Corbyn's threat to UK share schemes - (Esop) Centre
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Vol 33 No 4 January 2018
Corbyn’s threat to UK share schemes
An incoming Labour government’s plans to nationalise From the chairman
the UK’s rail, water and energy supplies and the Royal
Employee share plan sponsors must be thinking
Mail would wreak havoc on the share schemes
industry. Labour leader Jeremy Corbyn MP has stated carefully now about whether to launch new plans or
that he would nationalise British Gas, SSE, Eon, whether to play safe and roll over existing plans.
RWE, Npower, Scottish Power and EDF if he Last year's good news for employee shareholders is
became Prime Minister in 2020. He said he would put this year's problem: many equity markets are trading
National Grid and Royal Mail back into public hands at record highs, so to invite employees to buy
too. company shares at current high market prices - as
There are ten main privatised UK water and sewerage part of a Share Incentive Plan - could be inviting
companies – notably Thames Water, Severn Trent trouble, even with the risk mitigated by matching
and United Utilities – which offer all-employee share free shares. Ditto the Company Share Option Plan,
schemes, especially SAYE-Sharesave and the Share because tax-effective options can only be offered to
Incentive Plan (SIP). It is difficult to see how these Eso employees at market price. Some plan sponsors will
plans would survive, were a Labour government to re- play safe by using SAYE-Sharesave instead, despite
nationalise water companies. its dismal record at reaching all employees, because
Similarly, there are around 15 privatised rail of the discount on offer.
companies who hold franchises to operate trains in There is an alternative - to offer employees free
Britain – notably Virgin Trains, Great Western, shares outright. At Christmas 2016, Danish ferry
Arriva Rail London, West Midlands and Grand company DFDS celebrated its 150th anniversary by
Central. In many cases, their employees were offered awarding 30 shares to each of more than 7,000
shares in their employer at very favourable rates and employees in a restricted stock unit plan. Years ago,
sometimes free of charge during privatisation. British Airways did the same. Admiral, the car
Incentives like these created large groups of first-time insurance company, has been giving free shares to
employee shareholders. all its employees every year, subject to
Some of these privatised utility companies have performance.
diversified and own major utilities in several countries Public companies ought to be more inventive in this
or indeed are foreign-owned themselves. They would field - why not give free shares to those of its
live on post re-nationalisation, but they would be employees who have served in post for five years -
forced out of the UK market if Mr Corbyn were elected and a bigger free share allocation to those who've
to power and carried out his threat.
served for ten years? This at least would give
To reduce the immediate cost to taxpayers of corporates a better image, as well as help to cement
renationalising the railways in one go, Labour may
employee loyalty. We have the answers to inequality
instead pick off these companies one by one, by
refusing to renew their service operating franchises if we dare more.
when they expire. It would only take one or two such Malcolm Hurlston CBE
franchise renewal refusals to destroy their share prices
across the board. plans for government. It is estimated that the cost of re-
Although Mrs May’s government is not in imminent acquiring the UK assets of energy companies alone,
risk of collapse, post her deal with the Northern Irish which include British Gas owner Centrica and network
DUP, some in the City and in business fear that operator National Grid, would cost £124bn of
growing pre-Brexit fissures within her Cabinet and the taxpayers’ cash.
Tory Party generally could provoke an internal coup, Were all these companies to be re-nationalised in the
or worse, as the withdrawal negotiations are set to wake of Labour winning an overall majority at the next
enter a key phase in March. General Election, Mr Corbyn’s government would face
Centre member Linklaters, the leading City law firm, the tricky problem of how much to repay these several
has been assessing the legal implications of Labour’s hundred thousand employee shareholders, assuming
1their shares and share options would be forfeited. protection acts will require replacement. One of the
Long gone are the days when ‘New Labour’ biggest changes to data protection law will be the
Chancellor Gordon Brown saw Eso as a key tool in extended scope of the GDPR, above and beyond
the battle to raise the productivity of the UK existing data-protection legislation. It will apply to
workforce. He introduced the All-Employee Share data controllers and processors using information
Ownership Plan (AESOP) which was later renamed relating data subjects within the EU, regardless of the
the SIP. He introduced the Enterprise Management controllers’ and processors’ locations. A ‘data
Incentive (EMI) to encourage gazelle companies to controller’ may be individuals, or companies, a public
incentivise their key employees (not just the authority, agency or employer that, alone or jointly
executives) by offering Income Tax free share with others, determine the purposes and means of
options. processing of personal data on a digital or structured
However, this cuts no ice with Corbyn’s people, who manual files. A ‘data processor’ can be a company,
want ‘the workers’ to have full ownership of key employer or individual who holds or processes
pillars of the economy, via state control. personal data, but does not exercise responsibility for
Even the Communications Workers Union, the or control over the personal data. A ‘data subject’ can
Centre’s close friend, has been quiet recently about be the candidates or employees to whom the data
Royal Mail’s all-employee share scheme, the largest relates.
in the UK. The CWU’s general secretary, Dave Employers will need to know certain key changes.
Ward, who attended a major European Trade Union The most important is the restriction on the use of
Confederation Eso conference in Florence, as the consent in the context of the employment relationship.
Centre’s guest speaker, is backing re-nationalisation From a legal perspective, it seems that the onus will
at political level but can’t be insensitive to his be on the employer to show that employees have
members’ huge (135,000 participants) Share individually consented to their data being processed,
Incentive Plan (SIP) and the smaller parallel SAYE- that there is a legitimate interest in processing the
Sharesave scheme, in which 35,000 postal employees data or a legal requirement to do so.
