Making the best of shareholder activism

Navigating the shareholder spring.

Imagine the scene. You’re ready to sleepwalk your way through the yearly AGM ritual, you’re expecting a few shareholders to show up purely for the sarnies and the most exciting part of your day will be deciding what to wear. All of a sudden, reality breaks in and remuneration is in the cross hairs. The Association of British Insurers (ABI) issues a red top alert, ISS (Institutional Shareholder Services) issues a "vote against" recommendation, your shareholders are emboldened by the shareholder spring and vote against the remuneration report. Press coverage is destructive, you face public humiliation and although the vote isn’t binding, there’s so much pressure on you that you become yet another victim of anger about boardroom pay, another name in the hall of shame.

Sound familiar? Ask Sly Bailey of Trinity Mirror or Andrew Moss of Aviva, who are now seeking employment. Or Sir Martin Sorrell of WPP or Ralph Topping of William Hill, both of whom had their pay packets pummelled by shareholder anger.

Smaller companies have also been engulfed by this fury and are, in many respects, even more vulnerable. Cairn Energy took a roasting with 67 per cent votes against and 10 per cent abstentions on its pay report. AIM company Central Rand Gold was rocked by a 75 per cent revolt against its pay policy. Small cap Pendragon faced an ABI red top alert and an embarrassing climb down after a "no" vote.

That was the Shareholder Spring of 2012.

Shareholder votes on pay may only be advisory but directors who don’t listen to the message risk the ultimate sanction of being voted out. And it’s not just votes against which matter. Abstentions are often used to show a yellow card which directors should read as a clear signal to get round the table and talk to investors.

Remuneration consultants may be having a feeding frenzy advising on pay policy but the key area under the spotlight right now is the communication disconnect between companies and their shareholders.

Help is at hand

Investor activism is a way of shareholders flexing their muscles and demanding that you engage. Companies large and small should take to heart the need to talk to and listen to their shareholders so that they don’t end up with battle lines drawn, leadership resignations or picking up the pieces afterwards. Nobody wants to be hauled over the coals in public.

It can be tough being a CEO or an FD. You have to run the company, make hard decisions in a difficult economic climate, get your teams to implement them, deal with multiple claims on your time and somehow still find time to keep your investors happy. There are only 24 hours in a day and if you’re a smaller quoted company, it’s likely that your investor relations team is CEO and FD, both of you running at full stretch with no investor relations officer to support you.

The good news is that help is at hand. CEOs and FDs who want to avoid the sapping skirmishes of the shareholder spring can use a five-piece investor communications kitbag to put themselves on the front foot, selecting tools based on the amount of time available. Forward-planning helps smooth the way and reduces the risk of a public drubbing. And, it gives you a fabulous opportunity to bring your shareholders on side as cheerleaders for your company.

Tool #1 - Shareholder engagement

Dialogue matters. Planned, long term engagement puts companies in the driving seat. Regular dialogue with shareholders creates an atmosphere of understanding and builds trust; it enables directors to inspire confidence in the company and in the integrity of the executive team as you set expectations and educate investors about the value drivers of your business.

ABI director general Otto Thoresen told a recent Treasury Select Committee that company engagement with shareholders is “beginning to change but it’s not uniform and not fast enough”. Companies who only communicate when they have to are missing out on a great opportunity. Let’s face it, if you bump into someone you hardly know each year at an AGM and they ask you to lend them £1,000 for a business you know nothing about, you wouldn’t do it. If you meet a contact on a regular basis who tells you about their business in a way that excites and interests you, explains its strategy, prospects and progress against plan, then if that person asks you to lend them £1,000, there’s a higher chance that you’ll do it.

The reporting calendar provides the perfect framework for shareholder engagement. Quarterly results and interim management statements are part of a regular reporting cycle, giving you the opportunity to showcase your company to the market and helping reduce share price volatility.

