The Kay Review of UK equity markets and long-term decision-making recommended that “an investors’ forum should be established to facilitate collective engagements by UK investors in UK companies”.
A Collective Engagement Working Group was formed, and concluded that the Investor Forum should be established.
The Investor Forum was established as a not-for- profit member organisation. Simon Fraser and Andy Griffiths were appointed as Chairman and Executive Director respectively.
The focus of the first year was identifying a membership base, and proving the concept for the collective engagement model. Four full engagements were completed: Standard Chartered plc, Tate & Lyle plc, Rolls Royce plc and Sports Direct plc.
The “Collective Engagement Framework” was published, with support from a panel of legal advisers. The founding 20 asset managers and asset owners committed financial support for a period of three years, and total Membership grew to 33. Three full engagements were reported: Cobham plc, Mitie Group plc, and Royal Dutch Shell plc. The Forum collaborated with EY in a project to Improve the Reporting of Long-Term Value.
Membership increased to 35. Seven full engagements were reported, including BT Group plc, London Stock Exchange plc, Rio Tinto plc and Worldpay plc. Significant projects in the year including Working Practices in the Apparel Sector and the BankingFutures Pathway to Long-term Value.
Member numbers grew to 43. Six full engagements were reported, including Centrica plc, Reckitt Benckiser plc, Shire plc and Unilever plc. Projects in the year including Working Practices in the Food Sector and ADR Voting Practices.
Membership reached 50 and the founding members all renewed their support. Six full engagements are reported in this Review, including First Group plc, Imperial Brands plc and Vodafone plc. Projects this year include The Four Dialogues, Working Practices in the Construction Sector and Setting Standards to address Marine Plastic Pollution. An update to the Collective Engagement Framework was published in September 2019.
Kay Review obstacles to long-term engagement:
- A decline of trust and misalignment of incentives throughout the equity investment chain.
- Fragmentation has reduced the incentives for engagement and the level of control.
- Internationalisation of ownership with 54% of UK market now owned by international investors.
- Perceived regulatory barriers inhibit collective engagement.
- A narrow engagement focus has crowded out discussion on fundamental drivers of long-term strategy and operational execution.
Taken together, this has contributed to an industry structure which too often favours exit over voice.