Old Mutual Global Investors (OMGI) chief and ex-Schroders manager Richard Buxton has revealed further criticism of his former employer’s decision to promote Michael Dobson from chief executive to chairman.
The fund house’s decision to hand a non-executive chairman role to Mr Dobson, its chief executive of 14 years, has drawn fire from organisations such as the Institute of Directors (IoD) because of the requirements of the UK corporate governance code.
Former Schroders manager Mr Buxton, who as head of UK equities led the asset manager’s 2008 campaign against Marks & Spencer’s elevation of Sir Stuart Rose from chief executive to executive chairman, said he had heard similar criticism of Mr Dobson’s move.
Mr Buxton, who heads OMGI’s investment team as part of his chief executive responsibilities, acknowledged the decision had been expected but said the practice was out of touch with the modern era.
He said the head of a FTSE 250 company had told Mr Buxton and team that Schroders’ decision was “sending governance back 20 years”.
Mr Buxton added the view was shared by OMGI head of UK stewardship and governance Paul Emerton, formerly head of governance at Schroders.
Mr Dobson is to be replaced as chief executive by head of investment Peter Harrison, but will continue to work with “major clients, commercial partners and regulators” in his new role, Schroders said last month.
The UK corporate governance code states that chief executives should not become company chairs unless in exceptional circumstances.
At the time of the announcement, senior independent director Philip Howard, who led the appointment process, said Mr Dobson would bring “continuity at a time of change”.
He added the board had consulted senior shareholders over the move, as required by the governance code, and did not regard the decision as setting a precedent.
The IoD said last month that while Schroders’ board deserved credit for explaining their motivations, a “desire for continuity...should not come at the expense of board independence”.
Mr Buxton, turning his attention to the corporate sector as a whole, said at an OMGI event yesterday (April 20) that business confidence will be “key to propelling UK growth forward”.
The manager called on companies to put aside concerns over the impact of the UK’s referendum on EU membership, and instead to take advantage of cheap funding rates.
“Putting investment on hold, due to uncertainty, risks fuelling a lack of confidence,” Mr Buxton said, noting that betting markets remain confident the UK will remain in the EU.
“While the labour market is tighter but the cost of finance pretty low, there is a highly favourable environment for British industry to invest and enhance productivity.”
He added investors should not demand, or expect, any further easing of monetary policy from central banks.
The chief executive said: “Monetary policy has reached the end of the road. If [economies] do need more stimulus – which I do not think they do – then undermining banks and forcing [bond] yields down is not going to be helpful.
“If we need more stimulus it has to be via other means.”
