We wrote about the battle for Alliance Trust, one of the UK’s oldest investment trusts in the magazine’s investment briefing a couple of weeks ago, and I also looked at the war of words between the trust and its New York hedge fund enemies, Elliott. But things are hotting up.
Yesterday, Pirc, the group that advises shareholders on the best way to vote on these matters, released its recommendations for the AGM on 29 April. There are several key issues in the row.
One is that Elliott believes that Katherine Garrett-Cox, who runs the company, is obscenely overpaid. On this it is (to my mind) quite right, and it seems that Pirc agrees. Garrett-Cox’s incentives are considered to be excessive given that her total rewards come to nearly 300% of her base salary, rather than the 200% that is “considered best practice”.
Another is that the board is not independent enough – ie, it is not acting in the interests of the shareholders. On this Pirc also agrees – it is recommending that shareholders vote for all three of Elliott’s candidates on the basis that independence is a “safeguard against groupthink”.
Interestingly, however, it looks like the board of Alliance Trust is also coming around to the view that it is not independent: it has appointed its own headhunter to find a “truly independent non-executive director in the summer”, something that rather suggests it knows it doesn’t have enough of them already.
However you feel about Elliott (and I have been pretty impressed by it so far), I think that it is clear at this point that it has already been a force for good in this case: we haven’t even got to the AGM and already Alliance has been forced into accepting change.
I’ll be at the AGM in Dundee on 29 April – if you are a shareholder I rather think you should come too. It’s going to be a fine chance to vote for a better Alliance Trust – and to see shareholder capitalism in action.
PS – Many things worry me about Alliance Trust, but I’m finding the top ten holdings at the moment a particular concern: run your eye down this list and you will see that some 14% of the trusts assets are invested in funds run by the Alliance Trust funds business. If they were the best funds out there, maybe that would be OK, but can they all have passed such independent scrutiny?