Wetherspoons boss Tim Martin hits out at corporate governance rules

Wetherspoons boss Tim Martin has launched a scathing attack on corporate governance rules and advisers which he said are causing companies to collapse.

The ardent pro-Brexit businessman also said he believed a no-deal Brexit would be preferable to the current deal secured by Prime Minister Boris Johnson.

In a long update to the stock market, Mr Martin then hit out at one of the company's biggest shareholders for voting against two board members at the pub chain's annual general meeting last year.

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Wetherspoon chairman Tim Martin speaks during a rally of the Brexit Party in Peterborough, Britain May 7, 2019. REUTERS/Simon Dawson
Founder and Chairman of Wetherspoon Tim Martin speaks during the Brexit Party's 'We Are Ready' event at Colchester United Football Club in Essex.
Conservative Party leadership candidate Boris Johnson during a visit to Wetherspoons Metropolitan Bar in London with Tim Martin, Chairman of JD Wetherspoon.
Conservative Party leadership candidate Boris Johnson during a visit to Wetherspoons Metropolitan Bar in London with Tim Martin, Chairman of JD Wetherspoon.
Conservative Party leadership candidate Boris Johnson during a visit to Wetherspoons Metropolitan Bar in London with Tim Martin, Chairman of JD Wetherspoon.
JD Wetherspoon chairman Tim Martin during a Brexit Party rally in Peterborough King's Gate Conference Centre as part of their European Parliament election campaign.
JD Wetherspoon's chair Tim Martin speaks during a "Leave Means Leave" rally in London, Britain January 17, 2019. REUTERS/Simon Dawson
Former London Mayor Boris Johnson (R) speaks with J D Wetherspoon Chairman Tim Martin during a Vote Leave reception in Exeter, Britain May 11, 2016. REUTERS/Darren Staples
SEDGEFIELD, ENGLAND - SEPTEMBER 11: Leader of the Brexit Party Nigel Farage (R) speaks with Brexit Party supporter Tim Martin, the founder and chairman of Wetherspoon, before addressing party members and delegates at Sedgefield Racecourse during the Brexit Party Conference tour on September 11, 2019 in Sedgefield, England. The rally is part of a nationwide conference tour in which Nigel Farage will address audiences around the country. In readiness for a possible general election the party has already selected prospective parliamentary candidates in most constituencies across the UK. (Photo by Christopher Furlong/Getty Images)
COLCHESTER, ENGLAND - SEPTEMBER 02: Founder and Chairman of Wetherspoon Tim Martin addresses party members and delegates at the JobServe Community Stadium during the first rally of the Brexit Party Conference tour on September 2, 2019 in Colchester, England. The rally marks the start of a nationwide conference tour in which Nigel Farage will address audiences around the country. In readiness for a possible general election the party has already selected prospective parliamentary candidates in most constituencies in the UK. (Photo by Christopher Furlong/Getty Images)
LONDON, ENGLAND - DECEMBER 14: Labour MP Kate Hoey and Wetherspoon’s Chairman Tim Martin attend a 'Leave Means Leave' Brexit rally at the Queen Elizabeth II Centre on December 14, 2018 in London, England. Several politicians and public figures will speak at a series of rallies by the Leave Means Leave campaign calling on the Government to push ahead with Britain's swift departure from the European Union. (Photo by Jack Taylor/Getty Images)
TORQUAY, ENGLAND - OCTOBER 13: Tim Martin, founder and chairman of JD Wetherspoon (L), MEP and former leader of the UK Independence Party Nigel Farage (C) Conservative MP Jacob Rees-Mogg (R) wait to speak at the 'Leave Means Rally' at the Rivera International Centre on October 13, 2018 in Torquay, England. Leave Means Leave is a pro-Brexit campaign, holding a series of rallies and events across the United Kingdom. (Photo by Matt Cardy/Getty Images)
MIDSOMER NORTON, ENGLAND - SEPTEMBER 21: Jacob Rees-Mogg, Member of Parliament for North East Somerset, and JD Wetherspoon owner Tim Martin (L) speak with drinkers as they visit a recently opened branch of JD Wetherspoon, on September 21, 2018 in Midsomer Norton, England. Jacob Rees-Mogg, chairman of the European Research Group and a staunch supporter of Brexit, was joined on the visit by JD Wetherspoon owner Tim Martin, who also campaigned for the UK to leave the European Union in the 2016 referendum. (Photo by Matt Cardy/Getty Images)
MIDSOMER NORTON, ENGLAND - SEPTEMBER 21: Jacob Rees-Mogg, Member of Parliament for North East Somerset, and JD Wetherspoon owner Tim Martin (R), visit a recently opened branch of JD Wetherspoon, on September 21, 2018 in Midsomer Norton, England. Jacob Rees-Mogg, chairman of the European Research Group and a staunch supporter of Brexit, was joined on the visit by JD Wetherspoon owner Tim Martin, who also campaigned for the UK to leave the European Union in the 2016 referendum. (Photo by Matt Cardy/Getty Images)
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On trading, Wetherspoons revealed sales were up 5.3% in the 13 weeks to October 27 on a like-for-like basis, with one pub opened and four shut. The company aims to open between 10 and 15 pubs in the current financial year.

