Kay warns the short-termist City to expect radical reforms

Report will look into fund managers' fees, executive pay and boardroom behaviour

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.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power