participate, via regular savings. Its SIP, which was The GDPR will give candidates and employees
launched - as a free shares gift to all qualified postal greater control over how their personal data is used,
workers - during Royal Mail’s privatisation in 2013, which will require a change in practice on behalf of
reaches maturity in October this year. After a roller- most organisations. GDPR will require employers and
coaster year, RM’s share price closed at 452p each HR professionals to state the legal basis for
just before the new year. Collectively, RM employees processing data, retention periods, the data subject’s
own 12 percent of the total equity. right of complaint and provide information about
individual rights under the GDPR. The conditions for
GDPR enforceable from May 2018 consent to data being shared have been strengthened,
The implementation of the EU’s General Data requiring employers and HR professionals to use
Protection Regulation (GDPR) will affect many parts clear, legible and intelligible language in their
of corporate organisations, from candidate records to engagements with candidates and employees. It
employee details, all of which are covered by the new requires that information provided should be in clear
rules. The GDPR was designed to harmonise data and plain language to ensure transparency and ease of
privacy laws across Europe, to protect and empower access.
all EU citizens’ data privacy rights and to reshape the Many employers rely on employees’ implied consent
way employers across the region approach data to process their personal data and consent or data
privacy. Its aim is to protect all EU citizens from protection clauses are often included in the
privacy and data breaches in an increasingly data- employment contract. However, under the GDPR, for
driven world. Although the key principles of data consent to be valid, it must be freely-given, specific,
privacy have been retained in the GDPR, many informed and revocable. It states that, given the
changes have been proposed to the regulatory imbalance of power between employer and employee,
policies, wrote Barry Crushell of Aperture Partners. the latter can only give free consent in exceptional
The GDPR – which was cogently presented by circumstances. Consent is only one of a number of
White & Case at the Centre’s recent British Isles potential legal bases for processing employee data.
share schemes symposium - is enforceable from May Alternative legal bases include processing being
25 this year, at which point non-compliant employers necessary for the performance of the employment
may be liable to penalties. At the symposium White contract, required by law or in the employer’s
and Case gave participants a door-stopping legitimate interests which outweigh the general
background document with the caveat - anyone who privacy rights of employees.
doesn’t give this amount of information free is selling Candidates and employees will have a right under the
you snake oil. Both the document and the caveat GDPR to obtain information from employers about
were applauded. whether their personal data is being processed and, if
As the GDPR is a Regulation, and not a Directive, it so, where and for what purpose. It gives candidates
will have direct effect and needs only limited and employees the right to access personal data, to
transposition into national law. The Irish data exercise that right easily and at reasonable intervals,
so as to be aware of and verify the lawfulness of the
2processing. Candidates and employees will have the especially partner Graeme Nuttall OBE, the
right to be informed of their rights to request employee ownership expert.
rectification, erasure or restriction of processing, to
object to processing and to complain to the relevant
data protection supervisory authority. Employers and UK CORNER
HR professionals should ensure have their
organisations have the right procedures in place to Government urged to beef up EOT
detect, report and investigate a personal data breach. Liberal-Democrat leader Vince Cable MP urged the
Under the GDPR, breach notification will become government to increase tax incentives available to
mandatory in all member states where a data breach
company owners who hand over control by installing
is likely to ‘result in a risk for the rights and freedoms
Employee Ownership Trusts (EOTs). He backed an
of individuals.’ The Data Protection Authority must
IPPR (Institute for Public Policy Research) report
be notified within seventy-two hours of the controller
which claimed that the number of EOT companies in
or processor first having become aware of the breach,
the UK could be increased to 20,000 by 2030,
and if this timeframe is not met, reasoned
creating three million employee owners. He revealed
justification must be provided. Similarly, affected
individuals must be notified without undue delay. in an interview with City AM that only one in 20 UK
private companies offer any kind of employee share
The GDPR gives data protection authorities more scheme.
robust powers to tackle non-compliance, including
administrative fining capabilities of up to €20m (or Mr Cable said: “According to the fashionable
four percent of total annual global turnover, economist Thomas Piketty, a combination of elevated
whichever is greater) for the most serious returns to capital and stagnant earnings will
infringements. It makes it considerably easier for eventually lead to the re-emergence of stratified
candidates, employees and former employees to bring rentier societies, in which what you inherit and who
private claims against employers when their data you know are the dominant factors in your life
privacy has been infringed. The GDPR will allow chances. This perfect recipe for increased class
candidates and employees, who have suffered non- resentment, and social instability is already becoming
material damage, to bring a claim for compensation, apparent.
as a result of an infringement. ‘One of the most compelling ideas to improve the
workings of capitalism is employee ownership.
Increasing returns to capital do not exacerbate
EVENTS inequality if that capital itself is widely distributed.
Not only that; employee-owned companies have been
The Esop Centre/STEP Jersey share schemes for shown to be more productive, more motivated, and
trustees conference will be on Wednesday May 2 at more resilient in economic downturns than other firms
the Pomme d’Or Hotel in St Helier. “However, as a report published by the IPPR shows,
Newspad’s next international employee equity employee ownership remains a niche affair in the UK.
summit will be hosted in Paris by senior Centre Apart from John Lewis and Arup, few of us could
member Linklaters, at its offices in rue de Marignon, name a worker-owned company. Financial wealth –
off Champs Elysees, in June 2018. Further details to including company shares – is even more unequally
be announced shortly. distributed than wealth in general, with the top 10
percent of the population owning 70 percent of it. In
fact, despite Margaret Thatcher’s dream of creating a
MOVERS AND SHAKERS share-owning democracy, both individual share
ownership and British pension fund ownership of UK
Paul Arens has been appointed associate director for quoted shares are at record lows, and have declined
business development (Europe) at Centre member since the 1980s. Among publicly listed companies,
Computershare. despite £62.4bn worth of their shares being owned by
Nigel Mason co-authored the IPPR report on the employees, roughly £60bn of this wealth belongs to
EOT. the top tenth of households. Most of this is from
Centre member Fieldfisher was awarded Law Firm management buy-outs or generous executive rewards,
of the Year 2017 at The British Legal Awards including shares. Meanwhile, only one in 20 private
@LegalWeek #BritishLegalAwards https://lnkd.in/ companies offer employee share ownership schemes
guWzQt6. Congratulations to all concerned, at all.
