More NewsAnnual elections could spook company directors: Sainsbury’s

Annual elections could spook company directors: Sainsbury's

Proposals for annual director election may lead to short-termism

One of the UK’s largest supermarket chains fears new governance proposals
would intimidate directors and cloud their judgment.

Sainsbury’s has signaled its strong opposition to new governance proposals
which would see directors elected by shareholders every year.

The supermarket giant said there is the potential for the process to be
hijacked by activist shareholders which could rattle the nerves of directors
approaching election time.

“The threat, or perceived threat, from a major shareholder to vote against an
individual’s re-election could have an undue influence on the behaviour of that
individual,” said David Tyler, Sainsbury’s chairman, in a submission letter to
the Financial Reporting Council.

Tyler goes on to warn that directors could be subject to the “fashionable
trends of thought” which may promote instability in a company’s board.

“The press would have a field day building up the tension ahead of AGMs,” he
said.

Sainsbury’s main rival Tesco holds similar concerns. In its submission
company secretary Jonathan Lloyd said the process could be abused.

“We also believe that there is a very real risk of abuse of the process, with
activist shareholders using the opportunity to vote against re-election purely
as a means of registering their dissatisfaction with specific issues relating to
the running of the company, while not actually seeking the removal of a director
for reasons relating to that director’s performance,” he said.

Read the FRC’s submissions
here

Read Sainsbury’s submission
here

Further reading:
Corporate
governance changes will begin next year: FRC

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