This man knows how to keep himself busy. Most people would find being head of UK institutional management at JP Morgan Investment Management in London enough of a demand on their energy.
Not Geoff Lindey. This softly spoken Scotsman has had numerous other roles over the years, many of them resulting from his active involvement with the National Association of Pension Funds. For the last two years he has been chairman of the NAPF’s investment committee, a mantle he handed over to Graham Allen of ICI Investment Management at the end of February.
Lindey admits that chairing the NAPF investment committee entailed a whole range of responsibilities he hadn’t initially envisaged, including membership of the Takeover Panel and involvement with the institutional advisory groups at Liffe and the Stock Exchange. Indirectly, the position also led to his membership of the Myners and Greenbury committees.
Lindey hasn’t always been sniffing around the corridors of pension fund power in the capital, though. His career roots lie in Edinburgh, where he read mathematics before training as an actuary at the medium-sized Scottish Life Assurance Company. When he qualified he was working in the investment department managing a US equity portfolio and decided that he liked the investment business better than pure actuarial work.
With that in mind, come 1972, Lindey was on his way to London to do a brief stint at the Henderson Administration Group before moving on to NM Rothschilds. He was appointed a director of Rothschild’s pension fund division before moving to JP Morgan in 1989 to his present position.
But it is Lindey’s role as one of the key movers and shakers in the UK’s corporate governance debate that prompted this interview. The NAPF has become more proactive in its approach in recent years, contributing to the debate on wider corporate governance issues in addition to acting to protect the interests of its members.
That new proactive approach was partly responsible for last year’s NAPF recommendation that its members should exercise their right to vote at annual and extraordinary general meetings; and that they should regard their vote as an essential corporate governance tool. There was talk in the House of Lords during the passage of the Pensions Bill that voting should be made compulsory for pension funds, but Lindey is firmly opposed to that idea.
‘Our view is that pension funds have a duty to vote and should use that vote,’ says Lindey. ‘But it should not be compulsory. You’re not compelled to use your vote at a general election, which is arguably more important.’
But don’t those investors have a moral duty to use their asset power to further the interests of companies and thus of their members? They are not, after all, just responsible for their personal vote, as in a general election – they have a duty to their members.
Lindey questions this, arguing that ownership of pension funds is vested in the trustees in a ‘real sense’ not in the members: ‘Trustees are acting to ensure benefits are paid, but the cost really goes back to the employer who’ll have to fund the pension.’
Lindey does feel it is incumbent on trustees to exercise their vote, but he believes that compelling them to do so would amount to saying they should vote with management. Take a finely balanced case over a controversial issue, suggests Lindey, with 30 per cent voting for management, 30 per cent against. ‘I would assert that if you compel the other 40 per cent to vote – when they don’t want to – they will just vote with management.’
Even if you force funds to justify their votes no-one will be better off. In fact, Lindey intimates that governance might actually suffer if that were the case. He says intelligent people will be able to find a million and one reasons to justify their vote.
Surely, then, the NAPF’s recommendation to vote will have the same effect? ‘It’s a different way of looking at things entirely,’ argues Lindey, since the NAPF is not forcing anyone into anything: ‘Our recommendation is merely that people take voting seriously.’ He is at pains to point out, however, that in most situations a vote with management will be the right vote for investors and does not of itself exhibit a poor attitude to corporate governance. Quite the opposite. ‘In most cases the managements of British companies are doing a very good job.’
Lindey is equally forthright in his defence of the Greenbury Committee’s report on executive pay. The report was instigated by the government as a means of responding to public revulsion over the award of a 75 per cent pay rise to Cedric Brown, the recently resigned chief executive of the privatised utility British Gas. When it was released last summer, the report – and the members of the committee which wrote it – came in for a tongue-lashing from politicians and the press.
That response simply was not justified, says Lindey. He claims that most of the people who felt moved to comment on the report’s findings had not taken the time to read it. He points the finger of guilt at the Chancellor, Kenneth Clark, and opposition spokesman, Jack Cunningham, in this regard.
And he believes that people who actually bothered to read it, such as Bill Crist of Calpers, found it made good sense. In Lindey’s view, Greenbury’s real achievement was the cementing of the link between executive benefit schemes and the performance criteria which have to be met in order to trigger those benefits. More importantly, it stipulates that those criteria should be stated in the report of the remuneration committee to the shareholders.
‘Now, that is radical,’ says Lindey. ‘I can hardly think of any British companies which tell their shareholders what their medium to long-term objectives are.’ Indeed, not only do many companies fail to explain their objectives to shareholders, many have not even articulated them to themselves. ‘If a person or group of people are focused on their objectives they’re more likely to achieve them. I hope that will mean British companies will identify their objectives and pursue them relentlessly.’
He adds with a chuckle: ‘I think that could be good for Britain.’
So does Lindey see any value in the stakeholder approach to corporate governance recently espoused by the leader of the UK’s Labour Party, Tony Blair? Haven’t the German and Japanese economies benefited from such an approach rather than slavishly following the rule of shareholder value as advocated by Anglo-Saxons? In the wake of his Greenbury experience, Lindey juggles this political hot potato for a bit.
‘I don’t think the Anglo-Saxon system or the German or the Japanese systems are ideal,’ he begins. ‘It looks as if we’re moving some way towards them and they’re moving some way towards us.’
‘One thing about the current {Anglo-Saxon}situation is that it is at least straightforward,’ says Lindey. ‘Managements have to report legally to the law, accountably to the owners and in commercial terms to the customers.’
Having reached this conclusion he introduces an extra dimension by saying that the stakeholder approach means different things to different people. He cites the example of John Neill, CEO of the Unipart Group, and his support for the RSA’s view of stakeholders in its report Tomorrow’s Company, which was released last year.
‘John Neill is an extraordinarily articulate and, dare I say, extremely right-wing individual. I don’t think he allows any trade union activity in his company at all. Yet he believes in the stakeholder approach. So does Tony Blair. They can’t both be talking about the same thing. Tony Blair might not be very left wing but he’s not quite in the same political camp as John Neill.’
Whatever the outcome of the corporate governance debate in the UK or in any other country, Lindey is adamant that the agenda must be moved forward by domestically-based groups. ‘As I think Bill Crist has said: When in Rome do as the Romans do. When in London do as the Brits do.’ Likewise, he points to investors on the continent who are advancing the corporate governance debate in their own countries.
Lindey insists that it is wrong to believe that shareholder activism is not the way of institutional investors in the UK. That’s a dangerously optimistic line for a company to take. ‘For years the NAPF and Association of British Insurers have been working behind the scenes to try to pre-empt things like {the British Gas AGM}and to ensure that things go smoothly,’ he says. ‘It’s better to do things that way. If you can do it behind the scenes you can preserve the self respect of management who may have made a misjudgement or certainly misjudged the feelings of shareholders. That’s better than having a shouting match.’
