Call for more trusting relationships in UK equity markets
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A move away from short-termism and restoring trust and confidence in the investment chain are highlighted as key measures to transform UK equity markets.
In an independent review conducted by John Kay, creating relationships built on long-term trust and realigning incentives across the investment chain are said to be key for the future.
As part of Kay's UK equity markets and long-term decision making report, he sets out recommendations for ensuring that equity markets support their core purpose of enhancing the performance of UK companies.
Amongst his suggestions are improving the incentives and quality of engagement by establishing an Investor Forum to create more engagement among investors.
Furthermore he recommends changing the culture of market participants, including the adoption of 'good practice statements' by company directors, asset managers and asset holders to promote stewardship.
Kay says, 'A lack of trust and poorly aligned incentives have helped create a culture of short-termism in our financial markets. This is undermining their role of supporting innovative, sustainable long-term business performance.’
Speaking on his suggestions, he adds, 'There is no "magic bullet" that will deliver these outcomes, but the range of recommendations set out in this review will provide a clear vision and roadmap to help us achieve a financial world very different from our recent experience.'
The review conducted by Kay was commissioned back in June 2011 by business secretary Vince Cable.
Cable comments, 'Equity markets have a vital part to play in ensuring we have well run companies providing sustainable returns for investors. This report is an important and timely contribution to the discussion of how we achieve.'