Boardroom policeman treads on toes

Pirc's attack on Shell is raising hackles in the City. Terry Macalister reports
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The Independent Online
For a change, it won't be just directors who find themselves pitched against Pirc, the self-proclaimed policeman of corporate governance, at Shell's annual general meeting on 14 May. The Association of British Insurers and its members have decided to come out in support of Royal Dutch/Shell in its fight against shareholders protesting about the company's human rights record and environmental practices.

Pirc has backed a special resolution calling on the board to clean up their act. But after listening to the arguments, the AIB has decided to give public backing to the board. Many in the boardroom and in the City will be privately hoping that the AIB's stance marks a turning of the tide against politically correct shareholder activism.

"Some of what Pirc does is perfectly reasonable," said one pension fund manager. "But here they are turning from corporate governance to environmental issues and we can't go along with that."

Undaunted, Pension Investment Research Consultants (Pirc), is planning to step up its activities in a move which will create a ripple of concern in boardrooms around the country. At present it restricts itself to the country's top 350 companies but Alan MacDougall, founder and joint managing director, says he aims eventually to cover the entire stock market for its list of 53 clients.

The organisation, which has widened its attacks from executive pay to take on Shell's human rights record in Nigeria, has grown enormously since it was established by Mr MacDougall and Anne Simpson just over 10 years ago. From a desk and a telephone in Brixton, it has become a private business with offices on the fringes of the City, a staff of 22, and a turnover close to pounds 1m.

It is accused by critics of being an unrepresentative and secretive body, but Mr MacDougall insists Pirc is completely above board and transparent. He points out that it always sends details of its reports to affected companies so that they check their accuracy and comment on them ahead of publication.

"We are not a shadowy or secretive organisation. We have 40 pension funds and eight fund managers as clients, many from the private sector," he said.

But Pirc's sometime abrasive tactics coupled with Mr MacDougall's background with the National Union of Mineworkers and Hackney Council, fuel fears in some quarters that Pirc is politically motivated.

"Rubbish," said Mr MacDougall, pointing out that all his working life has been spent in pension or investment fund management. Ms Simpson's past as an Oxfam worker also puts her out of the frame as a political activist, except among the more paranoid boardrooms.

Although Pirc's profile has been raised by punch-ups with Shell over Nigeria, its staple diet is still pushing companies to abide by the Cadbury and Greenbury corporate governance codes.

It offers individual reports on all 350 FTSE companies, providing clients with details on all forthcoming agm resolutions analysed with reference to best business practice.

Regular updates on corporate governance are provided through a research service and a monthly briefing bulletin, Pirc Intelligence. In this field, it is competing against research material put out by organisations such as the National Association of Pension Funds in the UK.

Its research has been coupled with a Greenpeace-like flair for public relations. It has nothing in its locker to match Greenpeace's direct action, but critical shareholder questioning at annual meetings often start at Pirc's door. Its penchant for attacking high-profile corporations make it a useful story source for newspapers. And it has good in-house media advice available from its non-executive chairman, John Plender, who is a leader writer on the Financial Times.

The group, which mainly represents local authority and trade union pension funds, does not attend company agms itself. But it trawls through shareholder documentation to provide active shareholders with verbal ammunition.

Pirc and its high profile tactics can raise strong emotions from those with whom it has tangled, but few executives are willing to talk publicly. "You will not get us to comment about them on the record because Pirc has teeth. There might be no Brent Spar with Pirc, but it is certainly a war of attrition," says one of Britain's largest corporations.

Private views on Pirc are mixed. Some regard it as politically motivated and a self-serving irritant, while others believe it genuinely plays a vital role on corporate governance. The Institute of Directors, not usually coy about commenting on difficult issues, would only say: "Pirc is not really influential like Hermes or one of those funds," while the Confederation of British Industry said flatly: "It fulfils a role."