Warning to boardrooms in British Gas roasting

THE BRITISH GAS annual meeting last week was like no other shareholders' meeting I have ever attended, and I'm something of a veteran of AGMs. I have never seen such sustained hostility and contempt for a board of directors. Not even at the Nationwide Anglia AGM of 1991, when livid members came to complain about being stranded deliberately in obsolete accounts. Not even the Ratners AGM of 1992, when furious shareholders united in demanding the head of the then chief executive Gerald Ratner.

Those were angry, stormy meetings. But the British Gas event was on a different scale altogether. The intensity of rage was shocking. The resentment at a board out of touch and unyielding was almost palpable. No wonder the company banned all cameras from the hall.

This was not a bunch of radicals out to protest about fat cat bosses. The vast majority of the 4,000 shareholders were middle-class, middle- income and middle-aged or elderly. If anyone embodied that elusive class called "Middle Britain" it was the people in that hall.

For six hours they harangued, heckled, berated and condemned British Gas's 14 beleaguered directors. The message to the directors was uncompromising: you are a self-perpetuating oligarchy of greedy, arrogant incompetents. Non-executive directors coming up for re-election were grilled by one shareholder who somehow kept hold of the microphone. "Next job applicant!" he barked as he asked each director to justify his existence. I'm sure the likes of Sir Michael Perry and Keith Mackrell, two of the more bruised non-executives, haven't been spoken to in such tones since they were in short trousers. But for the skill of the chairman Dick Giordano (profiled on page 16), the meeting might have descended into anarchy.

What did it all mean? Partly, as Mr Giordano emphasised, the British Gas case was a surrogate for all the big pay rises paid to the executives of privatised utilities. Partly it was specific to British Gas: on most measures the company has performed lousily, be it shareholder returns or customer complaints. There were grumbles too about everything from the all-male composition of the board to alleged bias against Catholics in Northern Ireland. But there was no doubt executive pay was the main gripe.

Will directors in other companies learn anything from all this? Will future pay rises be any more restrained? I doubt it. The rules will change and directors will find new ways to reward themselves - share options are going out and long-term performance-related bonuses are coming in. But directors are too distant from small shareholders. And, more important, institutional shareholders are too distant from the pensioners, life policy holders and unit trust holders whose money they are investing.

But I like to think the meeting may just have altered the outlook of the 14 directors actually there. They have learned that to have a billion proxy votes from institutional shareholders in your back pocket is all very well. But it doesn't make you feel any better when a little old lady with 100 shares looks at you as if you have crawled out from under a stone.