City & Business: Nice house but a pity the doors are closed

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JUST when you thought every quoted company in the land understood the importance of being squeaky clean about fully disclosing directors' remuneration, along comes another example of stunning corporate naivety. As we report on page 1, Portals, which makes paper for banknotes and teabags, owns the magnificent eighteenth-century pile Laverstoke House, in Hampshire, and lets it to its own chairman, Julian Sheffield, whose family once owned it.

This is not disclosed in the report and accounts. Investors who have joined the shareholders' register since 1990, when the contractual relationship was mentioned at an extraordinary general meeting, would have no way of knowing about it. Laverstoke is not some modest pied-a-terre, but one of the finest houses in southern England with rights to some of the best trout fishing. It's hard to believe the market rent could be less than pounds 100,000 a year.

Portals is not obliged to disclose the arrangement under the Companies Act, so long as fellow directors have approved it. And the company might even argue that it is not technically breaching the Cadbury guidelines on corporate governance. But it is certainly blowing a monster raspberry at the notion of openness to shareholders. Mr Sheffield, who is deputy chairman of Guardian Royal Exchange, one of Britain's biggest institutional shareholders, should know better.

Ordinary taxpayers have an interest too: the Bank of England was a significant shareholder in Portals for most of the 1980s, when Mr Sheffield's curious living arrangements began.

Portals would be wise to disclose at once the full basis of the rental arrangements past and present. If Mr Sheffield is paying a fair market rent, and there is no evidence to suggest he is not, then how was it arrived at? Who among the independent Portals directors agreed the arrangement? Precisely what perks does Mr Sheffield get as 'caretaker' of Laverstoke? What about the fishing? Mr Sheffield forfeited the normal rights to privacy in such arrangements the moment he chose his own quoted company as his landlord.

Meanwhile De La Rue, whose supporters leaked the story, continues its supposedly 'friendly' talks with Portals. It must be wondering what kind of company it is wooing. It certainly has some first-class ammunition, should it choose to suspend discussions and launch a hostile bid.

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