Wednesday 29 April 2015

National Express board losing shareholder support over labour rights?

Big news tonight - the FT has reported that the major proxy voting adviser ISS has recommended that shareholders vote FOR Resolution 22 at the National Express AGM next week. PIRC has also recommended a vote in favour.

Resolution 22 calls on the board to commission an independent review of practice in Durham School Services, its US business. This follows repeated complaints from employees about management interference with workplace rights.

To my knowledge, there have been six shareholder resolutions at UK companies in the past ten years that focused on labour rights in one way or another. I don't think ISS has previously recommended a vote for any of them, so this marks a significant shift.

Many large shareholders may share the ISS view that the review proposed in the resolution is not an onerous demand. They may also feel that the board has allowed this issue to drag on for long enough, and action needs to be taken to address it and then move on.

Anyway, it set things up nicely for next Wednesday's AGM.

Quick update: NAPF has made the National Express resolution one of the questions it suggests trustees could ask their asset managers about, see here. Published on 1st May by coincidence.

Sunday 26 April 2015

Employees in corporate governance

I just noticed something rather surprising. There are five political parties that make reference to enhancing the role of employees in corporate governance in their manifestos.

I have done Labour already, so here are the rest.

Lib Dems (page 137 in full doc)
Strengthen worker participation in decision-making, including staff representation on remuneration committees, and the right for employees who collectively own 5% of a company to be represented on the board.

SNP (page 17)
We support increased employee representation on company boards, believing that this can help bolster long-term decision-making and improve industrial relations. We will urge the UK government to consult on how best to deliver such an increase.

Plaid Cymru (page 11)
Supervisory boards of major companies who employ more than 500 staff will include elected employees, to ensure scrutiny of the management in the interests of the company as a whole, building on established practices in industrially successful countries such as Germany.

Green Party

Amend company law to ensure that medium and large companies have employee and consumer representatives on their boards.

Thursday 23 April 2015

Vote FOR Resolution 22 at the National Express AGM

In less than two weeks, the day before the election, National Express has its annual meeting. Resolution 22 on the agenda is a shareholder proposal drafted and filed by three local authority pension funds that are members of the Local Authority Pension Fund Forum.

The resolution calls on the company to commission an independent review of its US business Durham School Services in response to ongoing claims of anti-union activity. The AGM comes just a few weeks after two Labour MPs issued a report on Durham, based on a trip to the US to investigate. They concluded that there was a "systemic anti-union bias" in Durham that the National Express board of directors need to address.

The company's anti-union activity was also criticised in an Early Day Motion signed by 33 MPs at the end of the last parliament.

We are now in a situation where unions, MPs and shareholders who have looked at this issue all believe that there is a problem. Even the company's own annual report discloses that labour issues pose a risk to the success of the US business. Yet, regrettably, National Express seems reluctant to act. So we need to give them further encouragement.

If you are a trade unionist and/or Labour supporter who is trustee of a pension fund or similar I urge you to vote for this resolution, and give the board a clear mandate to deal with the problem in Durham.

Vote FOR Resolution 22 on 6th May.

Tuesday 14 April 2015

Labour manifesto - the other corp gov stuff

OK, from Labour's workplace manifesto, here's the full text of the corporate governance proposals.

Short-termist pressure in the UK can undermine good workplace relations and weakens incentives to make the long-term investments in training, technology or R&D that underpin our most innovative workplaces. Labour will give investors a duty to act in the interests of ordinary savers and prioritise the long-term growth of companies they invest in. We will change takeover rules by restricting voting to investors who already hold shares when a bid is made and strengthening the public interest test to protect the UK’s national interests.
Pay at the top has seen huge increases in recent decades, often regardless of company performance or the situation of the wider workforce. Labour will improve the link between pay and performance by simplifying executive pay packages and ensuring greater transparency in organisational pay. We will require companies to publish the pay packages of the ten highest paid employees outside the boardroom and the ratio of the total pay of their top earner compared to the average employees.
We will also require investment and pension fund managers to disclose how they vote on pay and other issues and introduce binding votes on remuneration packages that work, by ensuring shareholders must approve a decision in advance, not after the event. And we will ensure that the voice of ordinary employees is taken into account when executive pay is set by putting employee representatives on remuneration committees. Elected employees would follow the same confidentiality requirements as other representatives. Unions, where they are recognised, and other employee representative structures should play a role in facilitating elections, as well as supporting the training of employee representatives. Where unions are not recognised, a process for electing worker representatives will be established.

There's a suggestion of doing something on fiduciary duty in there, much more in line with the original Kay Review recommendations. Could be a big deal, the Law Commission seemed to think it wasn't doable (if I read it right) but from memory the Aus system has something like this in there.
I think there's a slight change in the previous M&A policy - there is no mention of a higher threshold for votes to pass.
On executive pay, I am intrigued by the commitment to "simplify" executive pay. A lot of people across the board would agree with that aspiration, so could be fertile territory. Scaling back variable pay is obviously one way to do it. Not sure a binding vote on exec pay in advance is actually different in form to the new rem policy vote, though this could be made annual.

