Thursday, 16 September 2010

UK: governance reforms - a view from Government

Edward Davey MP, the Department for Business, Innovation and Skills minister with responsibility for corporate governance, delivered a speech yesterday at the ABI Investment Conference: see here. Mr Davey spoke about the Stewardship Code, shareholder empowerment, regulation and takeovers and short-termism. His speech provides a useful overview of the Government's current work in these areas.

Mr Davey observed that owning shares should be seen as a "responsibility" and "companies need to empower shareholders – big and small – by providing the information they need to act as effective stewards". With regard to takeovers, he noted:

... we want the takeover process to be more transparent. Directors to think about their long-term legal duties. Takeovers to be decided on the basis of long term shareholder value, not short-term speculation. And we want all shareholders to be empowered to influence the outcome. So we are committed to reviewing the factors that can be considered by regulators when takeovers are proposed. And which aspects of the framework could be tightened up. These might include higher merger fees. Or a pre-notification requirement for some deals, like those that exist in many other European jurisdictions.

The Takeover Panel has been looking at the way takeover rules operate as part of its review [see here, pdf]. The Government will set out its thinking later this year [and] we will be focusing on three key questions. Do takeovers make economic sense for the bidders? Do target boards too often act as if their sole responsibility is to get the highest price? And are takeover bids decided by investors with short-term horizons?"

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