Q & A with chairman of the UK Shareholders Association

John Hunter, chairman of UKSA, on corporate governance and investing

Q & A with chairman of the UK Shareholders Association

 

John Hunter UKSAIn this interview John Hunter, chairman of the UK Shareholders Association discusses corporate governance, investing habits and reforms he’d like to see.

Chris Menon: Why does the elaborate system of governance and control that now surrounds public companies not prevent Chief Executives running their companies like private fiefdoms;?in their own interests rather than that of their shareholders?

John Hunter: Senior executives avoid challenge, non-executives are recruited from the same pool, remuneration consultants operate in secret and are retained by those who are remunerated, journalist like big stories, institutional investors are not beneficial owners and are conflicted and most private shareholders are disenfranchised. What did you expect?

Chris Menon: You’ve been involved in the financial world for many years, having been an accountant, business analyst and having worked as a company secretary at a FTSE100 company. Do you think ethical standards now are lower than 30 years ago?

John Hunter: No. People have always been people. But the opportunities and the temptations for misbehaviour are greater now, the effects are more far-reaching and the consequences more contagious.

Chris Menon: Why should a private investor wish to get involved with an organisation like yours?

John Hunter: To apply pressure for the correction of ills that are economically damaging and morally wrong. If he wants to take advantage of UKSA’s social and learning opportunities so much the better.

Chris Menon: Following the furore over Tesco directors receiving large redundancy payments, do you agree with demands for company management to be on contracts with less than notice periods of less than 12 months?

John Hunter: No, typical knee-jerk solution with unintended consequences. Beneficial owners should approve major employment contracts.? It’s their money.

Chris Menon: What exactly do you mean by beneficial owners?

John Hunter: ‘Beneficial owners’ are those who benefit from the financial risks and rewards of ownership; they receive dividends and carry the capital risk (both upside and downside).? ‘Shareholders’ are those whose names are on the register; they carry the voting rights. For an investor in a nominee account the broker (or a related company) is the shareholder and the investor is the beneficial owner.

Chris Menon: What are the most important reforms?you’d like to see?

John Hunter: I’d like to see these reforms:

  1. Identify beneficial owners by putting their names on the share register, a necessary preliminary to…
  2. Giving beneficial owners shareholder rights and removing shareholder rights from unappointed agents.

Chris Menon: Any others?

John Hunter: The most achievable, which I’d certainly like to see enacted by the next government:

  1. Raise the individual limit on compensation for misappropriation of securities held in nominee accounts from £50,000 to 90% without limit (the formula that applies to pension funds held by insurance companies)
  2. Make all terms of director employment contracts subject to shareholder vote

The most influential in the long-term would be:

  • Teach young adults about compound interest, diversification and the trade-off between risk and reward

Chris Menon: Why is it that UK share societies are dominated by old white men?

John Hunter: I question the word ‘dominated’, but broadly it reflects the demographic of people concerned with the economic and moral issues of the current investment climate and with the time to try to do something about it. I agree we need to have a wider spread of people who understand this and can support our efforts by joining UKSA.? Encouragingly our membership is 30% female.

Chris Menon: What did you learn from your experience of investment attitudes in the US?

John Hunter: In the US they understand that the future has to be worked on as well as the present (the imperative of paying for one’s kids’ college education is a powerful driver). In the UK the future is someone else’s problem. Only education can change that.

Chris Menon: What’s the biggest difference in attitudes to equity investment in the US and the UK?

John Hunter: In the US if you sit at a bar with a stranger and say ‘IBM’s up a dollar’ you’ll talk for half an hour. In the UK if you sit at a bar with a stranger and say ‘BP’s up a pound’ he’ll say ‘How much did it weigh before?’

Chris Menon: What’s the best piece of investment advice anyone has ever given you?

John Hunter: Make sure you can sleep at nights.

 

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About Author

Christopher Menon

Every Investor Editor Chris Menon is a financial journalist who has written regularly for national newspapers, magazines and websites about personal finance, with particular emphasis on investing.