Tuesday 29 November 2011

Pessimism of the intellect...

...and all that, so that's what I'm blaming for being wrong, big style, about the BSkyB vote. The headline vote against James Murdoch was a bit shy of 19% (quite a bit above what I was expecting). Bad for any company, bad for any chair, well above average, and putting him the 1% of directors most unpopular with shareholders this year.

But when you back out the News Corp vote it gets very interesting. A few media outlets have got this badly wrong, including Pesto, and suggested that about a third of indie shareholders failed to back JM. Not so. You need to look at the actual number of shares voted.

The company says 1,105m shares vote for, 255m opposed, and 105m abstained. But, on a conservative reading, News Corp voted about 650m of those shares. Taking that out of the total means that the indie shareholder support for James is only about 55% I think.

That is a serious loss of confidence that the board will struggle to spin. If you're a shareholder and you think this company needs an independent chair now is the time to be pushing for it.

Monday 28 November 2011

BSkyB latest

OK, from what I've read it seems that Legal & General, Kames (Aegon investment arm) and Franklin Templeton are all opposing James Murdoch. That's on top of the three US investors identifed last week.

I suspect L&G's opposition will sting as it's a top 10 investor and has many UK pension fund clients who will be reading about their opposition in its Q1 reports to trustees. It can't be good news that large shareholders are public in their opposition to Murdoch either. Very difficult to change your mind once you're in the public domain saying a new chair is needed.

According to one report, Capital has voted for Murdoch but privately told the company it needs a new chair. I don't think that will be a one-off, so tomorrow's vote may not tell the whole story.

Also a certain hapless right-wing blogger has got himself called before the Leveson Inquiry for leaking Alastair Campbell's evidence. Incredibly the evidence is still available online. It is believed to say that Campbell received threatening phonecalls and texts "from the office of James Murdoch" when he supported The Guardian's 2009 story on the extent of phone hacking.

I'll blog asap tomorrow when the vote is out. Look out for possible large number of abstentions driven by ISS recommendation.

Friday 25 November 2011

More BSkyB snippets

Good bit from Hugh at Responsible Investor (cough up for a sub, well-paid asset manager types!!) on pre-disclosure of votes at the BSkyB AGM. CalSTRS, Florida and Christian Brothers all opposing James Murdoch, with CalSTRS opposing the whole BSkyB board. (hat-tip to Fair Pensions for alerting me to this)

Separately Chris Bryant MP has written out to institutional shareholders urging them to oppose James Murdoch's re-election. Can't think of a previous example of this happening? Though maybe some MPs were involved in shareholder campaigns in the 1990s? (Cedric the Pig etc).

For what it's worth I expect Murdoch to be re-elected very easily, with opposition maybe as low as 10%. Enough shareholders seem to be willing to take the board's word that he's a good egg. But I also don't think this will be the end of the story...

Tuesday 22 November 2011

Exec pay, and how some still fail to get the point

Today saw the publication of the High Pay Commission's final report which is, as should be obvious, well worth a read. I won't do a re-tread of the arguments & proposals it contains because you can find much better versions of that elsewhere. Instead my quick take on a few of what I think are the Commission's key points are, and their wider significance.

Radical simplification of executive pay is, just about, a win-win since no-one except remuneration consultants really benefits from complexity. Investors are sick of reading rem reports that go one for a dozen or so pages, and anecdotal feedback from directors suggests that they don't really know what they're getting when things get to a certain level of complexity.

But, as David Prosser (whose comment piece on the report is probably the most interesting I've read) points out in the Indie, complexity is a result of what investors supposedly want - carefully-designed performance linkage:
it is worth noting that the pay structures in place at many companies today reflect previous attempts to hold executives to account (rather than, in most cases, to obfuscate, as the High Pay Commission rather uncharitably suggests). Executive pay is now set with reference to hugely complicated performance yardsticks because remuneration committees have sought to show they are sensitive to complaints about rewards for failure. So sensitive, in fact, that it is almost impossible to understand the pay formulas they put in place.
This is a point that deserves to get made in responses to the BIS consultation that closes this week.

