Business View: Churchill would have fought Marconi's bankers in the boardrooms

GK Chesterton wrote that "democracy means government by the uneducated". It was no doubt with that in mind that the creditors of the once-mighty Marconi applied the thumbscrews to the board of the battered behemoth and, more crucially, to the Financial Services Authority to ensure that shareholders never got the chance to vote on the group's restructuring plans.

The board has approved the deal, the banks have approved the deal, the regulators have approved the deal and, at a meeting on 14 October at the offices of City solicitor Allen & Overy, the bondholders will approve the deal.

But at no time, or place, will the investors who have seen their shares collapse from a peak of 1,250p to just 1.3p on Friday, and who will end up with just half a per cent of the company they once owned outright, get a chance to say yea or nay to the bargain.

If you talk to the advisers to Marconi, they will go on about a number of technical issues that made the "solvent burial" structure for this rescue the favoured solution. If you talk to creditors, they go on about certainty within the transaction, and not wishing to sign up to a deal that could be blocked by unhappy shareholders. And if you talk to regulators at the FSA, who are responsible for looking after the interests of shareholders, they say they were handed a letter by the creditors saying they would put Marconi into administration if the FSA did not allow a waiver to avoid a shareholder vote.

In the City, institutional investors have all but given up on Marconi. "Half a per cent is a waste of time and energy," one City figure told me. Across a rather low Chinese wall, the equities arms of many institutions can see the bond investing and maybe even banking operations of the same firm, so what they lose on the roundabouts they gain on the swings.

For smaller investors there are no swings. They can only see losses from a company they thought was safe. At Apcims, which represents the stockbrokers whose clients are these small investors, the members are passing on the message that this Marconi deal should not be a precedent. Angela Knight, Apcims' chief executive, is going to see the FSA this week, and while it is too late to do anything about Marconi, she wants to ensure that any future restructurings (British Energy and Telewest come to mind) will be completed only with the consent of all investors.

To be blunt, Marconi's creditor banks have pulled a fast one. The board of Marconi should have called the banks' bluff – but, as it also probably didn't want to face the inconvenience of a shareholder vote, it caved in.

Small investors will, quite rightly, give the board a pasting at the annual general meeting on 8 October. But it will be an empty gesture. They have lost the right to vote on the stewardship of their own company as an expedient to save the City time and inconvenience.

Those who were responsible for this sad state of events should remember the words of Winston Churchill: "Democracy is the worst form of government – except all the other forms that have been tried from time to time."

Vodafone's silly point

Two years ago Sir Christopher Gent was threatening to take his bat, ball and phone giant away in a row about tax. Now Vodafone chairman and cricket supremo Lord MacLaurin is at it. He claims Britain is too critical of Vodafone and Sir Chris in particular. He says the City does not understand that Sir Chris could trip off to America and earn 10 times as much.

But the Vodafone chairman is living in the past. Has he not seen the backlash against corporate excess in the US? The mobile-phone-number salaries paid in the telecoms sector disappeared with the fall from grace of such beacons as WorldCom and Qwest. Across the pond they are only paying for performance – and a 70 per cent fall in the value of Vodafone since it completed its controversial takeover of Mannesmann hardly merits multi-million-pound pay packages. Also, US institutional investors have just come out against payments for completing transactions – something Sir Chris benefited from to the tune of £10m.

And before Lord MacLaurin and Sir Chris take that trip across the Atlantic, they should remember something very important: they don't play cricket in America.

j.nisse@independent.co.uk