Bank sees 11% of shareholders vote down the pay report as it is attacked by environmental campaigners, shareholders, former staff – and Bill Oddie
Angry shareholders of HSBC on Friday bombarded the group’s board with barrage of accusations ranging from financing Mexican drug cartels to supporting tax havens, slashing jobs and mis-selling products.
At the banking firm’s first annual general meeting since paying a record $1.9bn (£1.2bn) in penalties to settle US money laundering claims, they also rounded on the directors with charges of hunting down whistleblowers and grabbing bloated bonuses.
Environmentalist and broadcaster Bill Oddie joined the tirade of attacks in London’s Barbican Centre, accusing the bank of financing the desecration of forests in Sarawak and Borneo. Outside the AGM, campaigners from World Development Network confronted bankers with champagne flutes filled with ‘carbon bubbles’ to protest against the bankrolling of climate change, while street theatre performers heckled arriving executives.
Inside the auditorium, one shareholder unfolded an orange jumpsuit and suggested that HSBC board members swap their suits and ties for prisoner garb. A former staff member, now retired, appealed to the board to claw back bonuses paid to directors following scandals such as the mis-selling of PPI and interest rate swaps, and warned that interest-only mortgages would be the next scandal to envelop the bank.
HSBC chairman Douglas Flint told the hundreds of shareholders present that the bank had “unreservedly apologised” and was “humbled and horrified to find failings of such magnitude” after a year which had been “the most difficult that I or any of my colleagues have faced.” HSBC has since established a “financial system vulnerabilities committee” to better detect crime and misdemeanours in future. Chief executive Stuart Gulliver said he had joined the bank 33 years ago when it was “a kitemark for quality and that’s what we want to get back to”.
But the apologies failed to quash an embarrassing 11% shareholder rebellion against HSBC’s executive pay report. The bank’s pay schemehad handed Gulliver a near £2m annual bonus despite the bank’s involvement in a string of high profile scandals.
David Haslam of Methodist Tax Justice Network won cheers from scores of small shareholders after he asked Flint if he recognised the “very strong feeling that bankers are paid too much money”.
But the bank said Gulliver’s bonus was awarded in recognition of his “strong leadership” and “personal behaviour” in tackling the money laundering revelations.
Gulliver’s total pay and benefits for 2012 came in at £7.4m – more than 500 times that earned by the bank’s lowest paid workers. A total of 204 HSBC staff were handed more than £1m in pay and benefits last year.
Britain’s biggest union, Unite, described the scale of the pay as an “outrage” given that some of its members at HSBC take home £14,000 a year and are facing changes to their pension schemes and holidays.
In an AGM that divided between conventional shareholders worried about scrip dividends and earnings per share, pitted against protestors who had gained a platform by purchasing a few shares, Gulliver said the bank’s top priority was returns to shareholders, followed by global standards and streamlining the business. Flint added that despite “tumultous times” the bank’s share price had risen from 514p a share to 742p since the preceding AGM, and that its market value had jumped from $144.6bn to $208.1bn.
Bill Oddie said that while HSBC had offered numerous apologies for the financial damage it had caused, “there has been no mention of the environmental damage it is causing to wildlife habitats. That is a major crime, and HSBC has been financing that crime. In Sarawak, 95% of the natural forest has been damaged. It is a huge desecration, and at root it has been funded by HSBC.” Earlier this year Oddie was evicted from HSBC’s London headquarters when filming a spoof documentary examining “the natural habitat of the HSBC banker, a predatory species driving rainforest destruction”.
Gulliver said that HSBC is the first major bank to put in place a policy framework for logging and timber and promised it was not mere “lip service”. He also warned Oddie: “If HSBC exits from the business, regional banks will enter and you will have no leverage over them.”
Chairman of bailed-out bank faces hard questions over pay deals as he tells AGM of further changes ahead of privatisation
Job losses and branch closures are looming at the Royal Bank of Scotland, the chairman of the bailed-out bank has warned as shareholders accused the bank of having “cosy” and “unsustainable” pay deals.
Sir Philip Hampton told his fifth AGM of the 81% taxpayer-owned bank that £450m would be spent on computer systems after last year’s “big IT failure” when customers were unable to access their accounts.
The meeting was attended by 130 private investors and Jim O’Neil, the outgoing chief executive of UK Financial Investments, which looks after the taxpayer stake. One shareholder asked for reassurances that there were “no more skeletons in the cupboard” after last year’s £390m fine for rigging Libor and IT failures and the continuing mis-selling scandals.
