A group of the biggest FTSE 100 shareholders have asked the UK’s largest blue-chip firms to stop producing quarterly updates, as part of a larger move to change the way stakeholders interact with companies.
The request is included in a report published by the Investment Association (IA), whose members own approximately one third of the companies that make up the FTSE 100, titled ‘Supporting UK productivity with long-term investment’. It sets out a number of changes designed to make UK companies pay more attention to their long-term strategy.
Under the banner of ‘enhancing company reporting for efficient capital allocation’, the IA will also ask UK companies for clearer measures of long-term performance and call for increased investment in forward-looking research. Other areas highlighted by the association include improved reporting on capital management and non-financial factors, including human capital and sustainability issues.
Though a few of the country’s largest firms, including Unilever, Diageo and Legal & General, have already stopped producing quarterly reports, most continue to make three-monthly disclosures.
These new tenets for improved reporting feed into 11 action points designed to open up perceived barriers to long-term investment, and to sketch out how the UK capital markets can help businesses to drive sustainable returns. Further areas targeted for improvement include enhanced investor stewardship and engagement, strengthening behavioral incentives, and overcoming tax and regulatory impediments to creating long-term value.
Guy Sears, interim chief executive at the IA, advises in the report that long-termism is not necessarily a blind approach. ‘Asset managers have to act in the best interests of their clients,’ he explains. ‘These best interests may sometimes result in actions that appear to be short term, demanding change from companies or opposing management strategies, but are actually in the long-term interests of the end-client. Many of the recommendations are designed to improve the flow of information and feedback on the issues that are likely to matter most.’
The IA makes a series of actual recommendations alongside its guidelines, and pledges to measure and report on its success every six months in order to outline progress and development.
The group has already been working closely with UK chancellor George Osborne, after contacting him following last year’s budget, and will update him on the success of the program on the first and third anniversary of its launch.
