CBI chief suggests changing tax regime to encourage long-term investment

Something to be looked at by Kay Review says CBI President

The President of the Confederation of British Industry, Sir Roger Carr, has suggested the Kay Review could look at changes to the tax regime to encourage long-term investment.

Amending the tax regime to encourage long-term investment was “something to look at” Carr said at an event organised by the National Association of Pension Funds to launch the government-backed review into long-term investment led by Professor John Kay.

“One of the Kay Review outputs must focus on greater engagement between managers and owners,” Carr added. “We need to recognize that engagement between the equity owners and the issuer is key.”

Institutions needed to “police” corporate behaviour, he said, adding: “You’ve got to go to AGMs to demonstrate involvement.”

As well as his role at the CBI, the leading business lobby group, Carr also chairs industrial group Centrica, is a director on the Court of the Bank of England and senior advisor to private equity firm Kohlberg Kravis Roberts. He sat on an earlier body looking at corporate governance, the Higgs Committee.

Speaking at the same event, NAPF Chief ExecutiveJoanne Segars highlighted problems with the proxy voting chain. “It’s so complex that nether shareholders nor issuers know what’s going on – it’s unacceptable.” She said the NAPF is setting up a working group looking at these issues covered by the Kay Review.

Professor Kay said his strictly evidence-based review will focus on improving company performance and returns to beneficiaries. “BP, Vodafone, GlaxoSmithKline – these companies are very much part of our brief,” he added.

Kay noted that most successful long-term investors – he cited Vanguard, Fidelity, Capital TIAACREF, and Baillie Gifford – are not listed. This was a “paradox that needs to be looked at”. A core issue for the review was whether the “explosion” of intermediaries had been beneficial to savers. Speaking from the floor, Aled Jones, Responsible Investment Manager at the £4bn (€4.6bn) London Pensions Fund Authority, pointed to “process issues” in getting asset managers to engage with companies.

There was a question from Alan MacDougall, Managing Director of voting advisory form PIRC on the role of international financial reporting standards (IFRS). Kay said this would definitely be on the agenda.