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."

News
people'It can last and it's terrifying'
Sport
Radamel Falcao
footballManchester United agree loan deal for Monaco striker Falcao
Sport
Louis van Gaal, Radamel Falcao, Arturo Vidal, Mats Hummels and Javier Hernandez
footballFalcao, Hernandez, Welbeck and every deal live as it happens
Sport
footballFeaturing Bart Simpson
PROMOTED VIDEO
News
peopleA spokesperson said the support group was 'extremely disappointed'
Voices
A man shoots at targets depicting a portrait of Russian President Vladimir Putin, in a shooting range in the center of the western Ukrainian city of Lviv
voicesIt's cowardice to pretend this is anything other than an invasion
News
i100
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
News
news Video - hailed as 'most original' since Benedict Cumberbatch's
Arts and Entertainment
booksNovelist takes aim at Orwell's rules for writing plain English
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
The eyes have it: Kate Bush
music
News
i100
Life and Style
tech

Apple agrees deal with Visa on contactless payments

Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
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

Technical Software Consultant (Excel, VBA, SQL, JAVA, Oracle)

£40000 - £50000 per annum: Harrington Starr: You will not be expected to hav...

SQL DBA/Developer

£500 per day: Harrington Starr: SQL DBA/Developer SQL, C#, VBA, Data Warehousi...

.NET Developer

£650 per day: Harrington Starr: .NET Developer C#, Win Forms, WPF, WCF, MVVM,...

Java/C++ Developer

£350 - £375 per day: Harrington Starr: Looking for a Java/C++ Developer to wor...

Day In a Page

Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor