UK Government Response to the Kay Review of UK Equity Markets and Long–term Decision Making

04 November 2013

The Kay Review's goal was to shift the culture of equity markets to promote a longer-term outlook in UK equity markets and enable UK companies to deliver sustainable economic growth.

In the 12 years since the Myners Review, little has changed in the role and actions of institutional shareholders. The recommendations and findings of the Kay Review cannot be ignored or diluted as we have heard the Myners Review was. The similarities between the remit of the Kay review and that of the Myners Review demonstrate that little progress has been made to reform the sector. It is therefore critical that they do not share a similar fate. The Government must play an active role to drive reform on implementation of Professor Kay’s recommendations.

Professor Kay’s findings and proposals must not be ‘kicked into the long grass’ by the Government or the industry. Professor Kay’s specific recommendations need to be acted on and we will hold those responsible to account. Where Professor Kay has provided overarching principles these need to be turned into actions. The Secretary of State has assured us that there is an appetite for change in the Government and we have heard that this is mirrored in the industry. Therefore, there can be no excuse for inaction by either the Government or the industry.

The UK government sympathises with Professor Kay and the Secretary of State’s concerns that overprescription and formal legislation risk alienating the UK equity market in a global environment, providing false security through ‘tick-boxing’ and distorting the effective operation of the market. However, we have yet to be convinced that all of the major players in the institutional investment sector are committed to significant voluntary reform.

The UK government agrees that the industry should be given a chance to change of its own volition but the experience of the Myners Review does not fill us with confidence. A cultural change will not happen without a catalyst. Ministers must be willing, and seen to be willing, to pick up a ‘regulatory stick’ should progress stall. We reiterate our recommendations that the Government has to set out a timetable for reform which includes the following for every one of Professor Kay’s recommendations:

• a clear measure of success for the recommendation (the target);
• who is responsible for achieving the target;
• a clear deadline by which the target needs to be achieved; and
• the action that the Government will take if the target is not achieved.

Full document

© UK Parliament