COMMENT : The balance of power has shifted at Emap

'Yesterday's annual meeting has created the impression, unfairly or otherwise, that the chairman Sir John Hoskyns and his fellow directors were out to weaken shareholder interests'

The Emap board (or rather most of it) may have won the vote but it is less obvious that it has won the argument. Moreover, yesterday's annual meeting which saw director pitted against director on corporate governance issues, has created the impression, unfairly or otherwise, that the chairman Sir John Hoskyns and his fellow directors were out to weaken shareholder interests under the guise of an innocent housekeeping exercise.

Even the vote itself was not that overwhelming. In order to change its articles of association allowing the board to reduce the number of non- executive directors and remove a director on a 75 per cent vote, Emap needed the support of three-quarters of those who turned up to vote. In the event it got 82 per cent but that still only represented a third of all those shareholders registered to vote.

Looking at the resolutions it is easy to see why two of the non-executives, Joe Cooke and Professor Ken Simmonds, felt unable to support the rest of the board. Emap could, in theory, reduce its board, which presently consists of six execs and seven non-execs, down to just three or have only one non-executive on the board.

Emap insists that nobody is about to be sacked and that the purpose of the changes was emphatically not designed to weaken the position of the non-execs and, by extension, shareholders. Merely a tidying up exercise old boy to bring us into line with a host of other Footsie companies.

But there is no doubt that the balance of power has shifted. Hitherto, Emap could only remove an executive director if he was in breach of his employee contract, while a non-exec could only be turfed out through an ordinary resolution put to an annual shareholders' meeting.

Sir John argued yesterday that the balance has shifted for the good since the ability to throw out a fellow director on a 75 per cent vote makes it harder for a single director or a small number to dominate the rest of the board or conspire against shareholder interests.

Emap also insists that it has no intention of using the 75 per cent rule to get rid of independent non-execs and stuff the board with time-servers. This may well be the case. But the board must now be judged by its behaviour, which, following yesterday's events, has been given considerably wider scope.

Bungee-jump could be the start of a slide

The excitement on Wall Street earlier this week was good news for the headline writers. If the Dow's wild gyrations on Tuesday are remembered for nothing else they did at least add a new phrase to the lexicon of the dealing rooms, the bungee-jump crash, to describe the speed with which frenzied buying took over from frenzied selling in possibly the most volatile day yet on a stock market.

Not surprisingly attention focused on whether the market's rollercoaster ride was the prelude to a crash on the scale of 1987 or even 1929. The reality is probably more prosaic - while a major crash over the pond would see the supposedly decoupled Anglo-Saxon markets recoupling with indecent haste, what London is more likely to be embarking on is a sizeable correction of the kind that in a quiet way knocked 20 per cent off the value of the All Share in the first half of 1994.

It was an unremarkable slide, but the fall in the All Share from 1764 to 1445 between February and June 1994 dealt a heavy blow to fully invested investors in what should have been a year of recovery. Many of the features of that market look horribly familiar today.

Most noticeable is the sudden way in which the new issues market has fallen out of bed in the past couple of weeks. No one will readily admit to pulling a float because of market conditions, but there are more than a handful of expected issues that have just not appeared. For those that are taking the plunge, the waters are proving chillier than their advisers might have hoped.

Allied Carpets priced itself at the bottom end of expectations yesterday while a brace of AIM hopefuls have found that shares can indeed go down as well as up. Headhunter Hat Pin and drugs minnow Alizyme both sagged in first dealings, with the latter losing more than 10 per cent yesterday, on a par with the disastrous British Energy flotation.

Alizyme is just the sort of company you would expect to do badly in jittery markets. Founded only last year, available forecasts show a small loss last year growing to a bigger one this time and doubling again next year. Its search for obesity and gastrointestinal drugs will use up the pounds 5m it is raising from investors within two years.

The market fatigue that was inevitable after the rush of new entrants in recent weeks is a rerun of the slump in interest in March and April 1994 that left a raft of property and construction companies high and dry. If the pattern repeats itself, then the 5 per cent fall in the All Share since April is just the beginning.

BT is running out of time in Oftel battle

The stand-off between BT and Oftel is going right down to the wire. Despite the protestations from BT's shareholders in Newcastle yesterday, Don Cruickshank is not for turning. The director general of telecommunications last night delivered his final, final, final proposals on price controls and anti- competitive behaviour to BT, bluntly stating that they are "indivisibly linked".

Moreover, he has told BT that unless he receives a response by 2 August, BT will be considered to have rejected the proposals and will be packed off to the Monopolies and Mergers Commission.

Although BT does not, therefore, need to reply next Tuesday when it holds its crunch board meeting, it is fast running out of time. It may yet come down to tactics.

One option for BT is to freeze the countdown by seeking a judicial review of Oftel's right to link the price formula and anti-competitive powers, In the meantime the Government might then come to the rescue by promising legislation which will give BT a right of appeal against any Oftel ruling, thus allowing it to accept the package.

The danger is that unless BT has its ducks in a row inside the next two weeks, it will not be able to escape the clutches of the MMC.

On balance, its best course of action would still be to accept the Oftel proposals as they stand and hope for legislative amendments in due course. The new price formula reduces the proportion of BT's income that is regulated from 64 per cent to 26 per cent. It is also the last set of retail price controls.

BT cannot guarantee getting a better deal out of the MMC, either on prices or anti-competitive behaviour, while the distraction of a six to nine month inquiry is surely something that its management would prefer to live without.