Directors need more control

Representatives of RiskMetrics Group and JP Morgan at the WestLB Asset Management Round Table 2008 have suggested that directors and their boards need to have greater direction over their staff and watch where their management are putting company funds.

Martin Lawrence, head of Australian and New Zealand research at RiskMetrics, made the suggestion during the round table panel discussion on leverage and hedge funds in the US mortgage meltdown. Lawrence said that good directors needed to reign in their staff, direct where funds are going and provide greater accountability to shareholders.

In an interview with Money Management, Lawrence said directors had to be chosen carefully, explaining that a board of wise, experienced hands was needed.

“Boards [should be] playing a greater role in managing their staff,” said Lawrence.

“[Directors] were leaving too much to management without questioning them.”

Paul Brunker, equity strategist for JP Morgan, who was part of the panel, echoed Lawrence’s comments in a later interview.

“It follows on [from leverage, that] if we want companies to avoid leverage and risk-taking activities, boards have to be more pro-active,” he said.