Comment: Shares speak louder than abuse on British Gas

"Many of the people who manage our pensions and savings would themselves be considered overpaid by those who vented anger at the British Gas annual general meeting."

Nobody likes to apologise for the overpaid and this column does not intend to. The incompetence with which British Gas has dealt with executive pay, as with so much else in its public relations over the past year, is evidence enough that Cedric Brown and his chairman, Richard Giordano, do not deserve the half million apiece they get for their labours, not in any case unless being held up to public ridicule is thought part of the job. None the less, an awful lot of guff is talked about the City's failure to stand shoulder to shoulder with small shareholders on this issue. Many of the people who manage our pensions and savings would themselves be considered overpaid by those who vented anger at the British Gas annual general meeting. But that is not why institutional shareholders were so little in evidence yesterday. Nor is it why the great bulk of fund managers invariably tend to back the board, at least in public, on the issue of executive pay.

Imagine what would have happened if they had voted in favour of the PIRC resolution. In essence it would have been a vote of no confidence in the board; most of the directors would have been forced to resign and a management crisis would have ensued. How easily or quickly it could have been resolved is anyone's guess but in the meantime the share price would have plummeted and the company would have drifted. It has been known for institutional shareholders to vote out an incumbent board, particularly in the US, but this is generally regarded as the nuclear solution, for use only when all else fails.

For one of our leading savings institutions to have accused the board of talking "bollocks and bullshit", as so many small shareholders did yesterday, might have made good copy; it might even have been what some of them, mindful of the views of their policyholders, thought. But it would also have been counter-productive, akin to a marketing man criticising his own product. If you don't believe in the product, you don't tell everyone that. You try to change it - or you get out. Whenever a company faces a revolt on the scale British Gas has, albeit from small shareholders mobilised as never before on the specific issue of pay, it is generally evidence that something is seriously wrong on a much wider scale. Yesterday's outpouring of rage should at least help institutional shareholders bring about necessary change at British Gas, which as always should start at the top. Messrs Giordano and Brown should be made to prepare a credible succession as rapidly as possible.

Gloves off in fight for VSEL

At last; the phoney war is over. British Aerospace yesterday fired the first salvo in what promises to be a bloody fight with GEC for control of VSEL, Britain's obscurely named builder of nuclear submarines. How is GEC going to respond? Here is what an adviser might be telling Lord Weinstock, managing director, as he considers his options: "It is as important for British Aerospace to win control of VSEL as it is for GEC to prevent the takeover. How much can BAe afford to pay? Do we gain more by outbidding BAe or by forcing it to overpay?

"BAe's opening offer is a mere sighting shot. What we have to do is reply with an all-cash offer sufficient to spread doubts about BAe's chances of winning - say about pounds 18.50. That, in turn, should depress BAe's share price and reduce the value of its paper offer. BAe's successful two-part rights issue means it has reserves to raise the cash offer and improve the paper terms. But there is a limit and BAe investors will soon begin to worry about the risk of overpaying.

"BAe wants VSEL as a prime contracting platform from which it can control projects, and margins. There is also VSEL's pounds 300m cash to consider, as well as the opportunity to reduce tax by offsetting its own past losses against VSEL's profits. Even so, BAe would find it hard to sell anything above pounds 20 a share, which is the level at which dilution sets in. BAe has rebuilt its financial credibility over the last couple of years, and the damage done by overpayment would be long-lasting.

"GEC can easily outbid BAe if it wants VSEL badly enough. It depends how important this is to you. Is it the Trafalgar contracts you are after, or is it just a way of stymieing BAe's ambitions. If the latter, pounds 20 looks a high price for a defensive takeover, especially if your eventual target is BAe itself. On the other hand, a BAe victory could put the company out of your reach for good. So if the eventual target is BAe you may have to take the short-term pain of overpaying for something you may not in truth be too bothered about. Either way, it seems the cards are heavily stacked in your favour. Even if you lose the hand, the long-term game is yours provided BAe is fatally wounded financially in the process."

Time past for Kerkorian wing-and-prayer bid

For a while there it looked like Kirk Kerkorian, with his $22.8bn bid for Chrysler, was about to bring the Eighties corporate raid back into fashion. But with his offer now officially withdrawn seven weeks after its inception, he has in fact done the opposite. Wing-and-a-prayer bids - especially those with no money behind them - just will not do in the mid-Nineties.

