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Exclusive: Cable To Back Shareholder Group

(c) Sky News 2012

A permanent forum designed to maintain the momentum of Britain's 'shareholder spring' is to be established under plans to be announced next week.

I have learned that a review commissioned by Vince Cable, the Business Secretary, will recommend that a new shareholder group - independent of both Government and the corporate sector - be set up in an effort to encourage longer-term investment decisions.

That forum would be utilised by shareholders who are concerned about governance and other issues, although it would not specifically tackle gripes about executive pay, which Mr Cable recently set out separate measures to address.

The review has been led by John Kay, who was asked by the Government to recommend solutions to a perceived short-termism among stock market investors.

People close to the review say that Professor Kay concludes that equity markets are often dysfunctional in the context of their purpose of facilitating long-term investment decisions and enabling effective corporate governance.

Among the central recommendations in the report, I'm told, is that a new set of fiduciary standards should be applied to asset-holders and others who participate in the investment chain - in other words, those who manage and are stewards of hundreds of billions of pounds-worth of pension funds and other investments.

That would be significant in that it could effectively imbue market participants with a more formal duty of care towards those who entrust them with their money.

Professor Kay has been supported in his work by leading business figures including Sir John Rose, former chief executive of Rolls Royce (LSE: RR.L - news) .

Mr Cable was a critic of the takeover of Cadbury by Kraft Foods (NYSE: KFT - news) , and in particular of the investor short-termism that led many shareholders to offload their holdings to hedge funds, paving the way for the deal to take place.

The Department for Business, Innovation and Skills declined to comment ahead of the publication of Professor Kay's report on Monday.