Financial Services: Shareholder Engagement

Lord Lawson of Blaby Excerpts

Wednesday 19th January 2011 Lords Chamber

[Lord Sassoon]

My Lords, this is an ongoing challenge but institutional shareholders over the last few years—under considerable pressure from the previous Government, I am happy to say—have taken steps to make sure that, where they are representatives of pension funds or other representatives, they are more active in exercising proper stewardship in the votes of the underlying shareholders they represent. I recognise that it is an important issue.

[Lord Lawson of Blaby]

My Lords, does my noble friend agree that one of the problems of shareholder involvement in so far as the banks are concerned is that auditors are reluctant to qualify the accounts of a bank in any way whatsoever, even if they have reservations, because this might lead to a run on the bank? Does he agree that the answer is what I put in the Banking Act 1987—to have a mandatory dialogue between the regulators and the auditors of banks so that there can be two-way communication, which unfortunately went largely by the board with the changes in legislation under the previous Government?

[Lord Sassoon]

I am grateful to my noble friend for reminding us of the importance of audit, particularly in relation to banks. It enables me to remind us all that the Economic Affairs Committee of your Lordships’ House will, I hope, play an important part in the broader ongoing debate about stewardship when it comes up with its current report into the role of auditors.