Karin Forseke and Katherine Garrett-Cox have a remarkable talent for compromise. Back in the spring, the chair and (for a little while yet) chief executive of Alliance Trust, spent £3m of shareholders’ funds fighting proposals from Elliott Advisors, a New York hedge fund that thought the grand old Dundee-based investment trust required a shake-up.
The sport was excellent. Forseke denounced the rebels as “destructive” and “aggressive” and the Elliott camp made hay with Garrett-Cox’s £1.4m pay packet, an outsized reward for middling investment performance, it argued.
Sadly, Forseke and Garrett-Cox, realising their support among rank-and-file investors was not what they hoped or expected, spoiled the fun before the vote. They negotiated a truce that saw two of Elliott’s three nominees, previously denounced as short-termist yes men, ushered into the boardroom.
That was the first compromise and inevitably it has led to a second. As before, Elliott has got about two-thirds of what it wanted. Costs will be cut; the trust will be separated from its fund management division; that fund manager can be fired at six months’ notice; share buy-backs will be used to narrow the discount to asset value; non-core assets will be sold; and the board will comprise only non-executive directors.
That last change means Garrett-Cox will soon have to adapt to a humbler role as mere boss of Alliance Trust Investments (ATI), the fund manager. One can admire her appetite to stay and prove her stock-picking skills – but, given the past fuss, she’d gain more kudos if she told us she was a taking a pay cut to do the smaller job.
The reforms could work; the proof, of course, will be the trust’s performance. But the process of getting to this point has been tortuous. The Elliott nominees, shamefully, never spoke during the battle in the spring.
Forseke, by contrast, has performed verbal gymnastics. She spent those millions trying to defend the old system but now says change leaves the trust “significantly better positioned”. Her next compromise will surely have to be her own departure.
Fast cars, slow response
Hot news out of Wolfsburg. The top brass at Volkswagen didn’t spent Wednesday evening watching their football team lose at Old Trafford. No, they were engaged in important business: “[Wednesday] evening, the members of executive committee discussed the membership of the committee which had already been discussed last week.”
That sentence needs to be deciphered for those who aren’t following every twist of Volkswagen’s response to its emissions crisis. The five-strong executive committee of the supervisory committee, a sub-set of the full 20-strong supervisory committee, is establishing yet another committee to investigate the scandal.
That’s an awful lot of committees, and an awful lot of discussion about committees. No wonder Thursday’s statement also carried the news that “completion of investigations will take at least several months”.
In the meantime, someone at Volkswagen – probably not sitting in a committee meeting – realised that there were still cars on sale which may have the dodgy software. About 4,000 vehicles with EA 189 engines have been pulled from sale in the UK as “a voluntary measure”.
This is less than reassuring. It is now two weeks since the company learned that it had been caught cheating by US regulators, and it probably knew the game was up several months before that.
The corporate confessions came promptly after public disgrace but energy was wasted in the few days attempting the impossible task of keeping chief executive Martin Winterkorn in his job.
It should have been an obvious first step to establish which new cars might still have the defeat devices and then yank them from forecourts. Volkswagen is not helping itself in its response to the crisis.
A Shire thing
As we await the $100bn (£66bn) bid for SAB Miller, let’s not overlook the other big takeover battle involving a FTSE 100 company.
On second thoughts, Shire’s $30bn attempt to buy Baxalta of the US, to create “the leading biotech company focused on rare diseases,” may be best forgotten. This one has been running since early August and Shire appears no nearer to bagging its prey.
The message in Baxalta’s share price is not encouraging – it’s back to where it stood before Shire proposed an all-share combination and decided to appeal directly to its target’s investors.
Flemming Ornskov, Shire’s chief executive, can keep pushing if he wishes but US presidential hopeful Hillary Clinton, by vowing to reduce the prices of specialist medicines, seems to have deflated this bid, as well as Shire’s share price.
Baxalta’s stock has suffered, too, so perhaps there is still hope in an all-share bid structure. But, after nine fruitless weeks, Ornskov’s best policy may be an orderly retreat.
At least Anheuser-Busch’s takeover attempt of SABMiller will be conducted under British rules, which require a bidder to put up or shut up within a month. It’s a much better system.
How much?
Typical banker one-upmanship. Poor old Tony Hayward, chair of Glencore, cobbles together a few quid to buy 100,000 shares in the embattled mining-cum-trading house, then boardroom colleague John Mack, former Morgan Stanley hard-man, dips into into his back pocket to snap up 550,000. Just to rub it in, Hayward paid 90.9p a share but Mack got his at 80.8p.