Tool #2 - Perception study

Everybody wants to know what other people think of them and companies are no different. If directors want to manage their company’s profile and valuation, it’s essential to understand shareholders’ opinions about the company, the leadership team and the strategy so that you can ensure no nasty surprises at a vote.

John McFarlane, chairman of Aviva, lights the way. As he picks up the pieces in the wake of his former CEO’s resignation, his message to shareholders of 5 July recognises how important it is to find out what investors think about a company. McFarlane emphasises the importance of communicating and of listening when he says “over the past few weeks, I have met with our major shareholders and, in addition to their disappointment over our share performance, I believe there are legitimate concerns”.

Companies must communicate with buy side shareholders, listen to them and understand them, preferably before things get sticky. Even for companies with a good record of active shareholder engagement, a perception study is a powerful tool because it enables the board to take stock of the company’s current positioning in the eyes of the investment audience and it drives out those areas which need to be focused on in their IR strategy. It comes into its own when a board is unsure of where shareholder sentiment lies in the months ahead of a vote and wants to test shareholder mood, with time to act on the findings.

Tool #3 - Engagement with voting agencies

As the time of a vote draws near, companies may be blindsided by proxy voting recommendations. Proxy voting agencies are a section of the market many directors are not aware of and which require a nuanced understanding. They exist in the middle ground between a buy side shareholder and that shareholder’s vote.

Take the case of William Hill, which faced a difficult vote on its CEO’s retention package. Chairman Gareth Davis commented, "We consulted with the majority of our major shareholders and most recognised the importance of what was being put in place for William Hill's future. Whilst many of our largest shareholders supported the Remuneration Report resolution, one of the most influential vote advisory bodies recommended a vote against. It appears that a large number of shareholders across our share register voted in line with this recommendation.”

Savvy directors do not have to sit back and wait for a vote recommendation to happen to them: they can take the initiative and interact direct to ensure that the voting agency is in full possession of accurate information about the company and any areas of concern.

Tool #4 - Take it to the market

When a company has exhausted all other routes and still has concerns about shareholder understanding, then a board which is confident of its position can take it to the market. It can develop a tactical plan to proactively put information into the public domain to ensure full disclosure and transparency amongst all shareholders about any areas which may otherwise prove contentious. A recent example is easyJet, which earlier this year published and explained its remuneration policy and provided justifiable reasons for poor NED attendance at board meetings.

Tool #5 –Be ready for the future proposals on directors’ pay

The final tool in your kitbag is ensuring that your fellow board members are fully up to speed with Vince Cable’s proposals on directors pay. They are intended to address the disconnect between pay and performance and unsurprisingly they move the UK towards the US system of Say-On-Pay. Boards should proactively address the implications of these proposals as they start to firm up.

Conclusion

CEOs and FDs have some great weapons in their kitbag which they can organise like a military campaign to create winning strategies without hostilities. The messages emerging from the current levels of shareholder activism are that investor communication is all. Proactive, high levels of engagement and understanding are essential. Alignment of board strategy and shareholder interest is the guiding principle.

Rachel Maguire is the Investor Communications Director at Arko Iris. This article first appeared in economia.

Photograph: Getty Images

Rachel Maguire is the Investor Communications Director at Arko Iris

JOHNNY SAVAGE FOR NEW STATESMAN
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The constant gardener

The novelist Paul Kingsnorth on Anglophobia, voting Leave and teaching his children to live off the land.

It was when Paul Kingsnorth told me that he had got rid of the toilet in the County Galway bungalow he calls home that I began to wonder if the next couple of days would be more than I had bargained for. As it turned out, I was right – but not in the way that I had imagined.

Kingsnorth, now 43, found fame in 2014 when The Wake, his crowdfunded novel, was longlisted for the Man Booker Prize. Set during the Norman conquest, it is written in a “shadow tongue” that strips the Latin out of our language, leaving a rhythmic, incantatory version of Old English that powers the tale of Buccmaster, the narrator, who resists both the Norman incursion and the new Christian God in his land:

 

none wil loc but the wind will cum. the wind cares not for the hopes of men

the times after will be for them who
seen the cuman

the times after will be for the waecend . . .

