Wednesday, 9 September 2009

End of the PLC?

Excellent article today in The Times by Charlie Mayfield, Chairman of the John Lewis Partnership, which asks some serious questions about the future of the PLC as the best model for business in the UK. It can be found HERE.

Mayfield characterises the PLC model as being prone to short-termism, elitist, in that it usually excludes the means of production, namely the actual workers, from the ownership structure and only interested in management teams that can deliver double digit growth year on year, or else.

In all honesty, there’s not a lot I can disagree with here. My own time in the City was characterised by deepening disillusionment with the obsession for capital growth over income stocks, the need for “excitement”, which usually meant M&A activity, and an almost total disregard for the retail investor, otherwise known as you and me. All of this led very sound companies offering a good dividend year on year to be downgraded or just plain ignored by analysts with the result that management teams often resorted to desperate M&A activity to engender some interest in their stock. The JD Sports acquisition of First Sport would be a classic case in point, which nearly brought down the entire company.

While I don’t think it’s the end of the PLC, I do think the UK economy could benefit from some diversity. Again, Germany could be a good model, where major companies like BMW, Vaillant, Schaeffler etal remain private, family owned concerns existing alongside the likes of Siemens which is listed in Frankfurt and New York.

Worth a read.


Post a Comment