In this issue, focused as it is on how London’s most important businesses allocate their cash, consider the latest goings-on at capital markets business Nex Group (NXG). The digital execution bit of the company formerly known as ICAP, managed by chief executive and major shareholder Michael Spencer, put some other shareholders’ noses out of joint when it made donations of £5,000 each to five Conservative parliamentary candidates in the general election running against Liberal Democrat opponents who had supported last year's ‘remain’ campaign.
The board had decided to donate the money because it “felt it extremely important that the government had a clear mandate for the country to negotiate the best possible deal for the UK, following the decision to leave the European Union, in order to ensure that the position of London as the financial centre of Europe is maintained”. So it told its owners ahead of this week’s annual general meeting.
There’s little doubt that Brexit poses problems for Nex Group. As a facilitator of over-the-counter derivatives trades - the oil in the modern financial market engine - it needs the doors between the City of London and the EU to remain open. It’s a little ironic that it tried to influence the electoral defeat of the only party angling for a second referendum, but that’s political calculation for you.
Mr Spencer was the treasurer of the Conservative Party between 2006 and 2010, when David Cameron was in Number 10, though the company told the papers that the initiative came from chairman Charles Gregson. And when some shareholders and governance groups protested, it was Mr Gregson who offered to personally pay back the £25,000 of shareholder cash. The company reportedly has no intention to repeat the exercise.
There are signs that boards are getting shorter shrift from their owners about supplying company cash to meet political ends. A group of shareholders in Alphabet (US:GOOGL), the parent company of internet giant Google, have put it under pressure to provide more details on its lobbying activities.
In their supporting statement, the proponents put a question market over Alphabet’s contribution to the US Chamber of Commerce. The shareholders compared the company’s environmental stance with that taken by the business lobby with regards to reducing carbon emissions. A separate proposal called for more disclosure of political contributions, including those via trade associations and other third parties.
In response, Alphabet said it was committed to transparency across its business, highlighting the disclosure it already makes and its public policy positions, which maintains that spending decisions “are based exclusively on what’s best for Google and an open internet”.
In the event, both proposals were defeated by a hefty margin: the lobbying report proposal gained more votes of the two at 85m, but with 560m votes against. But the issue may not be going away. Last year, 63 of the biggest listed US companies had shareholder resolutions calling for more disclosure in this area, as reported by the Financial Times.
Shareholder lobby groups vying for greater disclosure on company lobbying might seem a bit of a tangled issue, but it’s understandable that owners ask for justification of the political conclusions reached by their company’s board. A fascinating example is JD Wetherspoon (JDW) owner Tim Martin, the media’s go-to Brexiteer, who went on a 100-pub tour last year to build support for the ‘leave’ campaign, aside from printing beermats and spending early mornings on the radio.
There is a (controversial) argument that this ran exactly counter to the interests of the company, reliant as it is on suppliers and labour from the EU. Mr Martin himself, in the company’s November trading statement, said that the failure to agree a tariff-free trade deal would put an “unfair burden” on its trade - though the pain he spoke of was for European suppliers rather than Wetherspoon’s margins.
The pub chain boss can get away with it: firstly, because he is entertaining, and secondly, because of the value he has created for shareholders under his tenure. He maintains the faith of all but a fraction. But Nex's experience might provide a better reflection of the changing times.
Ian Smith is companies editor at the Investors Chronicle
