Saturday, 16 February 2019

Workers on boards round-up 2

As I've blogged quite a lot recently, I think the ground is shifting with regards to the UK corporate governance model. Specifically, the issue of employee and other stakeholder representation is being debated increasingly frequently.

Although there is still a lot of resistance to worker directors in particular I think it's pretty clear what the direction of travel is. At the start of 2018 there was only one PLC - FirstGroup - with an employee director. By the end of 2019 I reckon there will be at least four. Slow change so far, but I can only see things moving in one direction from here.

Anyway, I thought it would be useful to pull together some bits I've spotted over the past few weeks on this topic.

1. An FT piece looking at employee involvement in governance as part of tackling executive pay.

2. YouGov polling showing workers on boards is supported by about two-thirds of the population in the UK (and by similar margins in other countries, including the US). Other left-wing policies also poll well.

3. A Slate piece on Elizabeth Warren's bill that would introduce worker directors on the boards of US companies.

4. A similar bill from Senator Tammy Baldwin (which also seeks to eliminate stock buybacks). Baldwin's bill calls for a third of the board to be workers, versus 40% in Warren's bill.

5. Google employees seeking a worker director on its board.

6. Polling from the US last April which found workers on boards to be the most popular of 5 progressive policies, supported by more than half of the 3,300 people polled. The detail of the polling shows registered Republicans were the only group where a plurality (not a majority) opposed the idea, and then only just.

7. A piece from Ryan Bourne from before xmas opposing workers on boards.

8. News from December that Capita is recruiting for employee directors (potentially two).

9. A piece from Australia about union attempts to get Labour to commit to workers on boards.

10. Another UK PLC, McKay Securities, nominating an existing NED as a employee representative director.

Previous round-up here.

Wednesday, 13 February 2019

Executive pensions & UK corp gov

Well over a decade ago, when I worked at the TUC, we started carrying out a survey of directors' pensions entitlements in the FTSE100. This was because we were aware that many directors still had DB pensions when these schemes were being closed for staff, and that exec schemes had preferential terms (accrual rates of 1/30th were common). As directors shifted into DC schemes, or started taking cash in lieu of a pension, it was clear that the rates available to them (often 20% or 25% of salary) were way above typical employer contributions to workforce DC schemes. As a result also argued that directors should be in the same schemes as their workforce and on the same terms.

Since then there have been various attempts to nudge companies to a) disclose more and b) adopt a fairer approach. Back in 2010 LAPFF and NAPF (as was) called for greater disclosure of directors pensions. A few asset managers now have a line in their policies on remuneration that directors shouldn't get preferential treatment.

The UK Corporate Governance Code now includes this (weak) blurb:


And more recently the Investment Association said that from this year it would "red top" companies offering differential provision. This is after years of telling companies that they should do this:


It's obviously a good thing that it is now recognised that giving directors another bung via pension contributions whilst keeping a lid on them for the workforce is not a good luck. But the reality is that it has taken a decade to get this far, that the Code is still very weak on this point, and we've still only got to the point where some shareholders might take a tougher voting stance (which they could have done at any time in the past decade). Even now we are not at the stage of corporates changing their approach.

It shows that left to its own devices the existing compact between corporates and asset managers takes a very long time to deliver limited change. Mainstream UK corp gov is a giant blob that stifles and slows any change. I'm not convinced many existing players have the orientation or capacity to challenge it.


Thursday, 7 February 2019

Inequality, depression, unions

Today someone mentioned Angus Deaton and it reminded me of this interview with him in the FT which I always meant to blog about. It's two years old now, and took place just after Trump's victory, but there are several bits that really resonate with me.




The last bit really interests me. I'm obviously an advocate for unions, and despair of the way that the decline of unionisation has scarred society. Many people (rightly) talk about inequality in regard to this, but I'm also interested in this issue - that Deaton hits on - of the removal of representation. 

I think a much underestimated value of unions is that they give workers the ability to challenge, to argue back, to assert some agency. In these days of the consensual anaesthesia, where conflict and contestation is characterised as undesirable, and democracy and deliberation as inefficient, you can see why those who want to keep a lid on things and/or "depoliticise" them (by taking issues out realms where they might be debated) don't like unions. Now we characterise workers taking action - arguing back, working to rule and (rarely) striking - as a pain in the arse, even while we celebrate those further up the foodchain for exhibiting the same kind of approach (think about the Theresa May "bloody difficult woman" stuff).

