Following the financial crisis, the Rt Hon Dr Vince Cable, then Secretary of State for Business, Innovation and Skills commissioned a review of UK equity markets and longterm decision making.
The Kay Review, published in July 2012, identified a number of key obstacles to long-term engagement. It recommended that “an investors’ forum should be established to facilitate collective engagement by investors in UK companies”, as part of a broader focus on promoting stewardship investment.
A Collective Engagement Working Group was formed, with the support of the IMA, the ABI, and the NAPF, to identify how institutional investors could work together to improve sustainable, long-term company performance and overall returns to savers. The Group concluded that the Investor Forum should be established.
Simon Fraser and Andy Griffiths were appointed as Chairman and Executive Director, respectively, and established the company as a Community Interest Company.
The Forum attracted a wide membership, of which roughly one-third was non-UK institutions, in line with the goal of representing international owners. “Proof of concept” was validated as Members began to propose companies for collective engagement.
20 asset managers and asset owners committed financial support to the Forum for a period of three years.
A fee-paying membership model was launched.
The “Collective Engagement Framework” was written and published, with the assistance of a panel of legal advisers.
The “Review 2015-2016” was published, describing the Forum’s first two years of activities.
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.