|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
RiskMetrics Group Studies Find an Increase in Shareholder Activism and Litigation as a Result of the Credit Crisis, Weak Risk Management Practices Seen as Key Cause of the Mortgage Meltdown and Subsequent Rise in Subprime-Related Lawsuits
Staff Writer
PR Newswire . April 9, 2008
_________________________________________________________________________
EXCERPT: RiskMetrics Group, a leading provider of risk management and corporate governance services to the global financial community, today published two separate studies examining shareholder responses to the subprime credit crisis. The first report, Credit Crisis and Corporate Governance Implications, identifies the corporate governance factors involved in the credit crisis, how stronger provisions might have mitigated investor risk, and the ways investors are evaluating boards' risk management and disclosure practices. The second report, The Subprime Meltdown Heads to Court, follows the consequences of weak risk oversight, providing an overview of the wave of securities litigation and regulatory enforcement actions beginning to swell. A major finding from both reports is that shareholder activism and litigation has increased as a result of the credit crisis. As part of its Credit Crisis and Corporate Governance Implications report, RiskMetrics Group evaluated the governance structures across eleven financial institutions, including the six that became targets for potential vote-no campaigns by labor pension funds. One common governance provision which surfaced among these firms was a combined role of chair/CEO during the years prior to the crisis. As a result of the crisis, there may be a higher level of support from shareholders to separate the roles. The report also showed that a substantial majority of all investor respondents indicated improved disclosure would have been somewhat or very effective in helping investors evaluate risk exposure. RiskMetrics Group Ineffective risk management by corporations with subprime exposure and the absence of mortgage industry regulation were considered to be the key causes of the mortgage meltdown by investor respondents, at 38 percent and 24 percent, respectively. Additionally, the report found a substantial majority of investor respondents believe boards lack risk management expertise. However, of the respondents who vote proxies, about sixty percent indicated they were unlikely or unsure whether they would hold boards accountable for failure to mitigate the risks related to the credit crisis by withholding votes from directors. In fact, lack of board oversight was only the third most concerning governance factor for all the respondents (22 percent) after lack of transparency (38 percent) and poor pay practices encouraging short-term performance (29 percent). |
|
|
