Some caricatures on a chess board

Activists wary of the blame game

‘I’d like to but my hands are tied’ is a tiresomely frequent excuse heard to defend inaction or poor performance. It is as if rules and regulations designed to promote fairness now justify obfuscation. There is evidence to suggest those who claim of impotence do so more as a cover for incompetence. Let’s look at two examples from the last week: The WPP chairman Roberto Quarta, and the English rugby team manager Eddie Jones.

The global advertiser WPP recently said good-bye to its long serving CEO Martin Sorrell in mysterious circumstances, which many shareholder feel deserve some explanation. The chairman has used the ‘my-hands-are-tied’ excuse in response to shareholder demands by claiming he is restricted by the Data Protection Act. This of course may be technically true but does his reticence really protect long term shareholder value in the company or does it signify that it is also time for a new chair? Some proxy voting agencies think the latter.

Not all corporate governance experts agree, some believe that revelations of precisely why Martin Sorrell abruptly left the company he founded  should not be made public so as to preserve shareholder value, while others see that the board earlier failed to respond to a charismatic and controlling CEO who had begun to look like a liability with his remuneration package and faltering business model. Sorrell has been allowed to ‘go quietly’ with what some activists regard as hush money by an acquiescent Chairman. Could things have been handled better, earlier? Data protection is a convenient excuse to silence shareholder dissent, at least until the AGM on 13 June.

The ‘my-hands-are-tied’ excuse cropped up again after England’s rugby team were beaten at Twickenham by the Barbarians on Sunday afternoon in what was supposed to be a showpiece for English rugby.  This was an England team embarking on a three test series against the South African Springboks in June, yet one that was beaten by a scratch team with only 4 days practice. To add insult to injury an England team reject, Chris Ashton, playing as a Barbarians scored  a hat-trick of tries against England in the 63-45 point game.

Inevitably the England team manager squirmed when this was pointed out,  and claimed he was prevented from selecting  any player who did not play for an English club: those who play in France know they are ineligible for consideration as an England player.  This is of course technically true under the revised selection rules but, like the Data Protection rule above, it is an excuse for poor decision making earlier. A rugby commentator made the point that the reason Ashton played in France is because he had been rejected as an England player, this was the cause not the effect.

In both the above examples a poor decision, or more generously,  a sub-optimal one has set the scene for a disappointment among a key audience, it doesn’t matter whether it is shareholders or supporters, each have expectations and, in modern parlance, are stakeholders with a valid voice. To engage the excuse of ‘I’d like to but my hands are tied’  might be legally or technically correct but it is a lame excuse for previous errors of judgement or foresight.  We can’t all be right, certainly not all of the time, but passing the blame on to a convenient piece of regulation is really rather poor, and not what good leadership is about.

Shareholder activism is beginning to worry boardrooms up and down the country. Investors tend to let a leadership team  focus on building a profitable business  to deliver the dividend, they don’t traditionally take much interest in how this is achieved, but times are changing. Some are beginning to ask awkward questions about how effective a management team really is and whether it is really looking at the future sustainability of the business and future demand.  It should not require a government select committee to expose complacency and incompetence,  as with the Carillion collapse, but there are plenty of new investors wary of excuses for under performance and only too keen to vote for change. If Pirc and Glass Lewis want change at the top of WPP, what next?