Thursday, 14 September 2017

ECJ ruling challenges Ryanair's employment model

Today saw a highly important by the ECJ relating to low-cost airline Ryanair. As many people will know* Ryanair is anti-union. It also relies on extensive use of indirect employment, with many cabin crew employed by agencies like Crewlink, whilst many pilots are self-employed contractors (yes, really).

But the other striking thing about Ryanair is that a large number of staff are employed under Irish law. This happens whether they work in Ireland or, in the case today, in Belgium. By happy chance Irish law has weaker employment rights in a number of areas than other nations in which Ryanair crew work. Today's decision, which you can access here, was essentially concerned with whether staff based in countries other than Ireland could have cases heard in their own country, and plays into the question about which country's law should apply.

I won't summarise the ECJ ruling, our resident legal expert has done that here, but it is very favourable to employees on this point, and thus a major setback for Ryanair, though the company claims otherwise.

The ITF has put out a statement on the ruling, which you can read here. There is also quite a bit of media coverage, most of it good (the Telegraph news story not so much!). Interestingly, some sell side analysts have come out with negative comments about the impact on Ryanair in response to the ruling, and various figures are being knocked about regarding the potential impact on its costs. This, plus the 3%+ drop in the company's share price, should tell you that financial markets have not bought the company's claim that the ruling doesn't change anything.

To me it looks like today is just the start of the company's employment model coming under more scrutiny and challenge. If I was an investor in Ryanair I think I'd be asking whether today's bombastic statements bear much relation to the truth, and just how much risk/cost there is tied up with the current model. It's interesting that the Advocate General's opinion in this case, which came out in April, did not even get a mention in the annual report.

As if that was not enough, Ryanair has its AGM next week. Again there has been a string of stories about corporate governance advisers recommending votes against the company's remuneration report and board directors. So today's news could not come at a worse time.

It will be a turbulent couple of weeks.

* If not, here's just one recent example:
“We don’t believe it will lead to unionisation because the first people up over the barricade looking for unions will find their base either frozen or closed,” he said.

Sunday, 10 September 2017

Adolf Berle on Sports Direct

Adolf Berle, of Berle and Means fame, continued to write interesting things about corporate power and control long after The Modern Corporation and Private Property. The excerpt below is from Power Without Property: A New Development in American Political Economy from 1959. I think it applies well, almost 60 years later, to what happened at Sports Direct last week.
"In effect, the position of the institutional managers is that they will not exercise their voting power to affect the choice or the policies of corporate managements. The individuals for who the institutions are fiduciaries, holders of rights in pension trusts, of shares in mutual funds, or of insurance policies, have surrendered their voting power. The institutional managers, therefore, by their policy of non-intervention, merely insulate the corporate managements from any possible action by or influence of the ultimate, beneficial "owners" of the stock. A policy of non action by the institutional managers means that the directors and managements of the corporation whose stock they hold become increasingly self-appointed and unchallengeable; while it continues it freezes absolute power in the corporate managements."

Friday, 8 September 2017

Worker directors via the UK Corporate Governance Code

As anyone who reads this blog will probably be aware, the Conservative government bottled its commitment to put workers on boards. Instead it has asked the FRC to amend the UK Corporate Governance Code to give companies three options, one of which is a worker director, under the 'comply or explain' regime.

It's worth noting that some people in corporate governance warned against the government seeking to achieve worker directors on boards through the comply or explain mechanism of the Code. For example, this was a particularly explicit call for political intervention instead of leaning on the Code:
The full-blown worker-elected director model should not be done through the corporate governance code. That is quite a big shift and requires parliamentary weight behind it to get it done. There is a risk if we try to do it through the code that we would have a very high level of non-compliance. That would cause the code to come into some discredit.
That comment was from Stephen Haddrill, head of the FRC, which is responsible for the Code, when giving evidence to the BEIS committee's corporate governance inquiry (see Q31). To be fair, Haddrill did also advocate looking at other ways of achieving representation, including NED chairing a employee committee. Nonetheless the FRC will have something in the Code that the FRC said could discredit it.

