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14 May 2001

Some very strange business in the City

Big investors sided with activists at a firm's AGM. Or so it seemed. Mark Thomas reports

By Mark Thomas

There are some who regard the board of Balfour Beatty – and in particular its chairman, Lord Weir – as personally evil. Although I haven’t checked Lord Weir’s head for any tell-tale 6s, it is reasonably certain that he doesn’t want his company’s projects to create the mayhem and havoc they do. If only to avoid the bad publicity that could affect the share price. When the company’s directors initially discussed the Ilisu Dam Project in Turkey/Kurdistan, they didn’t look up from the paperwork and say: “I’m not happy with the 78,000 Kurds we could be displacing with this dam. With the right project management team, we can easily displace more than 100,000! That’s what we should aim for if we really want to please the dark overlord Satan.”

None of the board wants to see conflict in the Kurdish region increase as a result of the dam they are planning, but what they personally want doesn’t come into the equation. By law, their first duty is to their shareholders and the company’s profits. Those priorities come with a price.

Lord Weir’s manner, which suggests that his idea of an industrial accident is downing a bad oyster or choking on a canape, is the least of his problems. Balfour Beatty is rapidly becoming a byword for corporate irresponsibility. The proposed Ilisu Dam – for which Balfour Beatty may receive £200m in export credit guarantees from the government – is only part of the charge sheet. The chief executive, Mike Welton, admitted that the company could have taken the defective track at Hatfield out of service; the company incurred a record-breaking fine for the Heathrow tunnel collapse; it is facing prosecution in Lesotho, accused of bribing a state official; and in America, it has been raided by the FBI investigating an alleged misappropriation of around $280m. It has made few friends with its involvement in PFI schemes such as the Edinburgh Royal Infirmary; and building a private motorway (the Birmingham Northern Relief Road) will not increase the number of Christmas cards it receives this year.

At the company’s recent annual general meeting, attended by more than 100 shareholding activists, the board should have had an inkling that it was in for a rough ride. The 23 security guards de-ployed to ensure the directors made it safely to the podium must have been a clue that something was up. Friends of the Earth had purchased £30,000 worth of shares in Balfour Beatty in order to propose a resolution calling on the company to adopt the guidelines on dam-building laid out by the World Commission on Dams. If passed, these would prohibit the company doing work on the Ilisu project. After its purchases, FoE began soliciting support from financial institutions with Balfour Beatty shares.

The task was virtually impossible. Investment fund managers are conservative beings: when was the last time you heard “Peps are a right not a privilege!” shouted through a bullhorn? It would be wonderful if, every time Eddie George refused to lower interest rates, City gents occupied the Bank of England in protest. It would be great to see traders hiding their identities behind cashmere scarves pulled over their faces, and to hear the police condemn them as a minority of violent extremists. But demonstrations are the preserve of those without power or influence. When city people are angry, they don’t go to the streets, they go to business lunches. If they are furious, they skip the hors d’oeuvres.

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So, not surprisingly, FoE’s resolution received just under 2 per cent of the vote. What was surprising, though, was that 40 per cent of institutional investors abstained, rejecting Balfour Beatty’s call to back the company line. In City terms, a 40 per cent abstention is the equivalent of taking out Niketown and Starbucks and getting a date with Naomi Klein.

The results of the poll were handed out on paper after the AGM had finished. FoE had won 13 million-odd votes, just under 7 per cent of the vote. Minutes later, Balfour Beatty folk were briefing journalists that FoE had won not 13 million share votes, but only 2 million. There had been “an error”. According to the company, three finance houses had mistakenly voted for the resolution when they meant to vote against it. The company, “surprised” by the votes, had contacted the institutions, only to find that these highly paid and qualified scrutinisers had ticked the wrong box and wanted to vote again. The company was happy to help and, the company’s PR folk said, they were allowed another vote. At this point, I bet even George W Bush would say: “This is dubious electoral practice.” Or at least he would if he could string the sentence together.

Mark Thomas is a director of the Ilisu Dam Campaign. His regular, fortnightly New Statesman column will appear next week


The Ilisu dam will

– displace 78,000 Kurds (figure from report commissioned by Turkish authorities)

– destroy Hasankeyf, a 10,000-year-old town, regarded by the Kurds as the cultural jewel in their crown

– possibly affect, in conjunction with other dams, the flow of water into Syria and Iraq, neither of which (in contravention of international law) have had any negotiations with Turkey on the subject

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