A report from think-tank, the New Economics Foundation (NEF) suggests that to meet the economic, social, and environmental challenges of the twenty first century the UK needs to move from the current dominant shareholder corporation model as it is no longer fit for purpose.

This publication follows on from other recent reports that have been critical of the UK's current economic model suggesting it fuels short-termism and encourages a tendency to under-invest in companies. The IPPR's Commission on Economic Justice made similar conclusions in its report last week which called for a shake-up of UK corporate governance to and similar conclusions were reached by the  Purposeful Company Taskforce, which was established by the Big Innovation Centre and Tomorrow's Company which both reported in May.

The NEF noted the findings of the Kay Review - undertaken by John Kay in 2012 –   which concluded that short-termism is a problem in UK equity markets and that, the principal causes are the decline of trust and the misalignment of incentives throughout the equity investment chain. There is also an acknowledgement by practitioners, the NEF said, that the market is not fulfilling its role of providing long-term capital for companies. If companies are not even performing their main functions anymore this matters, the NEF said, because of the immense power that shareholder-owned corporations wield – not just over our economy, but over our politics as well.

The report suggests that there needs to be both a different understanding of the ownership of companies and that companies should more clearly define their purpose and values - currently the NEF suggests some firms are entirely focused on produced shareholder returns. The new shareholder model, the NEF said, should be such that those holding controlling rights in corporations are committed investors, in it for the medium to long term, and concerned about ensuring the long-term success of the company. Companies should report regularly against their values and include this information on the social and environmental impacts of their operations.

Alternative forms of ownership to shareholding such as co-operatives, employee ownership, and mutual ownership should be incentivised and reinvigorated, the NEF believes. The report also suggests that corporations should be encouraged to consider the Trust Firm model, which offers a way for companies to commit to acting in the public benefit.

The NEF also believes there is an argument for an increased role for the state in the UK and notes that the country is unusual for not having a state investment bank.