Wednesday, 6 September 2017

Sports Direct chairman scrapes through

Today was the Sports Direct AGM and, once again, chairman Keith Hellawell was in the firing line. He had previously said he would stand down if he failed to get the support of a majority of independent shareholders.

Ahead of the AGM Unite has flagged up numerous ongoing problems at the company, and its complete failure to deliver on previous pledges.  Major investors like Fidelity, Aberdeen, Hermes and Royal London all publicly announced they were voting against. Trade Union Share Owners members also voted against and called for other shareholders to do likewise. All the voting agencies also recommended a vote against.

However, Hellawell squeaked through. According the company's AGM statement he received the support of 55% of the independent vote. In raw scores, he got 63.3m in favour, whilst 55.6m voted against. Inexplicably one or more major shareholder seems to have abstained on this vote, with 6.4m abstentions. But even of they had been shifted to the against column, though the margin would have been wafer thin, Hellawell would have been OK.

I suspect there is going to be a lot of scrutiny go how individual institutions cast their votes. We know that Phoenix was voting in favour, and the likelihood is that Odey did too, but that still leaves a lot of votes unaccounted for. (Ladies and gentlemen, start your spreadsheets....)

Against predetermination, trivialisation etc

I enjoyed this book recently. I won't attempt to summarise any of it, but here are a couple of the many bits that I liked. May post up some more.

We are not predetermined. Nothing of what we do is inevitable and inescapable, lacking an alternative. Against external pressures clamouring for our obedience and insisting on our surrender, we can rebel - and all too often we do. This, however, does not mean that we are free to act as we would wish or dream: having done with the bugaboo of necessity, we find ourselves confronted face-to-face by the all-to-real dilemma of feasibility. It is the feasibility - or more precisely the accessibility - of our goals, inflected and tempered by the chances of their attainment, that draws the line between realistic and fanciful options and varies the likelihood of alternative individual choices. People choice, but within the limits drawn by the feasibility of goals - a factor not open to choice. 'Being realistic', according to Gramsci, is indeed an ambivalent stance: it enhances the probability of success - but at the price of desisting from the pursuit of other goals, cast off-limits and so beyond reach. Above all, it renders starkly visible the disconcerting complexity of the task - though only to nudge for more effort, not to prompt its abandoning and resignation. Manipulating the odds, the powers-that-be may make some choices exceedingly costly and so reduce their chances of being taken - though they could hardly succeed in the effort to render them impossible to make. The world of humans is a realm of possibilities/probabilities, not determinations and necessities.   

Trivialisation is one of the great registers that power employs in arranging the score of common feeling. The flow of collective feelings can be made to absorb the negative potential of events, which always threatens to be dangerous, by reducing the quality of particular actions and specific occurrences, their dramatic and symbolic character; or by depriving such negative potential of any vitality, handing it back to each citizen individually as an occasional sample of the daily mediocrity surrounding us, a sample which we are to eat up and digest separately, promptly turning our heads to the other side, towards the next form of mediocrity, since a collective and public reflection never really seems worth the effort or the attempt. 

Friday, 1 September 2017

Wearing different hats

The excerpt below is from Hegemony and Socialist Strategy and plays into something I think a lot about today. To me it seems obvious that the Left had to shift towards a more expansive view of what people want than just what happens at work. In developed economies we don't have to be as defined by work as our predecessors were. So we are citizens, consumers etc as much as workers and we think of ourselves in that way too.

However, one of the big blunders the Third Way type 'modernisers' (they don't seem modern anymore, do they?) was to assume that because people spent less time thinking about their workplace identity, and more about other aspects, that the workplace didn't matter any more. In addition, it was too uncritical of the idea that we think like consumers about all kinds of things (public services, politics) and that therefore it was smart to relate to the public in a consumer-provider relationship and encourage this more generally.

