FRC Supports Cable Over Short Term Economic Agenda
Decision of business secretary Vince Cable, to introduce review of corporate governance of UK and the economic short-termism has been welcomed by the Financial Reporting Council (FRC).
It is for the first time that the recently published revised edition of UK Corporate Governance Code and the UK Stewardship Code by FRC has brought in the responsibilities of shareholders towards the companies they own.
Cable, in his speech to the Liberal Democrat conference in Liverpool, said that the government would review rules on corporate pay, takeovers and better shareholder engagement.
The chief executive of FRC, Stephen Haddrill said that the review offers a significant opportunity in order to build on the potency of the current system and set up a regime that truly services investors as well as interest of public.
He further added that the primary motive of corporate governance is to encourage tactful and discreet management together with effective entrepreneurial so that long-term success can be delivered. He also supports the minister’s focus on both tackling and encouraging short-termism and shareholder responsibility respectively.
In addition to that he also expressed the hope that the UK Stewardship Code will assist in fostering a better bonding between investors and company boards. Such a dialogue is necessary in order to enhance the quality of corporate governance and long-term performance of the company.
A sort of controversy cropped up when Cable alleged that the corporate world is ‘murky’ and denoted the capitalist system ‘tainted’.
In view of the harsh words used by Cable, the Director-general of the Confederation of British Industry, Richard Lambert responded that Mr. Cable has insensitive words to use for the capitalist system; therefore it would be interesting to take note of his ideas for an alternative.