UK - Schemes and fund managers have damaged their relationship with the government following their attacks on its plans to review shareholders' rights, Whitehall sources claim.
And they believe the schism is a major reason why the department of trade and industry has asked former Gartmore chief Paul Myners to determine whether existing fundraising rules make it difficult for companies to finance research and product development.
Pre-emption rights force UK companies to seek approval from shareholders before issuing new equity worth more than 5% of the existing share capital. Myners is assembling a team, which will be in place before the end of the month, and will report back to the DTI early in 2005.
The study comes in response to lobbying by the biotechnology industry, which believes its ability to raise money and compete against US rivals is hampered by these rules. It wants the pre-emption limits relaxed to 20%, in line with the US.
One government source was “gob-smacked” by the industry’s hostile reaction:
“What is the investment industry objecting to? The bioscience industry has raised this point; here’s an opportunity for the financial community to discuss and express views.
“This is a massive storm in a tea-cup and it does the City no good in its relationships with government when it adopts this tone.”
However, Hermes Pensions Management director of institutional relations Michelle Edkins said: “We are strong defenders of the concept of pre-emption rights because it is only right the people who own the company now have a say in who will own it in the future. We don’t want things given away from under our feet.”
Henderson Global Investors head of corporate engagement Rob Lake agreed: “If the outcome is that our rights as shareholders - held on behalf of our clients - are weakened because our holdings have been diluted, that would not be in our clients’ interests.”
Myners himself has appealed for calm: “I think a sense of proportionality, a willingness to be open-minded and discuss issues openly and objectively is what is called for here. The bioscience industry says that pre-emption is not working, and it is not the norm in other markets, so there is grounds for inquiry.”
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