Kay Review of Equity Markets and Long-Term Decision Making – 23 July 2012

The Kay Review of UK Equity Markets – commissioned by Vince Cable – was published on Monday. It is a welcome document – recommending what I can only term ‘a strong dose of common sense’  for the UK Equity food chain and the City.

At 133 pages this is a lengthy report  – but I would at least recommend anyone who  ‘talks equities’ with clients to listen to the RSA hosted launch event as a starter…

Audio:  http://www.thersa.org/events/audio-and-past-events/2012/reforming-equity-markets-to-support-corporate-performance

Report: http://www.bis.gov.uk/news/topstories/2012/Jul/kay-review

To my mind some of the more welcome ‘top level’ messages were:

  • Higher standards of stewardship and more longer term thinking are long overdue – and  will help address the lack of trust in the system
  • Financial markets exist to serve their users (companies and investors) not financial services employees
  • Improvements will not come with additional legislation and regulation – an improved ethos is needed

Working in SRI I have, on occasions, seen some excellent ‘behind the scenes’ work’ in this area. Yet these experiences have
regularly left me wondering how it can be that so much goes unnoticed or unchallenged.  It has also sometimes left me wondering why.

For anyone who has questioned why end investors appear to get a raw deal all too often – or have felt that there is something fundamentally wrong – the report contains many interesting recommendations.  Some could also perhaps usefully
be ‘passed up (or along!) the food chain’ by advisers of a certain mindset…

I hope the report is well received and that the investment community sees it as a useful contribution to the (re)building plan
that is so clearly needed.  For financial advisers it seems that although this is rather ‘big picture’ – it is very relevant for clients who want to encourage positive change and may be thinking about ‘Responsible Engagement’  SRI options.

For those fund managers who carry out ‘responsible engagement’ I hope it is seen both as something of a ‘pat on the back’ and, more importantly, a ‘call to action.’  If ever there were a time to shout about (and encourage) their work it must be now.

So whilst we may all be looking forward to enjoying a dash of Olympic fever of the next fortnight or so let’s hope the financial community turns its attention to this even more ambitious challenge soon after!

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