WH Smith links vote rights with insurance

WH SMITH has angered institutional investors by linking proposals to give equal voting rights to all shareholders with a resolution allowing it to buy indemnity insurance for its shareholders, writes Heather Connon.

Smith's will put the resolution to an extraordinary meeting of shareholders in London today. It is the latest in a series of companies - including Unilever and Rugby - to ask shareholders for permission to insure their auditors. It says it has no intention of using the powers but is simply updating its articles to take account of changes in companies legislation.

A number of shareholders are, however, unhappy about granting such powers, arguing that companies may be tempted to use them in the future - particularly if the cost of professional indemnity insurance continues to rise - and consistently vote against them.

Smith's has made the request part of a resolution that abolishes its two-tier voting structure. Voting against it would mean rejecting the chance to give equal rights to all shareholders - something all institutions wholeheartedly favour.

One large institution said it had reluctantly decided to vote in favour, despite reservations about the clause on auditors, because it supported the merger of the two classes of shares. But PIRC, which advises local authority pension funds, has recommended that its clients vote against.

John Napier, Smith's finance director, said the group's existing articles allowed it to indemnify its auditors out of its assets, which he said was 'even worse' than buying insurance for them.