David Prosser: Pru's shareholders hold it to account

Outlook It is too early to say whether Tidjane Thiam can carry on as chief executive of Prudential in the wake of his misjudgement of the willingness of investors to back the insurer's purchase of AIA. But what has happened at Pru is that this has been a triumph for those who want shareholders to assert themselves more aggressively.

If only, for example, leading investors in Royal Bank of Scotland had been prepared to stick their heads above the parapet in this way, rather than supinely accepting that the bank's management knew best when it got into a bidding war for ABN Amro just as the credit crisis was taking hold.

For too long, the attitude of many large institutional investors has been that it is not their place to make a fuss at the companies in which they hold stakes. At the extreme, investors have reduced their exposure to companies where they disagreed with management decisions. More commonly, they have simply shrugged their shoulders and not bothered voting their shares at the AGM.

That bred a generation of executives who knew their actions would very rarely be scrutinised by those to whom they were in theory accountable. This was one reason why bank bosses were able to expose their companies to the sorts of risks that eventually prompted the credit crisis.

Does the Pru rebellion – and the fact that shareholders' revolts over pay are now so much more common – prove that investors have learned their lesson? Well, to a point. It is to be welcomed that shareholders are now more likely to challenge their executives. But engagement does not have to be so confrontational – there has been rather too much grandstanding during the Pru affair.

This, by the way, is the problem for Mr Thiam. It should be possible for a chief executive to propose a course of action only to change his mind after a reasoned debate with leading shareholders. In Pru's case, the debate became a public fight in which the loser was eventually humiliated. It may be too late to restore relations.