Businesses have to build for a reliable future and not short-term profits said a leading UK entrepreneur today.
“Professor Kay is right to highlight the culture of ‘short-termism’ that has grown up in the City but I’d like to make it clear that the same kind of thinking is actually damaging our financial recovery,” said Will Davies - co-founder of aspect.co.uk London’s leading Property Maintenance and Refurbishment Company.
Professor John Kay of the London School of Economics criticised pay policies that focus on quick profits in a report prepared for Business Secretary Vince Cable into the equity markets and long-term decision making.
“When money is tight and finance difficult to come by some boardrooms are high-jacked into thinking only of quick profits,” said Mr Davies – who as an investment banker before creating aspect.co.uk
“They over-focus on turning investment into instant cash, which is understandable, but it will hamper a company’s growth in the long term,” he said.
In his report Professor Kay called for shareholders to exercise more responsibility over key business decisions and boardroom remuneration.
He said that the City employed too many middlemen who were focused on their own short term gain to successfully support business growth in the UK.
"Over the last 10 years, companies have done OK, people in the financial sector have made a lot of money, and savers have done pretty badly," said Professor Kay.
"A culture of trust relationships, which is actually central to making financial services work, has been displaced by essentially a culture of transactions and trading," he said.