Investors want transparency in derivative holdings
By Raji Menon
LONDON (Reuters) - A heavyweight investor group called for greater transparency in equity and derivatives transactions ahead of a G-20 summit aimed to restore confidence in global financial markets.
The International Corporate Governance Network (ICGN), whose member companies manage some $15 trillion in assets, is demanding tougher rules after the short-selling debacle around Volkswagen (VOWG.DE) cost hedge funds billions of dollars.
While not advocating a blanket ban on short-selling -- which it called a "legitimate tool" -- the group bashed large speculative positions built up "in obscurity."
"We do not believe short selling should be artificially restricted, but companies and shareholders should be aware when significant short positions are being created," ICGN said in a statement on Monday.
Hedge funds holding short positions in German car maker Volkswagen lost billions after Porsche (PSHG_p.DE) revealed it had built up 74.1 percent in its rival. Nearly 32 percent of the stake was held through derivative contracts.
Peter Montagnon, chairman of ICGN, told Reuters: "We would definitely have liked to see the extent of Porsche's holding in Volkswagen ... we have members whose are invested in Germany and so we would like to see this issue addressed."
The investor group also wants its members to have powers to appoint and dismiss boards and to have a say on remuneration, particularly in the United States.
Fund managers, who manage billions on behalf of pension funds, have also been criticised for their role in the current market crisis for failing to hold boards to account.
"Stronger rights will enable shareholders to hold boards more firmly to account for the longer term consequences of their actions. This is important because more effective boards are vital to prevent a recurrence of the crisis," the body said.
It said that government intervention in financial institutions should not undermine shareholder rights and corporate governance structures, including the requirement for fully independent directors.