I think this is a shabby state of affairs. In addition, as Deaton suggests, I think the destruction of the sense that you can argue back, or assert yourself, or have someone fight for you, must come at a psychological cost, especially when coupled with the decline in jobs where traditionally workers have had some agency. I also wonder about the effect that this has on democratic norms. The rise of unions paralleled growing demands for political enfranchisement. Ordinary people were familiar with being able to choose representation. If we no longer expect to be able to choose to have effective representation where most of us spend most of our adult lives (at work) do we fall out of the habit of seeking/expecting representation at all?

Like many of us, Deaton sees all this as an element of the Trump and Brexit revolts. Tying it together with his comments that Labour / Democrat leaders no longer look/sound like their voters, it also reminds me of this passage from Wolfgang Streek. I'm 100% a Remainer, but I can understand the desire to through a spanner in the works.

   

Wednesday, 6 February 2019

George Orwell's pay ratio

This, from The Lion and the Unicorn, popped into my head the other day:
II. Incomes. Limitation of incomes implies the fixing of a minimum wage, which implies a managed internal currency based simply on the amount of consumption-goods available. And this again implies a stricter rationing-scheme than is now in operation. It is no use at this stage of the world’s history to suggest that all human beings should have exactly equal incomes. It has been shown over and over again that without some kind of money reward there is no incentive to undertake certain jobs. On the other hand the money reward need not be very large. In practice it is impossible that earnings should be limited quite as rigidly as I have suggested. There will always be anomalies and evasions. But there is no reason why ten to one should not be the maximum normal variation. And within those limits some sense of equality is possible. A man with £3 a week and a man with £1,500 a year can feel themselves fellow-creatures, which the Duke of Westminster and the sleepers on the Embankment benches cannot.

If we were to update this today, £300 quid a week, or a bit over £15k, is basically minimum wage as an annual salary, and would suggest a maximum (under a 10:1 ratio) of £150k-ish. I bet many people in my corner of the world would consider that absolutely barking, and I bet many people I know in the real world would consider it really quite generous.

Tuesday, 5 February 2019

Shareholders vs Ryanair: Gone-derman

I think that's called a win:
Having agreed this group strategy as the best way to grow Ryanair, Sun, Lauda and other possible airline brands, Michael O'Leary has agreed a new 5 year contract as Group CEO, which secures his services for the group until at least July 2024. His agreement to commit for a 5 year period is welcome, and will give certainty to our shareholders and allow him to guide the individual CEO's of Ryanair, Laudamotion and Ryanair Sun. 
The Board had previously committed to setting out its succession plan before the Sept. 2019 AGM. In that regard, David Bonderman (Chairman) and Kyran McLaughlin (SID) have agreed to lead the Board for 1 more year until summer 2020, but neither of them wishes to go forward or be considered for re-election at the September 2020 AGM. In order to ensure a smooth succession, Stan McCarthy who joined the Board in May 2017, has agreed to take up the position of Deputy Chairman from April 2019, and will transition to Chairman of the Board in summer 2020. Stan will bring his enormous international experience (as a former CEO of Kerry Group Plc) and leadership skills to the development of Ryanair Holdings over the coming years, although a legend like David Bonderman will be a very hard act to follow.

Thursday, 31 January 2019

Sunday, 27 January 2019

"corporate governance zealots"

There's a bit of a daft bit in the Sunday Times today from Patience Wheatcroft. It argues that "corporate governance zealots" will drive directors of PLCs towards private equity, where there is less hassle/scrutiny. The argument is that we don't want to shackle our risk-takers in all that corporate governance red tape.



I say it's daft as this is really an auto-pilot moan. I first heard it when I was working about the TUC, which is well over a decade ago, and it pops up every now and then.

In fact, pretty much exactly the same argument appears in... err... the Sunday Times last February accusing... err... "corporate governance zealots" of... err... driving PLC directors towards private equity.


That piece was written by Luke Johnson, latterly most famous as executive chairman of Patisserie Valerie. 

And say what you like about him, but he's clearly a risk taker.

Finally, it would be churlish to point out that the phrase "corporate governance zealots" has a bit of history in the newspaper business too. So I won't.