Of course this also feeds into the question of whether the performance linkage that investors have sought to put in place is actually desirable after all. For one, does it simply replicate the performance pressure that asset managers (who cast most of the votes on rem reports) are themselves under? Do we really want our largest public companies run with one eye on short-term share price fluctuations that, in reality, may be nothing but noise?

Secondly, are we sure that performance linkage delivers... err... performance? It's notable that the Commission digs into this a bit and comes up with a fair bit of evidence, academic and anecdotal, that complicated incentive schemes don't really motivate directors. Again, this seems to be an argument that is gaining ground and, in my opinion, with good reason.

The other headline proposal that has got most attention is rem comm reform, and in particular the idea that employees should have representation. Within a couple of years this idea has gone from being advocated by just a handful of organisations (with the TUC the most obvious) to being seriously discussed. There are a number of reasons for this. One is that the idea that rem comms are too clubby, and that directors set each others' pay and therefore have no incentive to be tough, is easily graspable, so (unlike much corp gov policy) reform here has a tiny sliver of populist resonance. Second, as I've argued a bit, there's some psychological evidence that shaking up group membership to make it more diverse (opinions wise) can make decision-making less extreme (see Cass Sunsteain for details). Third it's a reform that seeks to address exec pay earlier in the process - at the decision-making stage - rather than most recent reform which has focused on disclosure+shareholder empowerment so that decisions already taken can be challenged.

This last point is important, because it's a tacit admission that shareholder oversight, as currently constituted, isn't really cracking the exec pay problem. It could be because they still don't have the right tools and/or right info, but I suspect most informed comment on this topic would now concede that it's actually a deeper problem relating to share ownership. We either don't have the right shareholders to make it work, or they aren't motivated to do so. Here the Commission admits that the subject is beyond its remit, but it is striking that they highlight a potential problem in relying on shareholder oversight alone. Many of us would argue that a stronger focus on the stewardship aspects of share-ownership is required, but a look at the voting records of asset managers on rem reports (see TUC survey for details...) shows that we face a huge challenge.

In all of this I think the Commission has pushed the debate on executive pay onto new terrain (or shifted the Overton window if you prefer!). It's recommendations will probably become the new normal pretty quickly, which was I'm sure the aim. There will be a fight over the employee reps point, but some kind of rem comm reform looks increasingly likely.

So far so simple, which leads me to the failure of some people to get the point. The FT's editorial on the Commission this morning was particularly weak. It reads:
A better strategy [than employee reps] would be to strengthen the role of shareholders. At the moment, they have only an advisory vote, relating to decisions already made.
This implies two things - a binding vote and/or a forward-looking vote. A binding vote would in essence be an instruction to the company, and a forward-looking one could, presumably, affect the distribution of resources. I'd certainly be interested to see these ideas fleshed out. But given that in nine years of advisory votes on remuneration reports, shareholders collectively have defeated under 20, where is the evidence that simply improving shareholder powers is "a better strategy"? Given that many asset managers rarely use the weak power they have already, what leads the FT to conclude that the solution is to tool them up further? The Telegraph makes a similar point in its editorial, but I expect them to put forward solutions they expect to fail to a problem they, in truth, are not sure actually exists (markets should get pay right, right?). The FT really ought to know better.

Which leads me onto my final point, and back to David Prosser's article. I think the Commission has done a good job as it has essentially aimed a couple of years into the future, plotting forward a bit from where we are. So, unless you are the sort of person who thinks that employee reps on rem comms is a Cuban approach to policy, none of the proposals are particularly radical, IMO. But if people really want to fight the last war, and propose another throw of the dice for disclosure+shareholder empowerment, let's see where that takes us. I suspect that it will mean a few years down the track we will far more illiberal ideas for dealing with pay come into play:
In the end, capping pay, or pay ratios, might be impossible politically, but it would be a much more direct way to tackle the problems identified by the High Pay Commission.

