The proposals, which come in the interim report on investment in UK equity markets by Professor John Kay, include changing from mandatory quarterly reporting for companies, increased protection against hostile takeovers, with extra powers for long-term shareholders and a change from quarterly reporting.
Kay‘s final report will be presented to the Secretary of State for Business in the summer.
The review’s principal focus is to ask how well equity markets are achieving their core purposes: to enhance the performance of UK companies by facilitating investment and enabling effective governance; and to enable investors to benefit from this corporate activity through returns from equity investment.
It is examining the incentives, motivations and timescales of all participants in the equity markets – from end investors, through pension funds, advisers, fund managers, and the markets, to company boards.
Largely, Kay has focused on the theme of responsible capitalism in the interim report.
He discusses various measures to enable a rejection to a takeover bid if it isn’t in the interests of the company itself, and argues for restraints on short selling trades.
In the report he says that there is a widespread view that "while it was once the case that shareholding was dominated by large UK institutions which were likely to have long-term stakes in both the acquirer and the company potentially to be acquired, and could therefore take a view of the merits of the transaction as a whole, this was no longer true.
“In some recent transactions a large proportion of shares in the target company had been owned by arbitrageurs whose only interest was in a rapid, profitable exit."
Cable commissioned Kay to undertake the review in June last year. Kay then appointed three city figures – Sir John Rose, James Anderson and Chris Hitchen – to form an advisory board.
The full interim report can be read here
Interested parties with additional evidence relevant to the Review can make a submission to the secretariat by email to: firstname.lastname@example.org.
The deadline for receiving further submissions is Friday 27 April 2012.