25 November 2021

J D WETHERSPOON PLC

Major investors and advisors are breaching the Corporate Governance Code, says Wetherspoon

Wetherspoon is disappointed to note that a minority of major investors and corporate governance advisors are breaching the 2018 Corporate Governance Code (the "Code") by using a "box-ticking" approach to its guidelines.

The Code explicitly discourages box -ticking and states that its guidelines should not be implemented in a "mechanistic" way. 

The Code requires investors to pay "due regard to individual circumstances" of companies and to "assess differing company approaches thoughtfully".

However, Wetherspoon's observations are that some advisors and institutions pay lip service to the Code, and appear to exercise their votes in an entirely mechanistic way. 

For example, if non-executive directors have been on a board for more than nine years, some investors will vote against them for the purposes of the AGM, for being in breach of the so called "nine-year rule", without proper consideration of a company's explanations, which drives a coach-and- four through the "comply or explain" aspect of the Code.

This rigid approach is especially questionable where investors themselves, on their own boards, do not observe the nine-year rule, but then try to impose that rule on others.

Fidelity, a major investor, has voted against two experienced Wetherspoon non-executive directors. However, it does not seem that the boards of Fidelity companies themselves observe the nine-year rule.

For example, Fidelity Investments, which has over $4 trillion of assets under management, has, according to Bloomberg (see appendix 1), four directors and does not have a majority of independent directors - nor are there any dates, transparently disclosed, regarding the length of tenure of the directors.

If major investors do not observe the rules themselves, it cannot be right to vote against directors of investee companies, especially when investees have adhered to the "comply or explain" requirements. 

As for corporate governance advisors such as PIRC, ISS and IVIS, they also seem to base their recommendations on a "mechanistic" approach, in breach of the Code's requirements. 

They do not to appear to engage with individual companies, in our experience, and have certainly never engaged with Wetherspoon, in any meaningful way.

Companies like Wetherspoon are only advised of the AGM voting recommendations of governance advisors a few hours before the deadline they impose for responses. 

The advisors invariably limit the scope for responses to their recommendations to 'factual corrections only' - which in Wetherspoon's view, does not comply with the spirit of the Code, since the Code says that:

"investors should engage constructively …and pay due regard to individual circumstances.... explanations must not be evaluated in a mechanistic way".

Wetherspoon chairman Tim Martin said:

"The harsh reality, in our opinion, is that corporate governance advisors, and some major investors, are themselves in breach of the Code.

"This is creating a situation in which many UK PLCs have, to their detriment, inexperienced boards. Almost no UK PLCs today have any NEDs who were at the company in the last (2008-2010) recession, for example.

"It's noticeable that many successful American companies do not adhere to the arbitrary nine-year rule, which, Wetherspoon believes, is a sensible approach.

"However, some American companies seek, even so, to impose the nine-year rule on their investees. 

"In order for there to be commercial success, companies must retain experience and culture.

"The corporate governance world needs to gets its act together, by eschewing a box-ticking approach, or it will inevitably continue to weaken the structure of businesses which are important to the UK economy"

Appendix 1

Board Members of FMR LLC (doing business as Fidelity Investments) *

Abigail Pierrepoint Johnson "Abby" - Fidelity Management and Research Co.

James Charles Curvey - FMR LLC

Gerald McGraw "Gerry"

Karen Kaplan - Hill Holliday Connors Cosmopulos Inc.

*As reported by Bloomberg.com on 25 November 2021

END

Enquiries:

John Hutson                 Chief Executive Officer              07970 477377

Ben Whitley                   Finance Director                        07970 477428

Eddie Gershon              Company Spokesman               07956 392234

Nigel Connor                  Company Secretary                    07818 232529

Please send any questions by email to [email protected] 

Notes to editors

1.     J D Wetherspoon owns and operates pubs throughout the UK. The company aims to provide customers with good-quality food and drink, served by well-trained and friendly staff, at reasonable prices. The pubs are individually designed, and the company aims to maintain them in excellent condition.

2.     Visit our website: www.jdwetherspoon.com      

3.     This announcement has been prepared solely to provide additional information to the shareholders of J D Wetherspoon, to meet the requirements of the FCA's Disclosure and Transparency Rules. It should not be relied on by any other party, for any other purposes. Forward-looking statements have been made by the directors in good faith, using information available up until the date on which they approved this statement. Forward-looking statements should be regarded with caution, because of the inherent uncertainties in economic trends and business risks.

4.     The current financial year comprises 53 trading weeks to 31 July 2022.