To me, the advantages of such a proposal have been manifest since this column first appeared in 1998. In the first place it would discourage short-termism. In the second it would promote the concept that business success generally takes many years to measure and that what seems a good move at the time can later turn out to be nothing of the sort, or worse. Thirdly, it would ensure that senior executives would do their best to leave their companies in good shape and good hands.
Nevertheless, I have held back from promoting this idea in this column. A shred of credibility is a useful accoutrement for a columnist. Why burn it to ashes? It would be as if a sports commentator suggested that professionals should be excluded from the Olympic Games.
Professor John Kay is clearly made of sounder stuff than me (or perhaps he just has a much bigger stock of credibility). Professor Kay has just published his review of whether there is too much short-termism in UK business generally and the UK financial services sector in particular. This was commissioned by Vince Cable. Professor Kay recommends that: "Long-term performance incentives should be provided only in the form of company shares to be held at least until after the executive has retired from the business."
This is one of 17 recommendations and others are equally radical. Pay fund managers on the same basis as above. Scrap quarterly reporting. Set up an investors' forum with its own secretariat to promote collective engagement by shareholders with companies. Require everybody in the investment industry at all times to put clients' interests ahead of their own… where would that lead? I hardly need to say that I am right behind all these recommendations too. At any rate in spirit.
And yet as I look on in open-mouthed admiration, my doppelgänger - the one that held me back from promoting this kind of stuff - giggles hilariously. Professor Kay's routemap is the Yellow Brick Road. Obviously, he was not troubled by the prospect of the government filing his report straight in the bin. Would it not have been better to have held back on the really radical ideas so that the disbelief with which they were received did not compromise by association the ideas that might have had a chance of being implemented? How about a bit of real tarmac?
The Kay Review is of course merely the latest in a succession of reports dealing with various aspects of UK business and financial practice going back at least as far as the Cadbury Report of 1992. They have all been dissatisfied with what they beheld. Between them they have nudged UK business and finance away from its wildest indiscretions. Yet 20 years on, investors are poorer while corporate executives and financial practitioners are vastly and inexcusably richer. Perhaps this is what inspired John Kay not to hold back.
Whatever his thinking, the opportunity now passes to Dr Cable and the government. And of course to a lot of purely tactical political considerations that have nothing at all to do with the merits of the Kay recommendations. Assuming (as I do) that Dr Cable buys the Kay view of the world and its prescriptions, does he hold sufficient sway to push this agenda forward? Does Dr Cable think it's realistic after three decades of accelerating pay excesses to ram the till drawer shut on executives' hands? Assuming (as I do) that George Osborne would rather take poison than associate himself with the real meat in the Kay Review, where is his standing heading right now?
One thing that is promising for the Kay Review - that none of the preceding reports had going for it - is that the timing is promising. The Kay issues have been creeping up on the UK public for 20 years and yet for the most part it has been unaware of them. But over the past year the issue of bankers' pay and widespread financial malfeasance has come to be appreciated by just about everybody. If John Kay's prescriptions can be blended into this zeitgeist, we should have a platform for valuable reforms.
