easily identified holders, the stakes collected together in the nominee groups are small individually, but collectively larger. We do not know who the actual owners are, but you can bet that some of them are the fund management arms of the banks. Can anyone seriously imagine the funds management arms taking up arms against their parents on the issue of culture, or helping the trustees of the super funds, whose money they manage, to do that? The holdings of the banks’ funds management arms in each bank and their rivals should be disclosed clearly in a separate report to the ASX (just listen to them moan about red tape). — Glenn Dyer
Failure to take a stand costs. And yet the failure to take a stand on issues like management, culture and good governance costs the bank’s shareholders. Take the Commonwealth — since the GFC it has been almost constantly in the news with bad headlines about BankWest, CommInsure, Storm Financial, poor financial advice to tens of thousands of customers and more. In the past year the bank’s shares have fallen 24%. Some of that is due to market worries about house prices, bad debt (these fears have ignored the improving economy, oddly), the latest moan or scam from a US fund manager or loudmouth, and the steadily rising toll of bad news stories about the country’s biggest bank. ANZ’s shares are down 40% in the past year for much the same reasons. Shareholders standing up and chastising the boards and management have been absent from this debate. Now the banks saw shareholders get these chances at annual meetings, and so they do. But corporate Australia, led by the Business Council, wants the government to abolish annual meetings, and make special meetings and shareholder votes impossible to call. They have no interest in listening to shareholders, and many big shareholders have no interest in talking to these boards. It is a meeting of closed minds, and we all lose. So if Bill Shorten is to hold a royal commission into banks, he can’t forget the way shareholders have abdicated their governance responsibilities and allowed dud management decisions and poor board oversight to flourish. That would be a rich area to mine, in fact. — Glenn Dyer
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