On 25 October 2010, the Department for Business Innovation & Skills (BIS) published a consultation paper entitled 'A long-term focus for corporate Britain'. This paper was issued following concerns that had been expressed by commentators that the UK capital markets were increasingly focused on the short-term and that this may be having a detrimental effect on their efficiency (and accordingly on investment returns). The consultation seeks evidence on the existence of short-termism and of market failures in UK capital markets in order to identify whether the system in which UK companies and their shareholders interact promotes or undermines long-term growth.
The main areas on which the consultation seeks views include:
- Board of directors – Do UK boards of directors have a long-term focus?
- Shareholders and their role in equity markets – What are the implications of the changing nature of UK share ownership for corporate governance and equity markets? Is short-termism in equity markets a problem and, if so, how should it be addressed? What action, if any, should be taken to encourage a long-term focus in UK equity investment decisions?
- Directors' remuneration – What are the main reasons for the increase in directors' remuneration over recent years? Are shareholders effective in holding companies to account over pay?
- Takeovers – Do boards understand the long-term implications of takeovers and communicate the long-term implications of bids effectively?
The consultation remains open for responses until 14 January 2011.
View the BIS consultation paper (38 page pdf).