Wednesday 29 July 2015

UK: 'Who owns the company?' - a speech by Andy Haldane

Andy Haldane, the chief economist at the Bank of England, delivered a speech earlier this year titled Who owns the company? A copy of the speech was published on the Bank's website yesterday, a few days after Mr Haldane's television interview in which he reflected on governance and the role of shareholders: see here or here (pdf).

In his speech, Mr Haldane explored the origins of the public company, identified the potential incentive problems among stakeholders and considered how policy actions could mitigate those problems. He concluded:
Challenges to the shareholder-centric company model are rising, both from within and outside the corporate sector. These criticisms have deep micro-economic roots and thick macro-economic branches. Some incremental change is occurring to trim these branches. But it may be time for a more fundamental re-rooting of company law if we are to tackle these problems at source. The stakes - for companies, the economy and wider society - could scarcely be higher".

Whilst the ideas and criticisms that Mr Haldane identified are not new, it is noteworthy that he should choose to highlight them (making clear that he was not necessarily expressing the views of the Bank or the Monetary Policy Committee). One thing that is missing from his speech, in which he traced the rising dominance of shareholder primacy and briefly considered section 172 of the Companies Act 2006, is the influence of the City Code on Takeovers and Mergers in reinforcing the position of shareholders. 

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