Hampton, speaking at the AGM in the bank’s HQ on the outskirts of Edinburgh, said he couldn’t make any promises but insisted the worst was over at the bank. He said earlier this month the bank would be ready for privatisation next year.
He cleared the way for job cuts and closures – the bank has 1,900 branches before 316 are sold due to EU state aid rules. “We have work to do over the coming years to get our business in the right shape … and that could mean further impacts on employees”.
Stephen Hester, named chief executive when Fred Goodwin was ousted amid the October 2008 bailout, has already axed 40,000 staff, leaving a workforce of 135,000.
Hampton fielded a string of hostile questions, including from private investor Kenneth Cramond, who called for the remuneration committee to resign because it had a “cosy” relationship with the bank. He said the vote on the pay policies was a sham because of the influence of UKFI – the remuneration report was passed with barely any registered dissent – and that if the bank had not paid out bonuses “we’d have turned a profit a year ago”. Some £600m was paid in bonuses last year.
“We can’t go on rewarding failure,” said Cramond. He pointed out that the 2% pay rise for branch staff was higher than those of public workers, who have had a three-year pay freeze.
Another shareholder, Gavin Palmer, interrupted the AGM to hand out a petition to try to set up a new committee on the board.
Campaigners against mining in the Appalachian mountains protested outside the AGM, and in the meeting Paul Corbit Brown urged the board to rethink financing such activities. He held up bottle of Appalachian tap water to complain that it was not fit to drink because of mining activities.
Hester, who waived his 2012 bonus following the IT failures, said it would take a further 18 months to get the bank’s capital ratios “in the final shape that we and our regulators want”.
Pay became excessive, chairman Sir David Walker says at his first AGM, as he admits there is no plan A, B, or C over possible spin off of its investment arm. Jill Treanor tweeted the action live from Royal Festival Hall, London
Guardian poll shows three out of four are ready to move their bank accounts as anger over NatWest shambles mounts
Angry customers are switching bank accounts in their droves, following the IT problems at the RBS group and the scandal surrounding Barclays’ interest rate manipulation. The Co-operative Bank, one of the few unsullied by the latest scandal, has seen a 25% increase in online applications week on week.
A poll on the Guardian Money website that started on Friday is asking readers whether they are fed up enough with their bank to switch accounts. By the time of going to press it had a “yes” response from 77% of the nearly 2,000 who had voted.
Who can blame them? Many at Natwest, RBS and Ulster Bank are suffering another weekend without money, as the problems at the group mean customers are still without access to their bank accounts. Barclays, meanwhile, has been caught up in the double scandal of Libor manipulation and the mis-selling of financial products to small businesses.
Comments on the internet and elsewhere suggest customers of the high street banks are increasingly looking for alternatives that focus on customer service and face-to-face banking.
“Ethics and behaviour are important but have to visit branch 3/4 times a week so ultimately it’s face to face service that’s important,” said Natalie on Twitter.
Many RBS Group customers are likely to be waiting for their problems to be sorted out or to receive compensation before changing accounts, while Barclays customers may want to see which other banks are caught up in the Libor issue before deciding where to switch.
But others are already investigating their options: on Friday the product comparison website Moneynet reported that traffic to its current account pages has increased by 12% in the past week compared to the rest of 2012.
Nationwide building society which, like the Co-op, has not been dragged into the Libor fixing review, has also begun to benefit. It said: “We are already seeing an increase in the numbers of people asking to move to Nationwide from other banks. After recent events we expect those numbers will increase.”
Many readers have expressed their intention to move to the Co-op bank, ethical bank Triodos or a building society, while others have started to take notice of other less obvious competitors, including peer-to-peer lenders and credit unions.
Handelsbanken, a Swedish bank, has more than doubled its branches across the country to 129 since the start of the banking crisis in 2008. It takes a strong community based approach: branches only deal with individuals and businesses whose premises lie close to the bank.
Each branch manager makes his or her own decisions about marketing, lending and even pricing of the branch’s products. Management is not rewarded with bonuses: instead, all staff benefit from an equal profit share scheme that pays them when they turn 60.
The bank will not appeal to everyone, however. Although it is not a high-net worth bank, it does cherry pick customers. “We don’t expect all our customers to have a huge salary but we are looking for people who take an active interest in their money and are in control of things,” said a spokesman. “If someone came to us with a huge overdraft and wanted to switch to us we would probably turn them away.”
