JD Wetherspoon Plc (LSE:JDW) has taken a pop at Fidelity, one of its shareholders, having had its nose put out of joint by the fund manager.
The pubs group is at odds with the US investment group over the issue of non-executive directors (NEDs) on the Wetherspoon board who have served for longer than nine years; the UK corporate governance code recommends that two three-year terms should be the norm for NEDs with a third term acceptable only in exceptional circumstances – a fourth term, to misquote Monty Python and the Holy Grail, is right out.
The code stipulates that serving more than nine years as a NED raises the assumption of a lack of independence, which has to be rebutted each year by the Wetherspoon board in the annual report.
Spoons says it has provided the necessary rebuttals and then engages in a spot of “what aboutism” by accusing one major Fidelity company, Fidelity Investments (a Wetherspoon shareholder) of appearing not to adhere to the nine-year rule itself.
“Inexplicably, whereas Fidelity International voted against two Wetherspoon NEDs, Fidelity Investments, without notice, voted against chairman Tim Martin and the company's three executive directors – yet, with no apparent logic, they voted in favour of all NEDs, including the two NEDs opposed by Fidelity International,” the company’s stock market statement said.
Tim Martin, who in between sessions on his soapbox is the chairman of Spoons, said the company recognises that sensible corporate governance is necessary and beneficial.
"However, an inflexible interpretation of the nine-year rule, and other rules, can result in perverse outcomes and has generally resulted in inexperienced and vulnerable boards of directors in the UK – with, for example, almost no NEDs on boards today who have had experience of the last recession (2008-10) at their current company,” Martin said.
"Wetherspoon has explained its position and has had a generally favourable response from institutional shareholders to its approach.
"A strange fact is that corporate governance has almost never been raised as an issue in the thousands of shareholder meetings I and the management team have had since our flotation.
"These sorts of issues, for many PLCs [publicly listed companies], seem to stem from the way in which the corporate governance personnel, who work for major institutions, cast their votes for annual general meetings,” Martin speculated.
"We believe it's important for the future of our business, and for the UK economy, for the comply or explain aspect of the Code to be more closely adhered to, in practice, by institutional investors – and for investors to practice what they preach,” Martin concluded.