The findings of the Kay Review, which called for a change in the culture of the UK’s equity markets, including an end to rewarding short-term performance, have been welcomed by ACCA (the Association of Chartered Certified Accountants).
Professor Kay has called for wide ranging reforms to encourage a more long-termist business environment, including paying executives’ long-term incentives in shares which do not become available to them until after they have left the company.
ACCA especially welcomes Professor Kay’s focus on the restoration of trust and confidence in the investment chain, and the recommendations relating to the application of standards of fiduciary care on the part of asset managers who handle enormous sums of money on behalf of others.
John Davies, head of technical at ACCA said: 'ACCA supports the thrust of Professor Kay’s recommendations. If we are to generate a sustainable, long-term approach in UK business, we need to address not only the factors which, intentionally or otherwise, incentivise excessively short-termist corporate behaviour, but the whole issue of the relationship framework between asset managers, beneficiaries, and investee companies. A healthy system of corporate governance needs to be based on a foundation of engaged ownership, but at present, this dimension is too often absent.’
The report, which found that the corporate sector was too heavily geared towards rewarding traders and middle men and was not focused enough on long-term investment and providing returns to shareholders and which questioned the need for bonuses in the City, took on board a number of suggestions made by ACCA, which was consulted as part of the review.
ACCA had told the review that 'small incremental changes to a code here or a piece of regulation there will not be sufficient. More radical change is needed.'