Delivering his Mansion House speech last night in London, Mandelson set out a number of changes he would like to see made to takeover rules following Kraft’s £11.7bn hostile takeover of Cadbury.
The Business secretary also stressed that “duty of engagement and long-term stewardship” must be central to fund manager thinking and said there is a case for making fund managers publish the terms under which they are paid and the goals they are working to.
Suggested changes to takeover rules outlined by Mandelson included raising the voting threshold for securing a change of ownership to two thirds of shareholders, lowering the requirement for disclosure of share ownership during a bid to 0.5 per cent from 1 per cent, giving bidders less time to “put up or shut up” and greater transparency on advisers’ fees and incentives.
Mandelson also suggested that bidders should have to set out publicly how they intend to finance their bids over the long-term.
Turning to fund managers, Mandelson said their decisions may be skewed by short-term goals.
He said: “The decisions about what to own and when are made by fund managers whose incentives may require them to deliver returns on short timeframes, even if they manage pensions for people whose key interest lies in the long term.
“For companies, the pressure to deliver short-term share price gains too often has to come before any wider considerations. In fact if CEO remuneration is tied to share price movements, simply raising the share price can become a corporate strategy in itself.”
Mandelson said the Companies Act 2006 encouraged long-termism amongst company directors and that an equivalent long-termism is needed from institutional shareholders.
“These company owners need to combine short term activism on company strategy, with long term commitment to the development of the companies they own,” he said.
Mandelson also told business leaders the Government’s increases to personal taxation “are fair and justified for now” and that corporate tax and capital gains tax rates “are competitive and need to remain that competitive”.