Reputation in Oil, Gas and Mining 2014: Communicating on corporate ethics
Uksif reputation in financial services 22 jan2013
1. Taking the Long View
Penny Shepherd MBE, Chief Executive
Reputation in Financial Services
22 January 2013
@UKSIF @NEIW13 @PennyShepherdUK
2. UKSIF welcomes Government’s Response
to the Kay Review
“The Kay Review could become
as influential over time as the
1992 Cadbury report on
Corporate Governance”
4. Where shall we start?
“I do not apologise for being correctly quoted as saying that while the financial services
industry performs many economically vital functions, and will continue to play a large
and important role in London’s economy, some financial activities which proliferated
over the last ten years were ‘socially useless’, and some parts of the system were
swollen beyond their optimal size.
“not all financial innovation is valuable, not all trading plays a useful role, and that a
bigger financial system is not necessarily a better one.
“parts of the financial services industries need to reflect deeply on their role in the
economy, and to recommit to a focus on their essential social and economic functions,
if they are to regain public trust.
Adair Turner
Mansion House Speech 2009
5. Socially Useful Financial Services
Support for “Real Economy” Transactions
Risk Mitigation & Pooling
Capital Allocation
6. Kay Review of UK Equity Markets and
Long-Term Decision-Making
Independent Review
for BIS
July 2012
“It is especially urgent that we work out
how the equity investment regime can be
recalibrated to support the long-term
interests of companies as well as
underlying beneficiaries, such as pension
fund members.”
Business Secretary Rt Hon Vince
Cable MP launching the Kay Review
7. Professor Kay’s Analysis
• Short-termism is a problem in UK
equity markets
• Causes:
– Decline of trust
– Misalignment of incentives throughout
the investment chain
8. His Way Forward
• Restore relationships of trust and confidence
• Diminish role of trading and transactional cultures
• Improve investor stewardship
• Shift to market structures that create appropriate
incentives rather than countering inappropriate
incentives through detailed rules of conduct
• Tackle misaligned incentives
• Reduce pressures for short-term decision making
10 Principles
and
17 Recommendations
9. His Recommendations
Include:
• Good Practice Statements / Enhancements to
Stewardship Code / Fiduciary Behaviour
• Investors’ Forum
• End to quarterly earnings reporting
• Disclosure of investment-related costs
• An independent review of metrics and models
• Improved remuneration: company directors and
asset managers
10. Ensuring Equity Markets support Long-Term Growth:
The Government Response
• Accepted analysis & conclusions
• Endorsed the ten principles
– Supported directions for market participants
– Will explore directions for regulatory policy
• Responded to the seventeen
recommendations
• Progress Update: Summer 2014
11. Industry Reactions
Version A Version B
1. Support the analysis
2. Not so sure about
the detailed
recommendations
12. Industry Reactions
“... the recommendations are underwhelming. Of
the 17 proposals (aimed in the main at issuers
and investors), few have substance and some
call for further reviews — it is a review calling
for more reviews ...not direct action that would
break the 30-year history of mutually
supportive, non-self-interrogatory locked-in
agendas for the media, money, and power
circles ... there is no catalyst here for restoring
trust.”
Clare Fargeot, CFA Institute (EMEA Region)
on CFA Institute blog, August 2012
13. As influential as Cadbury?
“Many boards at the time had too much of
the flavour of a club, with collegiality
taking precedence over constructive
questioning and challenge....
“While support for the Code was extremely
heartening, there naturally were criticisms.
Some considered that it would fetter
enterprise, others that it had no teeth. ...
“What was striking was how quickly and
how widely companies accepted the Code’s
recommendations. ..
“I believe that in that short space of time
[since 1992] boardroom effectiveness in
this country has been transformed. ..
Sir Adrian Cadbury, 2012
