Sir Iain leaves CBI presidency with stinging attack on the City

Sir Iain Vallance, the former BT chairman, will today deliver a stinging attack on the City in his outgoing speech as president of the Confederation of British Industry.

Sir Iain, who was forced out of BT last year after pressure from institutional shareholders, criticises the short-term nature of the City and the fee-hungry motivation of investment banks. He questions the use of corporate governance specialists that "show all the wit and wisdom of traffic wardens". And in a radical suggestion he champions a "one man one vote" approach to the corporate governance process to get smaller shareholders more involved.

In an article in the Financial Times Sir Iain says that the quest for shareholder value leads companies to "cut corners and rush fences in a headlong pursuit". He adds the financial markets "are fuelled by the highly geared (and rarely disclosed) remuneration packages of fund managers, investment bankers and their attendant analysts".

He calls for a radical shake-up of the corporate governance process in order to weaken the stranglehold of big institutions and grant more power to smaller shareholders. Calling the one-man-one-vote show of hands at annual meetings a "sham" he calls for the "block votes" of the big institutions to be replaced in order to end the disillusionment of private investors who feel detached from the process. "Carry the concept of one-man-one-vote though to the proxy vote and encourage online as well as postal voting – and you might just change all that," Sir Iain says. "You might, indeed, breathe new life into shareholder democracy."

He admits that these changes would be resisted by the big financial institutions and their representative bodies. "It would offend all the vested interests," he says. "Which is precisely why it might prove the right thing to do."

Sir Iain hands over his role as CBI president today to Sir John Egan, the former head of Jaguar.

Sir Iain's views on the City may have been coloured by the manner of his leaving BT. At the start of the dot.com boom BT was criticised for failing to listen to investor demands for more investment in new technologies such as mobile telephony and broadband internet access. The company's relatively late conversion led to a disastrous acquisition binge right at the peak of the market.

Fund managers then demanded senior management changes in order to support BT's £5.9bn rights issue last year that was necessary to cut the group's £30bn debt.