James Moore: Kay's ideas on target but it will take teeth if we are serious about fixing the City - Business Comment - Business - The Independent

James Moore: Kay's ideas on target but it will take teeth if we are serious about fixing the City

Outlook: Vince Cable will be formulating a response that could easily be frustrated

Goodness knows the City of London could do with a dose of sanity. Yesterday, an academic, of all people, tried to provide one. In castigating a "lack of trust and poorly aligned incentives" John Kay, a professor at the London School of Economics, is hardly saying anything new.

But he does have some half-decent ideas for fixing the City's problems and there is lots to like about his Government-sponsored report, not least its home truths for the fund-management community, which bears more responsibility for the current sorry state of affairs than its members like to admit.

They are, after all, just as fond of bonuses as bankers, and have continued to pick them up despite the fact that their inaction in the face of corporate malfeasance and just plain old excess is a significant contributor to the City's current low watermark.

Professor Kay's ideas include the creation of a stewardship code, providing guidelines for some of the more recidivist fund managers, and an investors' forum to facilitate collective engagement with companies (so no more excuses about mixed messages from shareholders when it comes to pay). He wants boards to consult with investors before making appointments, an end to the US practice of quarterly financial reporting, and an emphasis on fiduciary duty right down the line.

All this and his other ideas seem rather sensible and had governance groups purring, which is usually a good indication that something is on the right lines.

Leave it to the Trades Union Congress to get to the nub of the one real problem. It's worried that if all this is voluntary it won't work.

The City doesn't really do voluntary. Within its eyries sits a vast corps of vested interests which would far rather spend millions on lobbyists and PR companies to lie about how seriously they take the need for reform while doing precious little in practice.

And they're already sharpening their talons for the months ahead, during which time the Business Secretary, Vince Cable, will be formulating a response that could easily be frustrated by the refuseniks on the Conservative benches who have friends in the City and an interest in it providing them with cushy jobs when they're out of Westminster.

The Investment Management Association's line yesterday is a case in point. It was carefully worded and used the phrase "welcome" with a "but", the standard reponse of organisations to reports they don't like. It then went on to whine that Professor Kay doesn't recognise that fund managers are different to traders and therefore don't contribute to short terminsm.

Except that they do, if not by their actions then by their inaction. They could have moved against the destructive remuneration packages the report has identified years ago, but they didn't. The shareholder spring was only prompted by their fear that Mr Cable might legislate to force their hands.

Mr Cable's more radical proposals were watered down and the bits of Kay the City doesn't find to its taste are likely to suffer the same fate.

The road to the hell of the financial crisis was paved with truckloads of good intentions that got nowhere. Without teeth, this report will simply add another slab.

Rake's a non-runner in the Barclays stakes

Oh dear. If you backed the favourite in the "Barclays City's Second-Worst Job Handicap Stakes" you've done your money. Serial company director and former KPMG boss Sir Mike Rake was many people's idea of the class runner in the race to become Barclays chairman and the best internal candidate to clear up the mess left by the Libor-fixing scandal.

Unfortunately his connections have had other ideas. The Barclays deputy chairman doesn't get much time in the stable: he's also the chairman of BT and of EasyJet and strangely enough it was the latter that scratched him from the race.

"EasyJet confirms that Sir Mike Rake has informed the easyJet board that he has formally informed the chairman of Barclays that he does not wish to be a candidate for the chairmanship of Barclays," it sniffed.

It seems chairing one company with questionable remuneration structures, stroppy investors (stroppy investor in easyJet's case but Sir Stelios is more than enough to be getting on with) and strategic issues is enough to be getting on with. You can hardly blame Sir Mike.

Meanwhile, it's back to square one at Barclays, which has to find someone with the requisite ability, experience, thick skin and willingness to knock heads together. After, that is, it has dealt with the small matter of getting a new chief executive.

French without tears as Brits dodge the Jubilee

Now you know why so many companies are moaning about the Queen's Diamond Jubilee: a lot of their customers used the extra bank holiday to flee the country.

It seems that as many people hot-footed across the Channel to La Belle France as bought Union flags to wave out of their windows while watching the gushing BBC coverage.

Eurotunnel yesterday reported carrying a record 10,000 vehicles in 24 hours. The ferries were probably similarly crammed.

Well, the French have proved they can act magnanimously when their biggest sporting prize gets snaffled by the Brits.

Who also beat them to the Olympics, during which Eurotunnel is expecting another surge in revenues and profits.

Sadly, while Eurotunnel might have made money, with the promise of more to come, it wasn't winning any medals from investors who gave its numbers nul points and headed for the exits complaining about rising costs and missed targets.

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