Problem getting the message over

By ANTHONY HILTON FOR MAILONLINE
Updated:

 

BOOTS chairman Sir Nigel Rudd, wearing a CBI hat, and Barclays Global Investors boss Lindsay Tomlinson, representing the Investment Management Association, jointly chair a dinner at the RAC Club in Pall Mall tonight. Its purpose is to bring together leading industrialists and institutional investors to see if they can work out why relations between the two sides have turned a bit sour in the past year or so and what can be done to improve things.

The CBI's Digby Jones and the IMA's Dick Saunders noticed nine months ago that there was a new scratchiness in communications between their memberships and thought such a meeting might help clear the air. The dinner is the result. There is no formal agenda and nothing official to be agreed or disagreed upon, although there may be a desire for further work arising from it.

In addition, two surveys published today highlight the different pressures both sides are under. First, the IMA reviewed what its members have been doing in terms of shareholder activism - one of the things that can needle companies. It found that, compared with three years ago, far more fund managers have policies on activism, are far more are likely to use their votes and not necessarily to support the incumbent management, and there is more behind-the-scenes dialogue with the companies in which they invest.

Significantly, this survey was not produced with an eye on tonight's dinner. Rather its purpose is to highlight progress at a meeting at No 11 Downing Street tomorrow when the fund management industry will explain to Treasury ministers and officials how much it has done to meet the recommendations of the Myners Report of three years ago.

The Treasury, to judge from a speech delivered by one of its officials at the National Association of Pension Funds' meeting two weeks ago, will thank them for what they have done and then ask for more. It is a timely reminder that fund managers are under much more political pressure than ever before, and have a considerable weight of expectation upon them.

The other survey, with fieldwork by Mori and PricewaterhouseCoopers and published by investor relations consultancy Blue Rubicon, was deliberately timed for today and has relevance for tonight's meeting. It highlights the gap in perceptions between companies and institutions.

Most companies think they are doing a good job communicating. Most institutions think the opposite. Clearly, each has a different perception of what communication is, what it is supposed to achieve and what both sides expect to get out of it.

The key message is that if companies focus on set-piece presentations built around the financial reporting timetable, it will not be enough to deliver that extra layer of excitement, understanding and trust that translates into a premium on the share price. Institutions broadly expect companies to get the numbers right and are looking for something more.

As a result, astonishingly, they think the most important feature of a chief executive, way beyond his track record, his integrity, his vision and his leadership abilities, is his communication skills. I doubt any nomination committee recruiting a chief executive has things that way round.

Interestingly, the survey finds that all the corporate governance gets in the way. It is another example of Hilton's Rule that 'regulation makes things worse' because in this case the rules and codes inhibit what executives feel they can say and push them into a uniformly dull format for the way it should be said.

The spark, the verve, the departure from the norm that creates excitement, trust and a degree of loyalty are missing from such communication. But without such flair, genuine bonds of interest and mutual appreciation between institutions and executives are hard to forge, and the misunderstandings and antagonism are likely to continue.

WPP's gamble

SIR Martin Sorrell and his WPP have come under fire over the terms of a new executive incentive plan which will, if everything turns out as favourably as possible, net many millions for him and his senior executive team.

There is, however, one aspect of this proposal, and indeed the current plan that is shortly to expire, which sets them apart from the mainstream of executive incentive plans. It is a key feature of the WPP scheme that the executives who wish to participate have to put their own money on the line.

If things work out, they will get a multiple of it back. But if they fail to perform, their own money will be lost. They are, therefore, personally at risk if things go wrong, something the fund managers criticising them are not.

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