Sir Martin Sorrell says he has a conflict of interests when it comes to criticising activist investors.
This, he says, is because it’s in his interests that companies grow and expand, which doesn’t happen when activists get involved.
The truth is, Sorrell is right that he’s conflicted, but he gives the wrong reason. He’s conflicted because, as a big-league chief executive on massive pay, he may one day attract the attention of the activists himself.
He’s safe now because his pay is justified by performance. But if those two elements become detached, they could come sniffing. And rightly so.
Shareholder activism is not always the slash ’em and strip ’em kind he cites in the case of Heinz-Kraft. In many cases, activists breathe a fresh approach and force change that boosts returns for our pension funds.
Take Elliott’s assault on Alliance Trust: even if the activists lose next week’s vote, the board has been sent a clear signal that it must do better on pay, governance and performance.
In fact, activists are far less active in the UK than the US, which is a testament to how, with a few exceptions, British boards listen more closely to their investors than their more arrogant American counterparts.
Less entertaining, sure, but better for shareholders.
