Government to look into Short Termism
25 October 2010
Vince Cable, Secretary of State for Business has launched a review to consider whether there are failures in corporate governance and the markets. He is calling on company directors, shareholders and other investors to contribute their views.
The review, ‘A Long Term Focus for Corporate Britain’, aims to investigate issues including; the problems of short-termism, investor engagement, directors’ remuneration and – following on from last week’s announcement by the Takeover Panel – the economic case for takeovers. It also asks:
- Do boards understand the long-term implications of takeovers, and communicate the long-term implications of bids effectively?
- What are the implications of the changing nature of UK share ownership for corporate governance and capital markets? Whether disclosure of directors’ pay should be more transparent?
- Do shareholders and investors focus too much on the short-term?
Vince Cable, Business Secretary said:
“The UK has led the world in developing high standards of corporate governance. The first stewardship rules for investors, the first corporate governance framework for companies and the most comprehensive takeover code.
"Now is the time to look to the future and take a wider view on how these can work together. Well functioning capital markets are vital to productivity, growth and the future prosperity of the UK.
"We need to ask ourselves what are the factors influencing short-term decisions, the reasons for the growth of directors’ pay and why economically damaging takeovers still take place? I recognise that the best solutions will come from businesses and that regulation is not the only option. That is why today I am calling on all companies and individuals to put forward their ideas.”
The consultation will run for 12 weeks, until Friday 14th January 2011.
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