The investor forum envisaged in last year’s Kay Review of UK equity markets and long-term decision-making will be up and running by next June, according to the group tasked with putting the review’s ideas into practice.
The aim of the forum is to find out how investors might be able to work with listed companies to improve sustainable performance, as well as overall returns to end savers, the Collective Engagement Working Group said in its report launched today.
James Anderson, partner at Baillie Gifford and chair of the working group, said: “We insist that improvements in the collective engagement process are not a chimera.”
They are feasible, he said, with consistent and long-lasting effort.
The working group was formed in April in response to the Kay Review’s recommendations, and supported by the Association of British Insurers (ABI), the Investment Management Association (IMA) and the National Association of Pension Funds (NAPF).
“The investor forum we have announced today will drive cultural change and act as a mechanism for investors to work together more effectively when there are issues at particular companies that have not been resolved by conventional engagement,” Anderson said.
The forum will have its own secretariat to progress its aims and manage engagement action groups, the working group said.
These action groups will be open to overseas investors as well as traditional UK investors, and are meant to solve problems arising at major UK listed companies, it said.
Funding for the forum has been secured for at least two years from investors and trade associations.
Among its conclusions, the working group said cultural change was needed.
“Asset owners, asset managers and companies need to develop a shared sense of partnership, with the objective of promoting long-term strategies for prolonged competitive advantage at companies – leading to sustainable wealth creation for all stakeholders,” it said.
Major listed companies should hold an annual strategy meeting for institutional investors outside the results cycle, it said.
At these meetings, investors and company executives will be able to link governance to the company’s long-term strategy without the focus on short-term results, it said.
The group also said engagement on governance issues should be integrated into the investment process.
Vince Cable, secretary of state for Business, Innovation and Skills, welcomed the report and creation of an investor forum.
“We now need to see immediate and concrete action to make the forum a reality,” he said.
Prominent UK economist John Kay, who chaired the original review, said the forum had been central to his recommendations.
Glen Moreno, chairman of Pearson and deputy chairman of the Financial Reporting Council, described the approach as constructive and helpful.
“It provides a practical mechanism for managing the engagement process, particularly with foreign investors,” he said, adding that the annual strategy and governance meetings could help form effective engagement between institutional investors and company boards.
The IMA, NAPF, ABI also expressed their support for the new forum.