Why the silence from our own institutions?

Ever since Ivan Boesky, arbitrageurs, especially American ones, have had a bad name. None the less, when it comes to championing shareholders' interests against those of entrenched, defensive managements, they often talk a great deal of sense.

Guy Wyser-Pratte is one of Wall Street's veteran arbitrageurs; he was practising the art when Mr Boesky was still in short trousers. Most of the time his returns are dramatic but he appears to have got it seriously wrong over Northern Electric.

Like everyone else he failed to anticipate Professor Stephen Littlechild's extraordinary intervention and was caught long of the stock as the price plunged. Now he is attempting to undo at least some of the damage by forcing Northern's reluctant board to allow Trafalgar House to put its revised offer. Together with other like-minded shareholders, he is within a whisker of the necessary 10 per cent to requisition an extraordinary meeting.

In customary blunt fashion, Mr Wyser-Pratte has set out his case in a published letter to the Northern board. It may be a bit strong to claim that directors have acted with "cavalier disregard of their fiduciary duties" or even fraudulent manner, but it is hard to argue with most of the points he makes.

Rightly he points out that the proposals put forward in Northern's defence document not only included new information not disclosed to the regulator but also envisaged a level of gearing well in excess of the upper end of the range discussed with the regulator when the original price control regime was established last summer.

The board therefore should have known that the defence proposals would be unacceptable to Professor Littlechild. They should also have known it would prompt regulatory action. In so doing, Mr Wyser-Pratte suggests, they appear to have been more concerned with their own positions and salaries than the interests of shareholders.

Northern would argue that arbitrageurs are not representative of the bulk of shareholders; driven by the short-termist fast buck approach to investment, they rarely hang around for long on any share register. Trust us, directors say to investors, and eventually our decision not to allow Trafalgar to put its new offer will be vindicated.

Maybe, maybe not. One thing is certain, however. It is something shareholders ought to be allowed to decide for themselves. The only real surprise is that it should take an American arbitrageur to say it. Where are our own investment institutions? When it comes to championing their own interests they seem as paralysed in taking action as they are with issues of corporate governance and excessive executive pay. Or is it that other imperatives, the chance of lucrative corporate finance work or a share of pension fund management, get in the way?

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