3“As business secretary in the coalition government, I with the Centre’s work.’ Jo Swinson was awarded a
helped to deliver useful reforms to increase the rate CBE in the New Year’s Honours.
of employee ownership. One was the introduction of
EOTs. By enabling a significant proportion (more Rumpus over £126m LTIP bonus
than 50 percent) of a company’s shares to be placed Massive incentive share payouts to house-builder
in a trust on behalf of its workforce, EOTs give Persimmon’s senior executives under a maturing
employees a stake in the success of their company. uncapped Long-Term Incentive Plan (LTIP) were
Moreover, EOTs include substantial tax benefits if attacked by politicians, charities and corporate
the stake granted to employees represents at least half governance experts, who described it as “obscene,
of the business; in such cases the seller pays no corporate looting” and a reward based on “taxpayer
capital gains tax at the point of transfer. subsidies.” Nicholas Wrigley, chairman of Persimmon
“Since their introduction in 2014, there are now over and remuneration committee chair Jonathan Davie
150 EOTs in the UK, covering 12,000 people in firms announced that they were resigning as Persimmon
ranging from five to 2,500 employees. But while the started paying out £109m to ceo Jeff Fairburn on New
number of EOTs continues to grow, I accept that this Year’s Eve. In all, Fairburn stands to net £126m in
growth should be faster, and the IPPR has useful shares. Its finance chief Mike Killoran stands to
recommendations on how to achieve this. Additional pocket £88.5m and md Dave Jenkinson £63.2m.
tax incentives, for example, could plausibly lead to Persimmon said that the two were leaving in
more than 20,000 EOT companies by 2030, creating recognition of the fact they did not cap the
three million new employee owners. remuneration scheme when it was introduced in
“Empowering an ever-greater number of people to 2012.
own the firms they work for would put Britain on a Persimmon is one of the biggest beneficiaries of the
fairer footing and dispel some of the anger currently government’s Help-to-Buy programme, which has
directed at capitalism and the market economy. On its lifted sales and boosted house prices outside London.
own it is not enough – separate reforms are needed to Wrigley, a former banker, said he regretted not
rebalance ownership of land and property, for capping the company’s bonus scheme and was
example. And there are other models of ownership to leaving “in recognition of this omission.” The LTIP
be encouraged, such as social enterprises and was set up when house-builders were coming out
mutuality. of the doldrums of the financial crisis, and is now due
But as part of a broader programme to transform the to start paying out £800m shared among 140 senior
UK into a true capital-owning democracy, employee staff. It was designed to reward executives with shares
ownership has a key role to play.” worth up to ten percent of the company’s total value,
The IPPR report said: “EOTs enable a considerable depending returns to shareholders through dividends
share of the returns to capital (company profits) to be and other cash returns, with a potentially unlimited
distributed to labour, and for workers to exercise a payout. Shareholders have made a total return of more
much more significant role in the governance of the than 600 percent with reinvested dividends since the
firm. The growth of EOTs can be incentivised by a start of 2012. The LTIP was set out over a decade,
number of reforms, including stronger tax incentives rather than the usual two or three years, in order to
for the transfer of business ownership and for drive performance in the sector, which is affected by a
external investment and measures to build individual boom-and-bust cycle. When it was set up, 2,000 of
capital stakes for employees. At the same time reform Persimmon’s 5,000 employees had been laid off.
of pension auto-enrolment to increase minimum Since then, its share price has increased from £6.57 to
pension contributions would allow employers to c. £26.50 today. It is the third-highest climber in the
credit company shares to their employees’ pension FTSE 100 in the year to date, with its share price
accounts. This would boost pension savings rates, rising by 46 percent since January. About half
allow companies to use the working capital, and help Persimmon’s 16,000 new house sales in 2017 were to
transform the level of employee ownership in the UK. buyers who used the Help to Buy scheme.
Doubling the current rate growth of EOTs could see Stefan Stern, director of the left-leaning High Pay
over 21,000 companies majority owned by their Centre said: “Some of these elaborate pay structures
employees by 2030, with almost 3 million employee
owners.”
The chairman met Jo Swinson MP last month,
deputy leader of the Lib-Dems, who had ministerial
responsibility for the EOT. Mr Hurlston said: “As
deputy leader with the foreign affairs portfolio Jo
retains an informed and close interest in employee
ownership, both share and trust based. She is pleased
the EOT is meeting a real need and is interested in its
development as a attractive way of providing for
business succession. She wants to be kept in touch
4are so complicated that hardly anyone can understand
them, including the shareholders who vote and the
executives who profit from them. The world of fat cat
pay is full of myths. In reality big businesses are
complicated, and the crucial work is done by
thousands of people. Leadership is important, but not
so disproportionately important that a couple of
people at the top deserve to get paid so much vastly
more than everybody else. Share prices move about
for a lot of reasons, very few of which can be traced
back to the individual actions of a single person,
whatever their level in the organisation. Yet this is
the bogus premise on which executive pay packages
of the firms named, the aim being to publicly track if
are constructed.”
and how firms are responding to shareholder
Ashley Hamilton Claxton, head of responsible concerns. “The data reveals the true scale of investor
investment at Royal London Asset Management, concern and shows shareholders flexing their muscles
said that the resignations ”acknowledge the mistakes by exercising their votes,” added the IA.
made in the construction of the plan”. She added:
“Let this be a warning signal to pay committees in
the UK that poor pay decisions can have long-term Share plans news appeal
consequences.” Newspad asks share plan advisers and issuers
Last March, shareholders rejected Crest Nicholson’s (sponsors) alike to email us news of your all-
remuneration report by 58 percent at its agm, employee share plans. Your news could involve
although the company continued with its bonus plan, extensions or renewals to existing plans or about the
while Berkeley Homes has a similar remuneration installation of new plans. Alternatively, your news
scheme to Persimmon, meaning that chairman Tony might concern a vesting of SAYE options or the
Pidgley received a bonus of £29m this year. impending fifth anniversary of a Share Incentive Plan.
