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)

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 

Dell: Taking Companies private much too easy

Looks like the author admires Michael Dell. But let's face the hard facts - public equity markets give poor protection to the great unwashed public. Taking companies private is much too easy. And the ultimate insult is when the company makes a round trip and goes public again. A company is an undertaking that should be permanent and only in the most extreme cases it should be allowed to be delisted, taken private (including by Merger, Private Equity). Limit voting for any investor to 1% of outstanding shares, and make any taking private subject to the consent of at least 95% of outstanding shares. No wonder the Rich get richer with this system and gullible institutions just think one share one vote is in their - and the wider public's - interest. Public companies should be protected - they are a public good and allow dispersion of wealth in a true 'shareholder democracy'.
(6-July-2018)
Michael Dell’s rare relish in proving his critics right (FT, Pay Wall)

More votes for long-term shareowners?

Something can be said in favor of limiting voting rights for short-term shareholders. It feels intuitively right to exclude those who see shares just as gambling chips. But as always, the devil is in the detail! In particular, what is the right cut-off period?  (17-Oct-2017)
The Long-Term Stock Exchange Is Worth a Shot

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?

Snap and the Rise of No-Vote Common Shares

Agree with the author, but how will a ban on non-voting share classes be introduced? As with many Governance issues there is no effective forum to push through reforms and defend the ordinary investor as the Fiduciaries among the investment industry are only providing pious wishes.
(8-June-2017)
Snap and the Rise of No-Vote Common Shares

Non-voting Shares: Complete Failure by All!

Politicians, Regulators, Fiduciaries in the Fund Management and Private Banking Industries as well as participants in the Great Corporate Governance Moan are all equally responsible for the growing abuse of non-voting shares or different share classes.

https://www.wsj.com/articles/index-firms-take-issue-with-nonvoting-rights-1491739227 ((Paywall)

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

Binding Vote on Exec Pay - another Cop-out

Another slap in the face from our Political Class. It is absurd that the owners of a company do not have the right to control their agents, i.e. the management hierarchy. When will our sleepy fiduciaries (Asset Managers, Pension Funds, Insurance Companies and Private Banks) stand up and fight for the rights of their 'clients' (do they even know what the origin of this word is?)
(24-Mar-2017)
Stärkung der Aktionärsrechte: Hauptversammlung darf künftig über Vorstandsvergütung abstimmen | private-banking-magazin.de

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)

Institutions not vigorous defending investor's interests

The Top 20-30 Investment Institutions worldwide have a de-facto control over nearly all listed companies. If they complain about poor governance practices they only have to blame themselves. While cooperating on business decisions would compromise their decisions and make them insiders they could and should agree on core principles. These could cover executive compensation and closer scrutiny of mergers for a start. Complaining about poorly thought-out Mega Mergers lacks credibility and can only be seen as hand-wringing if not followed up by concrete proposals. Why not start with the muted takeover of BG by Royal Dutch Shell? Prohibit any merger 'agreement' unless shareholders have had a proper say, ban all 'Break fees'! To prevent large holders from squeezing out small shareholders there should be a two-step vote, one where each holder is capped out at a 1% share of the overall vote.
(30 August 2015) 

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)

How to streamline Governance 'Clutter'?

Any student of the Corporate Governance debate that has evolved during the past 30 plus years (especially here in the UK) will sometimes be confused by all the different codes that have been published. So a call to 'clean up this clutter' by a prominent participant (Guy Jubb, Standard Life Investments) in the current governance debate has to be welcomed. But this leads again to the key problem: who shall be in charge of setting the governance code, shall it be the companies themselves, the investment institutions, government or the real investors themselves? And that still leaves out the 100 pound gorilla that dominates so much voting on corporate and governance issues, the proxy advisers.
(10 June 2014)

Proxy Advisers - how are they selected?

I want to leave the question of whether or not the cost of employing proxy advisory firms can be justified for another day. But more importantly I would like to raise this point: on what substantive basis are investment institutions selecting a proxy firm. Surely it cannot be on price alone and must be somewhat related to the policies and rules a specific firm applies before it makes its recommendations. So hopefully there are major and detectable differences in the yardsticks each proxy firm applies - if not, why are there different firms, and can their different governance policies stand up to scrutiny? Which leads to the question: how do the investment firms justify the choice of a proxy advisory firm?
(29 May 2014)

The trouble with proxy advisors...and a solution

Detailed arguments in this defense of proxy agencies are very good, but simple solution is - ask what are the issues (pay, independence, related party transactions etc etc), they should be easy to answer, yes or not, no exceptions for specific circumstances or the get-out-clause of 'complain and explain' which only exist to make it extremely difficult to track thousands of companies - and the work has to be duplicated by all the investors. No wonder they love to outsource governance to proxy agencies. On top of that electronic voting on an easy-to-use platform would make it transparent, cheap and easy to vote on all the issues.
(12-Nov-2013)

Top shareholders back Alibaba's controversial corporate structure

Alibaba's 28 partners, mainly founders and senior executives, want to keep control over a majority of the board, even though they own only around 13 percent of the company. (Reuters)
It is quite amazing that the authorities in Hong Kong, traditionally not known for strict corporate governance, make a stand and bloc this move while other, much older , financial centres with a reputation to lose are in a race to offer more 'flexibility' in order to chase the IPO business.

