TIDMJDW
RNS Number : 1677U
Wetherspoon (JD) PLC
13 October 2014
For immediate release
JD Wetherspoon plc
Press article
The following article first appeared in Propel on 13 October
2014 and is repeated to further its distribution. It represents the
personal views of Tim Martin, chairman of JD Wetherspoon plc, and
builds on comments he has made in the last two annual reports of JD
Wetherspoon.
"
Breaking News - Opinion Special: Tim Martin criticises corporate
governance
The ruinous absurdity of corporate governance by Tim Martin
Woof, woof! What's that at the boardroom door? Why, it's the dog
that hasn't barked - until now. This corporate governance dog has
surreptitiously devoured our major banks and pub companies and has
moved on to make mincemeat of our biggest supermarkets. Like
Frankenstein, the carnivorous canine has outgrown its corporate
governance creators and is munching its way hungrily through our
finest companies.
The dog has been lucky so far: corporate mayhem has been blamed
on others. Gordon Brown mendaciously blamed bankers' troubles on
sub-prime American loans. Others have blamed "hot money", the Bank
of England or greedy and incompetent executives, perhaps forgetting
that they were appointed through the governance system, which
created the dog in the first place.
The travails of our biggest pub companies, for example, beset in
recent years by various corporate catastrophes, have been lain at
the door of the smoking ban or changing consumer tastes, rather
than the governance industry itself. Supermarket troubles have been
blamed on aggressive foreign companies, the internet and high
prices, but the dog had not been identified, until recently, as the
main source of the devastation.
However, the Tesco fiasco may have let the cat out of the bag.
One of the greatest absurdities of the governance system is that
you can comply with the rules and have, as many companies do, only
two executives on the PLC board. If they fall out, or one leaves
for any reason, you only have one, and if you're unlucky you may,
like Tesco, end up with none, a dangerous void for a major company.
In fact, only two or three executive directors is a dangerous
void.
The far more widespread malaise though, under the radar until
now, is that so-called compliant PLC boards are, in reality, highly
inexperienced and unstable. The unholy combination of a majority of
part-time non-executives, including the chairman, with a maximum of
nine years' tenure, and CEOs who average only four or five
institutionalises these weaknesses. A board led by part-timers,
with a short-term chief executive, which has very little real
contact or knowledge of the worlds of executives and customers, is
really a sitting duck in the business jungle.
These weaknesses are compounded by a raft of other governance
shibboleths: excessive emphasis on the role of shareholders (the
2012 Code refers to shareholders 63 times, employees three times
and customers not at all); performance-based pay, which encourages
over-borrowing in order to enhance earnings per share targets; the
discouragement of CEOs becoming chairmen, exacerbating the
short-term mindset of the former; autonomous board committees,
manned by non-execs, operating as remote and detached satellites,
clogging up company accounts with jargon-filled reports;
remuneration committees which have legitimised huge pay increases;
and audit committees which have effectively removed power from
executives and have presided over financial Armageddon at our banks
and other major companies.
The key to understanding the current problems, pointed out by
journalists like Chris Blackhurst and Anthony Hilton, is that the
pendulum of governance, designed to prevent Maxwell and Enron-style
debacles, has swung too far the other way. The composition of the
board of the Financial Reporting Council, which oversees
governance, mirroring the non-executives on PLC boards, consists
almost entirely of "City" types, with little experience of civvy
street, let alone pub or supermarket companies. This aspect is
exemplified by the appointment to update the rules of Lord Sharman
formerly head of Ernst and Young and Tony Blair's main advocate for
Britain to join the euro, whose financial judgement on the big
issues is transparently deficient. The great and the good, les
énarques, as the French say, have their role to play , but too much
power has been ceded to them, to the serious detriment of corporate
performance.
The nature and the tone of governance urgently need to change:
if you have top CEOs like Stuart Rose at M&S or Simon Wolfson
at Next, they should be encouraged, in due course, to become
chairmen, subject to appropriate checks and balances. Executives
should be properly represented on boards and should form a
majority: the tail should not wag the dog. Performance-based pay
should be consigned to the dustbin of history. There is no evidence
that it does any good, and it often encourages perverse
behaviour.
Britain's most senior judge, Lord Neuberger, who has seen many
dogs in his day, recently said that the reaction of the authorities
to failed regulation is often to produce more regulation, when what
is needed is different regulation. Inexperienced yet compliant
boards were intimately involved in the collapse of our banks, our
pubs and our supermarkets. We now need a new system of regulation,
which takes account of these factors.
Tim Martin is chairman and founder of JD Wetherspoon
"
Enquiries:
Company spokesman Tel.: 07956 392 234 / 020 8352 5012
Eddie Gershon
Notes to editors
1. J D Wetherspoon owns and operates pubs throughout the UK. The
company aims to provide customers with good-quality food and drink,
served by well-trained and friendly staff, at reasonable prices.
The pubs are individually designed, and the company aims to
maintain them in excellent condition.
2. Visit our website: www.jdwetherspoon.co.uk
3. The next interim management statement will be issued on 5 November 2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCFFWFIDFLSESS
Wetherspoon ( J.d.) (LSE:JDW)
Historical Stock Chart
From Jun 2024 to Jul 2024
Wetherspoon ( J.d.) (LSE:JDW)
Historical Stock Chart
From Jul 2023 to Jul 2024