The low-intensity civil war at chicken producer Sovereign Foods is likely to become more intense now that Country Bird Holdings (CBH) has bought up most of Sovereign’s smaller shareholders. But from here on, much of the battle might be fought out of sight of the media, which were used very effectively by the minorities who grew more militant with each attempt by the Sovereign board to push through a controversial BEE/management enrichment scheme.

The minorities were unable to kill the scheme because a large block of institutional fund managers was as determined as the Sovereign board to push it through. Had it not been for CBH opportunistically joining the fray early on, it’s likely those minority shareholders would now be sitting with a smaller stake in a company whose controlling shareholder was a consortium comprising BEE partners and management.

Of course, if the original scheme, with appraisal rights, hadn’t been scrapped, the minorities would have been able to bail at 850c. Instead, months later, they were able to escape thanks to the 875c/share they got last week from CBH.

Presumably the three fund managers that backed the Sovereign board (Old Mutual, Sanlam and Prudential) believe they know what is best for the people whose pensions or savings they manage. But what would have happened if these fund managers had been required to consult with the owners of the funds they had invested in Sovereign?

What if those current and future pensioners and savers believed their interests were more aligned to the garrulous minority shareholders than to the fund managers?

Most of those minority shareholders were happy with Sovereign until they saw its executives’ huge remuneration packages. They were intent on blocking the so-called BEE scheme not because they have issues with introducing a BEE partner but because it was folded into a proposal to bring those executives into a control pool.

The minority shareholders’ concerns might have resonated more with the savers and pensioners than the strategic direction of their fund managers did.

We’ll never know. The gap between savers/pensioners and their fund managers is so vast and riddled with layers of commission-earning advisers that real accountability is impossible.

The issue touches the very heart of what is wrong with so-called shareholder capitalism. Despite all the codes and statements of socially responsible investment, listed companies are not run for the benefit of stakeholders or the beneficial shareholders, but on the basis of what works for fund managers. We’re not dealing with shareholder capitalism so much as fund management capitalism.

Appointing employee-elected trustees to pension funds seemed a good idea in the 1990s. But all it’s done is give a densely unaccountable system a misleading veneer of accountability.

Commenting on UK prime minister Theresa May’s commitment to sweeping changes to corporate governance and the way boards are run, a Financial Times  article referred to asset managers’ push-back against activist pension funds. “Several asset managers ... said that voting the way pension funds want is logistically challenging and potentially expensive if the scheme’s money is invested alongside other investors’ assets in so-called pooled funds,” the FT said. (Imagine how much money SA would have saved if we had dispensed with the recent municipal elections because they were too logistically challenging and expensive.)

The introduction of employee representatives on boards may help to change corporate ethos. But sustainable change will require addressing the power of fund managers by devising a simpler voting system.

 Until the disparate owners of capital, like Sovereign’s minorities, have a voice in the boardroom, there’s no reason to expect change.

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