IR Monitor – 31st August 2022

This week’s news

Activating retail investors in shareholder activism 

One of the most talked-about trends in equity markets right now is the rise of the retail investor, and FTI has offered some insights on activating retail investors in shareholder activism. As the world buzzes about the retail investor, we suggest that management teams should focus less on reaching for fleeting valuation impacts and more on establishing a proactive communications strategy to build positive sentiment and secure favourable long-term voting habits. A focus on voting over value can unlock significant defensive benefits, in the face of potential activist attacks, as the power of small investor votes continues to rise. The article offers a wealth of research into this topic.

UK drives global record for dividends

The UK has helped to drive a global record for dividends by propelling the total pay-out from businesses around the world to a record $545 billion in the Q2. The Times has reported that companies in the UK paid out $36 billion in that period, an increase of 32% compared with a year earlier. This was driven, in large part, by post-pandemic increases from miners, banks and oil & gas companies.

UK companies warm to hybrid AGMs, finds report by White & Case 

UK companies are warming to hybrid AGMs, finds a new report by White & Case, although purely physical meetings remain the most popular option on the basis of the 2022 AGM season so far. The research, published in IR Magazine, shows that (since January 2022) 56 FTSE-350 companies went for a hybrid AGM compared to 94 that chose to offer no physical engagement at all. A further 34 companies decided on physical meetings with a virtual element but did not allow full participation by online attendees.  ‘There’s been more of a shift towards legal hybrid meetings than I thought we would see, namely meetings with full shareholder legal participation,’ Lachlan Low, counsel in the global M&A and corporate practice at White & Case, said.

Higher executive pay is no excuse for state intervention; it is also down 

Median pay for FTSE-100 CEOs is now 100 times greater than that of the average worker. It’s arguably a bad look in the middle of a massive squeeze in living standards but we should also be wary of crowd-pleasing political interventions that could very easily backfire, warns CAPX. Author Len Shackleton argues that this higher executive pay is no excuse for state intervention. He points out that both median pay and the pay ratio are considerably lower than levels of five years ago. Moreover, he also suggests that state intervention could lead companies to be headquartered in other countries. Imposing restrictions on CEO pay could make investing and company listing in the UK far less attractive.

Calls to ditch excessive rules to keep London’s capital competitive

Brexit shake-ups are essential to save the City of London warns Michael Findlay of the London Stock Exchange, speaking toThe Telegraph. Findlay argues that London will lose its status as a global financial hub and could be downgraded to a middling “regional market” without a post-Brexit overhaul of City rules. The answer, he says, is to tear up decades-old orthodoxies and to water down a host of stock market rules if the Square Mile is to remain competitive with the likes of Shanghai, New York and Tokyo. His submission to the FCA proposes abandoning the “restrictive philosophy” that governs the current listings regime in favour of the “disclosure-led approach” that was previously adopted by the Financial Services Authority, the FCA’s predecessor.

It’s okay for business to be about business 

And finally … Silicon Valley should spare us the guff about doing good. It ought to be OK to say that the purpose of business is to make money, suggests the FT. The article cites the example of Web3, ostensibly intended to move power away from large tech companies, which Silicon Valley insists will empower the consumer by offering a decentralised distribution of power and control. The FT suggests that Silicon Valley is protesting a little too much here; the explosion of ‘purpose-led’ missions such as ESG and Web3 are all too often self-serving, helping in reality to create money for investors which in itself is no bad thing. Companies are spending more and more of their resources on optics, leaving them with less and less time & money to focus on doing something that might actually be of value. And by encouraging the expectation that companies must tell us they exist to do good in the world, rather than existing to turn a profit, we risk encouraging them to be better at telling us lies.

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