We particularly like to hear about Sharesave payouts
Persimmon said: “The board believes that the
and how people spend them. Newspad runs stories
introduction of the 2012 LTIP has been a significant
about executive equity schemes too, but only when
factor in the company’s outstanding performance
they involve equity incentives (rather than cash) and
over this period, led by a strong and talented
more than 100 employees. Please email your news
executive team. Nevertheless, Nicholas and Jonathan
asap to Fred Hackworth, editor, newspad, at:
recognise that the 2012 LTIP could have included a
fhackworth@esopcentre.com
cap. In recognition of this omission, they have
therefore tendered their resignations. The LTIP
scheme was approved by 85 percent of shareholders Linklaters warns on trust registration
in 2012. It is designed to drive out-performance Linklaters has guidance from HMRC on new anti-
through the housing cycle and to incentivise the money laundering rules and is setting out more
management to deliver the capital return, grow the information to help trusts decide whether they should
business and increase the share price. Unlike many be registered or not. Trusts only need to be registered
other schemes, it extended to around 150 executives.” if they have a UK tax liability. For EBTs and SIPs the
*More than 140 listed companies, including JD relevant taxes are stamp duty reserve tax, income tax
Sports, Sky Group, William Hill, Ladbrokes and capital gains tax. Inheritance tax is on the list, but
Coral and Morrisons appear in a sin bin register employee trusts are not usually within this tax regime.
unveiling businesses have faced major investor EBTs, wherever sited, generally waive dividends, so
revolts last year. The Investment Association (IA), they are unlikely to have income tax liabilities.
the trade body for Britain’s £7tn funds industry, Offshore trusts do not incur CGT on any share
published the world’s first public register naming all transfers, but Stamp Duty Reserve Tax is generally
the companies where at least 20 percent of payable when trustees purchase shares. So SIPs and
shareholders opposed one or more of the board’s EBTs may be caught.
resolutions this year. Almost four out of 10 (38 Trustees of trusts that incur a UK tax liability in the
percent) significant revolts at agms during 2017 were 2016/17 tax year must register the trust on HMRC’s
related to pay. Thomas Cook, for example, scrapped online Trusts Registration Service (TRS). This
a bonus scheme this year after more than a third of register is not public. If the trust has previously been
investors rejected its plan. Bradford-based Morrisons registered with HMRC using form 41G, the trustees
suffered an investor backlash over its plans to bump will need to register the trust again using the TRS.
the pay of ceo David Potts. Executive reward was the Once registered, the trustees must update the
main reason for a shareholder dissent, but the re- information to ensure it is accurate, but only if they
election of company directors came second with 32 have incurred a UK tax liability in the previous tax
percent of resolutions on the register due to director year. There are two deadlines:
issues. The register will include responses from some New trusts which incurred a UK tax liability for
5the first time in the 2016/17 tax year must be have reformed their laws to try and secure a bigger
registered by January 5 this year share of the market,” said the Commission. The
Existing trusts with a UK tax liability must be project, part of its three-year work programme, will be
registered by January 31. a scoping study investigating English and Welsh trust
HMRC has just told the Institute of Chartered law. The aim will be to see how the law can be
Accountants in England & Wales that it will not modernised to benefit everyone and to help ensure
impose any penalties if the trusts are registered by Britain’s trust services are competitive in the global
March 5, though it has not officially extended the market. STEP has supported the Commission in
deadline. Linklaters reported considerable confusion identifying areas of English trust law that could be
and alleged inconsistencies from HMRC over the improved. ‘Trusts continue to play an important role
deadlines which, in future years, will be October 5 in our society by allowing individuals freedom of
and January 31 respectively. The required choice in who should inherit their assets and to
information is: provide for and protect vulnerable beneficiaries,’ said
Robin Vos TEP, Chair of STEP’s UK Technical
Name, date and place of administration of the
Committee. ‘I am delighted that the Law Commission
trust, its tax residence, details of the settlor has recognised this in its decision to consider how
(company setting up the trust), trustees and their trust law in England and Wales can be improved and
advisers has, at the same time, acknowledged the significant
Trusts accounts showing its assets and value contribution which English trust law makes in an
when acquired by the trust international context.’
Details of the beneficiaries.
Special rules apply to disclosure of the beneficiaries, GVC shareholders rebel
as many EBTs and SIPs will have large classes of More than a quarter of shareholders in online
beneficiaries. If the number of named beneficiaries gambling company GVC rebelled against the pay of
exceeds ten, the trustees will only need to identify the its senior management just a week after it bid for rival
class of beneficiaries and provide the names of Ladbrokes Coral. About 27.5 percent of investors
individual directors and key employees. voted against a new directors’ remuneration policy
Directors and key employees are the staff responsible and 26.4 percent objected to a new annual and
for running a business and making key decisions, or deferred bonus plan. This level of opposition – well
having a financial stake or ownership in the business. above the plimsoll line of 20 percent - should put
Details of a beneficiary (who is not named as a key GVC into the Investment Association’s Sin Bin list.
employee or director) need only be given if they Yet GVC has delivered total shareholder returns of
benefited from the trust after June 26 last year. The 3,000 percent in the past decade – partly through its
rules are complex, and include record-keeping aggressive acquisition strategy, which has seen it
(potentially even where there is no obligation to consume larger rivals Sportingbet and Bwin. However
register). Failure to comply can result in civil and some investors believe the pay of its top brass needs
criminal liabilities. Depending on where your SIP/ resetting. In its 2016 financial year, ceo Kenny
EBT are sited and hold their assets, some or all the Alexander saw his pay rocket 430 percent to £19.5m
new rules may apply. You should ensure that your largely driven by the company’s share price rise,
trustees are: aware of the deadlines; and able to fuelling the value of his share options. GVC said in its
provide the required information to HMRC. Re last annual report the impact of the share price rise in
queries, please contact Alex Beidas, Graham 2016 had contributed 79 percent of the value of Mr
Rowlands-Hempel, or Mirit Ehrenstein at Alexander’s reward.
Linklaters.
