The business - Patrick Hosking watches executives being spanked

Company directors usually get off lightly at shareholders' meetings and in sessions with the press.

The other day, I witnessed something highly unusual. I saw business leaders actually called to account. Obliged to answer questions. Put on the spot. Grilled. In a public place. On the record. By democratically elected representatives. It was beautiful.

The occasion was a hearing of the Treasury select committee of MPs. The witnesses were three senior executives from Aberdeen Asset Management, a firm allegedly caught up in the latest financial scandal - the mis-selling of complex investment products known as split capital investment trusts, or "splits".

Tens of thousands of people have lost billions of pounds in splits, many of which were misleadingly marketed as low risk. Some splits took on huge risks through heavy borrowing, and there is evidence of unsavoury collusion within the industry. Some investors have lost all their money.

The executives at Aberdeen, which has eight different splits in trouble, were roasted. MPs accused them of being "sophisticated snake-oil salesmen", of "pyramid selling", of being "the unacceptable face of capitalism".

The trio did their best to put their side of the story. They blathered, they blustered. But to no avail. "Just give us a straight answer," barked the Lib Dem MP David Ruffley, after some flannelling from Martin Gilbert, Aberdeen's chief executive. I doubt he has been spoken to like that since he was in short trousers.

Business leaders are very rarely confronted publicly with their sins (unless they end up in the dock, that is). They may be privately chided by an institutional investor or a regulator, but that is usually as far as it goes. In theory, annual general meetings are the forum for shareholders to hold directors to account. In reality, they are mostly stage-managed. No one is left in any doubt that it is the executives, not the shareholders, who are in charge. Questions are frequently vetted in advance. The directors sit high on a podium and control the microphones. Private shareholders are too docile or polite or ill-informed to inflict any more than flesh wounds.

In theory, too, press conferences are an opportunity for company directors to be grilled. But media-savvy companies have more or less given up holding press conferences. Instead, reporters are offered "one-to-ones" - individual meetings. In practice, these involve one journalist and usually two or more directors plus sundry spin-doctors. The solitary reporter is outnumbered and neutralised.

Select committees are different. For once, the company directors are in the minority and on the record. In the Aberdeen case, three directors faced nine MPs. Their velvet-tongued advisers were of no use to them. And unlike America, no one here pleads the Fifth.

The system may not always be scrupulously fair. Gilbert complained afterwards that the meeting was "inflammatory". Aberdeen, while being the biggest provider of splits, is not alone - however, it was the only company to give evidence. And some MPs will use parliamentary privilege to score cheap points.

But MPs are limited in their powers. They have no authority to compel witnesses to give evidence. Indeed, Chris Fishwick, the chief architect of many Aberdeen splits - a man paid £7m in the past two years - having earlier promised to attend, decided not to turn up because he had "meetings to go to". After this snub, I was rather hoping to see Black Rod, or some such personage, dispatched to drag Fishwick, gyves on his wrists, to answer to parliament forthwith. Instead, the committee merely harrumphed.

The Financial Services Ombudsman and the Financial Services Authority are now examining complaints about splits. A class action is planned. Compensation may or may not be ordered. Fines or bans may or may not be imposed. But all this is years away. Meanwhile, it is refreshing to see some directors answering publicly for their actions, imperfect as the process may be.


A shareholder revolt is bubbling at Vodafone. Sir Chris Gent, the man who presided over the biggest corporate loss in UK history and a quartering of the share price, is being treated to a fresh barrowload of gravy. Shareholders vote on his pay and options package at the annual meeting on 31 July.

It looks like being another grotesque example of failure being rewarded. The person ultimately responsible is Penny Hughes, who chairs the Vodafone board remuneration committee. Hughes, a former boss of Coca-Cola in the UK, is better known these days as a member of Tony Blair's Forward Strategy Unit, where she is encouraged to think the unthinkable and come up with "blue-skies" policy ideas.

The really "unthinkable" would be to dump Gent's pay scheme. Hughes understands pay cuts. She has just taken one herself at Web-Angel - a dotcom business that she chairs - after an 18-fold blow-out in losses.