Monday 21 November 2011

TUC voting survey

It's that time of the year again - the annual TUC trustee conference was last week, and at it the annual voting survey was launched. The conference was great, though I couldn't see it all as had to head out for a lunchtime meeting.

The blurb from this year's survey is below. The voting on bank remuneration reports is pretty depressing (especially Barclays!). Also interesting is the voting on James Murdoch at last year's BSkyB AGM - I am pretty sure there are some switchers this year...

Remuneration reports most likely issue to be opposed by institutional investors

Remuneration reports drew the greatest opposition from institutional investors yet bank remuneration reports were widely supported, according to the latest TUC fund manager voting survey published today (Tuesday).

The ninth annual fund manager fund voting survey, published to coincide with the TUC Pension Trustee Conference taking place in central London today, analyses the voting records of more than 20 fund managers, pension funds and voting agencies across 69 company resolutions between January and December 2010.

The survey has again found a sharp divide in voting stances, with four respondents supporting more than 70 per cent of resolutions, while five respondents supported less than a third.

Remuneration was the most common topic of engagement and the issue over which respondents were most likely to oppose company management. Half of the survey respondents supported less than half the remuneration reports on which votes were sought, and many supported less than a third.

The remuneration reports of all five major UK-listed banks were included in this year's survey. Surprisingly, bank remuneration reports comprised three of the five reports with the highest level of support in the survey. Barclays' remuneration report was backed by 75 per cent of all respondents - the highest in the survey.

These findings are surprising given the banks' recent stock market performance and dividend returns, says the TUC.

This year's survey showed further progress in the disclosure of voting records, with 13 respondents disclosing a full voting record, compared to just nine last year. However, the quality of information varied, with several fund managers only disclosing votes against and abstentions, and others only providing headline statistics.

This improvement in voting disclosure is good news for pension trustees and pension scheme members as it helps them to see how fund managers are using their shareholder mandate to influence companies, says the TUC.

Several respondents indentified changes made as a result of the introduction of the Stewardship Code a year ago, such as improved engagement record keeping. However, the Code has had very little effect on the voting stances taken by institutional investors and needs to be toughened up, says the TUC.

TUC General Secretary Brendan Barber said: 'Shareholders are supposed to be the ultimate check on our corporate system, but too many fund managers are still failing to use the power of their investments to influence corporate behaviour.

'The fact that UK bank remuneration reports received so much backing in the face of diminishing dividends and poor stock market performance is a clear sign that institutional investors are not doing their job properly.

'Reform of our corporate culture is long overdue and ministers need to take the lead in forcing through change, particularly on executive pay, where remuneration committees are frequently failing to act in a transparent and responsible manner.'

Sunday 20 November 2011

BSkyB weekend news

According to this piece on Bloomberg, The Times has pulled together a list of supporters of James Murdoch at the forthcoming BSkyB AGM. They include Taube Hodson Stonex Partners and... ahem... Odey Asset Management. Yes, apparently Crispin Odey thinks James Murdoch is the "right guy" to chair the company. Big news indeed!

There are three more interesting bits about the Bloomberg/Times report. First is the prediction that Capital are on side too. That is important as they are big holder, but I wonder what their clients will think. Second is the absence of other names. Are they struggling to find supporters? Third is the 20% figure (ie if 20% plus oppose he should go), which also popped up in a Telegraph column. I think this may be expectation management by the company, and if so it might be a useful benchmark.

A more objective comparison will be typical votes against directors. In the first half of 2011 the average oppose plus abtain was about 2.5%, of which 1.7% was the oppose. So a 20% oppose vote would be more than 10 times the average. And how many directors ever receive this kind of opposition? Less than 1%. Looking at a sample of just under 2,000 directors facing election at an AGM in the first half of this year, I can only see 9 that got 20% plus against, and two of those were directors at Eurasian! Add in the fact that News Corp holds 38%, and the board is setting the bar exceptionally low.

