InvestmentsApr 13 2015

Garrett-Cox’s public stance on board votes queried

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Garrett-Cox’s public stance on board votes queried

Eyebrows have been raised at Alliance Trust chief executive Katherine Garrett-Cox’s decision to launch an offensive against proposed independent director appointments to the trust’s board.

Trust investors said the spirit of the Association of Investment Companies’ governance code suggested executive board-members should avoid influencing nomination decisions. There is no suggestion any rules have been broken.

Jason Hollands, managing director at broker firm Tilney Bestinvest, said: “I don’t think it is right that the executive should be prominently involved in the defence against the proposed nominees.

“It actually reinforces the concern that the board is too close to the management team when it should be fighting for the interests of all shareholders.”

Roger Lawson, deputy chairman at ShareSoc, an independent non-profit body that advises private investors, said Ms Garrett-Cox’s involvement was “testing the spirit of the AIC code”.

“Really the appointment of directors should be in the remit of the nomination committee which is usually manned by non-executive directors,” he said.

Shareholders are set to vote on whether to appoint the three new non-executive directors to the trust’s board to boost oversight of the executive, which includes investment manager Ms Garrett-Cox, later this month.

The appointments were proposed by activist investor Elliott Advisors, sparking a battle between it and the existing Alliance Trust board that wants investors to vote them down.

The AIC code states: “The independent directors should take the lead in the appointment of new directors.”

An Alliance Trust statement said it abided by the AIC code given the selection process was led by the nomination committee of Karin Forseke, Alastair Kerr and John Hylands.

It added as part of the process, the candidate “would undoubtedly want to meet the chief executive as part of their own due diligence process” which was “very different” from the chief executive leading or influencing the process.

The statement said Elliott had “circumvented” the usual nomination committee process and that it was “entirely right” Ms Garrett-Cox was seen to have a public view on Elliott’s proposals given their main contentions were about aspects she oversaw, such as investment performance.