Xavier Rolet, ex-ceo of the London Stock Exchange
Trust law (LSE), was in line for a golden handshake of up to
The Law Commission is to make recommendations £12.6m, as he left the company after a bruising
to amend the trust law of England and Wales, with a boardroom row. The LSE said Mr Rolet had “agreed
view to attracting new business to the UK in a to step down with immediate effect” at the board’s
competitive world. The current legal framework, request. He had been due to leave next year, but one
based on the Trustee Act 1925, has been left behind of the LSE’s biggest shareholders claimed that he was
by the development of new legal structures elsewhere forced out. Mr Rolet was paid his salary of £800,000
in the world, the Commission argues – not least the for 12 months of gardening leave, and a potential
British overseas territories and Crown Dependencies, bonus worth £1.6m. Rolet, who led the LSE for eight
as well as Singapore and New Zealand. ‘Trusts are a years, also had a number of long-term incentives from
significant source of business for the City of London which he could theoretically earn £10.2m. The move
and many international corporations use English law was aimed at drawing a line under a bitter dispute
and courts to govern their arrangements’, says the over who should run one of the UK’s most important
Commission. Other countries have come up with new financial companies. It was announced too that the
trust, and trust-like, structures to meet demand, and LSE’s chairman, Donald Brydon, who faced a
6shareholder vote on whether to remove him from the £433,000 a year, as Sir Christopher Snowden became
board, would step down in 2019. one of the UK’s highest-paid university leaders.
“World-class capable leaders are needed to ensure
Uni snouts in the trough that the UK’s universities become one of the stars in
The government is to clamp down on university vice- the UK’s post-Brexit export strategy,” said Gill Rider,
chancellors’ pay, as uproar grew over details of their chair of the university’s council. Snowden’s pay in
massively increased reward packages during the past 2016-17 was revealed as part of regulatory filing and
two years. A fair remuneration code, due to be showed a sharp rise from the £352,000 he received in
announced in January will limit vice-chancellors’ the previous fiscal year. The university said his pay in
salaries to 6.4 times that earned by their academic the previous year was for just ten months in post and
staff. claimed the additional £80,000 was not a pay rise.
While sanctimonious guff is spoken about ‘massive’ The Universities and College Union (UCU), which
rises in executive reward, the emerging scandal over represents academic staff, said the figure was
pay-troughing by senior public sector figures like “extraordinary”, adding that it was the largest ever
vice-chancellors, who in reality are paid by pay deal for a British university chief. Sally Hunt,
taxpayers, has shocked many. The difference general secretary of UCU, said: “This simply cannot
between the two categories is that whereas private be allowed to continue; we need an urgent overhaul
sector executives can be sacked at a moment’s notice, of how senior pay and perks are determined, and how
public sector chiefs would either need to steal the our universities are governed. Clearly, when it comes
office safe or murder a colleague before being forced to senior pay and perks in our universities, many vice-
out. chancellors and senior staff look like they are living
The largest ever golden handshake in the educational on a different planet. The time has come for proper
world was paid by Bath Spa University, where transparency of pay and perks in higher education
outgoing vice-chancellor was handed £808,000 in her and for staff and students to be given a seat at the top
final year reward deal. Prof Christina Slade, who left table.”
in August after five years in post, received £429,000 Students now know what their still rising tuition fees
as ‘compensation for loss of office’ on top of her are spent on – socking great annual reward rises for
£250,000 salary. The university’s accounts reveal VCs, including luxury car loans, bumper relocation
that, in addition, she received £89,000 of pension allowances and huge pension contributions.
contributions, £20,000 in housing allowance and Belatedly, universities minister Jo Johnson said he
other benefits-in-kind worth £20,000. would introduce pay ratios to curb vice-chancellor
Meanwhile, professors at nearby Bath University pay and announced that a new regulator was about to
were in an open revolt against the golden goodbye end the gravy train of top academic pay rises, revealed
awarded to their vice-chancellor. Scores of academics The Telegraph. The code, to be issued by the
signed a letter to Prof Dame Glynis Breakwell, the Committee of University Chairs (CUC), will ban vice-
chancellor and the chair of council, warning that the chancellors from sitting on their remuneration
row over the vice-chancellor’s pay packet had led to committees, which decide how much to pay them.
a “reputational crisis” for Bath University. They The committees will be made to publish an annual
urged Dame Glynis, who is the highest-paid vice- report and will need to disclose the salaries of the vice
chancellor in the country and the chair of council to -chancellor and their highest earners. They will have
step down from their posts immediately or risk to justify why pay increases have been awarded. The
further “embarrassment” to the institution. The decision came with a warning that current
intervention came as the Higher Education Funding “governance arrangements” would be overhauled in
Council for England, the universities watchdog, the coming months.
announced it was making enquiries into the In a similar vein, ministers have informed fire
retirement terms of Dame Glynis, after receiving a brigades nationwide that it will no longer tolerate fire
complaint that the university had broken its own chiefs resigning with large payoffs, only to rehire
guidelines by awarding her so much. Dame Glynis, themselves to neighbouring forces on a consultancy
whose salary and benefits totalled £468,000, basis weeks later. About 250 ex fire chiefs have
announced last month that she intended to stand pursued this lucrative route in the past few years.
down after facing mounting pressure to resign amid a
row over her pay packet. Staff were furious after it Announcements under the MAR, Disclosure,
emerged that she would enjoy a six-month paid Guidance & Transparency Rules
sabbatical and a golden handshake of £265,000. She *Under the terms of the Bellway plc Employee Share
will stand down as vice-chancellor in August 2018, Trust (1992), 16,586 ords of 12.5p each (including
but still enjoy her full salary for a further six months dividend equivalent shares accrued between grant and
while she is on a sabbatical, and will have a car loan vesting) were transferred on December 4 to Edward
of £31,000 written off too! Ayres free of charge under the Bellway (2008) Share
The University of Southampton claimed that ‘post- Matching Plan. Mr Ayres immediately thereafter sold
Brexit strategy’ justified paying its vice-chancellor 7,812 Bellway 12.5p ords at £34.70 per share to cover
7income tax and NI liabilities. The balance of 8,774 and employees of companies in the Jardine Lloyd
shares and the 3,859 Investment Shares he held in the Thompson Group, including certain UK subsidiary
plan were transferred to Mrs Jane Ayres. companies. This includes the shares allocated to the
*AIM listed Ceres Power Holdings granted share five directors.