Bosses have also spent £43.3 million on buying freeholds of pubs where Wetherspoons was previously a tenant, and a further £6.4 million went on the company buying its own shares in an attempt to boost the price.

But Mr Martin used the update to express his anger at new rules that say non-executives should only serve on boards for a maximum of nine years.

Non-executives are supposed to be impartial and regulators believe there is a risk to their independence if they stay longer.

He said: "There can be little doubt that the current system has directly led to the failure or chronic underperformance of many businesses, including banks, supermarkets and pubs.

"I believe by vesting so much power in non-executive directors (NEDs), the system is also disenfranchising executives and the workforce – the people who have real expertise and are the cornerstone of business success.

"Another tectonic fault is that the institutions and advisers which oversee the code, as described below, do not themselves adhere to the rules they impose on others."

Brexit
Brexiteer and Wetherspoons boss Tim Martin, far left, who has been an ardent Brexit supporter, with Nigel Farage and Ian Paisley Jr (Jonathan Brady/PA)

He went on to attack companies that do not have employee representatives and more management on boards – Wetherspoons has a board of five executives and three non-executives – and complained that non-executives do not have enough experience.

"It is also common practice for there to be only two executive directors, the most senior of whom, the CEO, averages only about five years – managements and workers are thus absurdly under-represented.

"A cursory glance at the board compositions of major UK PLCs underlines the issues.

"Tesco, for example, which has 450,000 employees and is the UK's largest supermarket group, has only two executive directors, with total service of about nine years, and 11 NEDs with total service of 38 years. The overall average, including NEDs and executives, is only 3.7 years.

"This sort of corporate structure is mirrored in banks, retailers and pubs – where long-term performance, over recent decades, has usually veered between poor and catastrophic."

HSBC, RBS, Barclays and Lloyds were also singled out for having no non-executives with any personal experience of the financial crash in 2008.

Attacks were also made on Wetherspoons' largest institutional investor, Columbia Threadneedle, over its decision to not support the re-election of two non-executives at last year's annual general meeting.

"As a result, three of our four NEDs felt compelled to offer their resignations – inevitably destabilising the company in the process," he added.

Tory leadership race
Mr Martin has previously given his support to Boris Johnson (Henry Nicholls/PA)

But Mr Martin's strongest criticism was against corporate governance advisory group Pirc, which recommends to institutional investors how best to vote at annual general meetings.

Pirc has recommended investors vote against Wetherspoons' pay report over the company's £95,000 spend on Brexit-related beer mats, suggesting the company may have breached political spending rules.

Mr Martin said: "Amazingly, while advising Wetherspoon that it should have four or five 'independent' NEDS, the hypocritical Pirc has, itself, just one on its own board – someone whose only apparent employment experience has been at a local authority."

He also launched a personal attack on Pirc's boss, Alan MacDougall.

The Wetherspoons founder said: "MacDougall has questionable personable judgment, referring to himself on his Twitter account as a 'governance expert' and an 'ex-Eurocommunist'.

"In my opinion, many people equate communism with fascism, since millions of Europeans perished or were imprisoned under its yoke."

Pirc's rating on employee website Glassdoor was also highlighted as being particularly low, and that the boss "appears to rely on inexperienced and temporary workers to analyse complex company reports for corporate governance purposes".

On Brexit, Mr Martin said: "I strongly believe that the UK economy will be better off on the basis of no deal rather than the deal proposed by the Government."

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