If you are not ready to move your account, there are other ways to express your dissatisfaction:
Sign a petition
Ann Pettifor, director of thinktank Prime, has put a petition on the Number 10 website calling for a Leveson-style inquiry into the behaviour of banks. If it gets 100,000 signatures it could be debated in the House of Commons.
Pettifor’s petition states: “We the undersigned call for an independent, judicial public inquiry into fraud, wrongdoing and ethics of British banks, their management and their staff, and the role of the British Bankers Association.”
Join a campaign
The Move Your Money campaign, a child of the Occupy Wall Street movement, offers advice on how to organise a protest or meeting, template emails you can send to friends and family urging them to switch their cash away from the traditional banks, and template letters you can send to your MP asking him or her to support an early day motion calling for a “more sustainable banking system”.
Buy shares and vote
One way to have your say is to become a part owner of a bank. Gavin Oldham, chief executive of the Share Centre, says: “Shareholders do have a lot of influence – personal shareholders particularly – so all directors are aware that they are willing to speak to the media and raise issues. Chairmen and non-directors give attention to personal shareholders quite disproportionate to the value of their holding.”
Buying a share could get you into an AGM where you can stand up and ask a question, but if you have a bigger holding you could stage a protest at any point – if you can get support. If you have shares with a nominal (not market) value of £100 and can get the signatures of another 100 shareholders with holdings also worth a nominal £100, you can propose a shareholder resolution calling for changes.
With the same backing, you can put a message out to all other shareholders, which might be a good way to raise awareness of an issue you think needs action. If you are buying through a third party, as most people do, make sure it extends the shareholder rights to you.
• Activists attack security firm’s conduct outside AGM venue
• Shareholders remonstrate over abortive bid for rival ISS
The boss of G4S, the world’s largest security company, has admitted that last year’s abortive £5.2bn takeover of Danish rival ISS has forced the company to change its acquisition strategy, making big deals a thing of the past.
The fiasco, which sparked a sell-off in the shares and eventually cost chairman Alf Duch-Pedersen his job, also damaged relations with shareholders, which the board is still trying to repair.
Nick Buckles, chief executive of G4S, said that big deals were off the agenda and the company would revert to pursuing smaller acquisitions, worth £200m to £300m. He wants to expand in Brazil, China and India, as well as the UK.
The British-Danish security group held its annual meeting at the London Stock Exchange on Wednesday, which attracted dozens of protesters from the Palestine Solidarity Campaign, Global Women’s Strike and the All African Women’s Group to Paternoster Square next to St Paul’s Cathedral. Their chanting could be heard inside the stock exchange; the banners on display ranged from “G4S Securing Apartheid” to “End the Siege on Gaza” and “Justice for Jimmy Mubenga”, the Angolan asylum seeker who died while being deported from the UK by G4S in 2010.
G4S – the world’s second-largest commercial employer after American retailer Walmart – runs six prisons as well as detention centres for asylum seekers in Britain, looks after security in several UK hospitals, runs anti-piracy operations in the Indian Ocean, and provides security services and equipment to Israeli prisons and settlements.
Campaigners said they handed shareholders an “alternative annual report” that criticised the conduct of the security company in its dealings with the UK and Israeli governments. G4S and three of its guards are being investigated over the death of Mubenga, who collapsed after being heavily restrained on a commercial flight from Heathrow, according to passengers. G4S lost the multimillion-pound government contract to deport foreign nationals shortly after, but its rival Reliance had already been identified as the lead bidder prior to Mubenga’s death. A decision over whether to charge the guards is imminent, the director of public prosecutions said in March.
Journalists were not allowed into the shareholder meeting, which was attended by about 50 investors. At a press briefing afterwards, Buckles said shareholders asked questions about the company’s acquisition strategy, the £55m cost of the failed ISS acquisition and the London Olympics, where G4S is providing 10,000 security staff. The group has been criticised for charging high prices to London 2012 for its security services: the contracts are worth £284m.
“We had a good relationship with shareholders going into the ISS deal,” said Buckles. “They didn’t like the deal, some were more upset than others. [At the AGM] some said ‘you wasted £50m’ … These things take a little bit of time to heal. We’re 70 to 80% of the way there.”
