Consulting » Banham slates short-termism.

Tarmac and Kingfisher chairman Sir John Banham criticised City analysts and fund managers at the UK plc “board meeting” held at the Royal Society of Arts in June (see page 34). While underlining the importance of communicating with investors to ensure that a company’s shares are properly valued, he argued that stockbroking analysts in London were only half as good as those on Wall Street at predicting corporate earnings. “Maybe that’s one reason why fund managers in London generally have been under-performing index tracking funds over the past several years – which is a polite way of saying that they’ve been destroying shareholder value rather than creating it,” he said. “It seems to me that what matters about UK plc is not next quarter’s earnings, yet that’s what people are preoccupied with all the time. If you go and visit the analysts advising our (shareholders), all they want to talk about in London is next year’s earnings. If you go to our owners in Paris or Frankfurt, what they want to talk about is the future.” Sir John expressed his fear that the fund management industry may shift towards centres such as Frankfurt, Dusseldorf, Paris and Amsterdam “unless we all wise up – because what matters is the vision and strategy for the business, the way it’s structured, the calibre of its leadership. But not once in seven years have I ever been asked a question by an analyst about any of those things.” He also said that he was barred by the London Stock Exchange from including in a circular to Tarmac shareholders a note that the company had grown operating profits by a compound rate of 24% a year – “even though it’s straight out of the annual reports,” he said. “It seems to me that the stock exchange is more concerned to protect our owners from the views of their chairman – whom they’ve appointed and they’ve elected – than it is to protect them from the dubious delights of bad advice.”