Friday 18 November 2011

BSkyB news 2

So, apparently ISS have recommended an abstain on James Murdoch's re-election, but their report also reportedly says he should stand down as chair. That means that Murdoch has failed to receive the backing of any shareholder advisory group.

Of course, that doesn't mean much in itself, since asset managers don't just follow follow what their adviser says, and I have no doubt that a few of the usual suspects will continue to pull their punches. But there is undoubtedly some movement going on out there. Some asset managers will definitely take a tougher line this year than they have done for some time. There is also overseas investor interest in the chair's position.

I suspect asset managers may face questions from trustees about how they voted on James Murdoch, so support risks doing reputational damage. I still think he'll get through relatively easily, because I am cynical about mainstream asset managers, but this will store up trouble in the future.

I will be surprised if Murdoch doesn't get a slap of some form from the DCMS committee when it publishes its final report. The committee essentially seems to have come to the view that he is either incompetent or a liar. Taking the latter position would be very serious, but I suspect (currently) it's a minority view. But being criticised by parliament for incompetence is hardly something to stick on your CV & will surely add to pressure on him to stand down. I am kite-flying here, but it's a reasonable guess, I think, that James Murdoch can't come out of the committee's review within anything less than a further damaged reputation. If a dumbo like me can see this, so can an asset manager. So to give him the benefit of the doubt, and to vote for him, when you know this is a likely outcome seems rather irresponsible in my view.

Finally, note that the deckchairs are being shuffled, with Martin Gilbert apparently coming onto the board, and two others leaving. Gilbert would make a decent chair, and has done a good job at First Group, so maybe this is a medium-term plan? More surprising, when you think about it, is that the NEDs slotted to come off the board are not the News Corp reps. If two come off and Glibert plus one other join there is no change in the level of independent representation. Crispin Odey publicly said that the board needs more independence, though oddly not an independent chair, so why isn't he making more noise?

UPDATE: Actually I have been a doofus, one NED coming off is a News Corp rep.

Wednesday 16 November 2011

BSkyB news

There's a good round-up piece from The Grauniad here. What we know so far in terms of voting advice by shareholder groups is as follows:

ABI - Amber top, with role of chair flagged up
LAPFF - oppose James Murdoch's re-election, support SID's re-election
PIRC - oppose James Murdoch's re-election, plus other News Corp cross directors
Glass Lewis - oppose James Murdoch's re-election (? if Grauniad is right)

That means if ISS oppose or abstain on James Murdoch he will have failed to win the support of any shareholder advisory group. Not good for a FTSE100 chair.

Sunday 13 November 2011

Think carefully

So, James Murdoch's latest brush with the select committee is over. What do we know? Well, he has stuck to his line that he was not shown, and did not ask to see, the "for Neville" email, Tom Crone's briefing note or the legal opinion that said there was a powerful case that there was a culture of illegal accessing of information.

It has gone curiously unremarked, except by Tom Crone, that James Murdoch's version of events has changed since July when he said he wasn't told about the email or the transcripts. Now he says he was, but wasn't told what they meant and didn't seek to find out more. He simply signed off a massive settlement for an unpublished story. And he never went back and reviewed any details of the case when the Guardian went large on it in July 2009.

More circumstantial evidence was provided by Tom Watson, who revealed that he has spoken to Neville Thurlbeck of "for Neville" fame. According to Watson, Thurlbeck was told by Crone before the key meeting with Colin Myler and James Murdoch, that he was going to have to show Murdoch the email. Thurlbeck asked Crone afterwards if he had shown Murdoch the email and he said yes. It's more evidence against Murdoch's version of events, but still not the killer punch.

