Shareholder
Activism
Mitchells & Butlers - who looks after the small
investor?
It is
management dogma at most business schools - and certainly with
investment 'bankers' - that corporate activists are a good thing.
However, the current activity around Mitchells & Butlers (M&B)
raises a few points of principle.
First, newspapers
report that a group of investors controlling about 40 per cent of
M&B's shares are preparing to 'move on the board' (sic). They are
'understood to be acting separately but collectively' . Now it would
be interesting to find out what that is supposed to mean. How can
you act collectively and separately at the same time?
The same newspaper
report also refers to a 'series of letters and telephone calls' in
which the shareholders have 'warned the management' and demanded
that management take a specific action with respect to its property
portfolio. Some of these shareholders might also be interested in
entering into transactions with respect to this portfolio.
This situation illustrates a basic problem with the practice of
shareholder activism as a solution to the problem of corporate
governance: Any communication among investors creates the danger of
conflict of interests. Dialogue with management or other investors
gives an investor insights into the business outlook of the business
and an advantage vis-à-vis ordinary shareholders that are not privy
to this information.
Only full disclosure
of all communications between management of investors can guarantee
a level-playing field for all investors. In addition, a 'quiet
period' after any direct communication might also be useful. A few
days after any direct contact (and dissemination of relevant minutes
of the information exchanged) should be enough given that most
investors have easy access to bulletin boards, corporate websites
and newswires.
It would also be helpful if all significant proposals are discussed
in an open forum that is open to all shareholders and where all
proposals are put forward. It is high time that the owners of a
business do not only read in the newspaper when major decisions
affecting their investment are taken. The good old Annual General
Meeting (possibly supplanted by some sort of electronic
alternative) would be the most appropriate forum.
13-Apr-08
|