He said investors did not ask any questions about executive pay, which has featured prominently in the series of investor revolts that has become known as the “shareholder spring”. They prompted the departure of several chief executives, including Aviva’s Andrew Moss and AstraZeneca’s David Brennan. Buckles had pre-empted any criticism by waiving his £750,000 bonus in March. He still took home £1.9m in 2011, down from the previous year’s £2.5m. He joked that G4S had already had a “shareholder autumn”, referring to the investor revolt that thwarted the ISS deal.
“Me and the team didn’t think it was appropriate [to take a bonus] for a number of reasons,” said Buckles.
The company’s pre-tax profits slumped by 17% following the £55m in fees paid to investment bankers and layers working on the ISS bid.
But Buckles rejected the suggestion that other company executives should follow suit if things go wrong. “It’s down to your own motivation,” he said. “There has to be a way of assessing what constitutes good or bad performance. Boards or individuals should be capable of making those judgments, and they should be trusted to make those judgments.”
The remuneration report was approved by 98.8% of the proxy votes cast ahead of the meeting, with only 63.5% of the issued share capital voted. Results on the other resolutions were not disclosed as the Danish stock exchange had already closed.
Co-operatives UK’s AGM looked at some of the major talking points in the co-op world, including the newly formed My CSP
Co-operatives UK tried something new last Friday. This year it ran its annual general meeting for its member co-operatives as a stand-alone event, rather than, as in previous years, squeezing the democratic formalities into a spare hour or two at the Co-operative Congress, the residential event which has been the movement’s annual shindig since 1869.
It seemed to work. Perhaps a hundred and twenty people were present in an upstairs business centre in Manchester’s trendy Northern Quarter, and not all looked as if they had simply walked the few hundred yards from their desks at the Co-op Group’s head offices across town.
Eleven years after its creation, as a merger between the staid Co-operative Union representing the consumer co-operative societies and the rather more radical workers’ co-operative Industrial Common Ownership Movement, Co-operatives UK can now legitimately claim to represent most segments of Britain’s diverse cooperative sector. At one extreme is the giant Co-operative Group, one of the world’s largest cooperatives, with its 2800 food stores, its bank and insurance arm, and its interests in pharmacy, farming, funerals and – increasingly – legal services. At the other extreme are Co-ops UK members such as the Busy Bee Toyshop Co-operative, the Millrace Furniture Restoration Co-operative, the Bay of Colwyn Community Benefit Society and the Isle of Skye Renewables Co-operative Ltd. Under Co-ops UK’s highly complex voting system, the Co-op Group has 9,584 votes while Isle of Skye Renewables have been given two votes. But at least this year, everyone seemed to pull together. The only vote taken, on a technical constitutional change, went through 17,473 votes to three.
Ed Mayo, Co-ops UK’s secretary general, gave an upbeat report to his members, talking of the 152 new cooperative and mutual businesses which Co-ops UK’s legal service had helped register last year. He also welcomed the government’s recent announcement that it will work towards consolidating current co-operative legislation into a new composite act – though this much-needed overhaul of co-op law is still three years away from completion and, as primarily a technical operation, will not involve any substantive changes to what is currently possible under the law.
Co-ops UK offers membership not only to co-operative businesses but also where appropriate to mutuals, mirroring a similar change which is under way globally at the International Co-operative Alliance (ICA). Undoubtedly its biggest recent catch in membership terms is a mutual, the Nationwide Building Society, Britain’s largest building society and the first to formally identify itself in this way with Co-ops UK. The move by Nationwide is if nothing else adroit marketing, reconnecting it with the movement it left when it changed its name from the Co-operative Permanent Building Society in 1970. Memories are long in the co-operative world and ever since then the Nationwide has been a particular target for investors and borrowers seeking to elect member representatives to its board.
However Ed Mayo and his colleagues’ courtship of the John Lewis Partnership is still unrequited, John Lewis currently putting its energies instead into the Employee Ownership Association. And there is also work still to be undertaken to reach out to Britain’s massive agricultural cooperative sector. So far, Co-ops UK has successfully wooed Anglia Farmers Ltd as well as the federal Scottish Agricultural Organisation Society, but the potential is clearly enormous.
In the UK ‘cooperative 100′ league table produced each year by Co-ops UK, farmers’ cooperatives occupy ten of the first 25 places. The league table suggests that there are over 60 agricultural coops turning over at least £5m a year, and that the total of 450 or so agricultural coops together have a turnover of £4.4bn.
