Vince Cable wants more shareholder control in top banks’ governance.

The importance of shareholder engagement and their authority over governance issues has been highlighted by Vince Cable, the UK business secretary, in an article written in The Observer on July 1st, 2012.

Calling the governance at UK banks ‘lamentably weak’, Cable urges shareholders to take full responsibility for their ownership by exercising a stronger control over ‘out-of-control executives’.

This comes as a scandal of ‘biblical proportions’ hits the City. Last week global investment bank Barclays Capital was fined a record £290 mn ($456 mn) by US and UK regulators after being accused of rigging interbank lending rates over a number of years.

As a result, chairman Marcus Agius and CEO Bob Diamond have both resigned. The latter will be questioned on July 4 by MPs on the Treasury Select Committee, which has started reviews into operations of the LIBOR market and professional standards for bankers.

The reputation of Britain’s banking industry has been severely tainted, with several other banks – Lloyds, HSBC and RBS – all currently under investigation for rate-rigging. Artificially maintained low rates will have affected millions of market participants and transactions across the globe, causing an estimated loss of £30 bn during the financial crisis alone.

In addition to his plea for stronger shareholder power, Cable is calling for a strict separation of high street and investment banking activities, as was recommended in the 2011 Vickers report. He also advocates the application of more severe, US-style criminal sanctions for financial regulations offenders.