Wetherspoon’s fight

JD Wetherspoon’s chair and founder Tim Martin never shies away from a public spat. This week that disposition may have made some of his investors wish their money was elsewhere.

A clash emerged when Martin accused shareholder Fidelity of “no apparent logic” over the asset manager’s decision to vote against the reappointment of a number of non-executives because they had served more than the UK corporate governance code’s recommended limit of nine years.

Martin seems to have taken exception because the code is written on a comply-or-explain basis and the pub chain chair says the reasons have been explained. He later argued Fidelity itself had boardroom members who had been around longer than the nine-year term. Whoever said asset management would be a quiet life?

When you wish upon a star…

Gender diversity in boardrooms received a boost this week. And this is no Minnie Mouse story. Susan Arnold, a former executive at investment firm Carlyle, will become the first woman to be chair at film maker Disney.

Arnold has been a board member at the entertainment and media giant for 14 years, but her elevation to the chair will break new ground. Current chair Robert Iger said: “Having most recently served as independent lead director, Susan is the perfect choice for chairman of the board, and I am confident the company is well-positioned for continued success under her guidance and leadership.”

A healthy fine for Sensyne

The London Stock Exchange this week fined AIM member Sensyne Health over half a million pounds because of the way it dealt with CEO and CFO bonuses for an IPO completion.

The LSE concluded Sensyne broke the rules because the bonuses were not mentioned in admission documents, nor did the company properly consult its nominated adviser, Peel Hunt. Indeed, the LSE found Peel Hunt found out about the money in two text messages which gave the “impression, on any reasonable interpretation, that the award of the bonuses was a proposal that was not yet finalised, whereas, in fact, the terms of the bonuses were agreed and about to be paid.”

The LSE fined Sensyne £580,000, although that was reduced to £406,000 for “early settlement”. Breaking the rules is costly.

Portfolio primacy ‘won’t beat climate change’

Bad news for those hoping that the Big Three index fund managers—BlackRock, Vanguard and State Street—are about to save the planet. Harvard Law School professor Roberto Tallarita says their ability to push companies to tackle climate change is “grossly overstated”.

In a new paper Tallarita argues that the “portfolio primacy theory”, which says the Big Three are pushing investee companies to adjust their behaviour and business models, is off-beam.

He cites four reasons why portfolio primacy may have erred. Firstly, index funds are heavily invested in energy companies therefore “their incentives are more strongly aligned with major carbon emitters.” Secondly, stock markets may “underestimate” the social cost of climate change and therefore works with weak incentives. Thirdly, fund managers may not always act in the “best interest of their clients”. Lastly, most firms, including many carbon emitters, are “insulated” from the index funds because they are privately held. Tallarita points out many of the largest carbon emitting companies are either wholly owned, or at least controlled, by state governments.

All of this means policy makers need to quickly recognise the limits of portfolio primacy and reconsider using other policy tools. This will be bad news for politicians who have built climate policies on better disclosures to help investors. Other policies may be needed.