Comment: Scots giants quizzed on pay and the future

Terry Murden. Picture: TSPL
Terry Murden. Picture: TSPL
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THE annual gathering of shareholders for two of Scotland’s biggest companies yesterday gave us a snapshot of how they are dealing with past difficulties – and there are some positives to report.

Standard Life has invested heavily in transforming a business that came close almost a decade ago to going under. Its performance over the past year is undoubtedly encouraging, with assets under management, revenue, operating profit and dividends heading upwards.

But some in yesterday’s audience at the Edinburgh International Conference Centre were clearly unimpressed by a company now appearing to be working for the interests of shareholders and its own bosses rather than policyholders, many of whom are 
suffering poor returns.

Chairman Gerry Grimstone said it was a result of market conditions. The wider picture was of a company rewarding those who had grown the business substantially over the past three years.

Even so, there was anger that, while policyholders suffer, the managers help themselves to big pay and bonus packages. The top three directors 
received £10 million between them last year.

Executive pay is a recurring theme for shareholders and also featured at the Royal Bank of Scotland’s AGM at Gogarburn, where chairman Sir Philip Hampton expressed similar sentiments to his Standard Life counterpart. The bank may have made a whopping great loss but it still had to pay top dollar for its leaders if it was to recover and become competitive.

RBS is keen to move the agenda on to issues it regards as more important: its return to profit and to the private sector being the most pressing. There are likely to be more job losses, though they are not expected to be on anything like the scale of previous cuts. There will also be branch closures, as head of retail Ross McEwan told me last month. But again, that will be to ensure branches are in the right places, and there are likely to be some new ones, or new ways of handling transactions in public places. The bank, like Standard Life before it, is on the mend, but it will change in the process.

Foreign ownership is a bit of a one-way street

THE potential £5 billion-plus takeover of Severn Trent water company by a foreign consortium suggests we have become blasé about overseas control of our infrastructure, writes Martin Flanagan.

Severn Trent, one of Britain’s biggest UK water businesses, has caught the collective eye of Borealis, the 
Canadian investment group, the fabulously wealthy Kuwait Investment Office and the Universities Superannuation Scheme. But if a deal happens it would be just the latest of a long list of what have been called the UK’s “economic arteries” transferring to foreign owners.

Northumbrian Water, Thames Water and Yorkshire Water have all gone the same way, as have Associated British Ports, P&O Ports and ScottishPower.

This is not to adopt a Little Britain mentality. The Brits have no monopoly on running businesses well, and foreign owners can improve the performance of big British groups (Pernod’s acquisition of Allied Domecq in the drinks industry, for instance).

But it is notable that, although British companies have a decent footprint abroad, it is virtually inconceivable to imagine us owning such swathes of vital infrastructure in the likes of France, Germany, Italy, Russia or Spain.