The role of financial advisers in the corporate governance of listed companies ought to be a pivotal one. I am not so old but still remember a time when investment banks (or merchant banks, as they were known then) were often paragons of rectitude and the more reputable ones would not deal with a company if they felt it was acting improperly: not illegally, just improperly. Really, it is true. Of course, there were some that sailed close to the wind even then. I remember the time when I was involved in negotiating to buy Hard Rock Cafe and, at the very end of the deal - when everything was agreed - the advisers acting for the vendor raised the issue of their fees. Apparently they were not being paid by the vendor, having set up the deal speculatively, and wanted to land us with the extra cost. We were shocked. There was nothing illegal in this, just not quite cricket to leave it so late to tell us. Still, it was Drexel Burnham and Lambert and when you dealt with them you knew you were in the wild west.
Since then everyone has become inured to revelations about financial advisory firms. A recent Harvard Law blog examines the recent court case arising from Barclays behaviour in the del Monte takeover - where they advised and also misled the del Monte board. I would not have imagined that of Barclays in the past. And of course there is the opprobrium heaped on Goldman Sachs for selling investments to clients at the same time as other parts of their organisation described the securities in unflattering terms. Still, a City connection recently offered the opinion that people prefer not to deal with advisers they don't trust; and that over the next few years one may see the deal flow to some of these major institutions dwindling in quality and quantity as boards of directors go back to seeking advisers they can trust.
An interesting thought.