Standard Life’s Essar outburst shows shareholder activism has come to the UK

Standard Life's head of equities David Cumming is out of the country today but before he left these shores he did something UK institutional shareholders rarely do: He publicly castigated the majority owners of the London-listed group Essar Energy for a takeover attempt he described as an example of "cynical opportunism".

 

His public intervention, coming as it does from a well-regarded shareholder with nearly three per cent of the equity, will provide the greatest possible support to the non-executive directors who face the unenviable task of standing up to the Ruia family, one of India's richest, and opposing a deal which values the group's equity at less than a fifth of its value at the time of its flotation in 2010.

 

If the non-executives fail to oppose the deal, it will be another blow for the reputation of large oligarch-owned companies that have floated in London.

 

UK long-only funds do a lot of behind-the-scenes talking but rarely raise their heads above the parapet. This frustrates non-executive directors along the way, whose job it is to protect all shareholders, and not just those in the majority, from decisions by boards.

 

Non-executive directors often say they would love these shareholders to speak out earlier and more regularly. But the preferred strategy is to engage with management at an early stage and try to reach compromises without ever going public.

 

In these days of social media, where everybody has a view and can air it, there's an easy and effective way of getting one's views out in a disintermediated way. Standard Life has done that today. Others should follow. But don't hold your breath.