"Imagine a board room full of directors who somehow feel truly accountable and responsible to shareholders; who work to understand, reflect and advance the interests of the company's owners and other stakeholders; who feel, individually and collectively, that they and their company's strategy have a clear and meaningful mandate from shareholders."
So said Cevian Capital in its submission to the Kay Commission on Short Termism (one of many responses which may be freely downloaded from the Commission's website). With views like that, Cevian deserves a wider audience than it has gathered so far. And it may be about to get one, although not by dint of its corporate governance philosophy. Within four months of Cevian arriving on its share register, the shares of industrial old-timer Cookson are up by 60 per cent and demerger chat has accelerated this trend. Cevian is chunky: its near-20 per cent stake has cost at least £200m, but it probably has a total of over £1bn invested in the UK market. Who is Cevian?
Founded 10 years ago by a couple of nouveau Swedes who had achieved considerable success managing investments for Sweden's industrial aristocracy, Cevian has become one of the world's best-performing hedge funds. Yet it doesn't borrow, it holds less than 20 investments at any time, and its average holding period is three years or more. Cevian's first fund, raised in 2002, was a storming success, putting it in a position in 2006 to raise more than $4bn for its second fund. Over its first five years, this fund has earned 8.6 per cent a year, which is pretty good going. For instance Cevian's hedge fund benchmark has earned 3.4 per cent and the MSCI Europe stock index is down 2.7 per cent.
The demerger kite flown over Cookson in recent days and the fact that Cevian is far and away its largest shareholder have put a cast some limelight on Cevian. But it is fully three years since it set up shop here, initially via the purchase of a 5 per cent interest in Old Mutual. This has also been a winner, although it has only looked seriously clever in the last few months following the disposal of Skandia, Old Mutual's Swedish life insurance operation. Ironically (at least), one of Cevian's first coups when it was creating its reputation in Sweden was to line up Skandia for takeover by Old Mutual, back in 2005. Cevian's other big UK investment is Wolseley, the global trade retailer of plumbers' and builders' wares. Cevian has probably doubled its money here since the stake was first notified in 2010. Cevian has similar investments in Germany and Scandinavia.
Cevian is a strange beast. Those long holding periods put it in the private equity class, but unlike private equity, it only takes minority positions, and only in listed companies. It sees itself as an activist investor, but it doesn't seem to go in for public rows – at least not recently. Cevian ruffled Swedish feathers in its early days – the Swedish prime minister of the day was not impressed when it got on Volvo's back. But Volvo eventually did what it was told. Later Cevian upended the board of telecoms investor TeliaSonera and again attracted adverse comment in Sweden. But now it walks on water, no one is going to gainsay it.
Which is an interesting state of affairs, given Cevian's views on boards of directors. These seem to have been co-authored by Lord Myners, the distinguished investor, company director, minister in the Labour government and inventor of the phrase, "ownerless corporations". Myners joined Cevian's UK operation a year ago, taking the title UK Chairman. But although that imaginary boardroom quoted above might seem to spring straight from the mind of Lord Myners, in fact it goes back under Cevian's ownership to at least 2010.
That was when the organisation then known as Tomorrow's Company and now known as Force For Good put out a 40 page report sponsored by Cevian with a decidedly uncatchy title: "Bridging the UK engagement gap through Swedish-style nomination committees". I have to confess this passed me by at the time but I found it a jolly interesting read when I discovered a reference to it in Cevian's Kay submission.
In summary, 15 years ago, after a beating-up by shareholders, the boards of Swedish companies gave up their rights to nominate new directors to shareholder committees. And the system has worked happily ever since. Well, more or less.
I have no idea whether Cevian will be able to maintain its investment record. But if this concept it has planted in UK governance circles takes root, we should all be grateful.