 

But while The Wake was Kingsnorth’s ­debut novel, he was no novice. His first book, One No, Many Yeses (2003), was an investigation into the forces of globalisation that were destroying historic cultures across the world. It took him to Mexico, West Papua on the island of New Guinea, Genoa in Italy, and Brazil. Upon returning home, he observed the same forces at work in his own country. Real England (2008) was the result. In 2009 he co-founded the Dark Mountain Project, which describes itself as “a network of writers, artists and thinkers who have stopped believing the stories our civilisation tells itself. We see that the world is entering an age of ecolo­gical collapse, material contraction and social and political unravelling, and we want our cultural responses to reflect this reality rather than denying it.”

And it is that reflection of reality, as Kings­north sees it, that led him to these acres of land in the west of Ireland, and to the removal of the Thomas Crapper-style flushing toilet. Instead, there is a compost toilet, the use of which involves throwing a bit of sawdust down the loo after the business has been done: that’s it. After about a year, you get rich, odour-free compost to nourish the land on which you’re growing your food, and you’re not wasting gallons of water every time you flush. But if you grew up in Manhattan, as I did, using a compost toilet requires, right away, a pivot in attitude. It’s a blunt demonstration The novelist Paul Kingsnorth on Anglophobia, voting Leave and teaching his children to live off the land. just the kind Kingsnorth is after – of the way in which human beings’ relationship to the planet must be changed.

His fiction, his non-fiction, Dark Mountain (which publishes two volumes of prose and poetry a year and hosts conferences and festivals) and his move here, an hour’s drive from Shannon Airport, are all part of the same project for Kingsnorth – his life’s project. He and his wife, Nav, a psychiatrist, lived for a few years in Cumbria; not a metropolis, certainly, but more developed in comparison to this. Now they have planted a big kitchen garden and a stand of trees that will eventually provide all the fuel that they need. There are pear trees and apple trees, too. Their eight-year-old daughter and five-year-old son are being home-schooled. Every­thing he has done, Kingsnorth tells me, and everything he is doing here, come “at the same thing. I keep worrying away at this idea of what it means to be somewhere, and how you can have a relationship with a place, and what it means when that relationship is broken. What does it mean for a person to belong in a place, to the earth?

“I grew up on one hand with this sense of the power and beauty of the natural world, and [on the other with] the sense that I wasn’t living in it at all and neither was ­anyone else around me,” he says. “This leads you to explore how societies around the world have lived differently. But it all really comes down to broken relationships – between people and places.”

Kingsnorth grew up in the south of England, the son of a self-made man, a mechanical engineer who kept a photograph of Isambard Kingdom Brunel on display as a model of someone who had mastered the world. He was a passionate Thatcherite and businessman and, according to his son, his view of what success meant was a narrow one. “He was very keen for me to get on in life. That meant you went to uni, you became a doctor or a lawyer, you got a good job and a big house. He came from quite a working-class background” – Kingsnorth was the first in his family to go to university, studying modern history at Oxford – “so that’s quite a common story.

“He really pushed me to do that but I’ve always been quite a sensitive, poetic type, having to pretend that I wasn’t, being a thrusting young journalist, or whatever.” He laughs a little ruefully.

We’re sitting in the Irish sunshine in front of a comfortable wooden hut a moment’s walk away from the house. It’s his writing place, and it’s where I spent the night, the darkness and quiet providing the kind of sleep that I’d hardly recalled existed. Round the walls inside, Kingsnorth has tacked up a reproduction of the Bayeux Tapestry, the story of William the Bastard’s conquest. There is no wifi here and no phone signal, either.

Kingsnorth is tall and slender, and looks rather like a bearded version of a young Michael Palin. His wooden-framed glasses are stamped with the Timberland logo – an indication that escape from the globalised, commercialised world just isn’t possible.