options on December 6 under the HMRC approved *Maintel Holdings plc was notified on November 28
Ceres Power Sharesave Scheme, which was that the Maintel Holdings Share Incentive Plan (SIP)
introduced to encourage wider employee share acquired 692 ords of one penny each in the company,
ownership in the company. Options to purchase a at a price of 745p per share. The SIP sold 55 shares on
total of 2,265,603 ords of a nominal one penny were behalf an employee. Twenty shares each were
granted. These options will be exercisable between purchased at £7.45 per share under the SIP on
February 1 2021 and July 31 2021 at an exercise November 28 for PDMRs (Directors/Persons
price of 10.6p per share. Included is a grant to Discharging Managerial Responsibilities) R Grig, S
Richard Preston, Ceres Power’s cfo, who has been Legg and K Stevens respectively and are held by the
granted options to purchase 84,905 ords. Following trustees of the SIP. Maintel said that E Buxton, N J
this grant, Richard Preston now holds options over Taylor and W D Todd, being PDMRs, are trustees of
6,830,679 ords. the SIP although they were not beneficiaries of this
*Chapel Down plc announced that, following the transaction.
exercise of share options under Chapel Down’s *National Express Group (NEG) was notified that
employee share option scheme, application was made on December 8, First Names Corporate Services Ltd,
for 4,500 new ords of five pence each to be admitted acting as trustee of the National Express Group
to the NEX Exchange, for which trading began on EBT, purchased 1,000,000 ords of nominal value five
November 16. Following admission of the new ords, pence each in the company at an average price of
the company has 101,020,948 ords in issue with each 369.2 pence per share. The trust holds shares for the
share carrying the right to one vote. benefit of the employees, in particular for satisfying
*Close Brothers Group announced that a the future vesting of outstanding awards made under
programme to purchase shares with an aggregate NEG’s various employee share incentive plans. Dean
market value equivalent to £7.4m, had commenced in Finch, Chris Davies and Matt Ashley, as executive
November. This is in line with the group’s policy of directors are amongst the potential beneficiaries of the
hedging its exposure to executive share awards and shares held in trust. After this transaction, the trust
options granted under its all-employee share option held 1,643,746 ords for the above purpose,
schemes. The share purchase of Close Brothers ords representing 0.3 percent of the company’s issued
of 25p each was taking place within the limitations of share capital with voting rights.
the authority granted to the board by the recent agm -
*Numis transferred, on December 13, 2,000,000 (1.88
that the maximum number of shares to be bought
percent) of its ords from Treasury to the Numis
back was 15.2m. The purpose of the share purchase is
to meet future obligations arising from the group’s all Corporation EBT No.2, for the funding of scheduled
-employee share option schemes. The programmed award vestings under Numis’ various employee share
share purchases will end no later than January 31 schemes. The transfer price was nil. As a result, the
2018. The shares purchased will be held in Treasury total number of Numis shares held in Treasury
and used to meet future share demand from the is 10,061,088 (9.28 percent), the number of ords in
group’s employee share plans. The group has entered issue remains the same and the total voting rights in
into non-discretionary instructions with Link Asset the company are 108,377,448.
Services to conduct the share purchase on its behalf *Ocado ceo Tim Steiner participated in the all-
and to make trading decisions under the programme employee Ocado Share Incentive Plan (SIP),
independently of the group. approved by shareholders at the company’s agm in
*GlobalData plc announced that on December 14, it May 2011. Under it, employees are able to purchase
had purchased 5,000 ords at 590 pence per share. The ords in Ocado of a nominal two pence each at market
shares will be held in treasury, in order to satisfy the value using deductions from salary each month, and
exercise of share options under the company’s receive allocations of matching ords. Mr Steiner
employee share option plan. Following the purchases, purchased 59 partnership shares at a price of £2.511
GlobalData has 102,346,422 ords in issue with per share and was granted eight free matching shares.
180,000 held in treasury. These shares are held by the EBT for the SIP.
*Jardine Lloyd Thompson Group plc was notified *AIM listed Smart Metering Systems plc issued
that the trustees of the company’s Share Incentive 688,566 ords of one penny each relating to the
Plan (SIP) allocated 11 shares of five pence each in exercise of employee share options under both the
the Company to each of five directors. These Shares approved and unapproved Company Share Option
have been acquired by the trustees of the plan via Plan (CSOP). The new ords have been admitted to
market purchase at a price of 1277.78p per share. The trading on AIM under the block listing facility. The
trustees purchased in total 5,898 JLT Shares at the Company has almost 91m ords in issue. SMS does not
same price, on the same date, on behalf of directors hold any shares in treasury.
8Shareholder democracy? artificially boosted by currency movements or other
The Financial Reporting Council (FRC), the factors unconnected with the skill and success of the
regulator who oversees the corporate governance executives.
code for listed companies, launched a consultation to
give employees a voice in the boardroom. The FRC No financial passporting post Brexit
consultation suggests three options – to assign a non- The UK cannot have a special deal for the City of
executive director to represent employees, to create London, the EU’s chief Brexit negotiator told the
an employee advisory council or to nominate a Guardian newspaper, dealing a blow to Theresa
director from the workforce. TUC general secretary, May’s hopes of securing a bespoke trade agreement
Frances O’Grady, said it was “good that the code with the bloc. Michel Barnier said it was unavoidable
recognises the key role workers’ voices play within that British banks and financial firms would lose the
businesses. The next step is for the corporate passports that allow them to trade freely in the EU, as
governance code to recognise the important role that a result of any decision to quit the single market.
unions play in the long-term success of companies,”
“There is no place [for financial services]. There is
she added. The code operates on a comply or explain
not a single trade agreement that is open to financial
basis so that companies which ignore its provisions
services. It doesn’t exist.” He said the outcome was a
must provide an explanation.
consequence of “the red lines that the British have
The consultation – open until February – includes chosen themselves. In leaving the single market, they
plans that would require firms to publish their gender lose the financial services passport.”
balance too, building upon recommendations in the
This will be bad news for any UK based multinational
review by Sir Philip Hampton and Dame Helen
company which, post Brexit, wants to install a Europe
Alexander, who died in August, in to boardroom
-wide all-employee equity plan. For example, current
diversity. The FRC proposed that these numbers
exemptions from the EU Prospectus Directive would
include the first layer of management below the
fall away if the UK is refused further seamless
board and apply to all companies and not just the 350
financial services transactions within member states
biggest listings on the stock market.
