As political turmoil continues in the eurozone and solutions fail to materialise, the wait-and-see brigade are setting the pace
In what is starting to become an increasingly regular pattern, the markets spent the first half of the week soaring on high hopes of solid political solutions, only to fall back to its default position of caution when none was forthcoming.
The FTSE had a short week, meaning it had a lot of catching up to do, which it did with aplomb, jumping more than 2% on Wednesday – the biggest one-day rise of the year.
Excitement grew that the Spanish banking crisis could see a resolution, the Bank of England or US Fed would introduce more quantitative easing, and the eurozone interest rates would be cut.
In the end none of the above occurred and the markets had to make do with the wait-and-see brigade maintaining its all too familiar pace, sending the FTSE, French CAC, German DAX and Italian FTSE MIB closing lower.
The FTSE 100 was boosted initially by strong rises from the mining companies, especially after raw material lover China cut its interest rates, spurring hopes for more spending.
But by yesterday realisation dawned that China may be in trouble if it has to cut rates for the first time since 2008, marking Vedanta, down 50p, 5%, to 933.5p, Rio Tinto, down 146p, 4.8%, to £33.39 and Eurasian down 17.4p, 3.9%, to 424.3p, the biggest fallers.
Catalytic converter makers Johnson Matthey provided some much needed cheer to investors, reporting better than expected results and announcing a 100p a share special dividend – the first in its nearly 200-year history. Bosses also increased the final dividend by 20% to 55p, leaving shares closing up 196p on the week at £23.03.
Royal Bank of Scotland’s shares closed up 20p on the week at 220p, in its first few days of trading following a stock consolidation. The bank swapped one new share for 10 old ones to make the share price look more at home in the FTSE 100 and avoid the volatility that comes from what was starting to look like a penny share company.
It seems to be working, but the target price for the taxpayer to break even on their 84% investment now looks even further away at 500p instead of 50p at the old price.
Security group G4S held its annual meeting in secret this week amid protests at some of their practices, with some believing the board could be the next for the Shareholder Spring.
In the end the G4S board managed to control its shareholders, suffering the most minor of rebellions.
More troubling times were felt at pan-European publisher Mecom, which announced its second profit warning in as many months, sending shares down nearly 50%, closing at 75.5p. They had been as high as 230p in January.
Non-executive director Michael Hutchinson attempted to reassure the market, buying shares worth nearly £30,000. Unfortunately, none of the executive directors followed suit.
This week saw confirmation that hedge fund operator Man Group will be dumped from the FTSE 100 on 18 June and replaced by engineers Babcock in a reversal of the old adage: “Out with the old, in with the new”.
It wasn’t all bad news for Man, closing the week at 78.5p, getting an upgrade to “buy” from Citigroup. However, the reasoning from analyst Haley Tam was a back-handed compliment, suggesting “performance cannot get sustainably worse from here”.
Director on several boards hurt by Barclays vote as Man hedge fund investors exercise new-found sense of dissent
Alison Carnwath, a high-profile serial director with a seat in the boardrooms of a number of major companies, has become a focus of discontent among investors after suffering an embarrassing protest vote by investors at hedge fund Man.
Some 33% of investors failed to support her re-election to the board of the hedge fund group at Tuesday’s annual meeting. Shareholders who attended were reported to have criticised her lengthy tenure on the Man board and her performance at “another place”.
That appears to be a reference to her role as chairman of the remuneration committee at Barclays bank. At the bank’s AGM last week 22.5% failed to back her re-election to the board in protest at the £17m pay package handed to chief executive Bob Diamond– and the £5.7m tax bill the bank agreed to pay on Diamond’s behalf..
Man held its annual meeting at a time when investors appear increasingly prepared to exercise their votes. They are under pressure from the government to clamp down on executive pay and hold companies to account.
Company directors usually expect near unanimous support at annual meetings but the introduction of annual votes on directors seems to be encouraging shareholders to take action against individuals.
Carnwath is one of the highest profile non-executive directors in FTSE 100 boardrooms and chairs the property company Land Securities. The 59-year- old, who read economics and German at Reading University, worked as an investment banker for more than 20 years before moving into some of the UK’s biggest boardrooms.
In addition to Barclays, Land Securites and Man Group, she also sits on the board of the insurance group Zurich and US technology company Paccar.
She has previously held directorships at companies as diverse as Friends Provident, Glas Cymru and Gallaher. She also serves on the board of ISIS private equity partners, which owns the casualwear brand Fat Face and womenswear chain Bonmarché. Carnwath was chair of MF Global, the now-bankrupt brokerage, until March 2010.
The shareholder advisory body ISS had recommended to its clients – pension funds and other investors –to vote against her election to the board on the basis that she is no longer independent. Corporate governance guidelines say directors can no longer be independent if they have spent more than nine years in a boardroom. Carnwath has been at Man for 11 years.
ISS also highlighted that Carnwath’s tenure on the board was “concurrent” with that of chief executive Peter Clarke, who has been under fire from some investors for the under-performance of the group.
To head off concerns about her lack of independence, Carnwath had stepped down as the senior independent director– a key point of contact for investors – in July 2011.
However, ISS noted that she remained a member of the remuneration committee and said it “does not consider her to be independent; she remains a member of the remuneration committee, which should be wholly independent”.
Man insisted Carnwath was “unquestionably” independent.
Executive who agreed Diamond’s £17.7m deal
To use Nick Clegg’s words, Alison Carnwath is the embodiment of “crony capitalism” that allows a small group of City figures to set each other’s pay and bonuses without having to worry about the real world.
Carnwath, 59, is one of two executives to serve on the remuneration committee of three FTSE 100 companies – Barclays, Man Group and Land Securities.
The government wants to ban executives at one company from setting pay at another. Shareholders have also begun to act against this cosy arrangement that lifts executive pay across the board, with a third of Man’s shareholders failing to back Carnwath’s re-election to the board after a 21% protest vote at Barclays last week. Carnwath was responsible for pushing through a £17.7m pay package for Barclays boss Bob Diamond and £7m for Man’s chief executive Peter Clarke.
Investors have also complained that Carnwath, who has a holiday home in the Bahamas, does not have the best attendance record.
Pirc, the shareholder advisory body, urged investors to vote against Carnwath’s reappointment at Barclays noting that she “missed three audit committee meetings”. She earns £300,000 as chair of Land Securities, £158,000 from her role at Barclays and a further £100,000 at Man.
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