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(Synthesis by Yves REICHENBACH)
International meeting, Geneva March 30-31, 2001
Moderator:
Mr. Yves REICHENBACH
Historically, systems of remuneration linked to
the stock market remained a very long time opaque. Besides, some moral and
cultural problems are bound incontestably to the mechanism of the finance in
general. The bad understanding of this problematic and its consequences on the
society by the operators themselves contributed, until a recent past, to the
negative perception of the world of the finance by the public in general. The
responsibility of the organization of the finance on the working of our societies
is incontestable. It must be underlined.
Today, we notes a clear change of mentalities
in relation with the pre-eminence of money. This tendency exacerbates the
maximum and immediate profit seeking as supreme value of the human and economic
success.
The finance gives the impression to be a world,
often distant of the realities and the complexity of our society. It is incontestably conventionalist. On this
basis, it influences the principles of control of the management of the
societies that it is judicious to value.
The increasing disparities between" vastly
rich "and" vastly poor ", that didn't quit to increase these
last decades, can only increase the need to clearly define its mode of working
and its role in the resolution of the long-term challenges put to our society.
The number of the relative problems related to
the remuneration for the financial operators, we can mention as an example:
·
The
conflicts of interests that are bound in general to the lack of independence of
the portfolio managers and analysts in relation to the commercial politics and
to the ties with the clients of the financial or banking societies that employ
them;
·
The
remuneration of the brokers in number of the transactions that can motivate the
multiplication of the transactions;
·
The
unbalance of information to the profit of the financial or banking societies
and the financial operators that can succeed to operations of insiders;
·
The
bad working of the market in the domain of the mergers and acquisitions: the
enormous commissions due to the advisers and setters of operations, can incite
them to push the enterprises in policies of development that are not in
conformity with their long-term strategic interests and to those of the
employees. These operations succeed in general to very difficult integrations
of the new acquisitions.
These distortions created by the methods of
remuneration don't guarantee a normal and independent working of the stock
markets.
The reasons of the erratic working of the
markets are also bound to the following elements:
·
The
lack of predictability that cross our society. This factor of risk and
instability is due to the difficulty to fear the impacts of the new
technologies, the new life styles and the geo-political complexity in general
on the economic activity.
·
The
non-existence of the normative conditions to the working of the stock markets,
in many emergent countries, contributes
to shorten the cycle of the crises in these countries and to increase the
gravity of it. We can mention as an example, the insufficiency of the
regulation and the surveillance of the credit institutions, of the hiatuses in
the management of the risk and the serious lack of internal control, of the
state-controlled guarantees promoting the "taste" of the risk, the
lack of transparency in the situation of the enterprises, the non respect of
the environmental norms and the labor law, the inability of the state to set in
motion its legislative tool for lack of fiscal resources, etc.
·
The
emergence of new risks and new crises that has a global impact on our society,
affect the public goods. We can mention the impacts of the climatic warming up,
of the reduction of the biologic diversity, of the risks of epizooties and
epidemics, of the nuclear proliferation, of numerous regional ethnic crises,
etc. The world bank, in a non exhaustive inventory of the needs in financing,
encodes the lacks to about 300 billions of US $against about 16 billions
available actually.
Note that the markets cannot function without a
set of regulations serving to consolidate the market conditions and the
competition in a sustainable way. These defaults create a competitive advantage
for the contravening countries, but push them toward social and financial
crises. With globalization, the effects of the distortions of the market and
the deterioration of the public property have international consequences. The
crucial deficit of human and financial means in the domains concerned by the
public goods, to face stakes in a global level, generate more and more serious
tensions between the public opinion and the global institutions that promote
globalization, with no control under its perverse effects. Regardless of the
global solutions to bring to these challenges, it is right to underline that they
must be adapted to the own situation of every country.
Concluding the problem of the remuneration, the
solutions that have been discussed are the following:
·
Redefinition
of the techniques of remuneration for the main financial agents on the basis of
models privileging the risk-control. We can note a real awareness of several
big banks to this level.
·
Redefinition
of the role and the formation of the financial analysts. Creation of strict
rules concerning their independence.
·
The
role of pension funds is essential to promote the long term in the markets. To
this title, it would agree of:
·
To privilege
the long-term judgment of the fund managers performance;
·
To ask funds
of pension to display their long-term objectives clearly;
·
To make
participate the salaried employees and the unions to the definition of these
objectives.
·
To
institute a better control of the instruments such options that create a strong
incitement of their inventors to the volatility of the markets.