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The outspoken founder of pub chain JD Wetherspoon (JDW.L) has attacked rules designed to govern how businesspeople run companies and criticised a shareholder advisory group that has challenged his leadership.
Tim Martin, the founder and chairman of JD Wetherspoon, used a first quarter trading update on Wednesday to launch a broadside against the corporate governance code. Martin also criticised PIRC, which advises investors on those rules, and JD Wetherspoon’s own shareholders.
“There can be little doubt that the current system has directly led to the failure or chronic underperformance of many businesses, including banks, supermarkets, and pubs,” Martin said, calling for “urgent” reform of the rules.
‘Up the spout’
The corporate governance code is a set of recommendations for how publicly listed companies should be run. It makes recommendations on the composition of company boards, executive pay, auditing, and more. Companies that don’t comply must explain the reason for their divergence, according to the Financial Reporting Council (FRC), which publishes the rule.
Martin said in Wednesday’s statement that the code was “up the spout” and a “tick-box malaise, to which only strong-willed contrarians – and those with no financial interest in the perpetuation of the current system – are immune.”
Martin has been chairman of JD Wetherspoon for 36 years and the average tenure of non-executive directors on the pub group’s board is 15 years. In both cases, the code recommends tenures be limited to nine years to encourage scrutiny of management and strategy.
Martin said the code gives too much power to short-term non-executive directors at the expense of employees and executives.
“A core problem is that corporate governance institutionalises short-termism, inexperience, and navel-gazing,” Martin said. The code has led to “long and almost unreadable annual reports, full of jargon, clichés and platitudes,” he said.
Martin said reliance on non-executive directors has led to performance that has “veered between poor and catastrophic.”
“In contrast, non-compliant companies like Wetherspoon (average tenure 15 years), Fullers’ (10 years), Dart Group (12 years) and Berkshire Hathaway (19 years) have often fared far better, with experienced boards, long-term shareholders and a long-term view,” he said.
‘Many people equate communism with fascism’
As well as criticising the system, Martin launched a specific attack against PIRC, a shareholder advisory group that last year urged investors to vote against Martin at the Wetherspoon annual general meeting (AGM).
Martin is an outspoken Brexit supporter and printed pro-Brexit beer matts that were distributed in his pubs. PIRC said Brexit spending should be have been approved by shareholders and advised investors to vote against Martin’s re-election as chairman.
Martin criticised PIRC as “hypocritical”, pointing out that the advisory group has just one non-executive director despite advising that Wetherspoon should have four or five on its boards. Martin said it was also “a concern” that PIRC has a rating of 2.6 on Glassdoor, a website that lets employees anonymously review their employers.
The Wetherspoon founder also called out PIRC founder Alan MacDougall, who has sat on the firm’s board for 33 years.
“MacDougall has questionable personable judgement, referring to himself on his Twitter account as a ‘governance expert’ and an ‘ex-Eurocommunist’,” Martin said. “In my opinion, many people equate communism with fascism, since millions of Europeans perished or were imprisoned under its yoke.”
Martin even criticised two of Wetherspoon’s largest investors, Columbia Threadneedle and BlackRock, for not supporting the re-election of several long-serving non-executive directors on the pub group’s board at its recent AGM.
Martin said Columbia Threadneedle’s parent company and BlackRock both have members of their board who have served for over nine years.
The pair have “decided that one rule applies to itself, but that another should apply to Wetherspoon,” Martin said.
“Rigid compliance with current corporate governance guidelines will almost certainly guarantee eventual mediocrity or failure,” Martin said. “City regulators and lawmakers should make haste.”
‘Better off’ with ‘no-deal’
Martin’s invective against the governance code took up the bulk of JD Wetherspoon’s first quarter trading update. The group said comparable sales for the 13 weeks to 27 October 2019 increased by 5.3% and total sales rose by 5.6%.
“We continue to anticipate a trading outcome for this financial year in line with our previous expectations,” Martin said.
He added: “The company is frequently asked for comments by shareholders, customers and the press for comments on Brexit. I strongly believe that the UK economy will be better off on the basis of ‘no-deal’ rather than the deal proposed by the government.”