21 November 2012 Last updated at 19:01 ET
The government plans to become more active in mergers and acquisitions involving UK companies.
The decision is part of the government response to the Kay Review into how to discourage short-termism in markets.
The government has decided it should “engage with companies and their investors… to promote investment which benefits the UK economy”.
Professor John Kay called for it to discourage acquisitions that would threaten a firm’s operations in the UK.
The government’s response comes in the week that the acquisition of Autonomy, which was once Britain’s biggest software company, by Hewlett Packard of the US has ended in acrimony and allegations of financial misbehaviour.
‘No blanket regulation’
The Kay Review was commissioned by Business Secretary Vince Cable and published in July.
The Department for Business, Innovation and Skills endorsed Prof Kay’s 10 principles for stock markets, which were designed to encourage more focus on the long-term returns from businesses rather than short-term profits.
Prof Kay also called for the way that directors are paid to be changed to encourage more long-term thinking.
He suggested that bonuses should only be paid in shares that could not be sold until after an executive left the company.
The government responded that it “does not believe there is a case for blanket regulation”, but hopes that its reforms, designed to empower shareholders and create more transparency in remuneration, will help bring about such good practice.
Similarly, Prof Kay proposed that bankers and investment managers should receive bonuses either in the form of shares in the firms for which they work, or an interest in the investment funds they manage.
Again, such shares could not be sold until they left the company.
The government plans to promote this as best practice rather than imposing it through regulation.
The application of Good Practice Statements for company directors, bankers and investors are to be encouraged by the government.
BBC News – Business
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