Making plans with Sir Nigel

The UK needs an extra £1trn in capital investment over the next decade, according to an influential City lobby group that claims governance changes are critical to getting there.

The report comes from the Capital Markets Industry Taskforce (CMIT), a body chaired by London Stock Exchange CEO Julia Hoggett, whose campaigning over the past year has talked up the need for higher chief executive pay and seen the cancellation of planned new reporting requirements.

The report is written for CMIT by Sir Nigel Wilson, former group CEO of Legal & General, and looks at how the capital markets can change to produce that massive wad for UK plc.

Sir Nigel sets out a stark reality: the US has seen much greater growth in equity return—an average of 8% annually, since the financial crisis—compared with the UK’s just 2%.

The report takes quite a swipe at the UK’s regulatory landscape as part of the problem. “We cannot expect to achieve meaningful growth while we micromanage business through regulators, second-guessing decisions that rightly belong to company boards and not trusting investors to be able to make their own investment decisions without feeling the need to look over their shoulders,” Sir Nigel writes.

That’s not all. The corporate disclosure environment is also partly to blame for companies not listing in recent years, he believes. “We must address requirements that impose unjustified administrative burdens on users of our public markets, especially where these unintentionally discourage the use of our markets and where they create an unlevel playing field with other major capital markets.”

Of course, one person’s “unjustified” bit of rule-making is another’s “please make it happen now”, especially after a succession of corporate disasters. But there we go.

An eye on AI

The use of artificial intelligence—in its many forms—means it is beginning to throw up some intriguing governance conundrums, according to one academic. Martin Petrin, a prof at the University of Western Ontario in Canada, says the use of AI-as-a-service tools is challenging the idea of where the boundaries of a company lie and therefore how governance should cope.

He writes: “Businesses now frequently rely on external AI tools for various functions, from customer service chatbots to complex data analytics and core business operations. This can make it difficult to distinguish where firms end and the market begins.”

Regulators, therefore, must keep a beady eye on “fairness” and “transparency”, says Petrin. Sounds reasonable.

Governance: not built in a day

Italy is on the brink of a major review of corporate governance following pressure from investors, the Financial Times reports.

Giorgia Meloni’s government has been asked to revisit a new bill that would introduce rules that would increase the complexity of its arcane “slates system” (voto di lista) for electing board directors.

Those venerable governance watchdogs at the International Corporate Governance Network (ICGN) have weighed in with a letter to the Italian ministry of finance undersecretary Federico Freni.

The letter describes the slates measures as making things “more difficult” and introducing “further complexity”.

ICGN adds that the introduction of loyalty shares is likely to “dilute the voice of minority shareholders” and that new rules for AGMs will “limit the ability” of shareholders to question boards and management.

The FT writes that Freni says all issues will have “the utmost attention”. Board Agenda will monitor developments. Ciao!