Responsible capitalism needs responsible shareholders, says Jon Cruddas MP

In a speech in parliament later today Jon Cruddas MP will argue that the political debate on ‘responsible capitalism' has not gone far enough to deliver real change. The MP for Dagenham will insist that shareholder activism can be part of a more responsible capitalism, but that giving shareholders new powers will not be enough to achieve this.

Cruddas is calling for big shareholders, who manage millions of people's pension savings, to be made more accountable to the people whose money they look after.

With Vince Cable set to publish the results of his consultation on high pay next week, and only 18 pay packages being voted down in the last decade, Jon Cruddas is calling for changes in the law which would force shareholders to disclose their voting practices at company AGMs. He is also calling for reform of shareholders' duties to pension savers, to make clear that they can and should act responsibly. Currently shareholders often believe that their only duty to savers is to maximise short-term profit.

Cruddas' speech comes in light of ‘responsible capitalism' being catapulted to the top of the political agenda and the day after both party leaders delivered speeches on the subject. He will also emphasise the importance of reform in light of millions of workers being automatically enrolled into pension saving from 2012 onwards.

Jon Cruddas said:

"Making companies more accountable to shareholders will not be enough to tackle 'crony capitalism': shareholders themselves must also become more accountable to the ordinary savers whose capital they invest.

"This means much greater transparency about what is being done with our money. It also means clarification of investors' duties: we cannot have responsible capitalism if the capitalists think the law prohibits them from acting responsibly."

Christine Berry, Policy Officer at FairPensions, said:

"We welcome Jon's timely intervention in the debate about responsible capitalism.

"Government moves to give shareholders greater powers are to be applauded. But to paint this as a solution in and of itself, when we know shareholders often do not use the powers they already have, is either naïve or disingenuous.