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."
International Women's Day 2014: The shocking statistics that show why it is still so important
Malaysia Airlines: Search for true identity of passengers with stolen passports launched as terrorism concern grows
Singapore sting: Sky-high prices are pushing locals to the edge of affordability
International Women’s Day: 'When a man gives his opinion, he's a man. When a woman gives her opinion, she's a bitch' - feminist quotes from female icons to inspire you
Dead woman's body found sitting in a car after six years after direct debits ran $54,000 bank account dry
Britain's top vet sparks controversy with call for ban on slashing animals' throats in 'ritual' slaughters for halal and kosher meat products
Ukraine crisis: Russia dismisses '3am ultimatum' as 'total nonsense'
If you're horrified by a flame-roasted dog, you should be shocked at a hog roast
Poor 'live like animals' says Boris's privately educated sister after going on 'poverty safari'
White people become less racist just by moving to more diverse areas, study finds
Exclusive: Impact of immigrants on British workers ‘negligible’
- 1 International Women's Day 2014: The shocking statistics that show why it is still so important
- 2 Orgasm machine to deliver climax at the push of a button
- 3 Dear 'The Sun', breast cancer isn't sexy
- 4 Singapore sting: Sky-high prices are pushing locals to the edge of affordability
- 5 Liam Neeson turned down James Bond role because late wife Natasha Richardson said she wouldn't marry him if he took it
iJobs Money & Business
£12000 per annum: Inspiring Interns: The company works with Tier 1 FTSE 100 Ba...
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...
£30000 - £35000 per annum + generous benefits: Pro-Recruitment Group: Mixed Ta...