Not that Kingsnorth thinks it is: this, in effect, is his point. In the early days of Dark Mountain – when it was launched in 2009 with a manifesto, reviewed by John Gray in the New Statesman – he and his ­co-founder, Dougald Hine, were accused by some of a bleak nihilism, of walking away from the problems that face the planet. They argued that there was no technological fix for climate change. “We do not believe that everything will be fine,” they wrote: it almost sounded as if they were willing destruction on the human race. “We are not even sure, based on current definitions of progress and improvement, that we want it to be.”

Ecological movements around the world, as well as political movements toward liberalism and progressivism, are simply too focused on the survival of humanity and give precedence to “civilisation”, which has brought nothing but destruction to the planet and destroyed cultures that had existed for millennia, they said.

Years of involvement in environmental activism – battling together with the road protesters who, in the 1990s, fought against the building of motorways across Twyford Down; working as an editor at the Ecologist; attending conferences on climate change – left him at a dead end. “My belief in that way of doing things just collapsed,” Kingsnorth says now. It was this that brought him here, to a country where he could buy a piece of land and a little house without a mortgage. (There are tax advantages to living in Ireland, too, but other things, such as health care, are more expensive. He says that more important was the feeling that he could both be part of a community and learn the skills to be self-sufficient.)

“I’ve kind of made peace with the fact that we are where we are,” he says, “and I can’t really do anything to change that. Often trying to change that big picture actually makes it worse. I’m just going to do what I can do in my small life. Work this land, do my writing, see where that goes. If you’re really convinced that we’re living the wrong way, then you have to make some attempt to live the right way, don’t you? Even though you are part of the same culture, you can’t ever be a paragon of anything or an example to anybody. But it’s like Rilke said, ‘You must change your life.’”

He explains: “What that means to me is that you must change your opinions and write different things but you must do some stuff. Build a compost toilet and plant some trees and work the land – and that kind of knocks the hard edges off your ideologies as well, when you do that.”

If those hard edges were the result of his upbringing, he doesn’t make that connection. His father died nearly a decade ago but they made peace, he tells me, after his first two books were published: this was the kind of success that his father could recognise. (Family influence comes in many forms. He has two younger brothers – “supposedly identical” twins. One works for Friends of the Earth, the other for Citibank.) His father, he says, did give him useful skills: “I think if he hadn’t forced me into learning how to get things done, then I couldn’t write books. You have to have a kind of bloody-minded determination to do that.”

A similar strength of mind was required to turn his back on the movement that he had grown up with. He has had public disagreements with the journalist and activist George Monbiot, a long-time friend of his, whose environmentalism is of a no less passionate but perhaps more conventional kind. Regarding climate change, Monbiot says, “Paul rejects all technical solutions. He also says political solutions aren’t going to work, either – that’s where he and I diverge.” But confrontation has deepened their friendship, first forged in the years of the road protests. “I’m proud that we have this friendship, despite the fact that we disagree very vocally and with passion on several issues. It’s been an enriching experience for both of us – much more so than tacit agreement would be.”

Monbiot also believes in the importance of Kingsnorth’s project. “I feel that Paul’s work is a fascinating interrogation of what it is to live in the 21st century, when we seem to be living without the experience of previous centuries,” he tells me. “We are uniquely disconnected now from history, prehistory and the living world. Paul is exploring what it is to be disconnected and try to reconnect. These are the fundamental questions of our age.”

The Wake, in which Buccmaster becomes part of an outlaw resistance to the Norman invasion, roaming England’s forests, both the victim and perpetrator of violence, is partly an attempt to reconnect to a distant and neglected English history. The novel – which may have missed out on the 2014 Man Booker (I was a judge that year) but won the Gordon Burn Prize and the Bookseller’s Book of the Year award, as well as being shortlisted for the Goldsmiths Prize – found a champion in the actor Mark Rylance,
who acquired the film rights and read from the book at the Hay Festival in 2014.

