John Kay's interim report was published on 29 February 2012 and it summarises the representations made and draws out issues that will be considered in the second phase of the review. More input is welcomed up to 27 April 2012. The interim report focuses on three broad areas: the governance of companies; the ways in which current economic activities are measured and the functioning of the markets and the current structure of the savings markets.http://www.bis.gov.uk/kayreview

The modern role of asset managers if a key issue of the review. The key relationships are between asset managers and companies and asset managers and beneficiaries. Stewardship, the review states, should extends more widely than the set of issues commonly currently discussed as corporate governance.

In terms of the company and the board the review raises that the UK is an extreme case amongst many developed economies in it's openness to hostile takeovers. Also discussed is whether long-term shareholders should enjoy enhanced voting rights and whether shareholder committees would allow a 'collective voice' to be heard more effectively than individual engagement. Diversity models were raised as options to gain greater involvement on nomination matters.

Current reporting practices may have adverse effects on the behaviour of companies and investors and the review is concerned with the quality as well as the quantity of information: mark to market accounting and accounting for the liabilities of UK pension funds are highlighted. Market practices also came under the scope of the review and the current state of the IPO market is discussed as well as the trend of decline in UK Listings and the effect of limited free float on governance.

Asset managers and intermediaries come under the focus of the review. The critical issue for asset managers may be the structure of the relations between asset managers and those who provide the funds that they manage with a key emphasis on a lack of an incentive within the system for active engagement: exit usually being preferred over 'voice'. The growth of passive fund management is highlighted.

Intermediaries also come under the scope of the review and the concept of fiduciary duty is discussed in the review as being capable of having a wider use in the investment chain. As fiduciary duty is the highest standard of agency relationship that the law allows developments in this area could have a big impact. It will be interesting to see where this review goes: the final report is due in the summer 2012.