Perceived wisdom says that CEOs are answerable to the board, who in turn speak for the shareholder: but this lot have other ideas…
Earlier this week J P Morgan Chase & Co CEO Jamie Dimon launched a remarkable attack on his shareholders – blasting them for being “lazy”.
But this is far from an isolated incident. Across history many business leaders have ended up at loggerheads with their shareholders. Whether this comes from power struggles, mutual incompetence or just a good old-fashioned argument, it can turn nasty very quickly.
So here are five examples from recent times. One thing look certain from these cases; when the big guys fall out, everyone suffers together.
J P Morgan CEO Jamie Dimon
Starting with the most recent spat, JP Morgan CEO Jamie Dimon is currently taking a lot of flak after branding his own shareholders as lazy in a recent meeting.
He went on to reprimand the embattled shareholders – some of whom were in the room with him – for being “irresponsible” and “not very good investors” over their stance on executive pay.
The remarkable outburst was brought about by criticism of his proposed sharp salary increase. Dimon lambasted voters for listening to the counsel of the Pensions & Investment Research Consultants, who advised against voting for £20m package.
His criticism has not gone down well. High Pay Centre deputy-director Luke Hildyard accused Dimon of being “totally removed from reality”.
“There will be many active and engaged shareholders who feel extremely insulted by Mr Dimon’s suggestions of lack of professionalism,” he added.
CEO 0 Shareholders 3
Starbucks CEO Howard Shultz
This argument was almost entirely between Starbucks CEO Howard Shultz and one shareholder – but it was a humdinger.
In 2013 the coffee giant held its annual shareholders meeting in Seattle. Things got a bit rocky when shareholder Tom Strobhar – who is also founder of the Corporate Morality Action Centre – stood up and suggested the company’s profits had taken a dive since its support for an earlier equal marriage bill.
Shultz dealt with the question in pretty much the best way possible. His reply was:
“If you feel, respectfully, that you can get a higher return than the 38 percent you got last year, it’s a free country. You can sell your shares of Starbucks and buy shares in another company. Thank you very much,”.
There are good and bad reasons to take on a shareholder. For all of Starbucks’ flaws, this is pretty impressive.
CEO 3 – Shareholder 0
Former Morrisons CEO Dalton Philips
Some CEO vs shareholder dust-ups can continue even when the top boss is no longer with the company.
This is the case at Morrisons where CEO Dalton Philips, who did to be fair oversee some troubled times at the supermarket giant, has come under fire for a £1m posthumous bonus payment.
Despite the retailers’ profits falling by 52%, the board is still planning to award the sacked Philips a bonus of £1m for 2014. The shareholders are understandably upset by this and the company faces a serious revolt at the upcoming AGM.
Payments for CEOs who have overseen failure are always a tricky area. We’ll see how this one plays out.
Burberry chief executive Christopher Bailey
It doesn’t bode well if the shareholders reject your first remuneration package. It’s one thing if years of mismanagement have left the company in disarray and the shares financially equivalent to toilet paper, but saying enough is enough within months seems unfortunate.
But this was the position Burberry CEO Christopher Bailey found himself in after just a few months at the prestigious fashion house.
More than half (52%) of the shareholders voted against his eye-watering remuneration package that some estimates totalled at around £20m in shares.
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Luckily for Bailey the vote wasn’t binding and the shareholders were left frustrated. This was despite the backing of the Investment Management Association, who issued an amber warning about Burberry’s seemingly excessive pay policy.
But Bailey seems to have justified the company’s lavish spending. Sales in the six months up to April 2015 reached £1.42bn and the brand is now endorsed by some of the biggest names in the fashion world. If he carries on this this vein, the shareholders might be a bit happier going forward.
Shareholders 2 CEO 3
International Airlines Group CEO Willie Walsh
We move from high drama to a much more sedate and British affair in London. Late last year shareholders of International Airlines Group (IAG) – the result of the merger of British Airways and Iberia – kicked up a fuss when their 10% flight discounts were removed.
The discount was only available to BA shareholders who invested before the 2011 merger that led to the creation of IAG – so CEO Walsh wanted to end this apparent disparity among stakeholders.
The move led to some disgruntled shareholders threatening to vote against any future resolutions put forward by the board. But in the true spirit of British protest, there was plenty of grumbling but precious little action.
Walsh was able to fight off the mini-coup and have gone from strength to strength. IAG are currently in talks to acquire Aer Lingus in a £1bn deal.
CEO 2 Shareholders 1
Further reading: How the sharing economy is helping small business