Are you a commitment-phobe investor?
Setting a time limit on shares that carry voting rights is just one of many ideas put forward
Vince Cable is not short on bugbears. In his relatively short time in the cabinet, he has variously targeted executive pay, bankers' bonuses, bank lending and Rupert Murdoch's business empire.
And while the business secretary has attracted criticism for his crusades, the latest issue to come under his focus is indeed one that has troubled many City observers – short-termism. Cable is concerned at how companies pursue long term value creation in an environment of short term speculation and poor investor engagement. His ire was aroused early in the life of the coalition.
In 2011 he said: "Britain needs long-term investment. Our ageing society needs a safe way to fund a growing pension bill. It is especially urgent that we work out how the equity investment regime can be recalibrated to support the long-term interests of companies as well as underlying beneficiaries, such as pension fund members."
Cable has made it a priority to tackle what he sees as the broken nature of the capital markets. The growing distance between companies and their shareholders, the dislocation of boards from those they are meant to represent, and the perception that stewardship – enlightened, engaged self-interest from shareholders that should lead to better long-term performance – is ebbing away.
Cable isn't alone in his concerns. Even Al Gore, the best president the US never had (according to his supporters at least) has weighed in. "Some of the ways in which [capitalism] is now practised do not incorporate sufficient regard for its impact on people, society and the planet.
"Capitalism in its current form is creating and fostering numerous challenges, not least short-termism, over-reliance on GDP growth as a primary metric of prosperity, rising inequality, increasing volatility in the global financial market, and growing contributions to the climate crisis," Gore continues.
In response to this, Cable set up the Kay Review to look into the issues surrounding the capital markets. In early Marcy, John Kay, a respected British economist, published his interim report.
Quarterly reporting, which for many has contributed to a growth in an obsession with short-term bumps to results, comes in for particular criticism with the review strengthening the growing calls for an end to mandatory quarterly reports. Unilever stopped issuing quarterly reports in 2009, and Kay believes extending that across the market will allow companies to return to a long-term aims.
For example, Standard Life investors group told the Kay Review board that "the noise – positive or negative – arising in response to quarterly interim management statements is an unwelcome distraction in the context of encouraging boards to focus on the long term development of the business".
Indeed, Unilever CEO Paul Polman even went as far as saying he only wanted investors who were interested in the long term growth of the business. "If you buy into this long-term, value-creation model, which is equitable, which is shared, which is sustainable, then come and invest with us," he said. "If you don't buy into this, I respect you as a human being, but don't put your money in our company."
And it seems that the events of 2007 to 2009 have led even the staunchest advocates of laissez-faire economics to rethink their beliefs. The Institute of Directors, hardly a bastion of interventionism, recognised the problem telling the Kay Review it believed "The investment strategy of a significant proportion of fund managers is oriented towards share trading rather than long-term company ownership."
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