Tuesday, 2 August 2011

A cheeky argument against annual elections

There's an interesting claim from Hermes in this week's Financial News that the boardroom coup at Eurasian earlier this year was only possible because the company had instituted annual elections.

So what actually happened? Two directors - Sir Richard Sykes, the SID, and Ken Olisa - were voted off the board (two others stood down ahead of the AGM). But was this due to annual elections? Not in the case of Sykes. Go back to the 2008 AGM report here (PDF) and you can see that Sykes and Olisa were up for election. Looking at 2009 and 2010 AGM statements we can see that Olisa also faced re-election in 2009, but Sykes has not faced re-election since. So, on the three-year cycle that was the norm before the Code was revised, the SID would have been up for election in 2011 in any case and so could have been voted off anyway. Incidentally, one of the directors that stood down would also have been due to face re-election this year.

Personally I think the important point about Eurasian is that it's another example of dodgy governance where there's a controlling shareholder (or in this case group of shareholders). In this case it the problems were magnified by the tiny free float. In that case the problem we should be tackling is listing requirements, rather than refighting the annual elections argument.

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