Open Dissent by Mike Soden

international and were made up of private and institutional investors. At least that was until the Government was forced to step in, initially becoming a preference shareholder and subsequently, through conversion, becoming an ordinary shareholder. The market capitalisation of the banks was in aggregate close to €60 billion before the crisis occurred. More than 150,000 individual shareholders held billions between them, either directly or through funds. The value of the combined shareholdings in the banks today is less than 5 per cent of what they were at the peak. 24
    We can often forget that these 150,000 were family members, businessmen, farmers, professionals and pensioners. As the market value of shares started to evaporate, tens of thousands of individuals from all walks of life were hurtfinancially. The nest eggs that had been put aside for the rainy day had all but disappeared. Education funds for children, fees for nursing homes, cash for the new car or holidays, or just savings for a rainy day were no longer within easy reach. Worse still, the insecurity caused by this crisis has knocked the confidence out of this key sector of our community. Savers who were unlikely to be a burden on the state are now thrust into the social welfare system that they prided themselves on being able to avoid through good planning. Is consideration given to this cadre of savers in the context of them losing more than money? They have no reason to question their own self-respect or judgment; they did their piece for society and the system has let them down.
    In many ways losing one’s security brings on stress for the ordinary family that may manifest itself in frightening ways. This brings up the questions of the size of the holes in the pension funds and what can be done to fill them. Many of the Irish pension funds would have held substantial amounts in Irish equities. During the past three years some 70 per cent of the market value was written off. The Irish stock market index has fallen from a peak of 10,400 to below 2,700 over the past two-and-a-half years. 25
    Over recent years, a number of Irish corporations have gone to the wall, leaving their pension schemes underfunded. The trustees who were responsible for the investment of the pension funds in corporations were charged with the responsibility of taking an arm’s length approach to ensure no conflicts of interest occurred thatwould jeopardise their predetermined investment strategy. There are many categories of funds, ranging from personal to company to institutionalised funds. Simple investment strategies were often developed where the pension funds had overriding principles of security before growth; if growth was essential then the preferred risk profile of the investment had to be stated. Speculative funds in pension funds generally represented a very small percentage of the total to be invested. Entertaining speculative opportunities, however small, tended to be under the condition that there would be only modest losses in the event of a failure.
    One of the single biggest problems for Irish pension funds is the conflict that can arise when the trustees are encouraged to invest some percentage of their funds in their employer’s company. The support given to one’s company through investment in some part of the pension fund is laudable and, in good times, rewarding for all. Having influence in the company as a shareholder and not just as an employee allows for greater commitment to the vision of the organisation. Whatever percentage is deemed appropriate from the perspective of the maximum exposure by the company’s pension fund in the company, be it 1 per cent to perhaps a maximum of 10 per cent, should be predetermined. The benefits of so investing must be analysed and judged in the context of a possible major downturn in the economy or the company. On those occasions when the trustees meet with the owners or senior management of the company,