One of the principal recommendations of John’s 2012 review of equity markets was the establishment of an Investor Forum. John joined the Board at the inception of the Forum in 2014 but, with the Forum now firmly established, he has stood down to allow others to take the work forward. In the Forum’s annual report he says:
“One of the principal recommendations of the Kay Review of equity markets was that major institutional investors should organise to work more effectively together through an Investor Forum.
The Forum began work in 2014. In the last two years, it has engaged in quiet diplomacy to contribute to change at about a dozen large British companies, judging – correctly in my view – that shareholders can best bring about improvements in strategy and governance by private persuasion rather than through a megaphone. I agreed to become a member of the initial Board for two years while the Forum was established.
Asset managers working together can make a real contribution to improving the performance of British business, and assist management and Boards in doing their jobs and fulfilling their duties. The duty of the directors of a company in Britain is to promote the success of the company for the benefit of the members. Shareholder value is the product of the success of the company, not the goal in itself.
The success of a company is necessarily multi-dimensional. A successful company is one that meets the needs of its customers, rewards its employees – both financially and by allowing them to take pride in what they do, makes a contribution to the wider communities in which it operates, and in doing so earns sustainable long term returns for investors. The task of the corporate executive is not to maximise anything, but to steer the business on a course which over time achieves all these goals, because only through achievement of all these goals can that business survive in the long term.
The proximate accountability of corporate executives is to shareholders. Share ownership in Britain is unusually fragmented and in consequence such accountability is often best exercised collectively. Further, because a group of large asset managers together enjoy effective control over a majority of UK listed equity holdings, that group has a shared responsibility to restrain excess and review missteps – to help address some of the issues which have recently eroded the legitimacy of the UK corporate sector. and promote a business community that works for all stakeholders. A long-term constructive and consistent dialogue between shareholders and company boards is critical for business and ultimately economic success.
The Investor Forum has worked hard to establish a strong foundation, and I look forward to watching it establish itself as a truly effective model to bring about change and amplify the shareholder voice.”