Presumably emboldened by the fact that James Murdoch didn't just turn up and say "fair cop, it was me what done it", on Friday the senior independent director at BSkyB sent a letter out to shareholders setting out why the board had unanimously backed him as chair. It includes a defence of Murdoch's personal integrity. I sincerely hope the BSkyB board members know a lot more than they are letting on, because there are now some very serious rumours doing the rounds.

Since BSkyB's letter there have been two further important developments since then. First the Mail has run a story claiming that the police are likely to question Murdoch in relation to new email evidence. Notably the story has been covered, briefly, on the website of The Australian (a Murdoch title) with no denial from News Corp. In addition on Saturday night ex Murdoch editor Andrew "Brillo Pad" Neil tweeted that a source close to The Digger himself had told him that the emails referred to by the Mail could be "devastating" for James Murdoch. There was even an arrest rumour over the weekend when a Sky Business News Twitter account announced that James had been arrested. The tweet was quickly deleted and Sky said they had been hacked (no laughing at the back). Will reality imitate hoax in the coming days?

Secondly, The Guardian's Roy Gleenslade revealed in an interview on Saturday that an ex-Screws employee had told him all the current members of the DCMS committee had been tailed by private investigators and/or News of the World staff... earlier this year. (This is on top of News International titles previous hatchet jobs on the committee in 2009). We know the company's objective was in tailing the lawyers representing hacking victims - to try and discredit them professionally. Wonder what their objective was in tailing the DCMS committee members eh? (This is also on top of already tailing Tom Watson in 2009. He also revealed last week that he had been told by police that his computer may have been hacked.)

I have previously thought that the "fit and proper" test as applied to BSkyB was a low risk. I am starting to think again. If you look at what went on in News International, in particular the targeting of politicians who threatened News Corp's commercial interests, you have to think that Ofcom might focus on getting them to sell their stake down. Otherwise what does a company have to do to fail the test? Hacking phones, hacking computers, paying off cops, tailing commercial enemies - we know all this stuff happened. If that doesn't fail 'fit and proper' then presumably you really do need to be the mafia to fail the test....

Again it's worth repeating that the rumours out there should lead investors to conclude that there could be worse to come. Apparently a lot of people in media-land expect computer hacking to be big. You might also fancy a wager on The Sun closing, as the recent arrest of a veteran reporter over alleged payments to the police has apparently sent shockwaves through the paper. James Murdoch didn't take the opportunity offered last week to rush to the tabloid's defence. Closure is an outside chance, I'd say, but a chance now nonetheless.

Finally, again I think it is worth just asking the question about the possible overlap with BSkyB. Given that we know that News International employed subterfuge to try and undermine commercial threats, including members of parliament, is there any possibility that they may have done the same thing to defend their broadcast interests? I think this deserves some exploration. I imagine some people will recoil at even the suggestion, but this is an organisation that has routinely undershot low expectations.

To finish, I think if you are an institutional shareholder and you support James Murdoch's re-election as BSkyB chair you are now taking a risk. There really is no defence of ignorance if things take a turn for the worse, there have been plenty of warning signs. Think carefully before casting those votes.

Saturday 12 November 2011

Excellent union initiative on shareholder voting

The latest initiative by the Committee on Workers' Capital is excellent. There are now three markets - US, UK and Canada - where TUs carry out annual analysis of asset manager voting. As far as I am aware they were the first people to do this in each market, for which the US unions in particular deserve great credit, having come up with the idea. Now the CWC, which brings together TU people interested in such things from around the world, has taken the logical next step and put out a global survey.

Here's the blurb:

The Global Unions Committee on Workers’ Capital (CWC) announces the publication of its report: Proxy Review 2011. The report encourages investors to take an active role in proxy voting oversight.

Proxy Review identifies trend-setting shareholder votes on social, environmental and corporate governance issues that are relevant for pension investors with global equity portfolios. The report includes key votes from: Australia, Canada, Spain, Switzerland, the United Kingdom and United States of America.

