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Activist Insight: Gatemore blasts May’s governance reforms

29th August 2017

Liad Meidar, the chief investment officer of activist investor Gatemore Capital, has criticized the U.K. government’s plan for corporate governance reform, saying it is “insufficient to address some of the most glaring lapses.”

The activist’s plea focused on the “comply or explain” principle of the corporate governance code, suggesting it should be ditched because most of the companies provide weak explanations for non-compliance with few repercussions. The activist proposed that executive pay “be paid in the form of salary and restricted stock,” which cannot be cashed until retirement.

Prime Minister Theresa May’s plan has been criticized by opposition leaders, who said the government “watered down” an original promise to rein in excessive executive pay. Initially, the government had promised a binding shareholder vote on pay, but backtracked later, saying those companies that face revolt will be included in a register overseen by the Investment Association.

May has repeatedly criticized Britain’s corporate bosses for taking home excessive pay compared to the average employee and had promised a greater say for workers in boardrooms. The newly-unveiled plan requires firms either to create an employee advisory council or to allow workers to nominate a director, similar to Germany’s code. The caveat is that it will operate on the same “comply or explain” principle.

Meidar, who had led campaigns at French Connection and DX Group with mixed results, believes May should not allow workers to enter boardrooms, contending Germany’s success was based on other factors, including a well-trained workforce and a weak euro.

“If the Prime Minister wants to replicate Germany’s success in the U.K., she should be pushing for better workforce training, encouraged by tax incentives for companies which participate, Meidar said in a statement. “Adding to a company’s regulatory and reporting burden will not help to achieve this and, in effect, it will make the U.K. a less attractive place to do business.”

Meidar complained that a weak governance code has allowed French Connection’s CEO Stephen Marks to become entrenched at the expense of shareholders. Gatemore recently sold its 8% stake in the firm at a handsome profit.

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