Not everyone is automatically welcomed into Co-ops UK’s broad church, however. In a moment of some passion at the AGM, board member Nick Matthews argued strongly that the first ‘mutual’ to be established by the government to deliver public services, the newly-formed venture My CSP, was effectively nothing more than a private finance initiative with an element of employee ownership thrown in. My CSP, which has been set up to manage the civil service pension scheme, is 40% private sector owned, 35% government owned, and with a 25% employee benefit holding. It has been controversial from the start with the main civil service union PCS and received the thumbs down from Nick Matthews. “This is a private venture. It’s neither a mutual nor is it employee owned,” he said. His speech brought out the biggest applause of the afternoon from the AGM audience.
More generally, the coalition government’s much-vaunted interest in ‘mutualising’ public services poses something of a dilemma for Co-ops UK. On the one hand Ed Mayo contributes to the mutuals task force established by the Cabinet Office, and his organisation’s board does not necessarily reject the idea of mutualisation per se. There is considerable concern, however, that the mutual name could be sullied by being applied to ventures with only limited employee engagement.
This year’s stand-alone AGM was an indirect result of the UN International Year of Co-operatives 2012, and in particular the now well-advanced plans to hold Co-operatives United, the main closing event for the year, in Manchester from 29 October – 2 November. Co-operatives United, a pick-’n’-mix combination of trade fair, conferences and cultural events, is being actively planned by Co-ops UK, the Co-op Group and the ICA. Co-ops UK says that it will monitor this year’s AGM experience carefully before deciding whether to repeat the experiment in future years or to return to the Co-operative Congress model.
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The London-listed commodities giant got through its inaugural AGM unscathed – perhaps because it took place in a small theatre in Switzerland with questions submitted in advance
Glencore could not have chosen a more closeted venue for its stage-managed AGM on Wednesday – its first shareholders’ meeting since its flotation on the London and Hong Kong stock exchanges a year ago. The commodities firm picked a small theatre in Zug, Switzerland, for its executives’ first outing: a slick show that – remarkably for a FTSE 100 company at a time of unprecedented shareholder protest – ended with polite applause.
Glencore, however, took no risks that its executives might be blindsided by awkward investors, telling shareholders that “for good order” they should submit their questions to the company in writing at least two days before the meeting. It even took the precaution of trying to identify who was going to turn up by asking if they planned to arrive in town by train.
Only a few dozen people bothered to take in the delights of Zug, which promises “unique sunsets” and “world-famous Zug kirsch cake”. Among them were protesters publicising Global Witness’s allegations that Glencore may have had a role in the secret and possibly corrupt sale of stakes in mines in the Democratic Republic of Congo (DRC), but they were outnumbered by policemen. There were only four shareholder questions – a situation the chairmen of other FTSE companies like BP and Marks & Spencer, who annually run the gamut of organised protests, would probably relish.
Perhaps the special measures were designed to protect Glencore’s gaffe-prone chairman Simon Murray, who has shown he cannot always be relied on to make sensible off-the-cuff comments in public (his remarks about the dangers of hiring women in case they get pregnant spring to mind).
Two of the questions concerned the DRC allegations, to which Murray responded that Glencore had behaved properly and regarded bribery and corruption as totally unacceptable. But he dismissed the suggestion of an independent inquiry into the allegations.
The other two questions concerned Glencore’s opaque tax affairs and implied the company should reveal more about how much tax it actually pays. Good news there too, Murray said: Glencore fully obeys the law in all the countries in which it operates – a glib catch-all that will not have satisfied those who say Glencore is too secretive for anyone outside the company to assess whether it is avoiding tax or not, and that no company should claim credit for merely obeying the law.
The only encouraging part of Murray’s answer was his acknowledgement that there is now a debate about how much companies should reveal about their finances. Many campaigners want multinationals to be forced to disclose much more data, to help tax authorities detect if a firm is shifting profits out of the countries where they are earned and into tax havens such as Switzerland. One possible solution would be for multinationals to set out profits made and taxes paid on a country-by-country basis.
So Glencore came through its first AGM remarkably unscathed, albeit after using a few obvious strategies to exclude virtually all its critics from the first public gathering of shareholders. But such a controversial, vast business – which could get larger still if it merges with Xstrata – warrants far more scrutiny. Between now and its next AGM, shareholders should shame it into holding the meeting in London – and ensure that they are better prepared for its stage-management.
