The forum was one of the recommendations of Professor Kay in his review of the UK equity market in 2012 (the “Kay Review”).  The ‘Kay Review of UK Equity markets and long-term decision making’, published in July 2012, sought to address the issue of short-termism in the equity market.  The review concluded: 

Short-termism is a problem in UK equity markets, and that the principal causes are the decline of trust and the misalignment of incentives throughout the equity investment chain.   

Professor Kay’s investor forum recommendation was aimed at facilitating collective engagement to the benefit of the equity market and UK businesses. 

The Collective Engagement Working Group (established by the Association of British Insurers (ABI), the Investment Management Association (IMA) and the National Association of Pension Funds (NAPF) anticipate that the forum will complement existing “individual and collective engagement mechanisms” that are already in place and which, in their opinion, already “work well”.  They comment that the forum will identify how investors can “extend their ability and effectiveness to work together in their engagement with companies”.  It will be open to a wide range of investors, providing the opportunity for overseas investors to participate. 

It is hoped that this collective engagement will help to promote long-term strategic thinking on behalf of asset owners, asset managers and companies enabling them to create “sustainable wealth” for stakeholders.  

One feature of the forum will be to operate “Engagement Action Groups”, managed by a secretariat, to “address and resolve issues of concern when they arise at major listed companies".  To further promote long-term performance, The Collective Engagement Working Group recommend that major listed companies hold an annual strategy meeting or equivalent with institutional investors outside of the Annual General Meeting.  This meeting will inform investors of the company strategy and “link governance to the company’s long-term strategy without the focus on short-term results”. 

Click for:

• Press release (including link to The Collective Engagement Working Group report and recommendations (link to IMA website).
• Our previous UK Accounting Plus news item on the Kay Review recommendations.
• Our previous UK Accounting Plus news item on the government’s response to the Kay Review recommendations.