If you’ve been around in corporate governance long enough, you will remember the endless rows we used to have with the asset management industry about disclosure of voting records. In these days when analyses of how managers vote on issues ranging from climate change to executive pay are regularly published, it’s easy to forget what a fight they put up to avoid transparency. There are still a handful of holdouts in the UK who refuse to make their records public, but by and large the bigger managers play ball. The timeliness of the disclosures managers make is another question. Some disclose their votes on aRead More →

Anyone who has been reading the Financial Times over the past year or two will have noticed thatthe Pink ’Un has started to get the jitters about the future of capitalism. The rise of populists on Left and Right, political shocks likes Brexit and Trump’s election, and public antipathy towards business have led to many a hand-wringing opinion piece. For us, hands down the most interesting and significant intervention has come from Leo Strine, outgoing Chief Justice of the Delaware Supreme Court. Noting that in recent decades workers have failed to benefit relative to investors from the increasing wealth generated by companies, in largepart asRead More →

Where were the Thomas Cook shareholders? This is a question that we think deserves further exploration following the liquidation of the travel firm, which leaves thousands of workers facing redundancy. Because one of the odd things to emerge from the company’s failure is that the deeper it got into trouble, the less likely shareholders were to use their legal rights to intervene. If we look back at the company’s February 2017 AGM the proportion of the issued share capital that was voted was just under 84%. At the February 2018 AGM it dropped back to 82%. By this February’s AGM that number fell further toRead More →

Buried in AGM results last week is the amazing news that almost 95% of independent shareholders voted against Benzion Freshwater, the chair and chief executive of property investment business Daejan Holdings. The company is a rare example of an all-male board, something that is an increasing point of friction with investors, and it looks as though last week patience ran out. The company is tightly controlled with a free float of barely 20%. As such it has to report the votes on its independent NEDs twice once with all shareholder votes counted and again with just minority shareholders voting. From this we can see theRead More →

It’s obviously the week for low-cost specialists with a controversial chief executives and reputations for poor governance and working conditions. Also back in the news is Ryanair. This time it’s because of a worker-driven governance demand: representation at board level. Last week the union umbrella groups the International Transport Workers Federation (ITF) and the European Transport Workers Federation (ETF) wrote to Ryanair CEO Michael O’ Leary. The letter from the two groups, which have particularly strong links to Ryanair’s cabin crew, acknowledges progress made over the past two years but highlights some concerns over the new group structure. Most significantly, it calls on the companyRead More →

Elliott Advisors is on the warpath again. Last week it was reported that the activist firm had ’grabbed 5% of the shares’ of over 50s travel and insurance group Saga Plc. According to reports, this heralded a move top push for options including break up of the business. So it’s just the latest example of shareholder activism? Well, not quite. If you look closely at filings triggered by Elliott it’s not clear whether it actually holds any Saga shares. If you read the TR1 notice issued by Saga on 17 July (relating to thresholds being crossed on 12 July) the percentage of voting rights attachedRead More →

Why would almost a third of a bank’s stock be out on loan on Friday, then drop back to under 5% on Monday? It’s an interesting point highlighted by a paper from Richard Davies Investor Relations. Having undertaken detailed analysis of stock-lending levels in a range of PLC stocks, the firm notes that these big shifts take place around ex dividend dates. A reasonable conclusion, therefore, is that this is linked to dividend arbitrage – the practice of moving stock between jurisdictions in order to reduce the tax hit on dividends. Whilst, in its basic form, the practice is legal under FCA rules, the hugeRead More →

In Germany there are signs that banks may be coming closer to the day when they pay up for their involvement in dividend tax manipulation. According to recent reports, German banks could be on the hook for 610m euros. The case involves trades which enabled some international investors to benefit from tax breaks intended for German shareholders. In the case of cum-ex trades, more than one investor was able to claim the tax break on the same shares. Deutsche Bank has found itself tied up in the scandal. Whilst it maintains that it did not undertake any of the trades itself, it appears to haveRead More →

As always, we like to keep an eye on what’s happening with short positions in UK companies. To reiterate, short sellers do not always get it right, but given the risks involved it’s useful to see if there are any trends. Some might not be surprised to hear that large shorts in troubled construction and outsourcing firm Kier Group are on the up. Large 0.5%+ shorts in Kier now total almost 10% and, given that there are likely to be others below the 0.5% disclosure threshold, the total short could be pretty chunky. What’s more, a number of the shorts have increased since the company’sRead More →

Another week, another story about industry and ownership concentration. As we’ve noted previously, a mixture of industry concentration within sectors, and ownership concentration in relation to firms, has started to attract some attention. A recent piece in the Wall Street Journal looked at the former, whilst an FT article this week focused on the latter, in particular the growing power of passive managers. The obvious link between the two is… Albert Hirschman. One way that regulators and others seek to assess the level of market concentration is by working out the Herfindahl-Hirschman Index (HHI). Named after two economists, Hirschman and Orris Herfindahl, the HHI scoreRead More →