Large investors must make “common cause” engaging with companies – UK’s Cable

Investors must forget their historical divisions, says minister

Major investors need to put aside their differences and make “common cause” in engaging with companies, says UK Business Secretary Vince Cable.

Cable, in a speech to the Association of British Insurers, also pointed to evidence that shareholder engagement is vital for investment returns.

“To establish new norms, major investors must forget their historical divisions and make common cause in engaging companies more coherently and effectively than in the past,” he told the ABI. The comments are interesting because investors have traditionally avoided being seen to act in unison, worried about breaching ‘acting in concert’ rules.

In a reference to the developing Libor rate-fixing scandal, he said: “When investing in bank shares is only for the brave, something has gone dreadfully wrong.” Cable’s comments preceded the resignation of Barclays’ CEO Bob Diamond.

The ‘shareholder spring’, Cable said, showed that the “status quo” of reluctant investors was beginning to shift.
“More generally,” he said, “the shareholder spring demonstrates that investors have the will to act asresponsible, long-term owners, securing better returns on investments and making a positive difference to the companies they own.”

Cable’s comments come as the government has initiated a series of reforms designed to give more power to shareholders. He said: “It is now up to you to use them.”

“Investors have the will to act as responsible, long-term owners”

In a separate development, the government announced that an independent Institute for Employee Ownership would be established, in response to a report it commissioned from Graeme Nuttall, a partner at European law firm Field Fisher Waterhouse.

And the London Stock Exchange said it plans to introduce a new FTSE Employee Share Ownership Index as a “fully fledged benchmark”.

The exchange’s CEO Xavier Rolet said the new index would “help raise awareness of how significant employee equity ownership can be advantageous for both companies and employees.” Cable speech