(passporting).
The proposal that companies which have a 20 percent
The stark declaration quashes the hopes of the Brexit
vote against their remuneration report would have to
secretary, David Davis, for a unique trade deal that
explain how they intend to discuss the dissent with
would include financial services. The Brexit
shareholders – as discussed at the Centre’s recent
secretary has called for a “Canada plus plus plus” deal
share schemes symposium- has been actioned already
with the EU, a reference to the free trade agreement
by the IA (see separate story).
struck between Ottawa and Brussels in 2016, but with
The FRC recommended that all companies with a the crucial addition of financial services.
premium listing of equity shares, from their
In an interview with European newspapers, including
accounting periods beginning on or after January 1
the Guardian, Barnier said:
2019, establish a remuneration committee of at least
three independent non-executive directors. “The A trade deal could be agreed within a two-year
remuneration committee should… oversee transition period, but would have to be ratified by
remuneration and workforce policies and practices, more than 35 national and regional parliaments.
taking these into account when setting the policy for The UK could not stop Brexit unilaterally, arguing
director remuneration,” said the consultation that overturning the decision to leave would require
document. A description of the work of the the consent of 27 EU member states – a view at odds
remuneration committee in listed firms’ annual with one of the authors of Article 50, Lord Kerr.
reports should include “an explanation of the The UK must follow all rules and regulations of the
company’s approach to investing in, developing and EU during the transition period, including new laws
rewarding the workforce and what engagement with passed after the UK has left.
the workforce has taken place to explain how The UK could negotiate trade agreements with the
executive remuneration aligns with wider company rest of the world during the transition, but they could
policy”. not come into force.
Long-term incentive plans (LTIPs) will soon get even However, the Bank of England retaliated by
longer – but long-term board appointments will have unveiling plans to allow European banks to operate in
to get shorter, according to the new UK Corporate the UK as normal post-Brexit. Banks offering
Governance Code, as published by the FRC. Under wholesale finance - money and services provided to
the new Code, executives at UK-listed companies businesses and each other - would continue to operate
will be required to hold on to LTIPs, or bonuses paid under existing rules. It means EU banks operating
as shares, for at least five years – rather than the through branches in the UK can continue without
shorter periods that still apply at a third of FTSE 100 creating subsidiaries - an expensive process.
companies. Equally significant, remuneration Subsidiaries are forced to hold their own shock-
committees will be able to reject pay and bonus absorbing capital which can’t cut and run - they
packages when a company’s performance has been essentially become UK companies. Changing from a
9branch to a subsidiary could cost billions for a bank 29 2019, thus the freedoms available therein, in
like Deutsche Bank, for example, which employs particular, cross-border financial services (e.g.
9,000 people in the UK. seamless transaction ‘passports’) will not apply to UK
Currently, banks based anywhere in the EU can sell institutions. Theresa May proposed that the UK
services to anywhere else in the EU thanks to the should stay in the Single Market and the Customs
financial services passport. Union during the proposed two year transition period,
A tit-for-tat response to Barnier’s threat – forcing EU but she did not say that the UK would be bound to any
bank branches in the UK to become separately rules which the EU adopts after March 29 2019
capitalised subsidiaries - would have encouraged during the transition period. She proposed that the UK
European banks to pull out of London - gradually should not be stopped from negotiating free trade
eroding its pre-eminence as a financial centre. On the agreements with third countries during the Transition
other hand, London acts as the wholesale bank to the Period, but it was doubtful whether this would be
EU and access to its expertise and capital is highly accepted by the EU.
prized. “Some may see this decision as surrendering *Her speech did not recognise the EU proposals
a trump card that should have been held back for the regarding grandfathering existing trades in goods,
tough negotiations ahead. However, many thousands customs arrangements, administrative and court
of highly paid people work in the London branches of proceedings. Nor did it recognise the role and
big EU banks. That creates knock on jobs in other importance which the European Court of Justice
professions like accountancy and law. Those people (ECJ) places on the competences and rights of the
pay a lot of tax to the exchequer too. Furthermore, ECJ regarding international agreements when it
services sold by the UK branch of a French or comes to their interpretation in respect of rules
German bank to a third country like the US, for stemming from the acquis communautaire. This was a
example, count as UK exports - something the key ‘red line’ for the Tory hard-line Brexiteers. It
government is keen to maximise,” said Simon Jack of remains to be seen how any relevant dispute
the BBC. resolution mechanisms implemented for the purpose
*The transition period, which permits a status quo of the transition period would be qualified or rejected
after the UK leaves the EU will not continue beyond by the ECJ when called upon to decide about the
December 31 2020, Brussels announced. This constitutionality of the relevant arrangements for the
deadline is three months shorter than envisaged by transition period.
the May government. Terms of the transition period, “Leaked documents from EU negotiator Michel
which the UK calls an implementation phase, have Barnier suggest that Britain will get nothing more
yet to be negotiated between the two sides. The EU than a standard free trade agreement (FTA) for basic
says the UK will have to continue to follow its rules goods but not services,” wrote Ambrose Evans-
and cannot adopt an “a la carte” approach. Pritchard in The Telegraph. “This might well be less
*The Prime Minister’s speech last September in than Canada’s Ceta deal – perhaps ‘Canada Dry’ –
Florence and Michel Barnier’s response clarified that since services are a mixed competence and require the
from the EU’s perspective, the UK will be a ‘Third backing of all member states. The revelation is that
Country’ from March 30 2019, when the UK leaves Germany’s Angela Merkel was willing to give up
the EU. The two year transition period proposed by final ratification of Ceta in order to forge a coalition
Theresa May in her speech requires an agreement to with the Greens. If Berlin can be so frivolous in
be negotiated and concluded between the EU and the dealings with a Nato ally like Canada, Britain should
UK before March 30 of that year, when all count on nothing. An FTA deal does not need
international agreements, like Free Trade ratification but is worthless. It preserves the EU’s
Agreements, Comprehensive Air Transport unfettered access to our goods market and safeguards
Agreement, Horizontal Air Transport Agreements, their £80bn trade surplus, but offers no reciprocal
Fishery Agreements, and more than 700 other access on services where we have a surplus. It hangs
agreements the EU has entered into with other the City out to dry.
