Vince Cable announces a review into corporate governance and economic short-termism.
Dr Cable said the aim of the review was to put responsible shareholders back in the driving seat of the UK economy:
“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.
“Short-termism and shareholder disengagement are an increasing problem for our economy. Short-term investors and financial gamblers value a quick buck above all else, for example, by driving company boards into accepting takeover bids that make no economic sense.
“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.”
The Government will launch a comprehensive consultation in the autumn. Areas it may cover include:
- What drives market short-termism?
- Do boards set out their long-term objectives sufficiently clearly?
- How can we encourage shareholders to become more engaged in the company’s future?
- Do shareholders have sufficient opportunity to vote on takeover bids?
- Do target boards do enough to consider whether the bid represents value for their shareholders in the long-term?
- Does the way in which directors are paid unduly encourage takeover activity?