James Moore: Only a year on, and the shareholder rebellion looks like history already

Outlook. Plus: Lenders are still failing to meet recovery needs
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The Independent Online

What a difference 12 months can make. Last year's shareholder spring was, in reality, nothing like as revolutionary as was claimed at the time.

All the same, by this point in 2012, at least four companies had seen their remuneration reports defeated while a number of others had faced up to significant rebellions.

What's more, a number of chief executives found themselves seeking new challenges. When ceos depart public companies, they are never ousted. Instead they "retire" and it's always their own decision to go.

I wouldn't dream of suggesting otherwise, for fear of a letter from m'learned friends. But I would just point out that the "retirements" of David Brennan at AstraZeneca, Andrew Moss at Aviva and Sly Bailey at Trinity Mirror all came at a time when those companies' shareholders were kicking up a fuss about pay.

And, while it was the Libor scandal that ultimately precipitated the "retirement" of Bob Diamond from Barclays, pay was a rather important issue there too.

Compare all that to what's happened this year. Which is nothing. Zip. Nada. In fact, it hasn't been this quiet since the spring of 2008, just before the financial crisis, which was the catalyst for the shareholder spring, really started to bite.

By contrast, in the US, where it is often claimed that people don't care about excessive executive compensation, there have been more than 30 votes against pay so far this year. Even conservative Switzerland has seen a couple.

Institutional investors, when pushed, have tended to argue that the peaceful AGM season in this country should generally be seen as a jolly good thing. They describe combative AGMs as a sign of failure, and claim that peace reigns in the City because companies heard the message sent last year, and have responded by engaging with investors earlier, and moderating the worst of their excesses.

Governance experts back up only some of this. What improvements there have been, they say, have been tentative at best. Which means that the truly outrageous has been substituted with the merely appalling in most cases. But, apparently, that is good enough for the institutions, which only really flexed their muscles amid concerns about what Vince Cable in the Business Department might do if they didn't.

The big institutional fund managers are paid to oversee the pensions and savings of a public that is still suffering from the effects of flat or falling remuneration combined with inflation that has been running at levels persistently above the Bank of England's target. With fees that are drawn from those savings.

To justify those fees, you might think that they ought to demonstrate that they take that job of stewardship seriously by performing a stewardship role over the companies in which they invest. And by clearly and consistently using their votes at AGMs to enforce this rather than meekly accepting a few minor concessions after a nice lunch in the boardroom.

Sadly, after a hint that this situation might be changing in 2012, normal service has resumed in 2013.

And people think that the banking industry cheats them.

Lenders are still failing to meet recovery needs

Speaking of the banking industry, and before we let it off the hook, yesterday produced more evidence that it is failing to do its job. Despite the thick end of £1trn of taxpayers' funds in both direct and indirect aid being lavished upon it.

Despite a fresh flood of cheap money being thrown at them through the Bank of England's Funding for Lending scheme, designed to encourage them to provide loans to businesses and homebuyers, they're not biting.

Figures out yesterday showed participants reduced credit by £300m in the first three months of this year. The decline is a big improvement on the £2.4bn reduction in the final quarter of 2012.

But it is still a decline, and the pool of credit offered by scheme banks continues to dry up.

The excuses were flying thick and fast yesterday. They ranged from the usual "but we are lending, look we've fiddled with the numbers a bit to show it" to "but small businesses just don't want to borrow from us". The latter came from the British Bankers' Association.

Before criticising the Bank of England for the apparent failure of its scheme, it's worth pointing out that without Funding for Lending, the situation could be very much worse.

The situation certainly would be very much worse were it not for HSBC, which doesn't need the cheap cash from the Bank because it's flush with deposits and has to find ways of making a return on them if it wants to avoid the embarrassment of having to turn customers away.

Regardless of whom you choose to believe in this particular debate, what is abundantly clear is that the inability of small and medium-sized businesses to secure finance is crippling Britain's economic prospects.

Things may naturally improve over the coming months, when banks should have completed the work regulators want them to do to bolster their capital bases.

But it will need to if Britain's economic recovery is to gain real traction.

As things stand, the private-sector lenders, however they choose to dress up their numbers, are failing to meet the needs of that "recovery", even with the support provided by the Bank.

If that situation persists, more radical measures may be required. Where the private sector is failing, it is incumbent upon the state sector to step in and fill the gap.

That's something the majority state-owned Royal Bank of Scotland, for one, might care to pay close attention to, particularly with an uncertain general election looming and politicians casting around for ideas to lure the public into the polling booths.