Du Plessis: Pot calling the Kettle black

Interesting to read this lament from someone who has to much to be grateful for this "narrow british way of life". Thanks to the "narrow" circle of people who seem to be in control of so much of the City he sailed comfortably from one post to the next.

When he extols the positive (in his "narrow" view) aspects of the business enviroment in the United States he conveniently forgets to mention that a separation of CEO and Chairman is highly unusual over there. And rightly so, as the facts clearly demonstrate that a separation has virtually no benefit and if anything is detrimental. If business performs markedly better in the USA it clearly speaks against this (expensive) separation.

Du Plessis clearly thinks that the sky is the limit for executive pay - again assuming that only high pay for the C-Suite will lead to strong economies when that is not supported by the facts. The USA may look well positioned as the nation with the highest per-capita income (apart from minnows like Luxembourg, Monaco etc) but can one assume that extravagant levels of executive pay are the principal - or necessary - cause of this?

One of the people rankings so popular with the press placed du Plessis as the 10th most powerful person in UK business (TheTimes 2006 Top 100) But does he enjoy any legitimacy? Who gives him this "power"? the same narrow circles that control government, regulators and major firms!

In the latter case it is the financial intermediaries - Pension Funds, Mutual Funds, Insurance companies and Private Banks - that vote "their" shares in favour of high pay. Like du Plessis they have no explicit mandate on how to cast their votes from the ultimate shareholders - the great unwashed public. Proxy Advisors may look like they take an objective view they are also beholden to these Intermediaries who pay substantial (secret) fees to them.

(10 May 2023)

Narrow British way of life’ is holding back the City (PayWall)

How to influence Companies' Human Rights behavior

How should, how can, shareholders influence Companies? The only solution I can see is a new platform to give them a say in the proxy process. As matters stand the existing (and pretty much unaccountable) oligolopy of profit-seeking proxy 'advisers' cannot be relied on to represent the views of the ultimate owners of Companies.

LinkedIn is facing pressure from senior MPs and academics to stop “bowing to Beijing” by censoring users who are critical of China.

The Times has identified scholars, businessmen, journalists, whistleblowers and a former diplomat whose accounts were blocked in China after the professional networking site found “prohibited content” on their profiles.

 Stop bowing to Beijing, MPs tell LinkedIn (The Times, PayWall)

Amundi investors urged to vote against chief’s pay deal

Major problem for the whole governance debate: The 'Shareholders' as the Investment Management Firms and/or Banks are often mistakenly called are in reality nothing but fiduciaries for the real end investors. But they have disproportionate power over corporate policies - and therefore our whole economic (market? capitalist?) system. This is a relatively recent development - just remember that Fidelity was a comparative midget in terms of AuM just 45 years ago, and Blackrock was only founded in 1986. No one seems to have thought of introducing a mechanism that allows end investors - the real shareholders - to influence - let alone control - the governance policies that are exercised on their behalf by these fiduciaries. To add insult to injury directly or indirectly they pay their fiduciaries twice, once with any management fees and again for farming out governance to third parties, known as Proxy 'Advisers'. Not many savers are informed about the fees that are charged by these advisers and how their performance is measured. At best they provide a fig leaf for the fiduciaries and at worst the fees they receive are an outright waste of money as fund managers should be able to assess companies they invest in in a 360 degree fashion, not just if the price will go up or down in the next five minutes. So to conclude: would the great unwashed public agree to pay CEO's the sums they get paid these days? I think the answer should be obvious.
(11-May-2019)
Amundi investors urged to vote against chief’s pay deal

What do real end investors want from Proxy Advisors?

A recent survey found that real end investors do not want more political and social activism! The survey also highlights the lack of influence retail investors have in the corporate governance debate. And it should also be mentioned that while 30% of listed shares in the USA are directly owned by the Great Unwashed Public, the remaining 70% are also owned by individuals - albeit via financial intermediaries in all forms and shapes.
(24-April-2019)
Proxy Advisors: What Do (Real) Retail Investors Think?

What purpose do Proxy Advisers serve?

One of the large Proxy Advisers seems to be more than happy to sign off on the compensation of Credit Suisse CEO Thiam. And many institutional investors are similarly content with his pay. But where does that leave the ordinary investor - the great majority is not holding CS shares directly but invests their savings via intermediaries who are really fiduciaries. But how do they insure that their investor's best interests are represented? This is the great deficiency in all the discussions about corporate governance - the real participants have no voice!
(10-April-2019)

Who runs our Companies? Proxy Firms? ETF Providers?

