Correspondence: 20/03/2002 - to Sir Howard Davies, FSA 38 Swains
Lane
London N6 6QR.
Sir Howard Davies
Chairman
Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS
T: 020 7676 3000
F: 020 7676 1011
h.davies@fsa.gov.uk
20th March, 2002.
Dear Howard,
You may recall
that a year ago you expressed agreement with some of the ideas about mutuality
I put in a submission to Treascom. I attach recent letters I wrote to John Tiner
spelling out the continuing failure of mutuality at the Equitable, along with
a letter I wrote to Treves explaining why I was withdrawing my application for
board membership.
We want mutuality
to provide effective accountability to members, which means two things:-
-
the requirement
on a board to provide a full explanation of what it is doing, and not to
hide its misjudgements behind a smokescreen of specious reasons for not
providing information as Thomson appears to have done to hide the contents
of the financial review June 2001
-
an effective
way for members to elect member representatives to the board. The constitution
of the Equitable as a company coupled with its archaic articles of association
and voting by resolution mean that:-
-
members
cannot put down motions at an AGM
-
members
cannot effectively call an EGM
-
*through
proxy voting the incumbent board/chairman can de facto control new board
appointments
-
In
consequence the Chairman/Board can effectively gerrymander the voting (as we
imagine Treves will do at the next AGM on May 27th to ensure he continues
to have a compliant board including an "appointed" member representative)
To these ends
we would like to see ACTION by the FSA to improve the governance of mutual
life offices. We want to see the following provisions set out in legally enforceable
form:-
-
analogous
to the Building Societies Act of 1986 we want a definition of the maximum
number of members required to call an EGM of (say) 0.1%, and to put a motion
to an AGM of 0.05%
-
a minimum
number for proposing people for election to the board. The number would
vary by size of membership, but might be 50 for a Society the size of Equitable.
There are two reasons for this:-
-
to avoid
frivolous applications
-
to avoid
the incumbent Board splitting "independents'" votes
-
a ban
on voting by resolution, which requires members to vote for and against
each resolution and allows proxy voting. Indeed if a voting paper is signed,
but the votes are left blank, the voter is deemed to give the chairman power
of proxy. The Building Societies Act 1986 allows for both voting by resolution
and postal voting, which the Nationwide adopts. Under postal voting the
yes votes for each candidate are totalled and those with the most votes
are appointed. There is no proxy voting and signed blank forms are void)
-
the publication
on a website of all matters of significant commercial interest unless those
matters are adjudged to be genuinely commercially confidential in the interests
of the members. Where there is a dispute between members and a board over
whether a matter is confidential or not, there should be a simple means
of resolving the dispute on a level playing field which precludes the board
employing a squad of lawyers and barristers to outspend members. The means
might be a reference to the FSA or a county court with provision for no
award of expenses.
We are aware
that the board of Equitable is not alone in gerrymandering elections. I read
on Motley Fool that Ronnie Sloan, actuary and independent board candidate at
Standard Life has for the second year running withdrawn his application in protest
of the proposed voting procedure despite his seemingly suitable qualification.
To paraphrase from his press release the obstacles to his election:-
-
it would
be necessary first to vote off one of the existing directors standing for
re-election
-
The chairman
would not agree to abstain from casting all discretionary proxies in favour
of existing directors (thereby thwarting the above), nor from casting them
against Sloan if his resolution ever came to a vote
Thus far the
regulatory authorities have seemingly done nothing for the members of
the Equitable - I hope you will at least define a regulatory code with legal
force to ensure effective mutuality.
Yours sincerely,
ALEX HENNEY
c.c. EMAG Commiteee and
website
ELAS Board
Mr. Andrew Bolger
Ms. Liz Dolan
Mr. Christopher Chope MP
Mr. Ron Sandler
Ms. Liz Kwantes
Mr. Ron Bullen
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