The sheer scale of the attempt meant that it could hardly be ignored. Mr Kerkorian, who is 77, did not have a reputation of letting go of his mice easily. Moreover, he had solicited the support of none other than Lee Iacocca, the former Chrysler chief and America's most famous corporate legend.

Even so there was almost instant scepticism on Wall Street about the viability of the offer. Where was the roughly $18.5bn in required financing going to come from? The wind, if there ever was any, seemed to slip from Kerkorian's sails within days. Bear Stearns announced that it would not serve as his investment adviser. European manufacturers made plain they were not interested in taking part. An early climb in Chrysler's share price quickly began to slip.

Chrysler's Robert Eaton, meanwhile, set his face firmly against the bid. At the heart of his case: his determination to protect the $7.3bn fund that Chrysler has built to protect itself against the next sales downturn. A Kerkorian takeover would have siphoned off at least $5.5bn of it.

At Chrysler's recent annual meeting in St Louis there was not one speech made in favour of the Kerkorian offer. The "gambling dude" from Las Vegas should be told where to go, one shareholder opined. The bid, at least, is now gone, and Mr Kerkorian has little to show for the venture. Certainly, his reputation has been scarcely enhanced, nor has that of Iacocca. And whereas a tussle of this sort in the Eighties might have offered some return in greenmail money, not so today. Mr Eaton and his colleagues showed no inclination to buy back Mr Kerkorian's stake. The Eighties, it seems, have gone for good, much as Mr Kerkorian would have liked to revive their freewheeling ways.

Voices
A Siberian Tiger
voices
Arts and Entertainment
Peter Griffin holds forth in The Simpsons Family Guy crossover episode
arts + ents
News
Ross Burden pictured in 2002
people
Life and Style
Upright, everything’s all right (to a point): remaining on one’s feet has its health benefits – though in moderation
HealthIf sitting is bad for your health, what happens when you stay on your feet for a whole month?
PROMOTED VIDEO
News
President Obama, one of the more enthusiastic users of the fist bump
scienceBumping fists rather than shaking hands could reduce the spread of infectious diseases, it is claimed
Sport
Laura Trott with her gold
Commonwealth Games
Arts and Entertainment
Gal Gadot as Wonder Woman
arts + ents
News
Bryan had a bracelet given to him by his late father stolen during the raid
people
Arts and Entertainment
Chris Pratt stars in Guardians of the Galaxy
arts + ents
Arts and Entertainment
Pedro Pascal gives a weird look at the camera in the blooper reel
arts + entsPrince Oberyn nearly sets himself on fire with a flaming torch
News
Danny Nickerson, 6, has received 15,000 cards and presents from well-wishers around the world
newsDanny loves to see his name on paper, so his mother put out a request for cards - it went viral
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
France striker Loic Remy
sportThe QPR striker flew to Boston earlier in the week to complete deal
News
Orville and Keith Harris. He covered up his condition by getting people to read out scripts to him
People
Arts and Entertainment
Zoe Saldana stars in this summer's big hope Guardians of the Galaxy
filmHollywood's summer blockbusters are no longer money-spinners
Arts and Entertainment
O'Shaughnessy pictured at the Unicorn Theatre in London
tvFiona O'Shaughnessy explains where she ends and her strange and wonderful character begins
Life and Style
Workers in Seattle are paid 100 times as much as workers in Bangladesh
fashionSeattle company lets customers create their own clothes, then click 'buy' and wait for delivery
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Training/Learning and Development Coordinator -London

£28000 - £32000 per annum: Ashdown Group: Training/Learning and Development Co...

Training Programme Manager (Learning and Development)-London

£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

.NET Software Developer (.NET, C#, ASP.NET, front-end)

£30000 - £45000 per annum: Harrington Starr: A Global Financial Service Organi...

C# Web developer (C#,MVC,ASP.NET,SQL)

£30000 - £40000 per annum + Bonus+Benefits+Package: Harrington Starr: C# Web d...

Day In a Page

A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on
It's the best of British art... but not all is on display

It's the best of British art... but not all is on display

Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
Critic claims 'I was the inspiration for Blanche DuBois'

Critic claims 'I was the inspiration for Blanche DuBois'

Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
Sometimes it's hard to be a literary novelist

Sometimes it's hard to be a literary novelist

Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

Edinburgh Fringe 2014

The comedy highlights, from Bridget Christie to Jack Dee
Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

The woman stepping down as chair of the Heritage Lottery Fund is worried