Kingsnorth and Rylance first met about a dozen years ago when Rylance was at the Globe and Kingsnorth later wrote the programme notes for Jez Butterworth’s play Jerusalem, in which Rylance played the English folk anti-hero “Rooster” Byron. Rylance, who says that he hopes to start work on the script for The Wake very soon, describes the novel as “an eye-opener”, a reminder that the Norman conquest was just that: a conquest.

“I remember driving back from the Hay Festival,” Rylance tells me. “You come down through a valley on the Welsh borders; at the bottom is a Norman castle. It’s a ruin now, of course – but after reading from The Wake, it suddenly looked very different to me. I thought of all the romance I had as a kid about castles, but suddenly I saw them as [part of] a violent occupation.”

If The Wake is a novel of resistance – to conquest, to a way of life imposed from outside – then Beast is a story of submission to a force that cannot be resisted. The book is the second volume in what Kingsnorth envisions as a trilogy: The Wake is set a thousand years in the past, Beast is set in the present, and the next volume will be set a thousand years in the future. Beast is slim, hypnotic, a swift descent into the solitary world of ­Edward Buckmaster, a man alone on a moor in the West Country. His is the novel’s narrative voice, and he both observes and experiences his predicament.

 

. . . you will understand soon enough that this world is a great animal, alive and breathing, that we walk through it, we breathe with it, we are its breath, that when we stand on a mountain overcome by the sunset and all that it brings, or fall to our knees in front of an altar in the presence of something greater than ourselves, then we are sensing the animal shift and turn beneath our feet. Then it is calling us home.

 

He wrote it swiftly, he tells me, in just eight months; his other books have taken more than twice as long. But, he says, he could only have written it looking out over the field outside his writing shed. “Every time Edward makes a plan” – he tries to leave the moor but whenever he does he ­becomes injured or lost – “he gets yanked out of his plan, by the place. He’s being claimed by the place, and I feel like I’ve been claimed by this place.”

Ireland is the place that has claimed him now; but he has written extensively about the claim – or lack of it – that England makes on the English. In Real England, he went searching for what English identity means at a time when displaying the St George’s flag can be read simplistically as a sign of football-hooligan racism. “It’s terrible,” he says. “It’s very sad. There’s an Anglophobia stalking Britain. It’s not acceptable to be an English patriot in the way you can be a Scottish or a Welsh patriot. Those are small countries that were attached to a bigger country. They define themselves against that. So what does the bigger country, England, define itself against?”

Yet the longing for definition, however problematic, doesn’t go away. “What does it mean to be ‘us’ in England?” he asks. “It’s such a big question at the moment because the level of migration is so high. You need
to know who you are, and where you are, and have some control over that. If there isn’t an acceptable outlet for it, it goes to an unacceptable outlet.”

This put him, cautiously, in the Brexit camp – he cast his postal vote for Leave. When we speak the morning after the referendum, he says that he is feeling “shocked and excited” by the result. “One of my Irish friends shook my hand today and said, ‘It’s a great day for Britain.’” Before the vote, Kingsnorth had said to me, “There’s a green radical case to be made for leaving Europe.” To him, the EU is a “huge, undemocratic bureaucracy trying to run thirty countries from one city. I’m instinctively in favour of small groups of people running their own affairs, close to the ground. Democracy only works when it’s close to the people.

“Notions of culture and identity change all the time and they’re probably changing faster now than at any time in history. So it seems to me that the most positive thing you can do is to say: here I am in a place with some people around me. What does that ­relationship look like? How can I deepen it? How can I be here?”

