London Stock Exchange wins battle against activist investor Sir Chris Hohn
The board of the London Stock Exchange (LSE) Group has resoundingly beaten off an attempt by activist investor Sir Chris Hohn to remove its chairman, winning a shareholder vote held today after a bitter public row over the departure of ex-chief executive Xavier Rolet.
Some 79 per cent of votes cast by LSE shareholders backed Donald Brydon to remain as chairman, according to a statement issued after an extraordinary meeting at a Southwark hotel.
Hohn called for Brydon's replacement as soon as possible after a sizeable rebellion of 21 per cent voted against, saying there had been a "major corporate governance failure".
However, in a rare intervention Andrew Bailey, chief executive of the Financial Conduct Authority (FCA), dismissed Hohn's calls for the immediate resignation of Brydon, backing an "orderly succession process".
Hohn, who runs The Children’s Investment (TCI) fund, accused Brydon of forcing out former chief executive Xavier Rolet arbitrarily and then not being open enough with shareholders about the reasons for his departure.
The hedge fund manager said the 21 per cent rebellion constituted a "serious rebuke of the board by shareholders" in a letter sent to the LSE after the result seen by CityAM
Hohn claimed other shareholders who voted to keep Brydon on have already "asked the board to commence work on the chairman's succession plan immediately", based on TCI's conversations with them.
However, the LSE strongly denied this was the case. A spokesperson said: "None of the large shareholders we have met with have expressed that view."
He said: "A chairman of a FTSE 100 company is expected to command the overwhelming support of shareholders. This is no longer the case with LSEG and it is therefore imperative that a search begins immediately for a new chairman as there is no justification for waiting until 2019."
The FCA's Bailey, rejected that course of action. He said: “The FCA has a statutory objective to ensure the integrity of the markets it regulates. Today’s vote should now lead to an orderly process of succession of the CEO and then the chair of the LSE as set out by the board.
"It is important that everyone supports and contributes positively to that process,” he added.
After the vote Brydon thanked shareholders for the support and welcomed "the stability that this gives the group". He said: "The recruitment process for a new CEO is underway and we will update our shareholders in due course.”
Neither Hohn nor Rolet attended the meeting, which was sparsely attended by shareholders. Only three took the opportunity to ask questions of the board, although CityAM understands representatives from TCI were present at the meeting.
However, TCI, itself a five per cent shareholder, struggled to find support among the large institutional investors who could have given the necessary backing.
While fellow hedge funds Egerton Capital and Lone Pine Capital backed Hohn in the run-up to today’s meeting, Blackrock, the Qatar Investment Authority, Standard Life Aberdeen, Aviva and a raft of others all swung behind the LSE.
The FTSE 100 company will now focus its efforts on hiring a new chief executive; Rolet resigned with immediate effect at the start of November after Bank of England governor Mark Carneyexpressed his surprise that the board’s decision to replace him might not be respected.
Prior to Rolet’s resignation Hohn had demanded the search for a replacement chief executive be halted and Rolet reinstated beyond the end of 2018.
Paul Heiden, the senior non-executive director who presided over the meeting, told shareholders the relationship between Rolet and the board “became fairly strained” after the chief executive refused to confirm he would step down.
Speaking at the meeting, before the vote was carried out, Brydon defended the board's behaviour.
He said: "A carefully calibrated succession process was put in place, however difficult, but sadly the actions of a few shareholders have disrupted that process creating a major distraction for the company that has not been in the interests of the vast majority of shareholders."