Shareholder voting is one of the primary means by which investors can influence a company’s operations. It is therefore important for shareholders to participate in the voting process. However, pension equity investments can span hundreds of companies and numerous countries. Add to this complexity, regulatory differences, conflict of interest problems, agency dilemmas and narrow interpretations of fiduciary duty, which all contribute to accountability gaps along the investment chains of pension funds. Recognizing these gaps, Proxy Review was created to serve as an accessible resource for pension trustees who would like to evaluate how key proxy votes in international portfolios were cast on their behalf.

Ken Georgetti, Chair of the CWC and President of the Canadian Labour Congress said, “At the height of the global financial crisis, institutional investors were accused of failing to actively oversee corporate governance and risk management practices at the companies they own. This report will help the pension fund trustees who invest workers’ retirement savings overcome barriers in exercising such oversight. As our Proxy Review project demonstrates, creating the opportunity for dialogue between trustees and their investment managers is one important way the Committee on Workers’ Capital is tackling serious accountability deficits within global investment chains.”

The selected key votes in Proxy Review 2011 focus on corporate governance issues, though environmental and social issues are also highlighted. Among the issues addressed are the independence of Board members, CEO succession planning, executive remuneration and compensation, pay-ratio disclosure, sustainability reporting and disclosure of policies on labour and human rights standards.

These votes were cast at major global companies that represent a wide range of industry sectors. Companies include: Rio Tinto, Barrick Gold, Banco Santander, Nestlé, Credit Suisse, Novartis, UBS, BP, Hewlett Packard, Apple, Chevron, Shell, JP Morgan Chase and Bank of America.

Wednesday 9 November 2011

Nom comm reform

I've blogged a bit recently about the importance of remuneration committee reform, and in particular the idea of opening up membership to employees. Of course another way of tackling this issue could be to go through nominations committees, and thus affect who ends up on boards. Notably this idea got a nod last week from Sir George Young in response to a question from Angela Eagle. See Hansard here, text below:
Finally, on executive pay, it is worth reminding the House that the average chief executive of a FTSE 100 company earned 47 times the amount earned by the average employee in 1998 and 115 times that amount in 2009, so the gap actually widened under the last Labour Government. I agree with the hon. Lady that there is an unsustainable disconnect between how our largest listed companies perform and the rewards that are on offer. Concern on that comes not just from Government, but from investors, business groups and others. We are considering ways to reform remuneration committees and to empower shareholders, for example by making shareholder votes on pay binding and ensuring that there is shareholder representation on nomination boards. We are consulting on a number of issues, but at the end of the day, it is up to shareholders rather than the Government to determine executive pay.
That looks like a bit of a score for Paul Myners, who has pushed the idea, along with Cevian, the asset manager he now works for.

Sunday 6 November 2011

Exec pay again

OK, my tendency to obsess about one issue kicks in again, but it's worth keeping an eye on the executive pay debate.

There have been a few interesting developments of late. First up, David Cameron repeated his suggestion that it would be good if there were more women on remuneration committees, as it might dent executive pay. This is interesting because I'm not aware of any evidence that this might be the case (though very keen to hear if anyone knows otherwise) so it's an odd idea. It might make you think this may in part an attempt to tick the pro-women box now that Cameron's polling advantage there has disappeared, though it risks pandering to a rather patronising view of what greater board diversity would bring.

Personally I wonder if it is instead/also an attempt to avoid the rather more obvious idea of employees feeding into rem comm decision-making. I bet Tories instinctively HATE that idea, because it would a) acknowledge employees as a group, rather than a number of individuals and b) it would start to legitimise an employee role in governance. One of the great achievements on the New Right was atomisation, so people at work think more in individual terms, and less in a collective sense. I don't mean this in any kind of conspiratorial sense - people on the Right believe this is how people should think - but it's an achievement they don't want to lose. So safer to address rem comm reform it terms of individual progress and meritocratic advance than to have to give ground to notions of social partnership and all that entails.