The referendum, he says, has “exposed this festering divide. A lot of anger that had been stored up has come out, because there is a huge number of people in England and Wales who have not been given the option to say what their countries should look like.” He acknowledges that these questions of national feeling can be “poisonous” – and also that there is “a worrying possibility that you have a culture war as you have in the US, where people are polarised between left and right, rather than looking for common ground.” It remains to be seen whether Brexit will lead to anything like common ground but he is willing to take the chance. (There is also the possibility that his status as a British citizen living in the EU will change; the Irish are trying to work out what will happen to the 250,000 Brits who live in Ireland.)

Some might argue that Kingsnorth’s argument is simplistic; that it would be impossible to turn our backs on governance. Yet it is not as if he hasn’t spent years thinking long and hard about the alternatives and being deeply involved in those alternatives. And it must be said that being here in County Galway, on the two sunny days of my visit, is awfully pleasant.

Kingsnorth is careful to describe the howling gales that pour in from the Atlantic during the winter months; he needs to build a porch for his writing hut to stop the windows leaking. But watching his children scramble up the tree house he has just built for them, or tasting the fennel water that his daughter makes for a treat, I begin to imagine a different kind of life. I had been curious, I confess, about how much of the material world would be off-limits to the family and especially to the kids. I suppose I had feared encountering a puritanical joylessness. So I am relieved to learn that they watched Star Wars: the Force Awakens on the ferry back from their month-long trip to France (the camper van looks cosy) – but then I wonder why it is that I consider the gospel of George Lucas the mark of civilisation.

He thinks that his children will inherit a difficult and challenging future. “We’ve destroyed half of the world’s topsoil in a hundred and fifty years,” he says plainly, “and half of the world’s forests; and 90 per cent of the peat bogs here in Ireland and 90 per cent of the meadows in England. There’s a huge litany of this stuff. Since I was born in the early Seventies, between a quarter and half of the world’s wildlife has been killed off. I’m only 43. That’s frightening.

“The writing’s on the wall. It’s not rocket science. You can see it everywhere.”

He and Nav hope to give their children skills that will be useful to them as the planet changes in the coming decades. “I want to walk a fine line between terrifying and depressing them, which we try not to do, but also making it clear where we are and what humans are doing,” he says. “I’d like to bring them up thinking that they had a responsibility for all of this” – the land all around us – “that they were part of it, and that they knew how to provide for themselves in a responsible way, and that they’ll always have this as their root stock to which everything else is grafted. But,”
he says, “maybe they’ll move to cities and become fashion designers. Who knows?” He laughs. “That’s up to them.”

Kingsnorth is not presuming to tell anyone else how to live. His goal is to open a space for debate, not to deliver lectures. “It seems so much more interesting now to have questions rather than answers. The most boring kind of writing is arguing from a position. ‘Here is what I think, here is my evidence to support it, and here is why everyone else is wrong.’” If his children are being home-schooled, so is he. Sitting on the sofa, reading a thick book with their mother, his son and daughter are learning about the evolution of humankind. While I’m there, the family jokingly decides that there might be another branch of the developmental tree: Homo kingsnorticus. An argumentative species, yes, but curious and open-minded. Gifted and imaginative.

The end of the human world doesn’t frighten Kingsnorth. “Nature hasn’t noticed it’s in crisis,” he says. “If we crash the whole system, it will recover in a few million years and start doing its thing again. If instead of believing that everything gets better, if you just note that things happen and that everything is finite, then you have another view of history.

“We’ve put all our reliance on technology and machines but the price you pay for this is so enormous – it’s hugely destructive of life around you and gnaws away at what you’ve done. So that was one experiment. Then that will fall apart and things will be different. Not better or worse. Different.”

Homo kingsnorticus looks out over his green field. The sun is shining; the birds are singing. Here we are, at least for now.

“Beast” is published by Faber & Faber on 7 July

Erica Wagner is a New Statesman contributing writer and a judge of the 2014 Man Booker Prize. A former literary editor of the Times, her books include Ariel's Gift: Ted Hughes, Sylvia Plath and the Story of “Birthday Letters” and Seizure.

This article first appeared in the 30 June 2016 issue of the New Statesman, The Brexit lies