Voldemort’s bad spell makes the case for bank reform
America’s biggest bank, JP Morgan Chase, last week gave more ammunition to advocates of banking reform with a stunning admission that it had lost billions, thanks to positions taken by a trading desk on which one of the stars was nicknamed either Voldemort or the London Whale (take your pick).
It is a bittersweet tale. When the activities of the Whale – French-born, London-based Bruno Iksil – were first reported in April they were dismissed by Jamie Dimon, JP Morgan’s bulldog of a boss, as a “tempest in a teapot”. Just over a month later, he is confessing to a surprise $2bn trading loss blamed on “errors, sloppiness and bad judgment”.
An embarrassing turn of events for a man who not only derides journalists but regularly attacks anyone in favour of regulatory reform. Dimon said as much last week, admitting this “plays right into the hands of a bunch of pundits out there”. He has described some of the rules set out by international regulators in Basel, Switzerland – snappily known as Basel III and essentially requiring banks to hold more capital – as “un-American”. Not surprisingly, he is also against the Volcker rule, which would limit how much of their own money banks can use to take bets on the financial markets. But as one of the few bankers who had a good credit crunch, he gets away with his hardline stance.
A strong case for bank reform was made after the debacle at UBS, where trader Kweku Adoboli allegedly lost around $2bn. That was eight months ago, and still most of the talk about bank reform is just that: talk.
In the UK, for instance, the Treasury has admitted the white paper setting out the proposed legislative changes needed to implement the recommendations set out by Sir John Vickers will not now be published until next month. Assuming this legislation is passed, the “ring-fence” that banks will be required to erect between their high street and investment banking businesses will not be constructed until 2019, more than 10 years after the crisis that sparked the need for reform. This is too far away. Two $2bn losses in the space of eight months demonstrate that big banks need to be restrained, and quickly.
Brewers’ viral row reveals pitfalls of social media
Diageo, owner of Johnnie Walker, Guinness, Smirnoff and dozens of other tipples, is a company that takes social media very seriously. A fifth of its vast advertising and marketing budget is spent on Facebook campaigns and promotions. This week’s communications highlight, or lowlight, has been rather different – a full-on corporate grovel to address a cock-up that went viral.
For those who missed the story, somebody from Diageo arrived at a Diageo-sponsored industry awards dinner in Glasgow to discover that Brewdog, an upstart microbrewer, was due to receive an award for Innkeeper of the Year 2012. A threat was made to withdraw future sponsorship if the gong was handed over; the organisers duly gave the award to someone else.
The backdrop here seems to have been Brewdog’s non-membership of the Portman Group, the industry body that promotes responsible drinking. But the ineptitude of the bullying was breathtaking: the independent judges had made their decisions; they were bound to reveal all; and Brewdog’s name had already been engraved on the trophy, which the replacement winner might just notice.
Brewdog promptly told the world, displaying a neat line in quotableinsults: “Once you cut through the glam veneer of pseudo corporate responsibility this incident shows them [Diageo] to be a band of dishonest hammerheads and dumb ass corporate freaks. No soul and no morals, with the integrity of a rabid dog and the style of a warthog.”
To be fair, Diageo’s grovel arrived quickly in the form of an unreserved apology to Brewdog and the British Institute of Innkeeping for “a serious misjudgment … which does not reflect in any way Diageo’s corporate values and behaviour”. If the drinks giant is lucky, the damage to its corporate name will turn out to be barely noticeable. Even in the globally-connected age it’s hard to imagine many Johnnie Walker drinkers in Brazil, Japan or China will be switching drinks brands as a result. It could have been worse, in other words.
The broader moral of the tale, though, is marketing via social media cuts both ways. The internet will destroy more businesses that it creates.
Those protesting about high pay are not making any moral point – they merely miss the huge dividends they used to receive
I realise that history repeats itself as farce, and increasingly does so within approximately three news cycles, but could the phrase “shareholder spring” please be beaten, tortured, and buried in an unmarked grave at the earliest possible convenience?
How can the mere risk of life and limb against brutal regimes be metaphorically yoked to the sheer inspirational courage it takes to turn up to an AGM at the Canary Wharf Hilton because you’re ticked off about the dip in your dividends … but no, I don’t think any of us has the stomach to continue with that particular line in sarcasm. Even by the glib standards of Her Majesty’s Press, the classification “shareholder spring” seems quite the achievement. If “spring” is the cliche du jour, then I actually yearn for the return of the Watergate-inspired “-gate” suffix. Come back, -gate. All is forgiven.
