I have long complained about directors serving on boards for longer than 9 years. The UK Corporate Governance Code (which you can easily find on the web) says any director who serves for more than 9 years cannot be considered “independent” and there should be a majority of independent directors.
When the UK Corporate Governance Code was drafted this principle of avoiding long-serving directors was introduced and I consider it a very sound principle. But investment trusts (including Venture Capital Trust) continue to ignore this rule. An extreme example of this is that of Maven Income & Growth VCT 4 (MAV4).
In the latest Annual Report (the AGM is on the 12th May), it appears that two of the five directors (Malcolm Graham-Wood and Steven Scott) were first appointed to the board in 2004 and another director (Bill Nixon) is a managing partner of the fund manager. Clearly a breach of the Code therefore and the explanation given to excuse this is feeble (see page 57 of the Annual Report).
I did raise this issue before the last AGM and got a response that the FRC considers compliance with the AIC Code as sufficient, but I have never seen any official pronouncement on this. As the AIC represents the fund managers effectively and certainly not the shareholders in trusts, it is hardly an unbiased body either.
No action was taken to refresh the board since the last AGM so we have the same cosy arrangement continuing. I have therefore voted against the aforementioned directors and also against the Chairman, Peter Linthwaite, for allowing this situation to persist. I recommend other shareholders do the same.
The company’s AGM is being held in Glasgow but no shareholders are permitted to attend and no alternative on-line or hybrid meeting is being provided. All you can do is submit written questions so here again the board is avoiding accountability to shareholders in a proper manner.
This is clearly a good example of how investment trusts (particularly VCTs) can become poodles of the fund manager and ignore good corporate governance principles.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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Interesting to note today the large number of votes “withheld” on the reappointment of the directors at MAV4 – over 800,000 for all 4 which is usually a sign of disapproval. Perhaps my comments had some impact on shareholders’ votes. But they also recorded over 1 million votes against reappointment of the auditors, against disapplication of pre-emption rights and against share purchases. But voting against share buybacks is usually not a good idea in VCTs.