Friday, 14 November 2008

Bank vs State

There's all kinds of spin and counter-spin going on out there about the nature of the Government's involvement in the banks in which it is taking a stake. In today's FT, Sir Philip Hampton and John Kingman play down the idea that HMT will be a back seat driver. Rather, in their comment piece, they pitch their role as comparable to an institutional investor:
First, we will operate like any other active, engaged shareholder to maximise the sustainable value of the taxpayer’s investment in the banks, taking account of risk...

Like any other large institutional holder we will engage robustly with banks’ boards and management, holding both strategy and financial performance to account. We will also need to understand the views of and, where appropriate, consult with other investors – again, as any engaged investor would...

Finally, like any engaged investor, we will take a close interest in board remuneration structures. We want our investee companies to pay fairly, but not beyond fairly, for the world-class talent they need...

Excuse me for stifling a chuckle, but who are these 'engaged investor' types that UKFI (the govt's investment vehicle) is going to act like? I would argue that they barely exist in the UK market. As I've argued previously, if you take a look at the actual voting of asset managers - on, say, bank remuneration - you won't harbour any illusions about them being very engaged. (A more prickly person than I might make a particular point about the asset management arm of a bank in which HMT might have something of an interest.)

If the Government IS going to act like a genuinely engaged shareholder, all power to them, but it's a slightly different offer to seats on the board, which Darling was suggesting not long ago. In fact the Government is bending over backwards to at least give the impression that it won't meddle. All of which does rather kick away the central argument in Barclays' decision to go for Middle East funding. In contrast to HMT, Barclays is telling shareholders that having state investment would mean interference and conflict with its global strategy. That won't happen, you understand, with two large investors holding a third of its shares.

Today the Barclays team meet with the insurers, whose trade body has amber-topped their report on the bank. Taken together with the abstention recommendation from RREV that's already a real vote of no confidence, as these are not radical organisations. Perhaps some of the large institutions would have preferred HMT to have a chunk of Barclays (especially if that was the only alternative to this deal). I still think Barclays will easily make it through the vote, simply because most asset managers rarely oppose management, but they have done some serious damage to their reputation.

3 comments:

Nick Drew said...

should stifle chuckles like that, Tom, you'll do yerself a mischief

Tom P said...

it was almost a chortle. imagine!

will said...

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