countries around the world will not apply to the UK “We should opt for a WTO framework, and make the
any longer, because any transition period agreed £50bn divorce bill contingent upon EU common sense
between the EU and the UK will only apply between over airline landing rights, Euratom, food trade, and
the EU and the UK - but will not keep alive the UK’s other cliff-edge matters. There were only two options
status under the international agreements of the EU for the UK after Brexit: a WTO clean break, or a
with other countries worldwide, unless those other Norway package in the European Economic Area. I
countries agree. This will affect, for example, the US- preferred the softer Norway route, a compromise that
EU Air Transport Agreement of 2007, the European might have preserved high access to the EU single
Common Aviation Area Agreement of 2006, the market, with passporting rights for the City. We
European Economic Area (EEA) Agreement with would have been outside the customs union and
Norway, Liechtenstein and Iceland and the bilateral therefore able to strike other trade deals. Sadly, it is
agreements the EU has entered into with Switzerland. too late.”
The UK does not intend to join the EEA after March Brogues on the ground: Frankfurt and Dublin are the
10leading destinations for banks choosing to relocate Pierre Moscovici, to concede it was as yet “an
away from the UK after Brexit, a board member of insufficient response.”
Germany’s Central Bank told Germany’s Der Spiegel The blacklist includes South Korea, Mongolia,
magazine. Andreas Dombret said jobs shifted away Namibia, Panama, Trinidad & Tobago, Bahrain and
from London will benefit Dublin and Frankfurt the the United Arab Emirates. The EU claimed that these
most. “Above all, the big American banks are countries had failed to match international standards
concentrating on these two cities”. Twenty banks and had not offered sufficient commitments that they
have chosen Frankfurt as their new EU hub, claimed would change their ways during talks leading up to
Dombret, who is responsible for banking and publication of the list.
financial supervision at the Bundesbank. He said Of the jurisdictions with links to the UK – Guernsey,
that banks are keen to move entire operations away Jersey and the Isle of Man along with Bermuda and
from London, as opposed to simply shifting key areas the Cayman Islands – have been placed on a so-called
inside the EU. Deutsche Bank is likely to shift ‘grey list’ – meaning that they had committed to
thousands of jobs to Frankfurt as part of a post-Brexit reform their tax structures by the end of this year
scenario. Bloomberg reported that an initial 4,000 (2018) to ensure, for example, that firms are not
jobs are expected to shift to the continent. Deutsche simply using their zero percent corporate tax rates to
Bank may move £268bn of balance sheet assets out shield their profits. These jurisdictions will be
of London as it looks to build its Frankfurt hub. regularly monitored by the EU. The Crown
Goldman Sachs and Morgan Stanley are scouting dependencies have apparently promised to introduce
for offices in Frankfurt. Dublin too has attracted substance requirements, aimed at meeting the EU’s
significant interest from banks looking to maintain an concern that some of these jurisdictions “facilitate
EU base. JPMorgan is buying a building in the Irish offshore structures which attract profits without real
capital capable of holding 1,000 staff from March. economic activity.” Whilst the form this commitment
Bank of America has chosen Dublin as its preferred will take remains unclear, it highlights ways in which
EU hub too. jurisdictions on the grey list can avoid being placed
Only HSBC, among the bigger players, has chosen on the blacklist in future. Moscovici, has called on
Paris to be its future European HQ. However, France member states to set a precise timetable to examine
won a consolation prize – a third round EU members’ the grey-listed countries’ commitments in six months
ballot, beating Dublin, to host the European time.
Banking Authority - much to the delight of
The European Commission produced a scoreboard
President Emmanuel Macron. An office in La
under which country jurisdictions were examined
Défense and another in central Paris are possible
against objective economic, financial, stability and tax
locations for its new 200 strong EBA headquarters.
Staff transfers from the doomed London HQ will governance indicators. Risk indicators include
begin before the March 2019 Brexit. This means that transparency and exchange of information,
Paris will host both EU authorities responsible for preferential tax regimes and no corporate income tax
setting banking standards, as well as the European or a zero corporate tax rate. The Commission’s
Securities and Markets Authority, the agency in scoreboard was a first basis for the European
charge of regulating financial trading. Blackrock, the Council’s Code of Conduct Group to decide which
world’s largest asset management firm, reportedly jurisdictions would be relevant to screen in more
shortlisted both Dublin and Frankfurt as potential detail. It further measured the transparency of the
new EU bases. selected country’s tax regime, their tax rates and
whether their tax systems encourage multinationals to
unfairly shift profits to low tax regimes to avoid
WORLD NEWSPAD higher duties in other jurisdictions. In order to avoid
being placed on the blacklist in the future, all
EU blacklists ‘tax havens’ jurisdictions must comply with the EU fair taxation
rules and must not offer preferential measures or
The EU named and shamed 17 countries in its first
arrangements that enable companies to move profits
ever tax haven blacklist and a further 47 remain to be
categorised, in an attempt to clamp down on the to avoid levies. Companies must implement anti-
estimated £506bn lost to aggressive worldwide tax profit-shifting measures and meet the transparency
avoidance every year. The crown dependencies of standards previously set by the Organisation for
Economic Co-operation and Development
Jersey, Guernsey and the Isle of Man are among
(OECD).
those which await categorisation but are confidently
believed to be on track. These new measures will have an impact on the
conduct of anti-money laundering diligence in
The move was hailed as a vital first step, but the
circumstances where entities are based in or have
failure of the member states to agree on any sanctions
significant operations in blacklisted jurisdictions, and
for those on the blacklist provoked the European
to a lesser extent the same is true for operations in
Commissioner for economic and financial affairs,
11You can also read
