Wetherspoons boss Tim Martin hits out at corporate governance rules
The boss of the pub group said advisers are wrong to suggest he should have more non-executives and said advisory firms were too inexperienced.
Wetherspoons boss Tim Martin has launched a scathing attack on corporate governance rules and advisers which he said are causing companies to collapse.
The ardent pro-Brexit businessman also said he believed a no-deal Brexit would be preferable to the current deal secured by Prime Minister Boris Johnson.
In a long update to the stock market, Mr Martin then hit out at one of the company’s biggest shareholders for voting against two board members at the pub chain’s annual general meeting last year.
On trading, Wetherspoons revealed sales were up 5.3% in the 13 weeks to October 27 on a like-for-like basis, with one pub opened and four shut. The company aims to open between 10 and 15 pubs in the current financial year.
There can be little doubt that the current system has directly led to the failure or chronic underperformance of many businesses, including banks, supermarkets and pubs Tim Martin, Wetherspoons
Bosses have also spent £43.3 million on buying freeholds of pubs where Wetherspoons was previously a tenant, and a further £6.4 million went on the company buying its own shares in an attempt to boost the price.
But Mr Martin used the update to express his anger at new rules that say non-executives should only serve on boards for a maximum of nine years.
Non-executives are supposed to be impartial and regulators believe there is a risk to their independence if they stay longer.
He said: “There can be little doubt that the current system has directly led to the failure or chronic underperformance of many businesses, including banks, supermarkets and pubs.
“I believe by vesting so much power in non-executive directors (NEDs), the system is also disenfranchising executives and the workforce – the people who have real expertise and are the cornerstone of business success.
“Another tectonic fault is that the institutions and advisers which oversee the code, as described below, do not themselves adhere to the rules they impose on others.”
He went on to attack companies that do not have employee representatives and more management on boards – Wetherspoons has a board of five executives and three non-executives – and complained that non-executives do not have enough experience.
“It is also common practice for there to be only two executive directors, the most senior of whom, the CEO, averages only about five years – managements and workers are thus absurdly under-represented.
“A cursory glance at the board compositions of major UK PLCs underlines the issues.
“Tesco, for example, which has 450,000 employees and is the UK’s largest supermarket group, has only two executive directors, with total service of about nine years, and 11 NEDs with total service of 38 years. The overall average, including NEDs and executives, is only 3.7 years.
“This sort of corporate structure is mirrored in banks, retailers and pubs – where long-term performance, over recent decades, has usually veered between poor and catastrophic.”
HSBC, RBS, Barclays and Lloyds were also singled out for having no non-executives with any personal experience of the financial crash in 2008.
Attacks were also made on Wetherspoons’ largest institutional investor, Columbia Threadneedle, over its decision to not support the re-election of two non-executives at last year’s annual general meeting.
“As a result, three of our four NEDs felt compelled to offer their resignations – inevitably destabilising the company in the process,” he added.
But Mr Martin’s strongest criticism was against corporate governance advisory group Pirc, which recommends to institutional investors how best to vote at annual general meetings.
Pirc has recommended investors vote against Wetherspoons’ pay report over the company’s £95,000 spend on Brexit-related beer mats, suggesting the company may have breached political spending rules.
Mr Martin said: “Amazingly, while advising Wetherspoon that it should have four or five ‘independent’ NEDS, the hypocritical Pirc has, itself, just one on its own board – someone whose only apparent employment experience has been at a local authority.”
He also launched a personal attack on Pirc’s boss, Alan MacDougall.
The Wetherspoons founder said: “MacDougall has questionable personable judgment, referring to himself on his Twitter account as a ‘governance expert’ and an ‘ex-Eurocommunist’.
“In my opinion, many people equate communism with fascism, since millions of Europeans perished or were imprisoned under its yoke.”
Pirc’s rating on employee website Glassdoor was also highlighted as being particularly low, and that the boss “appears to rely on inexperienced and temporary workers to analyse complex company reports for corporate governance purposes”.
On Brexit, Mr Martin said: “I strongly believe that the UK economy will be better off on the basis of no deal rather than the deal proposed by the Government.”