Panto performances where public is powerless

WHAT goes to the core of public outrage at the debacle of the banks is the blistering question "How did it happen?"

How were banks able to operate without ever being called to account by watchdogs, financial regulators or, most importantly of all, by their owners? That is us: investors in pensions, insurance and investment funds.

These questions are back in the spotlight as companies embark on their annual meetings where they ask shareholders to rubber-stamp multi-million-pound salary and bonus packages for senior staff.

But the annual meetings are pantomimes: entertaining but ultimately pointless. The power is held by mega voting blocks of institutional shareholders who run big pension and insurance funds on our behalf. As such, the vote is in the bag before the chairman gets up to speak.

Although these big funds represent most people's largest investments, individuals are denied any say about the running of the companies they invest in. That prerogative has been passed to professional fund managers and institutional investors.

That they shirked these responsibilities in the run-up to the credit crunch is self-evident. Now they have drawn up a new stewardship code to assure us, regulators and parliament that next time they will do better.

The code promises higher standards of probity and intervention. It remains to be seen whether it will make any difference or it is yet more stage dressing.

Certainly, Royal Bank of Scotland chief executive Stephen Hester's nearly 8 million package, which must look obscene to nurses and policemen who are seeing their pensions cut, sailed through effortlessly.

Despite noisy scenes at the annual meeting last week in Edinburgh, it was always getting a green light once its biggest shareholder, the UK government, gave the nod. Yet the vote was 99 per cent in favour, indicating other institutions had also fallen in behind the government, which commanded just under 70 per cent of the vote.

How long the public will put up with this mutual-assured professional back-slapping remains to be seen. People power forced directors at Dutch bank ING to waive a proposed bonus, for fear of a customer boycott. Institutional fund managers can be boycotted too.