UK's IMA starts talks on new investor body

LONDON Thu Nov 22, 2012 12:07pm EST

LONDON Nov 22 (Reuters) - The UK's fund management trade body has taken the first steps to set up a forum to improve relations with UK companies, putting into practice a report this summer aimed at preventing a Barclays-style board implosion.

The Investment Management Association (IMA), trade body for the UK's 4.2 trillion pounds ($6.7 trillion) asset management sector, is assessing support among institutional investors for a forum as proposed by July's government-backed Kay Review.

Economist John Kay's report said fund investors could improve returns to savers if they engaged collectively with company boards rather than individually.

The new forum will aim to let investors see if other shareholders support their calls for change at companies and to promote longer-term decision-making by company management, the IMA said.

The Kay Review of UK Equity Markets and Long-Term Decision Making was commissioned by Business Secretary Vince Cable in response to the takeover of confectioner Cadbury by U.S. rival Kraft Foods, which critics said was driven by short-term investors seeking a quick reward.

The drive to improve relations between companies and shareholders comes after an investor backlash earlier this year, dubbed the "shareholder spring", which cost the jobs of executives such as Aviva boss Andrew Moss and Sly Bailey, head of newspaper group Trinity Mirror.

When publishing his review John Kay also highlighted Barclays as a "classic illustration" where collective engagement would have ensured a more orderly transition for the board after the bank lost its top three executives in the fallout from the Libor rate-rigging scandal.

"This is the beginning of a process. Interest has been expressed but we don't know how widespread it is yet," said an IMA spokeswoman.

The IMA said it hopes to include all types of shareholders, including foreign investors and sovereign wealth funds.

"Whilst it is always the right of an investor to sell shares, for those who choose or who have to hold shares, high quality engagement can play a role in better outcomes. In turn, principled collective action could be effective when engagement fails," said IMA CEO-designate Daniel Godfrey.

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