Wetherspoon (JDW) stock falls amid shareholder spat
By Jenni Reid
08:25, 30 November 2021
British pub chain JD Wetherspoon (JDW) released an official statement today in a continuation of its public dispute with some of its investors over the tenure of non-executive directors (NEDs) as members of its board, which it says are taking an “inflexible interpretation” of corporate governance rules.
The dispute relates to recent votes against the reappointment of two of Wetherspoon’s NEDs and the nine-year limit recommended in the UK Corporate Governance Code.
Investors did not seem to enjoy the latest round of mud-slinging, however, with Wetherspoon stock falling by 2.6% to £86.34 in early trading on the London Stock Exchange.
Back-and-forth debate
Last week, Wetherspoon said that some investors were taking a “box-ticking approach to corporate governance and were not adhering themselves to the rules they required of investees”.
It accused shareholder Fidelity International of hypocrisy for voting against the reappointment of NEDs over the nine-year rule.
The fund manager defended its adherence to the rules in a recent Daily Telegraph report by saying that “a majority of the Fidelity International Limited board members joined the board within the past nine years”.
Wetherspoon today hit back saying that it was impossible to verify the length of service of Fidelity International’s website and that the investor’s public documents had no mention of adherence to a nine-year rule.
It also said Fidelity’s remarks in the Daily Telegraph did not necessarily mean it was compliant with the UK code that stipulates that a majority of independent non-executive directors must have joined in the last nine years, not merely a majority of board members.
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The pub chain has also called into question the relationship between Fidelity International and Wetherspoon shareholder Fidelity Investments, which voted against chairman Tim Martin and the company’s three executive directors, but in favour of all NEDs, including two opposed by Fidelity International.
Wetherspoon said in its previous release that Fidelity Investments did not have a majority of independent directors and did not transparently disclose the length of tenure of its four directors.
A Fidelity International spokesman told the Daily Telegraph that the two firms were “completely separate entities”.
Wetherspoon today said this was “stretching a point” since Fidelity Investments CEO and chairman Abigail Johnson was a director of Fidelity International.
Capital.com has contacted Fidelity Investments and Fidelity International for comment on Wetherspoon’s latest statement.
Favourable response
Regarding the nine-year limit, Wetherspoon argues that the UK corporate governance code states that individual company circumstances can be taken into account, and that experienced non-executive directors are needed.
Today, Wetherspoon founder and chairman Tim Martin commented: “Wetherspoon has been a PLC [public limited company] since its flotation in 1992. During that time, relationships with shareholders have been generally harmonious. We recognise that sensible corporate governance is necessary and beneficial.
“However, an inflexible interpretation of the nine-year rule, and other rules, can result in perverse outcomes and has generally resulted in inexperienced and vulnerable boards of directors in the UK – with, for example, almost no NEDs on boards today who have had experience of the last recession (2008–2010) at their current company.
“Wetherspoon has explained its position and has had a generally favourable response from institutional shareholders to its approach.”
Preach
Martin added: “These sorts of issues, for many PLCs, seem to stem from the way in which the corporate governance personnel, who work for major institutions, cast their votes for annual general meetings.
“We believe it's important for the future of our business, and for the UK economy, for the comply or explain aspect of the Code to be more closely adhered to, in practice, by institutional investors – and for investors to practice what they preach.”
Wetherspoon stock has fallen 15.96% this year after reversing gains made during a summer rebound in hospitality, and after a November trading update revealed sales had fallen below pre-pandemic levels in recent months.
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