Monday 13 April 2015

Remuneration revolution

The Labour Party will require employee representation on remuneration committees if they form the next government. It's there, in the manifesto, on page 21. Despite some whispers that this policy might be dropped, because business lobbyists don't like it, it's now a manifesto commitment.

On its own this is not a big step. There are several arguments I've heard about from people why this won't make any difference. But what it represents is significant in corporate governance in the UK, and perhaps more widely. Firstly, if enacted, this policy will mean that remuneration is no longer solely a matter for companies and their shareholders. That formulation is part of the 1990s vintage of corporate governance which Labour had previously embraced, so to shift away from it is interesting on its own.

Secondly, to formalise employee representation of any type at board level is entirely new. The UK took a different path from the rest of Europe in the 70s and 80s when it rejected the extension of employee rights into the field of corporate governance. Now - if Labour can get this policy through - we are heading in a new direction. 

Like many people on the Left, I see this policy as important, but not enough. If we are going to have a fight with business over this policy we might as well go the whole hog and advocate what many of us really think is needed - board-level representation, not just on rem comms. If Labour gets in, and consults on this policy, we should argue that representation on rem comms should be achieved as a subset of representation on boards. But that is an argument for another day.

Finally, I've spoken to various people about employee representation in corp gov in the UK many times over the last few years and quite a few seemed confident that it would never happen. I'm not so sure. Even in a hung parliament with a minority Labour government I wonder if the Lib Dems or SNP would vote against? It wouldn't enhance their radical/left-of-centre credentials in either case. Change might be closer than we think.

PS - I'll blog the rest of the corp gov related bits in the manifesto later.

Sunday 12 April 2015

The politics of business leaders support

When the Telegraph ran a Tory-supporting letter from a group of business people this caused an interesting split amongst Labour supporters. Some saw the letter as very damaging and further evidence that the party had lost much of the credibility built up in the Blair era, others said it wouldn't make any difference or may even backfire for the Tories for looking too matey with corporates. The second stage of this argument saw some of the former group argue that the fact that some on the Left saw the letter as potentially damaging for the Tories was a sign of how anti-business many Labour supporters have become.

I'll nail my colours to the mast here. I'm not too bothered by Labour being criticised by corporate leaders. I think they still only get one vote each, that they can see the world with a very skewed perspective, and I don't believe any political party can satisfy all interests. Therefore if Labour is genuinely going to stand up for "hard-working alarm clock British families who play by the rules" they are likely to annoy some business leaders over some issues. I wouldn't actively encourage hostility towards business, but I wouldn't see opposition from business leaders as that significant. And for what it's worth I think some on the Right of Labour have a tendency to mythologise the extent of genuine business support for New Labour (as opposed to transient tactical support for the obviously dominant political power) and its value.

But what about the question of how Labour and Conservative stances towards business play out with the punters? Well, there is some useful polling out from YouGov here (page 9). On the face of it, the news isn't great for Labour. 33% think Ed Miliband is too hostile to Labour, compared to 29% saying he gets the balance about right. Of that 33%, 11% say much too hostile, and 22% say a little too hostile.

As you might expect, Labour and Conservative supporters have sharply different views here - 67% of Tories think Ed is too hostile, compared to 10% of Labour voters and 32% of Lib Dems. Of those 27% of Tories think Ed is much too hostile to business compared to 1% of Labour supporters (you know who you are!), and 4% of Lib Dems. Interestingly 40% of UKIP supporters also say too hostile, with 17% saying much too hostile, while 20% say he is too close to business. This no doubt reflects that party's strange mix of right-wing ex-Tories and hard-up white working class voters who might previously have voted Labour.

However, the Conservative polling to my eyes looks much worse. 50% say David Cameron is too close to business, and of those 29% say much too close. Even 24% of Conservative voters think that Cameron is too close to business. 75% of Labour supporters say he is too close, compared to 60% of Lib Dems and 55% of UKIP supporters, with the percentages saying much too close at 57%, 24% and 33% respectively. Again this points up the fact that many UKIP voters are deeply sceptical about the Tories motives.

Where does all that leave us? If, big if, we take the polling at face value I would argue that business-oriented interventions like the letter in general tend to reinforce existing perceptions of the Labour and the Tories. However, the damage is a bit worse for making Cameron look too close to corporates than making Ed look too hostile. In addition, a large proportion of Lib Dem and UKIP voters who also think the Cameron is much too close to business, significantly more than think Ed is too hostile. That may matter when these people are considering voting tactically.

In short, invoking the extent of business leader support might be your classic 'double-edged sword' -one which may hurt the Tories more than their opponent when they wield it.  

Saturday 11 April 2015

Shareholders vs customers

Duncan O'Leary from Demos has a very interesting blog here digging into some polling of business leaders views on whether a Conservative / Labour government would be good / bad for various stakeholders in big business (investors, employees and customers). As Duncan points out the really interesting thing is that there seems to be a recognition that what might be good for one group might not be good for another.

To me, this is self-evident, but as I've blogged before quite a few people in the corner of the world I inhabit are resistant to this idea, and genuinely seem to think any tensions resolve themselves if only long-term shareholder value is the objective. Therefore the fact that business seem to implicitly believe that shareholder and other interests are distinct seems pretty significant.