Perhaps there really is the odd, blinkered, S-Class Mercedes-driving arse, in a tizz about his dividend, who imagines that provoking the resignation of the Aviva boss over executive pay is in some way akin to running the gauntlet of Bashar al-Assad‘s death squads. I implore him to get in touch.
In the meantime, let’s dispel the great myth about the so-called “shareholder spring”, which is that the plucky rebels are making some sort of significant moral point. With the rare exception of shareholding pressure groups such as War on Want, those voting down remuneration packages have only affected a conscience after sustaining losses in the financial crisis. As their almost total placidity displayed in the years when the fat cows were coming out of the Nile, they couldn’t give a toss about executive pay if their dividends are up.
Even now, their rooting out of injustice appears highly targeted. Anyone detecting some sort of sudden altruistic commitment to the greater good among most shareholders is seeing things. Theirs is merely a different class of self-interest.
Still, you have to admire their insouciant refusal to consider their part in the problem. We know all about emetic levels of executive pay; that has long been part of the conversation about how we found ourselves up the creek. But less frequently discussed is the ever-increasing pressure that firms – particularly those in the financial sector – were under to pay hugely cavalier dividends to their shareholders. In many cases they have continued to do so after the financial crisis hit, instead of putting aside money as capital to cushion themselves in the event of further recessions or crises. So perhaps I’ve missed it, but I can’t recall any AGM proposals in which shareholders criticise management for rewarding them too generously in the past. It might be the most surreally retroactive of resolutions, but it would make a valuable point.
After all, the AGM setting does not preclude the making of radical philosophical points, as HSBC – the financial sector’s biggest dividend payer – discovered almost a decade ago. Present at its shareholders’ meeting was one of the bank’s night-time cleaners. Charities had bought shares for Abdul Durrant, and he made an extraordinary plea to the bank’s boss to be paid a living wage.
“In our struggles our children go to school without adequate lunch,” Durrant explained in front of all the other shareholders. “We are unable to provide necessary books for their education. School outings in particular they miss out on. In the end, many of our children prefer a life of crime to being a cleaner.” Which rather puts today’s shareholder moralising into perspective.
Still, if absurdist uprisings are your bag, you were certainly spoiled for choice this week. The perennial request for more police on the streets was met in satirical fashion on Thursday, as an estimated 30,000 officers in London alone tore themselves away from lucrative overtime or being on the sick to march against budget cuts and changes to their working practices. “Remember what you did to the miners!” was the tart verdict of one of the protesters in the separate public sector workers’ strike. “Have a bath,” was one officer’s retort to the Socialist Workers party demonstrator who gave up a mischievous cry of “Charge the police!” (Incidentally, huge thanks to the several coppers and ex-coppers who contacted me after last week’s column with observations that tended toward the aggressive. I would report the worst offenders of you to yourselves, but naturally fear the whole episode could end in a bizarre incident in which I was alleged to have kicked myself down the nick stairs.)
Perhaps we get the revolutions we deserve. If Britain’s contribution to global democratic sea changes is to be a “shareholder spring” and a bunch of policefolk reclaiming the streets from themselves to defend their Spanish practices, then that is a matter for sobering reflection. In fact, in the interests of completing the trifecta, I would now like to see MPs march against a penny of cuts to their own diamond-encrusted pensions. It would be a development that would indicate the news had finally eaten itself, admittedly, but that might offer some perverse form of closure.
Another round of household energy bill price hikes looms after Centrica warns cost of supplying gas has risen by £50 a year
Millions of households face higher energy bills this winter after the owner of British Gas predicted that the cost of supplying homes will rise by £50.
Ahead of what is expected to be a fractious AGM on Friday, Centrica served notice on its 15.9 million UK customers that another round of price hikes are in the pipeline.
In an interim management statement it said wholesale gas prices for the forthcoming winter are around 15% higher than last year while non-commodity costs – such as transportation and government environment levies – will add £50 to the cost of supplying the average household this year. Because the wholesale gas prices were not factored into the £50 figure, bills could rise by an even higher amount in the winter.
Centrica said: “The trend for retail energy costs therefore remains upwards.” The statement came as Pirc, the shareholder advisory group, warned that Centrica’s new executive pay scheme means “potentially excessive amounts could be awarded”.
