Disproportionately focusing on short-term performance lies at the center of wayward practices at fund houses and having a strong corporate governance culture is the best safeguard against unethical conduct, HSBC Global Asset Management chief executive Sridhar Chandrasekharan said yesterday in Taipei.
The London-based CEO said that the manner in which an organization judges performance challenges will result in different sets of responses that ultimately define a corporation’s culture.
“How an organization structures its environment for people is important ... Within HSBC, one of our biggest focuses is the investment process we use,” Chandrasekharan said when asked to talk about his ideas on enhancing the integrity of financial professionals.
The questions came amid recent reports that fund managers at First Securities Investment Trust Co (第一金投信) and ING Securities Investment and Trust Co (安泰投信) allegedly engaged in unethical practices for personal enrichment.
The Financial Supervisory Commission is probing fund houses across the nation to strengthen internal oversight and prevent rogue conduct on behalf of their employees.
“When our performance is challenged, our natural response is to review our investment process to determine if it is valid or not. We therefore have less reliance on idiosyncratic securities selections,” Chandrasekharan said.
However, there seems to be a disproportionate amount of attention paid to performance alone, which could be a problem because it could prompt employees to succumb to tempting short-term fixes when performance is weak, he said.
Companies should look at performance over a longer period of time, as well as try and determine if any calibrations need to be made to improve performance, he added.