By Sarah Mortimer
LONDON Nov 22 UK Business Secretary Vince Cable
will renew calls to boost scrutiny of companies in a bid to rein
in reckless behaviour, avoid another crisis and bring back trust
in financial markets.
Cable wants to increase regulation to rein in executive pay
schemes and change the way company directors measure their
performance by scrapping quarterly reporting, he told
institutional investors at the Association of Pension Funds
(NAPF) Corporate Governance Conference on Thursday.
The business secretary submitted a written ministerial
statement to Parliament supporting proposals for new governance
standards by the Kay Report to get rid of short-term
profit-seeking in equity markets
The Kay Review of UK Equity Markets and Long-Term Decision
Making was commissioned by 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 government is pushing through legislation to allow
shareholders a binding vote on pay policy for first time, and
wants the EU to change compulsory quarterly reporting, which
Cable says distorts the way companies measure performance.
"Managing a company through 90-day intervals and on
expectations for the next quarter can be quite harmful," said
Simon Wong, a partner at activist firm Governance for Owners.
"There needs to be a drive to change the way asset owners
such as pension funds look at the performance of their asset
Cable also backed the Kay Report's call for the creation of
a new institutional investors' forum to help shareholders engage
better with companies.
Pension funds, fund managers and companies need to push for
a change in the culture of the financial markets, which still
produce examples of "irresponsible capitalism", Cable said.
He referred to Starbucks avoiding paying UK, UBS
trader Kweku Adobli, who was jailed for seven years after
gambling $2.3 billion of the bank's money, and the sale of
unnecessary and unasked-for Payment Protection Insurance to
Pension funds were criticised after the financial crisis for
not demanding greater accountability through their fund managers
from the companies they invest in - particularly banks.
Cable said he believed most companies played by the rules.
"But like many people (I) share a sense of dismay about some
recent behaviour," he said. "Our task is to reform the system,
bring about a restoration of trust so the system can work