Rolls-Royce chief backs May’s proposal for workers on boards
Hermes fund boss backs PM’s clampdown on executives But I still won’t tell you what MINE is
ROLLS-ROYCE’S chief executive has said he is in favour of Theresa May’s controversial plan to put workers in the boardroom.
Warren East is the highest-profile boss to come out in support of the Prime Minister’s proposal, which has sparked unease among business leaders.
He said his personal view was that workers on boards helped communication, citing Germany, where worker representation is common.
‘We have nearly 20 per cent of our workforce in Germany, so are wellacquainted with worker representation,’ he said.
‘We have good relations here with our trade unions. It could be an extra channel to communicating with the workforce. Gone are Victorian days of managers and workers.’
East took over RollsRoyce last year after it issued a series of profit warnings. He has overseen a reorganisation that has included big job cuts.
May last week denied her proposals were an abandonment of freemarket principles, saying they were to ensure ‘everybody plays by the same rules’.
Rolls-Royce is expected to update investors on its restructuring this year. It has axed 4,000 jobs in the past two years and some more job losses are expected.
THERESA May’s plans for a clampdown on boardroom excess and to put worker representatives on boards unnerved many business leaders, but Saker Nusseibeh was cheering. Nusseibeh is the chief executive and chief investment officer of Hermes Investment Management – one of the UK’s biggest fund managers. Formed from the giant BT pension fund Hermes, it manages billions of pounds of investment, holding shares in Britain biggest companies and many overseas.
He is a particular fan of the idea of workers on boards. ‘It reminds the board that a company is not just run for executives,’ he declares.
And Hermes practises what it preaches: it has a worker representative on its board, Billy McClory, a member of the Unite union. Nusseibeh says it has helped him run the business better: ‘Billy is brilliant.’
So May, he thinks, has hit the right note. ‘She clearly understands that the vote for Brexit was partly a cry by a great number of people that the system as it stands does not work. For the free market system to work, it has to become more inclusive, it has to have more governance.’
Despite his backing for May, Nus-
You can make money, grow your business – and make society a better place too
seibeh is a Labour man and once stood as a Labour councillor, probably a rarity among City fund managers. But his background is also far from typical of the City’s finest.
Nusseibeh is a Palestinian-born Muslim, educated at Eton and with a PhD in medieval history.
While at Eton, the 15-year-old Nusseibeh took a trip to Runnymede, the site of the sealing of the Magna Carta. Its principles of freedom and responsible government had a lasting impact. ‘It was when I decided to permanently emigrate to England,’ he says.
Forty years after that trip, he still regularly returns, taking a trip to the historic site on his Harley-Davidson (‘Is there any other bike?’)
Unusual as all this sounds, it does perhaps fit with Hermes Investment Management, which has long been a little unconventional itself.
It invented responsible investing long before it became fashionable and it is prepared to use its stakes in blue chip companies to vote against abuses or boardroom failures.
It has done so recently at Sports Direct and at Volkswagen, where it voted against key board members over what it saw as the mishandling of the emissions scandal. The VW case is, as Nusseibeh admits, evidence of how workers on boards is ‘not a panacea’. After all, a worker representative on the Volkswagen board – standard in German groups – didn’t prevent Dieselgate.
But Nusseibeh thinks workers on the board can create what he calls the ‘mindset of partnership’.
And it is that mindset which went so wrong at Starbucks, he argues. When it failed to pay a fair level of corporation tax, Nusseibeh says it broke what he calls its ‘social licence’ to operate. The effect was that some customers stopped buy- ing their coffee at Starbucks. It is the reason why he views companies which do not pay their fair share of tax as an investment risk.
Either consumers will stop handing over their cash – as in the Starbucks example – or because at some point, the company may be forced to pay its dues.
Central to Nusseibeh’s outlook is the idea that workers in companies are, in fact, also the owners, through their pensions and investment managed by the likes of Hermes.
‘It is the capital of ordinary working men and women who have put their money into their pensions. But they also work in the companies we invest in, they also buy stuff from the companies and they are affected if these companies don’t pay their fair share of tax. Mrs May’s speech is possibly the beginnings of a realisation by the political class that this is an issue that needs to be dealt with.’
He warms to his theme: ‘You can make money, you can grow your business and you can make society a better place,’ he argues. And this stance does not come at the expense of profit. ‘We have research that proves that better governance leads to better [share price] performance.’
So what has made this man a cam- paigner against corruption, corporate greed and misconduct?
It is clear that Nusseibeh’s unusual upbringing has made him what he is. His mother was a campaigner for social justice actively involved in the setting up and running of Palestinian orphanages and schools.
Nusseibeh describes Hermes as the place where he ‘found himself’. But he began his career in the late 1980s at Mercury Asset Management.
While working there as a junior analyst, he watched as Mercury took what he regarded as an excessive fee from a client for selling some overseas shares. It was perfectly legal, but money that Nusseibeh felt belonged to the pensioners or savers in the fund.
‘At the time I hadn’t quite worked out quite how bad that was and I didn’t speak up enough. It shames me to this day,’ he says.
So what about the future of the City post the referendum result? ‘For the banking part of the City, I think we will lose some power. The City is not going to stay at number one.’
For his own sector, he is more optimistic. ‘The UK does excel at fund management. We simply have to obey the rules that exist in Europe to be able to sell into Europe.
‘Most firms in the City have funds based in Luxembourg or Dublin and so they have passports anyway. The only question is whether there will be more onerous regulations on us for not being in the EU. In that case we just have to suck it up and do it.’
Earlier this year, Hermes voted against paying the boss of advertising giant WPP, Sir Martin Sorrell, £70million in one of its most public demonstrations of its ethos.
So what does Mr Nusseibeh earn? As a private company, it is not disclosed and Nusseibeh won’t say. For the man who holds boards to account, maybe more transparency is what is required in his own remuneration.