Sam Laidlaw, Centrica’s chief executive, was paid nearly £4m in 2011 despite a rise in pretax profits of just 1%. The biggest impact on Centrica’s 2011 results was at its “downstream” operation, dominated by the British Gas residential outfit, which reported a 30% fall in operating profit to £522m.
Centrica’s statement means that British Gas customers should brace themselves for a price rise announcement at the end of the summer. Last August, British Gas raised electricity prices by 16% and gas prices by 18%, although it has since cut electricity prices by 5%, while leaving gas prices unchanged. In 2011, higher household prices were offset by lower usage due to mild weather, reducing the average bill by £37 to £1,024. If the £50 cost rise is passed on to customers it would represent a 5% increase on last year’s average bill for British Gas customers.
Centrica added in its statement that the business is trading in line with expectations. In a hint to the government over its struggling plans for a new generation of nuclear power plants, the group added: “Further clarity is needed to deliver the investment required in new [energy] generation capacity.”
Centrica is a 20% shareholder in the eight nuclear power stations owned by British Energy, a business controlled by France’s EDF. Both EDF and Centrica are waiting for the government to confirm financial support for nuclear energy – through a set carbon price and subsidies for low-carbon energy – before deciding whether to press ahead with plans to build new plants. The most advanced project is at Hinkley Point in Somerset.
Large number who rejected the remuneration report is seen as a ‘warning shot’ from investors
Trinity Mirror chief executive Sly Bailey has narrowly survived a shareholder revolt over her pay, after just 54% of shareholders voted to approve the remuneration report at the annual general meeting on Thursday.
The large number of voters who rejected the report follows a rebellion by major shareholders, who are unhappy with her £1.7m pay packet and the financial performance of the company. It comes in the wake of Bailey announcing she is to step down from the Daily Mirror publisher at the end of the year.
A source said that the rebellion is a “massive smack on the wrist” and a “warning shot” from investors, although if the report had been rejected it is highly unlikely company directors would have had to return any of their pay.
Investors voted to vent their mounting displeasure after a decade under Bailey’s leadership, during which the publisher’s market capitalisation has slumped from more than £1bn to £80m, and share price has fallen by over 90% to 30p. During that period, Bailey has pocketed more than £14m.
The lack of confidence in the structure of pay and bonuses at the publisher will put pressure on Jane Lighting, the former chief executive of Channel 5, who heads the remuneration committee at Trinity Mirror. However a spokesman said she will not stand down from the position.
More than 80% of shareholders voted to re-elect Lighting as a non-executive director, while over 85% voted in favour of reappointing Bailey for the rest of the year until a new chief executive is found.
Almost a quarter of shareholders voted against Trinity Mirror’s long-term incentive plan, which outgoing chairman Sir Ian Gibson said was being reviewed and may be adjusted to include targets such as achieving digital strategy goals.
Speaking after the AGM, David Grigson, the former Reuters finance chief who will take over from Gibson on 3 August, hinted at more board changes over the next year and said that Bailey’s successor will be “paid differently”, with more of a focus on performance targets.
Shareholders bombarded Gibson with questions and criticisms on how the company had operated since Bailey became chief executive.
“It has been a strategy of despair rather than success and achievement,” said shareholder Chris Morley, who is also a member of the National Union of Journalists. “Ever since she came in we have had year after year of cuts – and not always when the economy was bad – tens of millions of pounds of cuts and lots of good quality journalists, which has left the business weaker.”
He called on the board to bring in a new chief executive who would “grow the business rather than cutting it into a thousand pieces”.
Gibson, however, argued that the company is not in “crisis” and is performing better than many “privately-owned” rivals. He said Bailey had delivered on the strategy required in the economic climate, backed by the company board.
Bailey was not required to field any questions and disappeared immediately after her last annual general meeting.
Another shareholder said “I’ve been coming to this [AGM] all the time, I’ve got no confidence in the board, all I can say is you’re all fired.”
However Gibson said: “She has consistently delivered robust profits and cashflows and importantly set the digital basis for the group going forward.
He denied a news report that Bailey had been awarded a £1m pay-off. “We asked for that to be corrected, she is not getting a pay off she is working her notice.”
He pointed out that since Bailey joined the Daily Mirror’s publisher from IPC Media in 2003 she has had to manage the “worst and longest economic downturn this country has ever seen”.
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