Ownership & Governance
Lord Myners is once again on interesting form, as Tom notes:
He suggests that Walker hasn’t gone far enough (!) and floats the idea that there could be differential voting rights for shareholders, with those in it for the long term having more influence. This latter argument will be controversial with some investors, who are very attached to the principle of ‘one share, one vote’. But the EU looked at this issue and found now evidence that one share one vote leads to better outcomes. And if such a reform did lead to a more long-term approach on the part of least some big investors, maybe it is a principle worth conceding.
I’m with Tom on this second reform. We need to find a way of incentivising longer term ownership. A tax credit for dividends from stocks held for, say, over one year is one solution. A rise in stamp duty on share transactions is another. Not only would this, hopefully, increase holding periods and shareholder engagement, it would also reduce trading levels and hence lower costs.