John Kay, who heads the Government's review of equity markets, indicated yesterday he was ready to recommend a radical overhaul of the duties of big investors in monitoring companies in which they invest.
The well-known economist added that he was prepared to call for a stripping away of unnecessary rules and indicated trading activities that do not produce useful results could fall foul of his review.
Yesterday was the deadline for submissions to the Kay Review into the effect of UK equity markets on the competitiveness of British business.
The review was ordered by the Business Secretary, Vince Cable, in June to review the impact of big shareholders on Britain's companies. The banking crisis and Kraft's takeover of Cadbury drew accusations that investors were looking for quick profits and neglecting their responsibilities as custodians of Britain's companies.
The Stewardship Code, introduced last year after much deliberation, sought to make big shareholders intervene more forcefully and transparently to rein in management.
Asked about strengthening the code, Mr Kay said: "We will have to review that. I've encountered people who think it's about tweaking the Stewardship Code and I see our brief as being an awful lot wider than that."
He also said he was prepared to call for regulations to be cut back, though he declined to give details.
"I'm very ready to say there areareas where we have too much regulation and where it may be counterproductive in trying to achieve well-intentioned objectives."
Mr Kay's remarks promise a far-reaching set of proposals that will shake up the management and trading of company shares in Britain. His interim report will be published in February with a final report appearing in July, after extensive consultation.
The process is similar to the one adopted by the Independent Commission on Banking, which unveiled its final report in September. But Mr Kay's remit is wide ranging and is likely to delve into executive pay, boardroom behaviour and fund managers' fees.
Mr Kay stressed that he had a basic view that markets in shares are there to promote healthy companies and to benefit the public whose funds are invested in them. That is a view that may not bode well for short-term trading, and other racy strategies that, it is claimed, enhance liquidity.
"As far as I'm concerned, equity markets are there to improve the performance of companies and to generate returns to ultimate beneficiaries – pensioners and long-term savers. That is all they are about."
Mr Kay said he was still waiting for submissions to arrive and that he had been talking to people "on a more individual basis" in recent weeks, including the National Association of Pension Funds, the Association of British Insurers and the Investment Management Association.
Mr Kay is working with an advisory board made up of Sir John Rose, the former chief executive of Rolls-Royce, James Anderson, chief investment officer at Baillie Gifford, and Chris Hitchen, chief executive of the Railways Pension Trustee Company.Reuse content