An insult to shareholders

FOR an insight into what is wrong with governance in Britain’s boardrooms and shareholder democracy, one needs to look no further than testimony given to the Commons business committee.

The snobbery and dissembling of the witnesses could almost turn one into an enthusiast for John McDonnell’s diluted proposal to hive off 10pc of shares in the FTSE 100 into a wealth fund for workers.

The condescending views of head of stewardship at Hermes, Bruce Duguid, who suggested private investors are too thick to understand the complexity of boardroom pay-outs, is insulting. What makes it even more clunky is the origins of Hermes as manager and guardian of Postel Investment Management, the pension funds of Post Office, Royal Mail and BT back in 1983.

Indeed, it still manages the BT pension fund, the largest private sector scheme in Britain. It might be time for trustees to find a more consumer-friendly guardian.

Duguid’s out- of-touch testimony was matched by ‘over-boarded’ Royal Mail remuneration chairman Orna Ni-Chionna.

She told Rachel Reeves’s committee that ‘she was embarrassed that she got the engagement with shareholders wrong’. It wasn’t just her work with investors which misfired, but her job as the enforcer of executive pay at Royal Mail. Anyone with common sense ought to have recognised that a £5.8m pay-out to new chief executive Rico Back, as compensation for leaving his previous job at Royal Mail parcels delivery service GLS, was beyond the pale.

It was an inter- company transaction which may come close to breaching company law. The fact that it was paid free of UK tax through the Netherlands is an insult to every postie in Britain.

In the past, unions have been accused by management of being bolshie and holding up progress. Given the golden goodbye to former chief executive Moya Greene and the golden hello for jet-setting Back, one can understand their distrust of management. Ni-Chionna cannot possibly stay in post.

Which brings us to Unilever. During the battle to keep it from skulking off to Rotterdam, there was assurance that the Marmite-to-Magnum maker had engaged with investors. Peter Newham, executive vice president of rewards at Unilever, told MPs that the company both failed to talk to shareholders about the change of domicile as well as pay for top bosses.

A more alert board would not go pell-mell into governance decisions which trample over the rights of stakeholders.

Overpaid fund managers and over-boarded pay bosses live in gilded cages that cut them off from the reality of ordinary citizens. Their insouciance betrays capitalism.

High price

SAINSBURy’S and Asda have won a pyrrhic victory in the fight to consummate their £14bn merger. The Competition & Markets Authority bought into the argument that it needs to look beyond the big four grocers to other players, including nofrills discounters Aldi and Lidl with a market share of 13.2pc, online grocer Ocado and prepared food services Deliveroo.

City estimates suggest that a broader review of this scale would dramatically cut the number of Sainsbury’s/Asda shops that will have to be shuttered or sold off. The downside of the CMA probe is scrutiny of the impact on suppliers. A key pledge made when the deal was unsheathed in April 2018 was that it would deliver lower prices to consumers. This would be done by using the market power of the combined group, some 30.7pc share according to Kantar figures, to chisel down prices from big suppliers such as Unilever and Proctor & Gamble.

A consequence of that might simply be for the suppliers to raise their prices to, say, neighbourhood shops without the same negotiating power. Truth is that handing 30pc of any market to single players will grant it extraordinary power to set prices. The merger would only make sense if there were an existential threat to Sainsbury’s or Asda. This deal should be blocked.

Bumpy rides

THEME- park owner Merlin is being haunted by safety and terror fears which have plagued the UK tourist market in spite of a relatively cheap pound.

The reality is that in a world where commerce is moving online, live attractions such as Legoland, Chessington et al increasingly are sought after by families. With real earnings on the rise, there is no reason to think that Merlin will be unable to ride out relatively static sales and a rising cost base.

Wizard.