Wednesday, 25 January 2012

That 75% threshold - a few quick points

1. There is already pushback on it, have a look at Lombard and Lex in the FT today. It is, as it stands, probably the most radical proposal in Vince's statement (in the sense that it is likely to actually bite because less companies will pass). As such it is also the one against there will be the most lobbying (though lawyers will no doubt start on contractual stuff soon!). So the progress of this idea might be a signal of how much appetite there is to pursue reform in the Coalition (and I assume Vince wanted to be more radical).

2. One point in favour that could be made is that it would strengthen the hand of minority shareholders where there is a controlling shareholder. If everything stayed the same in terms of voting behaviour, Xstrata would not have passed its remuneration report (I know it won't be the same vote, but...) last year. Or in 2010. Or in 2009.

3. As I flagged up previously, the flipside is that given the increasing amount of overseas ownership of UK shares it could be the cases that a UK PLC could lose a pay vote as a result on non-UK votes. To firm this one up, I can't spot a single UK institution that voted against Hammerson last year when it wanted authority to call meetings on short notice. That vote required 75% in favour too, and I'm pretty certain it was non-UK investors that defeated it (remember Ontario Teachers owns about 11%). One to watch.

4. Again I've made this point before, but if the principle is conceded that you need 75% to pass a pay resolution, why only require 50% for director elections, or acquisitions? So there is a decent 'slippery slope' argument against (for!) such a change.

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