There is some ground opening up here for Labour as many in the party would be actively enthusiastic about employee involvement in rem comms, so this could become a bit of a wedge issue, at least in my little corner of the world. Although asset managers and the investor representative bodies won't like it, there is definite interest in the idea that is starting to bubble up.

More generally there is also a sense that patience is running out. There are only so many times you can call on the executive class to exercise restraint and they stick two fingers up. There are only so many times you can urge asset managers to take a tougher line and they shrug their shoulder and say there's nothing much they can do about it. Of course we've been through all this before, and nothing has changed, so therefore shouldn't we just expect it to carry on? Well, maybe, but it was a former FTSE chief exec who said in a conversation recently that the position of executives taking ever more out of companies as their reward was analogous to the position of the unions in the 70s. People moaned for a long time about TU power before anything happened, but when change came it was very significant.

I now think that we could see some fairly radical reform in respect of executive pay, whether it happens under the Coalition or the next Labour govt in 2015 ;-) I suspect it will go significantly further than the policy positions adopted by most of the 'professional' governance bodies because most of them are still stuck parroting the disclosure+shareholder empowerment model (which hasn't worked very well). There has been an opportunity since the crisis to think very differently, our sector hasn't really done that. Don't be surprised if what we thought were the ground rules of the exec pay debate get overtaken by events.

Wednesday 2 November 2011

A crunch point

So, at the end of this month James Murdoch faces re-election as chair of BSkyB. I've been following the hacking stuff, and the shareholder reaction to it, since the summer. I think this month is the crunch point, in several ways.

First up, next week Murdoch is back in front of the DCMS committee. He will be quizzed, no doubt, both about what Tom Crone and Colin Myler have claimed about their meeting with him, about the separate meeting with Myler alone, about what Julian Pike said, and about the latest published evidence.

To be scrupulously fair, you can, just about, maintain an argument that James Murdoch didn't know in the summer of 2008 about the extent of hacking. He could have not understood the implications of the Taylor case, and why he was having to make a monster settlement over an unpublished story. Having got counsel's opinion (which clearly argued there was a culture of illegal hacking), he might not have asked Crone and Myler exactly what it said and/or they may not have told him. (Pike's phone notes get very close to this issue, but don't quite prove anything). He could have just missed the point of what was going on. I find that version of events very hard to believe, but I suspect it is the version that he will continue to propagate and which, unfortunately, I reckon the likes of Louise Mensch will buy.

Even if you accept that version of events though, you have to question at what point he became aware that something was up. Did he never return to the Taylor settlement mentally? Not even when The Guardian blew it open in July 2009? Again I find it very hard to accept. At least bythat point alarm bells should have been ringing, surely.

But even if you accept that what had happened didn't dawn on him till much later, you surely have to conclude that, if he wasn't covering up what was going on, his oversight was awful. If this had been dealt with much earlier it is quite possible, for example, that the BSkyB bid would have gone through. That was a major strategic ambition for News Corp, and it cost them millions in break fees, with about £15m in fees incurred by BSkyB (plus a few million in retention awards). If he had cleared up the mess in News International earlier all this might have been avoided. Instead he missed it (on a sympathetic reading of events) and did damage to both companies. That would be enough to lose your job if you had a different surname.

Non-Murdoch investors have made their feelings pretty clear at News Corp, by voting heavily against James Murdoch last month. I think they need to do the same at BSkyB. My own view is that he has misled parliament about his knowledge of hacking, but even if you don't share that view his failure to spot and deal with the issue shows extremely poor oversight. In addition, what does BSkyB derive from having such a compromised and non-independent chair? It's hard to see good arguments in favour.

Therefore I think this re-election is a crunch point for institutional investors too. Understandably there are already journos sniffing around trying to get a sense of how the vote will go, therefore there is likely to be significant scrutiny of voting decisions. I struggle to see how a vote in favour of his re-election, or an abstention, is justified by events, and there is no defence of being unaware of what the issues are. This is a real test of how seriously investors take their responsibilities - let's hope they don't flunk it.