Brawl between Alliance Trust and Elliott Advisors needs a new script
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Version 0 of 1. We all enjoy a good corporate punch-up but the great Alliance Trust v Elliott Advisors scrap needs a new plotline. The only decent gag in yesterday’s dispatch from Elliott was its lofty line accusing Alliance of resorting “to personal attacks in a manner unbecoming of directors of a public company”. Ho ho. Elliott is a US hedge fund most famous for seizing an Argentinian naval vessel in a dispute over debt. These guys are not softies. They can dish it out, and they can take a personal attack or two. The repetitive nature of the brawl is this: both sides can muster some decent arguments. Elliott is spot on when it says Alliance’s investment performance, under well-remunerated chief executive Katherine Garrett-Cox, has been poor to middling. Alliance has underperformed its investment trust sector in five of the past six years – not by much, but odd percentage points add up over time. On the other side, Alliance makes an understandable grumble when it says Elliott, with a 12% holding, may not be revealing its full hand. Do the Americans really want to be bought out via a tender offer? Do they want Alliance to outsource its fund management to a third party? If either is the case, why not just say so, or take the opportunity to quash suspicions? Instead, the proposal on the table is to elect three new non-executive directors proposed by Elliott – Anthony Brooke, Peter Chambers and Rory Macnamara. All three have had upstanding City careers and are probably quite capable of injecting some fresh thinking into Alliance’s boardroom. Elliott may also be right that “they would not countenance being unduly influenced by any particular shareholder.” But one also understands why the average Alliance investor might have doubts on that score. Respect in the City is one thing. Outside the Square Mile, the trio could equally come across as a bunch of stuffed shirts doing the bidding of an aggressive US hedge fund. Brooke, Chambers and Macnamara, if they want to dispel that impression, should find their own voices, rather than let Elliott defend their honour. That means writing to Alliance’s shareholders to explain why they want to join the board. Nobody expects fully formed prescriptions. But it is reasonable to expect a detailed view of the questions Alliance should address and a demonstration, as far as possible, of independence of mind. This is an election and, as with the other one, the voters must hear from the candidates. Speak up, and speak for yourselves, chaps. If not, why should anyone vote for you? Boardroom squeeze? “Executive pay is no longer increasing and indeed is falling slightly in real terms,” declares PwC, adding: “At the same time, pay is getting harder to earn … Remuneration committees are really raising the bar.” It’s a point of view, and one assumes PwC’s remuneration consultants, if pressed, could supply the statistics to support their counter-intuitive conclusion based on only 39 annual reports from FTSE 100 companies. The rest of the world may take some convincing. Two news stories yesterday illustrate why. First, it cost £50m to run the Prudential’s boardroom last year – that was the combined rewards of eight executive directors (£48.6m) plus nine non-execs (£2m). Even then, the top earner, at £15m, was outside the boardroom – he is assumed to be Richard Woolnough, M&G’s star bond manager.The Pru has performed wonderfully for shareholders, as noted when Credit Suisse poached its chief executive, Tidjane Thiam, and the bumper sums are largely the result of a rising share price inflating the value of past awards. Even so, £50m is a lot. When does PwC think that became normal? The other tale lies in the FTSE 250 index, where Ladbrokes’ Richard Glynn cannot claim Thiam-like popularity with his shareholders. Indeed, after a series of profits warnings, the bookie changed its chief executive last week. Yesterday’s news was Glynn’s payoff. Some features were standard, like a year’s salary (£580,000) and a year’s pension allowance (£131,000). But what’s this? Glynn will get £100,000 for “failure to grant a performance share award in March 2015”. Eh? He agreed to go at the end of last year, so why would he get a share award three months later? PwC, no doubt, can make sense of it. Gloves are off Sir Ian Cheshire, we thought, had unified the various parts of the Kingfisher DIY empire created by Sir Geoff Mulcahy. But there’s a lot more to do, it seems. New boss Véronique Laury calls the group “locally managed” and wants more pan-European co-operation. She may be right. Kingfisher’s outlets currently buy 1,000 different designs of gardening and building gloves. That sounds about 900 too many. |