Great Britain: government attacks the “short-termism” of corporate governance

Tackle “short-termism.”  A consultation on the review of corporate governance was launched on October 25th, which will end on January 14, 2011.  The goal is to investigate markets, notably the growing importance of short-term views that negatively impact their efficiency and therefore return on investment.  It will also analyze the strategies of corporate managers and of the people managing assets, who sometimes have different interests than shareholders.  The consultation also asks about managers’ remuneration: why is it increasing? “Chief executives’ total remuneration rose by 14 per cent per year over the 10 years from 1999-2009” Cable pointed out.  “Compare this with average earnings growth of 4 per cent.  So perhaps it is time to return to Earth.”  Please remember that the corporate governance code was amended in May (see our dispatch No. 100439) in order to increase boards’ responsibility towards shareholders.  However, there’s still a lot to do to “moralize” the business world even further.  Cable thinks the best solution will come from the businesses themselves.  Therefore, he encourages managers, shareholders and other investors to take part in this consultation.