Mr D A Walker, an Executive Director of the Bank, discusses the implications for British industry of the changes taking place in the capital markets and, in particular, an intensification of pressures causing the markets to be influenced by short-term considerations. While accepting that the sharper attention of institutional investors to short-term performance has brought some positive results, he argues that the need for long-term commitments and investment strategy in industry requires an ability to take longer-term views in boardrooms and confidence that institutions are ready to be long-term holders; and offers three possible approaches to mitigating the problem:
- Institutions could agree to set aside part of their UK equity portfolios in respect of which they would deliberately take a longer-term view.
- Company boards could seek to encourage greater shareholder awareness of their longer-term strategy by disclosure of planned spending on innovation to yield new products over a run of years ahead.
- Mergers policy might give more explicit attention, on a discretionary basis, to other considerations as well as the competition criterion in appraisal of merger proposals.
Capital markets and industry - Speech by Mr D A Walker at the Glasgow Finance and Investment Seminar