This raises a number of questions
1 - is there a race to the bottom in regulatory affairs, contrary to all intentions proclaimed by global regulators?
2 - what is the role of board - should Management pick directors (effectively controlling itself)?
3 - should different voting rights be allowed, and if so under what circumstances?
4 - what obligations - if any - do the financial 'advisors' facilitating the IPO have? are they responsible to shareholders or do they only have to look after their own narrow financial interests?
27-Sept-2013

Cameron vows to tackle executive pay

For once we can give wholehearted applause to the British Prime Minister - if he stays the course. As reported elsewhere, it is regrettable that the ABI and the NAPF - these guardians of the investor's best interest - have already put the spanner into these proposals. One should not forget that these organisations are deeply conflicted and their own governance needs to be put under closer scrutiny. Have they ever bothered to find out the opinions of their ultimate paymasters - the people who are insured or whose money they manage?
(08/01/2012)

Stop creeping takeovers and abuse of minority shareholders!

The case of a speculator/investor acquiring a 15 percent stake in Austria's leading Telecom business highlights the potential abuse of special privileges by holders of large or controlling shareholders. With just 15 percent of the shares an investor should not get any special treatment, certainly no 'coffee time' with management as he can get insights into the company strategy that are not available to other shareholders. If anything, being a holder of a large stake should come with special obligations and restrictions. Voting rights should generally be limited - Reuters had a limit of 1 percent for a long time and it did not do any harm to the company. What is particularly sad is the silence on the part of Shareholder organisations and institutional Investors. Anyone who wants to support a campaign to stop similar abuses should contact us. That holders of large - but not even controlling - blocs of shares get preferential treatment when board seats are doled out by management (this in itself is an abuse that needs to be ended as those that are to be supervised select their own supervisors) is another defect of corporate governance that needs to be ended.
(10/12/2011)

Executive Pay - consultative vote not enough

There is disappointment among corporate governance activists in Switzerland who hoped that (purely 'consultative') shareholder votes about (top) executive pay would lead managements to moderate their greed. Novartis Chairman and CEO shows no shame when accepting a 'compensation' package calculated to be worth Sfr 25.3 million in 2010. Apart from the fact that combining the two top offices is already a dubious corporate practice the fact that he gets 'compensated' for accepting a no-compete clause is another slap in the face for shareholders - but also for other employees who generally do not get separate compensation if they have to submit to a no-compete clause in their employment. One should think that someone who certainly has a high degree of intelligence like Vasella would be perfectly able to make a decision whether or not to accept such a clause when accepting his basic pay package. That he gets substantial pay for 'retirement benefits' that are not necessarily aligned with the pension benefits of ordinary  employees is another contravention to fair play. Summing up we can say that these 'consultative' votes are a waste of time. We call for binding votes on top executive compensation and demand that all perks (health, pension, share options etc) are made available to all employees on a pro-rata basis related to basic salary. Even better, if top management is prevented from receiving discretionary bonus awards the whole discussion about annual votes on compensation would become superfluous.
(23/02/2011) 

Merger deals must come out into the open

When a US judge harshly criticises a leading investment bank (or should it be commissioned merger broker?) saying the bank "secretly and selfishly manipulated the sale process" to boost its fees (Wall Street Journal) it sheds a rare light on the fact that these significant transactions are usually handled behind closed doors. As we have argued on previous occasions, in the interests of both the selling and the acquiring companies these transactions must be handled in a much more measured and transparent process. Advisory fees are significant - for both parties - and have to be paid whether a proposed transaction is eventually consumed or not. It can also be questioned why a company that is the object of (of often unwanted) attention by a 'suitor' or 'predator' should feel obliged to hire banking, legal and public relations advisers when it is the shareholders who should have the ultimate say over the deal in any case. Certainly it must be in the realm of the possible for management to explain the pros and cons of a merger proposal? One can only hope that this case is seen as a warning by all investment banks many of whom have used similar questionable practices in the past.
(17/02/2011)