UK to review governance regime to favour “responsible shareholders”

Government announces “comprehensive review”

UK Business Secretary, Vince Cable, has announced a “comprehensive review” into corporate governance and short-termism this autumn in a bid, he said, to put responsible shareholders “back in the driving seat”.
“We will look at the economic impact of takeovers, shareholder responsibility, corporate incentives and pay – all the factors that can help us build a framework founded on long-term economic logic,” said an announcement from Cable’s Department for Business, Innovation and Skills. It added: “We need shareholders that act like long-term owners, alive to the risks of instability and the broader consequences of how the companies they own behave. We aim to put responsible shareholders back in the driving seat of our economy.” There were few further details, and the disclosure was overshadowed by a furore over Cable’s speech to the annual conference of his Liberal Democrat party, thejunior partner in the coalition government, where he created headlines by severely criticising bankers’ pay. Cable told the conference: “I am shining a harsh light into the murky world of corporate behaviour.”
His comments follow remarks by his LibDem ministerial colleague Ed Davey last week that he welcomed shareholder activism.
Campaigning group FairPensions said Cable’s comments should be welcomed but pointed out that shareholders lack the necessary tools to be active owners because they have limited access to the necessary data from companies about forward-looking risks. It added that the proposed reinstatement of the Operating and Financial Review (OFR), as part of Cable’s department, was an opportunity to ensure that companies’ reporting of ‘extra-financial’ issues improved materially.