Star fund manager Neil Woodford says the fund management industry is failing to hold highly paid executives to account and the problem is getting worse.
In a report published by the think tank High Pay Centre, Woodford says short-termism is “frustratingly rife” in the fund management industry and it is getting worse as managers “fail to act like owners” because they are “borrowing stock rather than investing in it”.
He says the UK needs to learn from best practice in Europe to address the issue.
Former City minister and ex-chairman of M&S Lord Myners has also contributed to the report, written by Treasury committee member and Conservative MP Chris Philp.
The report calls for the mandatory publication of pay ratios, as well as a shareholder committee with at least one employee representative to address pay and make recommendations on director appointments.
Philp describes the rise of the “ownerless corporation” and argues shareholders are not exercising proper oversight of the companies they own.
Woodford says too many firms separate corporate governance activities from fund management activities “with the result that engagement is often not as effective as it should be”.