Those new investors who had not studied the details of the company’s flotation earlier this year would have probably needed to sit down on a well padded sofa when they realised where most of the missing money had gone. The management team had collected more than £2.2 million as a reward for successfully floating the business. Perhaps the company realised that this could have generated a degree of umbrage. So yesterday, to show that management was not running the show entirely without care for shareholders’ interests, there came the announcement of an interim dividend that had not previously been mentioned.
That may be enough to quell any protests. They could, anyhow, be easily brushed aside with the assurance that the bonus had been agreed before the company came to market. Nevertheless, investors who backed the flotation are unlikely to be overjoyed with the performance so far. The shares were floated at 149p in July, reached 170p briefly and last night stood at just 152p.
If Fidelity International were an investor in the company, it would be asking whether the rewards of management and shareholders were being properly aligned. Quite how seriously Fidelity takes this matter is now apparent from our analysis of the organisation’s voting record. The number of occasions on which Fidelity has seen fit to vote against the remuneration policies of our major companies should make some other institutional investors wonder about whether they have been paying enough attention to the matter.
Fidelity’s investment chief, Anthony Bolton, attained the soubriquet “The Quiet Assassin” after he effectively dispatched Michael Green from his planned role as chairman of ITV. A lack of noise has characterised the organisation’s opposition to the behaviour of the companies on its remuneration hit list. No doubt those companies are made aware of Fidelity’s displeasure but they obviously take the view that other investors will not react with a similar negative vote, otherwise they would be unlikely to risk having the remuneration report voted down, a rare and embarrassing occurrence. But if Fidelity was to make a fuss about its unhappiness over what it deems over-generous remuneration schemes, other investors might have the courage to pile in behind.
Instead, Fidelity quietly makes available its “principles of ownership” which include details of the ways in which it judges remuneration schemes. That the organisation’s interests lie clearly in shareholder returns rather than less easily measured areas is also spelt out. Under the heading “Corporate Social Responsibility”, Fidelity explains that it takes social, environmental and ethical issues into account when “these have a material impact on either investment risk or return”.
“Poor social, environmental or ethical performance” does not merit a vote against the board, only “positive engagement”. Money is what counts.
CBI pensions in the spotlight
COMPULSION is a word that the Government has been very nervous of using when discussing the need to encourage higher levels of saving. Lord Turner of Ecchinswell, however, is apparently preparing to enter into the “c” territory.
His report on pensions is believed to call for compulsory matching of employee contributions to a pension scheme by employer contributions. We can expect such a move to be greeted with indignation from the business world. Most large companies do contribute to pension schemes, but, now that the holiday season so many enjoyed has become a distant memory, many have taken the opportunity when moving to defined contribution schemes to define a significantly reduced employer’s contribution.
Some employers make no contribution. Many of them are small firms, which will argue that compulsion to do so will cripple their frail finances.
The Government is not bound to accept Lord Turner’s recommendations. John Hutton’s apparent endorsement of pension credits indicates that it might be preparing to file the report away and forget about it.
But if it does decide to accept the principle of compulsory employer contributions, the trade unions will applaud. If it bows to business and does not, then we can expect to hear much more about the level of executive pensions.
After the CBI’s fury over public-sector pensions, it was only a matter of time before the unions put a spotlight on the benefits of those at the top. The CBI should whisper to its members that they could show the way in delaying pensionable age.
Big cat at bay
GIVEN an ultimatum to bid by the Takeover Panel, Macquarie and its advisers are employing predictable tactics and trying to talk down the price of the London Stock Exchange. Without a bid premium, they mutter, the stock could sink back well below £5. Anyone hoping they might offer at least £6 can whistle, suggest the Australians.
They had better be prepared for a loud chorus to emanate from pursed lips, for the LSE has done an effective job in persuading the City that its shares are worth significantly more than £6, even if the £8 smoke signals from Paternoster Square are not being taken entirely seriously.
Despite code-naming its LSE interest Project Panther, Macquarie does not seem to have done a good job in sizing up its prey before announcing it. The formula that has worked so well for it on bridges and toll roads is not so easily applicable to a stock exchange.
Sunnier shores
IT SAYS a lot about the market’s expectations for DSG International, the unimaginatively relabelled Dixons group, that its downbeat trading statement could have encouraged the shares to edge marginally upwards. Sales in the UK are flagging and the chief executive, John Clare, sees “no clear indication yet of any recovery”. But its move into overseas markets is providing some brighter prospects. Venturing abroad used to be the downfall of British store groups, but increasingly it is their salvation.
