Alliance Trust chief on track to deliver and standing firm for Elliott showdown
WITH politicians travelling the length and breadth of the country in a frantic effort to secure voters’ support, a different but no less hard-fought election will come to a head in Dundee on Wednesday.
“We’ve not been brilliant all the time, but our aim is not to be in the top quartile”
Shareholders will gather at the city’s Gardyne Theatre for the annual meeting of Alliance Trust, where they will decide whether to elect three new non-executive directors onto the board of the Tayside institution.
Director appointments tend to be a formality, but in this case the trio have been nominated by Elliott Advisors, a US hedge fund that has sparked a long-running war of words in its attempt to shake up the Alliance boardroom.
The situation is a “challenge”, admits Alliance chairman Karin Forseke, who has urged the trust’s army of small shareholders to reject Elliott’s proposal and put their faith in the current band of directors at the 126-year-old firm. Swedish-born Forseke, a former deputy chairman of the Financial Services Authority (FSA), says: “Several people have told me not to worry about this, that it’s going to go fine, and while we believe we have a lot of support, one of the most important issues for us is that people do come out and vote.”
Alliance has secured the backing of another venerable Dundee firm, Beano publisher DC Thomson, which owns about 5.5 per cent of the wealth manager and has said it will vote against Elliott’s nominees. Others that have rallied behind its cause include Unilever chief executive Paul Polman and BAE Systems chairman Sir Roger Carr, who has praised Alliance boss Katherine Garrett-Cox for her “huge dedication to her role”.
And in a remarkable twist last week, it emerged that First Minister Nicola Sturgeon had found time amidst the Westminster election campaign to write to Garrett-Cox offering her assistance and voicing concerns about activist investors seeking to drive change for short-term market gains.
Elliott, which controls 12.2 per cent of Alliance and describes itself as a long-term shareholder in the trust, wants to see its nominated directors – Anthony Brooke, Peter Chambers and Rory Macnamara – installed on the board in an effort to provide “fresh perspectives”.
The hedge fund insists that this is the only formal proposal it has made, but Forseke says it has also been pressing the firm to buy back a hefty proportion of its shares. She adds: “They made it very clear to me in my first meeting with them that they would like a 40 per cent tender on the table at a very narrow discount. It’s the firm view of the board that this is not in the interest of all our shareholders, which is why we have resisted complying.”
Forseke also stresses that Alliance has no view on the individuals that Elliott has put up for election, although the wealth manager has claimed that they “cannot be considered to be independent”, prompting a scathing response from the activist investor, which said the trust had failed to engage with it on “matter of substance” and resorted to “personal attacks in a manner unbecoming of directors of a public company”.
Influential shareholder advisory groups Pirc and ISS have recommended that investors vote in favour of the trio, while at the same time highlighting concerns over the trust’s performance and executive pay. Garrett-Cox has seen her total remuneration double to more than £1.3 million in the past five years, a period that has seen the trust’s total shareholder returns slightly underperform the Morningstar Global Sector Index.
Forseke says: “We’ve not been brilliant all the time, but our aim is not to be in the top quartile. Our aim is to be in the upper end of the second, because if we set the mandate to be in the top quartile we would have to increase risk. There are always going to be others that do better than us, but we’re going to do better than the majority.”
She also rejects the claim that the trust is overly-generous when it comes to executive remuneration and says it is looking at “upping the bar” in terms of aligning pay and performance.
While resisting Elliott’s attempts to swell its seven-strong board to ten people, Alliance said earlier this month that it has accelerated its process of finding a “new, truly independent” director with the help of headhunter Russell Reynolds. Forseke – who insists she takes corporate governance “extremely seriously” given her background at the FSA, since replaced by the Financial Conduct Authority – says the board is yet to decide which attributes its new director should bring to the table. “We haven’t done that work yet. After the AGM we’ll put our minds to that.”
Despite the boardroom wrangling and complaints over pay and performance, Forseke believes the majority of Alliance’s shareholders only really care about the share price and dividend, “end of story”.
But she is unwilling to predict which way the vote will go on Wednesday.
“I don’t want to speculate because we’re not there yet. Shareholders are the ones that decide. We’re all very professional so we’ll work with whatever the shareholders want us to do. I certainly hope they have trust in us and our strategy. We have set ourselves some very tough targets and we’re on track to deliver.”
Job: Chairwoman, Alliance Trust
Born: 1955, Sweden
Lives: Forseke divides her time between Stockholm and London
Education: Studied economics, sociology and marketing at the University of California, Los Angeles
Previous roles: Deputy chairwoman, Financial Services Authority; chief executive, D Carnegie & Co; non-executive director, Royal Opera in Stockholm
Hobbies: Trips to the opera while in London, but in Sweden the focus is on gardening
Favourite thing: Her horse called Luchador – Forseke took up dressage as an “antidote” to the financial world
Claim to fame: In 2005 she was ranked among the 100 most influential people in European capital markets