Two governance stories have remained regular fixtures in the media in recent weeks – Stuart Rose’s position as executive chair at Marks & Spencer and the ongoing fallout from the Fred Goodwin pension deal.
At Marks & Spencer, the issue continues to be the board’s decision early in 2008 to allow Stuart Rose to combine the roles of chair and chief executive. It was an unpopular decision at the time, as the rest of the market splits the roles, and many shareholders continue to have reservations about the company’s governance structure. At last year’s annual general meeting (AGM), more than a quarter of shareholders did not support Rose’s re-election, it appears mainly because of concerns about the concentration of power.
In order to seek to bring resolution to the situation, the Local Authority Pension Fund Forum (LAPFF) has filed a shareholder resolution encouraging the company to appoint an independent chair (and as such split the roles of chair and chief executive) by July 2010. This resolution is intended to give investors the opportunity to express views on the current governance structure – which is a clear breach of the combined code – without having to vote against Rose’s re-election.
I should declare an interest, as PIRC is the research and engagement partner for the forum, so this is an issue in which we take a close interest. To date, it’s fair to say that the reactions of other shareholders have been varied. Some have expressed support privately, others argue the resolution doesn’t go far enough, and some will clearly not be supportive. Already Standard Life has given its public backing to the board and its current structure.
The resolution should add extra excitement to the M&S AGM. Hopefully it also heralds a more assertive approach from shareholders who do have governance concerns at investee companies. In the wake of recent criticism of their lack of engagement over governance, some investors may feel more emboldened to take a stand over this issue.
Meanwhile, the Fred Goodwin pension debacle continues to reverberate. At the centre of the row were, of course, City minister Lord Myners and former Royal Bank of Scotland (RBS) chair Sir Tom McKillop. Last week saw the spat over Goodwin’s pension finally draw blood, as McKillop announced he would stand down from his position as non-executive directors and member of the remuneration committee at BP. In reality he jumped before he was pushed, as a number of shareholders were agitating in the background against his re-election, and articles in the business press had also appeared imploring him to stand down for the good of British capitalism.
McKillop didn’t go without a fight though, and tried to take Myners down with him. The day before the BP announcement, McKillop fired off a new missive to the Treasury select committee disputing Myners’ version of events, which led in turn to opposition demands for the minister to resign. At the time of writing he has not done so and, given McKillop’s resignation, it would seem that the battle has been settled in Myners’ favour.
By the time you read this column, the RBS remuneration report should have been defeated at its AGM after UK Financial Investments (UKFI), the state’s asset management and majority shareholder in the bank, announced its decision to vote against it. UKFI made it clear the vote was purely based on the decision to allow Goodwin and fellow director Johnny Cameron to take early retirement, and with unreduced pensions.
This marks the first time a UK bank has lost the vote on its remuneration report, or any other resolution for that matter. It will probably be a record vote against a remuneration resolution too. As such, the AGM is corporate governance history in the making.
Of course the humungous pension that sparked the row in the first place will continue to be paid nonetheless.
Tom Powdrill is head of communications at PIRC
