Private Investor: Small punters don't have to fund executive playpens

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The Independent Online

Sorry, but my patience is exhausted, and that's saying something. I bought Vodafone in the good times at over 200p, and more in the troughs of the slump in shares a few years ago for as low as 80p, so I did see it as a long-term core holding. I still retain some, but I've now jettisoned about 50 per cent of the holding.

Why have I done this? A few reasons. First, we small private investors do have to take make the most of the few advantages we have. Thus, the really big investment funds and pension funds will feel that they "must" hold Vodafone simply because it is so big, and the tracker funds have to do so because it is such a large component of the FTSE 100 index. Those of us who can do as we wish, however, can just ignore it, or be extremely underweight in the shares.

In other words, we small punters can sell out long before the institutions are forced to by poor performance, because we don't harbour any great ambition to mimic the stock market as a whole.

Interestingly, the converse was true in that great sell-off of shares a few years ago. Back then, the slump in share prices became so serious that the authorities followed pensions funds and the institutions to off-load great wodges of blue chips at whatever the market would offer, for regulatory, prudent reasons.

No matter that they were making the slump in share prices worse, the various ratios of liquidity had to be protected and that was that. That episode of distressed institutional shareholding was a great opportunity to buy into stuff such as Shell on the cheap, so I did.

The real danger signal with Vodafone, though, is the way the board seem to have decided to turn this great company into a playpen. The machinations would not be so bad either, if they didn't involve such a disgraceful waste of shareholders' money.

There are big egos here, expensive to maintain - notably in the forms of Sir Chris Gent, the honorary president of Vodafone and the man who did so much to build it up, and the present chief executive Arun Sarin. Then there's the marketing chief who will soon be departing with a £1.5m pay-off and the present chairman, said to be looking for half a million pounds to float into retirement on.

Well, they're not going to be throwing my money round the boardroom as if it were custard pies any more. I've rung the changes and intend to buy into something where the executives are also extremely well rewarded, but concentrate on their business rather than fighting each other - harder than it sounds, actually.

By the way, one piece of unexpected good news this week was the prospect of a windfall from the Lambeth Building Society. I opened an account there some years ago and I was mildly interested to see that it was to be bought by the Portman Building Society.

Normally when this sort of mutual-on-mutual activity happens you just get a small payout of 5 per cent of your saving balance, say, but this time it's yielding £400-plus for members. This is almost as great as the demutualisations of the 1990s, but without any shares actually being issued or change in corporate status. Where's the money coming from? The reserves? The building society carpetbaggers, who we thought we'd seen the last of, may have their day after all.

s.o'grady@independent.co.uk

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