UK sets up panel to recommend ways to end 'short-termism'

Now that it has collected the testimony, it's time to get an interpretation. The UK Department of Business, Innovation and Skills has asked a prominent public economist to make sense of the evidence concerning the barriers companies face to taking a long-term view of their future, or in the language of the department: "to examine investment in UK equity markets and its impact on the long-term performance and governance of UK quoted companies". John Kay, best known as a columnist for the Financial Times newspaper, has been asked to review responses to the consultation the government conducted in late 2010 and the early weeks of 2011. Kay will produce an interim report by February and then a final report by July. Expect government action thereafter. Or perhaps government inaction in the face of an intractable problem.

Kay is a noted proponent of what's often called "long-termism", and therefore something of a sceptic about the way that institutional investment has come to colour the nature of corporate governance. Many collective investments turn over their portfolio every two years or so. Increasingly fund managers are evaluated – for their own remuneration, as well as by end-investor decisions on where to place their money – on quarterly fund-performance statistics. Combined with the growth of algorithmic trading and the prominence of hedge funds in the mix of equity holders on any given day, and any notion of shareholder primary in corporate decision-making is almost certain to bend towards a short-term orientation.

Source document: The government update has links to the original consultation and the list of responses.