A lot of noise had been created about the (supposed) undue influence that 'passive' investors (and ETF providers in particular) may or may not exert on investee companies. But the elephant in the room really are the few proxy firms that dominate voting advice to most investment managers. Apart from the fact that it is unclear how much of an extra burden their fees heap on the charges that the real end investor has to bear (without ever being asked), their 'advice' (basically nothing but another opinion for which they will never be called to account) in many cases ends up in the proverbial waster paper basket as their clients often ignore this expensive advice. Apart from that the self-imposed voting principles that proxy firms publish on a regular basis are devoid of any input from end investors and the wider public (are we not in a new age where wider stakeholder interests should be included in good corporate practice?) (9-March-2019)
Elliott's key proposals for hyundai dealt a blow by Glass Lewis

Proxy Advisers - cosy and intransparent cartel

Who gives the handful of proxy advisers to right to set their own 'policies'?
Do they ever ask the real end investor, - and not only the intermediaries that pay hefty fees with other peoples' money?
Why does it seem impossible for real end investors - and the public at large - to find out the fees that are paid to proxy firms so that they can do the work that the financial intermediaries should be doing, i.e. supervising the companies they invest in on behalf of the great unwashed public?
(10-Feb-2019)
ISS Policies on Compensation 

Give Real End-Investor control of proxy voting

The current system of allowing fiduciaries such as Pension Funds, Mutual Funds or Private Banks discretion over proxy voting is broken. In an age of Internet and seamless information flows it should be easy to change the system. While most investors would be hopelessly challenged a system of delegated voting via proxy firms would be appropriate. They would declare their policies and investors could choose the proxy firm that most closely matches their preferences. Even a sort of 'mix and match' of policies on individual issues could be envisaged.
(20-Jan-2019)
How to fix the unhealthy concentration of corporate voting power 

Blackrock suggests improvements to Proxy process

Very thoughtful, but the question remains: how to give the real end-investor the opportunity to influence proxy voting. Should investors - hoders of mutual funds, pension fund beneficiaries etc - be allowed to choose between different proxy advisors (a bit like supporting a political party)? Let us know your opinion on this!
Blackrock comment to SEC
 (11-Dec-2018)

Proxy Advisors under the Microscope

The post strongly suggests that the concerns expressed by public companies and industry groups about proxy advisors should not be dismissed. (12-Nov-2018)
Are Proxy Advisors Really a Problem?

Who shall police executive Pay?

The problem is that the 'Shareholders' the headline refers to are only fiduciaries for the REAL shareholders. They latter are systematically disenfranchised, by political decision, regulation and the self-interested activities of the intermediaries - to save cost, have a simpler life. So the first step - before demanding legislation - would be to empower the real investors, take power away from fund managers and proxy advisers. Anyone with a serious interest to improve governance should contact us. (9 May 2018)

Are Shareholders the right people to police executive pay? (FT, Paywall)

Singapore Exchange - interests of shareholders neglected?

What do the ETF giants, index providers, proxy advisors and governance big-whigs have to say about this? Nothing will be the answer again. And if they are neglected, will they have the balls to call for a boycott?
https://www.bloomberg.com//news/articles/2018-03-12/in-pursuit-of-tech-ipos-singapore-bourse-is-said-to-ease-rules

Fee pressure - who can afford good Corp Governance?

As an afterthought to the previous entry just one question: if more and more assets move to passive instruments and fee income of the investment fiduciaries is under sustained pressure, who can then afford to pay for detailed corporate governance? The work cannot just be done by some second-rate professionals as the task requires detailed analysis, maybe even more so than the task of buying or selling shares at the right time. And letting a few proxy agencies take over the whole process it not that cheap either when you consider wafer-thin fees on passive products. This is apart from the question of who monitors the proxy agencies and competitive aspects if two or three providers dominate the field. Activist Investors to the rescue? But they want more than a pound of flesh! And are their motives aligned with the interests of the ordinary saver and investor?
(16-Aug-2017)

Who asks the REAL Investor for his opinion on Pay?