On a slight different point, in my small corner of the world I've lost track of the amount of times trustees have told me "I take my union hat off when I go into trustee meetings". Whilst I understand the need to act responsibly (though I'd ask where the really bad examples of member trustees doing otherwise are), I do think in practice this has sometimes lead to trustees adopting far too narrow a view. And adopting an 'investor' persona can be in direct conflict with our interests as employees (or citizens or even consumers for that matter). I don't see why we shouldn't seek to develop a "union trustee" hat for our reps to mentally put on.

Anyway, here's  the blurb:
"If the worker is no longer just a proletarian but also a citizen, consumer and participant in a plurality of positions within the country's cultural and institutional apparatus; if, moreover, this ensemble of positions in no longer united by any 'law of progress' (nor, or course, by the 'necessary laws'), then the relations between them become an open articulation which offers no a priori guarantee that it will adopt a given form. There is also the possibility that contradictory and mutually neutralising subject positions will arise. In that case, more than ever, democratic advance will necessitate a proliferation of different political initiatives in different social areas... [and] each initiative [will come] to depend on its relation with the others." 

Tuesday, 29 August 2017

The Conservative corp gov calamity is an opportunity

I've blogged before about the political problem that executive pay has become. The Conservative government's latest attempt to both look tough and do little is to my mind more evidence of it. I can see no positives in the outcomes for the government, though it provides short-term tactical and long-term political opportunities for the Left.

Let's recap on the details first:

  • There will be disclosure of pay ratios - a policy that is directly addressed to the "fairness" question about pay, and one which many investors originally opposed but have come around to.
  • There will not be mandatory worker representation on boards. Rather there will be a comply or explain requirement that companies have either a non-exec nominated at as a worker rep, or an employee advisory committee, or a worker director. 
  • Further clarification of Section 172 of the Companies Act. 
  • There won't be any further powers granted to shareholders, but the Investment Association will keep a record of any companies receiving 20%+ votes against.
  • There will also be some tweaks to the UK corporate governance code relating to disclosure around remuneration.

Understandably, this package of reforms has been attacked for being a much watered down version of Theresa May's original ideas, which is what it is. So to the extent that the public is following this debate at all, I suspect all they will hear is that the Government has lost its nerve and/or given in to lobbying over the pay of corporate executives. As with previous reforms in this area, the fiery rhetoric which launched the initiative is not matched by the policy that emerges at the end.

On the most trivial level, I can't see what possible benefit the Conservatives derive from this. They risk reinforcing rather than challenging (presumably the original plan) the idea that they are weak in the face of corporate power. And for what? Does anyone with any knowledge of corporate governance believe that the final package of half-hearted measures will achieve much? It might have been simpler to kill the review off, blaming the need to focus on Brexit.

On the flipside, the government's weak position gives Labour the opportunity to hammer home the idea that the Conservatives always do this, that they are in thrall to corporate and financial donors and so on.

Looking further ahead, by leaving the door ajar the government has now opened up new terrain into which campaigners from the Left must now pour. The argument is simple: if even the Tories concede that worker representation on boards is desirable, and will implement a weak as water policy on it, we need to finish the job properly. This is a straightforward campaign opportunity now for all those who agree with the policy.

But also remember the dog that did not bark. There is no extension of shareholder powers in the government's response. Indeed the role of shareholders in terms of the proposals is very limited. This is quite striking when you consider the last 20 years or so of attempts at reform. I've argued before I think future governments would put far less emphasis on the role of shareholders when trying to tackle these issues, but I'm surprised it's a Conservative one that did this first. I think this is the shape of things to come.

Still, there's still some time for some nonsense in there. The government does advocate the ICSA (company secretaries) and Investment Association (asset managers) providing guidance on how companies can take account of the views of employees and other stakeholders. I must be missing something, because I can't see why one group of stakeholders (investors) should get to advise companies on how they should talk to another (employees). Labour should attack this idea for the nonsense it is.