11 April 2016

Blog: What Investors Want from Companies

by Simon Brickles | 11 April 2016

Have you ever wished as a quoted company that investors would tell you what they “really, really want”? Well, the Investment Association has just published an Action Plan for the investor community. Not every quoted company will be as familiar with the Investment Association as fund managers are. So, in case you don’t know, the Investment Association has amalgamated various investor bodies in a new organisation over recent years (some of which many of us did know). The important point is that it now represents fund managers and investors with over £5.5 trillion under management. So its views matter.

Interim CEO of the Investment Association, Guy Sears, helped to bring together a powerful steering group of investors such as senior managers from Old Mutual, Henderson, Allianz, AXA, BlackRock, Standard Life and Schroders. The result is the recently published Investment Association’s “Productivity Action Plan”. Whilst that title may not be something that has you reaching for the download button on your kindle, unlike so many City reports, this one is worthwhile reading.

Working closely with HM Treasury, the Action Plan sets out proposals that should help investors focus on addressing the issues which for so long have been holding up the UK’s longer-term productivity. At the same time it seeks ways to reduce some of the focus on short term issues, which help neither investors nor companies. For example, the action plan raises the question of whether quarterly reporting is too much of a “distraction” and takes away from the need for investors and companies to concentrate on longer term issues. It cites the example of Unilever, which has decided not to publish full quarterly financial results any more, replacing such reports with more general quarterly trading statements. Investor opinions are somewhat divided presently on the merits of full quarterly reporting but the Action Plan cites certain major investors as publicly supporting Unilever’s stance.

There are many other issues which are of concern to investors (and therefore quoted companies) raised by the Action Plan that will be relevant to corporate clients of Capital Access Group. It would not do justice to the Action Plan to try and summarise all of them in this blog but they include working with the FRC on accounting and corporate governance, early engagement with companies seeking to IPO, simplifying remuneration of directors and tying it more closely to performance, better transparency in respect of companies’ capital positions and addressing the systemic bias towards debt rather than equity. My colleagues at Capital Access Group will keep clients informed about such issues as they develop.

In the meantime, both the full action plan and a summary are available on the Investment Association’s website:

http://www.theinvestmentassociation.org/

Incidentally, many will be glad that immediately after the publication of the Action Plan the successful lobbyist Chris Cummings (he of CityUK fame) has been appointed permanent CEO of the Investment Association. However, let us hope that the talents of the cerebral and popular Mr. Sears, who delivered this excellent report as Interim CEO, will continue to bring good sense to the City debates too.