All very well for the Investment Association to claim that 'Investors' hold cards for AGM season. But apart from the fact that the season is basically over the big question remains: how much - if any - influence do the real end investors that the article refers to ("those of us who ....through pensions and savings are (trying) to get the best possible return on their hard-earned money") have with respect to corporate governance, and the most critical and topical issue, that of (excessive) executive pay?

Shareholder Proxies Could Be the New Regulators

A step in the right direction. But the great majority of votes are cast by Fiduciary Investors (Pension and Mutual Funds, Asset Managers, Private Banks, Insurance Firms and Sovereign Wealth Funds), often relying on input from Proxy Advisers that are responsible to no one. So this is not going to move the Corporate Governance needle that much until there are ways that the real end investor can control how these Fiduciaries cast the votes on his behalf.
Fair Game: Shareholder Proxies Could Be the New Regulators

Red Line Voting - good idea but...

The initiative from the Association of Member Nominated Trustees is a step in the right direction. But what is really needed is a way to give the real end investors, the pension fund beneficiaries, the investors in mutual funds or the clients of Private Banks a say in all votes that are held in the corporate world. Only if a conduit for them is designed will there be meaningful change in matters or corporate goverancne, ethical and social responsible investment. While it will not be possible for all individuals to vote on each and every issue and for every company whose shares are held (directly or indirectly) the solution could be to extend the role of proxy agencies. The investors should be able to select an Agency of his choice (similar to voting for a political party or politician). Agencies would be required to clearly state their voting policies and strictly adhere to them.
Red Line Voting
(11 August 2016)

Proxy and Compensation Consultants - part of the Problem

Reading this post about some technical aspects related to Equity Compensation Plans makes it clear that advisors are barking up the wrong tree. A simple-to-understand Executive Compensation Plan would make siperfluous the highly technical issues discussed in the post. The main problem is the very level of the compensation dished out to CEO's and higher levels of management.
(18 April 2016)

Citigroup Bonus Cap fails to sway Executive Pay Critics

While I applaud that some observers are rattling the cage in the C-Suite I am afraid the result will at best be an adjustment of some decimals behind the comma. 20 or 22 or 18 million, or whatever the number the CEO and his cronies in the Board decide to be 'fair' compensation to show up at the office, it is a number that is decided in a circular fashion - CEO 'invites' board members, board members 'reward' their buddy and hey presto we are all in this together.
The basic deficiency in Executive Compensation - and more importantly CEO pay - is the fact that the fiduciaries who are now supposed to represent the end investor (be they direct or indirect share owners) are just not doing their job, partly because they are in the same boat - be it as recipients of similar pay packages or because they try to get investment mandates from the pension funds the companies they invest are managing.
Only a dismantling of this nexus will lead to lower Executive Pay. As I suggested before, if just the pay of the CEO is controlled the rest of the executive pyramid will adjust accordingly. CEO pay ( and the 'incentive schemes' which have demonstrably be found to be useless) should always be voted on before it is set for each year (during the Annual Shareholder Meeting). All votes by fiduciaries should be based on proxies received not from some proxy agency that makes up its mind divorced from the desires of the end investor but from real people that are the ultimate owners of public companies.
(9 April 2016)

Proxy Advice - Should it be a business?

One can erect any number of 'Chinese Walls' in order to prevent conflicts of interest but I still wonder if the something as important as good corporate governance should really be handled by a profit-oriented entity, in particular one owned by a Private Equity firm which may or may not be in it for the long haul. What do you think?
(22 July 2014)

Stockholders do NOT approve Pay of WPP's CEO Sorrell

Another twist in the never-ending quest of the WPP management led by CEO Sorrell. Are they really so desperate to receive every Penny they can get their hand on? What do they have to prove? But apart from this question - which is more a subject for a psychology site - one can say one thing: the REAL shareholders of WPP - or any other listed company - are usually not the ones that approve the one-sided and completely unnecessary 'incentive' schemes that inflate executive pay for the 0.1% that design their own 'compensation' schemes. In fact, their fiduciaries, large investment institutions such as Pension Funds, Investment Management firms and Mutual Fund Manager as well as Private Banks are the ones that wave these schemes through. They should stand up and be counted and not hide behind spurious 'governance statements' or - even worse - proxy advisers that are just an extra cost for the investors and responsible to no one. 'Best Business Principles' for Proxy firms may have been released just recently, but again they basically are designed by insiders for insiders.
(26 June 2014)