Quarterly reports damage behaviour of firms and investors, says Kay Review

Critics claim Cadbury's takeover by Kraft was driven by demands for a quick reward

Quarterly reporting by companies may be damaging the behaviour of both firms and shareholders, according to the preliminary findings of the Kay Review into investment in UK equity markets.

Vince Cable, the Business Secretary, commissioned the report last June following concerns that short-term incentives are damaging the way British firms are owned and managed, particularly in light of Cadbury's takeover by the US food conglomerate Kraft Foods. Critics claimed that acquisition was driven by investors demanding a quick reward.

John Kay, a professor of economics at the London School of Economics, consulted with shareholder groups, insurers, pension funds and individual investors for the review.

His interim report said that quarterly reporting and interim management statements could be "useless or misleading".

It also described executive pay as a "principal source of friction" between groups representing shareholders and company managers, and noted criticism of "rewards for failure" was widespread.

Professor Kay also flagged up the concerns of respondents over the impact of high-frequency trading, and said he will examine using legal changes to ensure that equity markets function mainly for the benefit of the companies whose shares are traded on them and the investors whose money is involved, rather than in the interests of the asset management industry.

Ideas to combat takeovers that are damaging the long-term health of firms outlined in the report included creating a public body to review such deals, or give greater voting rights to long-term shareholders.

"One of the big, overriding themes in economic policy has to be generating – in both equity markets and corporate Britain – a belief in the importance of the long-term perspective," Mr Cable said.

The review will make its final recommendations about corporate activity and governance this summer.

Investor groups, including UK Sustainable Investment and Finance Association (UKSIF) and campaign group FairPensions were amongst those to back the interim report.

Penny Shepherd, the chief executive of UKSIF, said: "Effective transparency and procurement are not the sexiest of topics, but they must be embraced if we want to create genuine long-term relationships between companies and investors."

Start your day with The Independent, sign up for daily news emails
News
FIFA President Sepp Blatter reacts during a news conference in Zurich June 1, 2011
news
News
people
Life and Style
food + drink
News
peopleKatie Hopkins criticises River Island's 'seize the day' bags for trying to normalise epilepsy
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
Nicole Kidman plays Grace Kelly in the film, which was criticised by Monaco’s royal family
film'I survived it, but I’ll never be the same,' says Arash Amel
Life and Style
Retailers should make good any consumer goods problems that occur within two years
tech(and what to do if you receive it)
Life and Style
healthIf one was missed, vomiting blood was seen as a viable alternative
Life and Style
tech
News
i100
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

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Guru Careers: Graduate Editor / Editorial Assistant

£16 - 20k: Guru Careers: A Graduate Editor / Editorial Assistant is needed to ...

Day In a Page

Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor
The ZX Spectrum has been crowd-funded back into play - with some 21st-century tweaks

The ZX Spectrum is back

The ZX Spectrum was the original - and for some players, still the best. David Crookes meets the fans who've kept the games' flames lit
Grace of Monaco film panned: even the screenwriter pours scorn on biopic starring Nicole Kidman

Even the screenwriter pours scorn on Grace of Monaco biopic

The critics had a field day after last year's premiere, but the savaging goes on
Menstrual Hygiene Day: The strange ideas people used to believe about periods

Menstrual Hygiene Day: The strange ideas people once had about periods

If one was missed, vomiting blood was seen as a viable alternative
The best work perks: From free travel cards to making dreams come true (really)

The quirks of work perks

From free travel cards to making dreams come true (really)
Is bridge the latest twee pastime to get hip?

Is bridge becoming hip?

The number of young players has trebled in the past year. Gillian Orr discovers if this old game has new tricks
Long author-lists on research papers are threatening the academic work system

The rise of 'hyperauthorship'

Now that academic papers are written by thousands (yes, thousands) of contributors, it's getting hard to tell workers from shirkers
The rise of Lego Clubs: How toys are helping children struggling with social interaction to build better relationships

The rise of Lego Clubs

How toys are helping children struggling with social interaction to build better relationships
5 best running glasses

On your marks: 5 best running glasses

Whether you’re pounding pavements, parks or hill passes, keep your eyes protected in all weathers
Joe Root: 'Ben Stokes gives everything – he’s rubbing off on us all'

'Ben Stokes gives everything – he’s rubbing off on us all'

Joe Root says the England dressing room is a happy place again – and Stokes is the catalyst
Raif Badawi: Wife pleads for fresh EU help as Saudi blogger's health worsens

Please save my husband

As the health of blogger Raif Badawi worsens in prison, his wife urges EU governments to put pressure on the Saudi Arabian royal family to allow her husband to join his family in Canada