Madam, – I was intrigued by the opinion of the learned academics (Opinion and Analysis, November 28th) that the banks’ shareholders “failed in their duty to monitor and control management” and should not get away with ” dereliction of duty”.
I was not aware that when purchasing shares in a bank one was undertaking an obligation of this nature. I would be grateful if they could explain how small shareholders could exercise this “duty”, dereliction of which they claim has had such horrendous consequences.
They seem unaware that it has hit shareholders every bit as hard. In fact, other than in relation to credit restrictions and, potentially, executive bonuses, shareholders are really the only stakeholders “hit” so far! I do not know of any provisions in corporate legislation which impose directly on shareholders who are not involved in management an obligation as described.
The shareholders appoint a board of directors to exercise these duties and, until shown to the contrary, there would normally be no reason for them to doubt that such directors were acting with due care.
Even in a case where deficiencies were found, it would be difficult for small shareholders in a public company to take specific action, other than to try to appoint new board members.
I would be very concerned if these sorts of theories are being imparted by these gentlemen to their students. – Yours, etc,