Electra Private Equity have fought off an attack from Sherborne Investors Management. The latter wanted a change of directors and for the company to conduct a strategic review, but resolutions to remove three directors were defeated with over 61% of the votes cast against them.
The interesting aspect of this event was that over 81% of the votes in issue were actually voted. There was considerable debate last week at the meeting ShareSoc held on shareholder rights about the difficulty of getting investors to vote. This surely shows that when votes are critical and the company concerned puts in effort to get the vote out then a high percentage is achievable but it may have cost the company several million pounds to achieve this.
It is of course now a regular feature to get over 60% of the shares voted at General Meetings and this has improved in recent years because of the encouragement to institutional investors to vote. However, the turn-out of private investors is known to be much lower, particular if they are holding shares via nominee accounts. It is their voting level that really needs to be improved.
Note that ShareSoc took no position on this particular battle, although both PIRC and ISS supported the existing board in their voting recommendations. The issue did not seem particularly clear cut to this writer. But another interesting aspect of these events is that the board have now announced a review that will cover the fee arrangements with the manager, the capital structure and the distribution policies of the company. It is surprising how often that a vote that arises from shareholder activism and which is defeated causes a company to promptly reconsider some matters. This happened at Alliance Trust also for example. So the moral is: if you fight an activist campaign it may not be necessary to win the vote outright because you may achieve much of what you want anyway. You just have to maintain the pressure long enough until the directors see more merit in your arguments.
Roger Lawson
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