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The TUC has today (Tuesday) published a collection of essays by authors from the City, politics, unions and academia, making the case for reforming the UK’s corporate governance system, which many believe is letting down businesses and the wider economy.

The TUC has today (Tuesday) published a collection of essays by authors from the City, politics, unions and academia, making the case for reforming the UK’s corporate governance system, which many believe is letting down businesses and the wider economy.

The TUC book Beyond Shareholder Value: the reasons and choices for corporate governance reform includes 17 essays from organisations ranging from the Institute of Directors to the Fabian Society and the TUC. Other authors include Patrick Diamond from Queen Mary University, Vicki Pryce from the Centre for Economics and Business Research, Andrew Smithers from Smithers & Co Ltd and economist and author John Kay.

All of the contributors agree that the current system of corporate governance is not serving the economy as well as it should and needs to be reformed. While there are a variety of proposals for how the shareholder value system needs to change, a number of themes are picked up by several authors, including:

• Shareholder value is stifling innovation and holding back investment. Several authors, including John Kay, Vicky Pryce and Patrick Diamond, argue that shareholder value is not conducive to company innovation, and has led to a fall in business investment over the last three decades.
• Shareholder value is closely associated with short-termism. Authors such as Aeron Davis and Dan Corry argue that with the average time a share is held for now reduced to mere days, a focus on shareholder value discourages companies from taking a long-term view. Both Roger Barker and Frances O’Grady agree that even some asset managers, who are supposed to take a long-term view, end up focusing too much on share trading.
• It is not only shareholders that bear risks or contribute to company success. Frances O’Grady and William Lazonick argue that shareholder value fails to recognise the stake workers have in the success of a business, or the contribution that taxpayers often make through government investment.
The authors broadly agree on two themes for reforming shareholder value – changing who contributes to decision-making both within companies and wider economic institutions such as the Financial Reporting Council, and broader institutional reform to change the environment in which all companies operate. However, there are different ideas for how to carry out these reforms, with some calling for statutory worker representation on boards and others for voluntary stakeholder councils and a wider representation on regulatory bodies.

The book includes a number of proposals for institutional reform including the introduction of different classes of shares to differentiate between short-term traders and those with a long-term stake in a company, and tightening the rules surrounding takeovers. Reforms to company and personal taxation, such as using capital gains tax to encourage long-term share ownership, are also suggested.

The book, edited jointly by Ciaran Driver of the School of Oriental and African Studies, Peter Kenway of the New Policy Institute and the TUC’s Janet Williamson, is being launched at an event in Westminster later today (Tuesday). Guest speakers at the event include Conservative MP Jesse Norman and Shadow Minister for Industry Iain Wright MP.

TUC General Secretary Frances O’Grady said: “There is a growing consensus that we need to change our corporate governance system away from its current focus on shareholder value.

“The recent crash has thrown into the spotlight problems with corporate governance that have dogged the UK economy for decades, such as the discouragement of investment and innovation.

“While the sheer breadth of expertise brought together by the TUC means that we will never all agree on how we change the system, it’s clear that the appetite for reform is growing from across business, workers and wider society.

“Corporate governance may be considered a niche issue best left to the City. But when the prizes for a more rational system is sustainable economic growth with more jobs, higher incomes and greater profits, it’s an agenda that should command support from across the political spectrum.”

NOTES TO EDITORS:
- Beyond Shareholder Value: the reasons and choices for corporate governance reform is available at www.tuc.org.uk/sites/default/files/Beyond_Shareholder_Value.pdf 
- The report authors include Roger Barker from the Institute of Directors, Bob Hanke from the London School of Economics, Andrew Harrop from the Fabian Society, TUC General Secretary Frances O’Grady, Nita Clarke from the Improvement and Participation Association, Dan Corry from New Philanthropy Capital, Colin Crouch from the University of Warwick, Aeron Davis from the Labour Finance & Industry Group, Simon Deakin from the University of Cambridge, Patrick Diamond from Queen Mary University, Michael Gold from Royal Holloway University, economist and author John Kay, William Lazonick from the University of Massachusetts, Jonathan Michie from the University of Oxford, Vicki Pryce from the Centre for Economics and Business Research, Andrew Smithers from Smithers & Co Ltd and Grahame Thompson from the Copenhagen Business School.
- The publication is being launched at an event in Westminster between 4.45pm and 6.15pm. Please contact the press office if you would like to attend.
- All TUC press releases can be found at www.tuc.org.uk
- Follow the TUC on Twitter: @tucnews
- Congress 2014 will be held at the BT Convention Centre, Liverpool, from
Sunday 7 September to Wednesday 10 September. Free media passes can be obtained by visiting www.tuc.org.uk/media-credentials and completing an online form. Applications must be in by noon on Wednesday 27 August. Any received later than that will be processed in Liverpool and will cost £75.

Contacts:
Media enquiries:
Liz Chinchen   T: 020 7467 1248    M: 07778 158175    E: media@tuc.org.uk
Rob Holdsworth    T: 020 7467 1372    M: 07717 531150     E: rholdsworth@tuc.org.uk
Tim Nichols   T: 020 7467 1337   M: 07808 761844   E: tnichols@tuc.org.uk

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