Invested interests

BIG shareholders are 'pathetic'. Their failure to hold our major companies to account is 'a sin'.

And as for small shareholders: they are simply disruptive wastes of time who do little more than munch sandwiches and ask inane questions at annual meetings.

It was typically outspoken stuff from Sir Richard Sykes, the former boss of drugs giant GlaxoSmithKline. And it certainly grabbed attention for a new inquiry he will launch this week.

Sykes' brusque manner should not, however, obscure the laudatory aims of his investigation into the relationship between investment and wealth creation being carried out under the auspices of the think tank Tomorrow's Company. Quite simply - and breathtakingly ambitiously - the inquiry will attempt to resolve some of the glaring inefficiencies of Britain's capital markets.

Why, for example, when most consumers try to plan their pensions saving over decades, do company bosses appear to run their businesses only for the next quarter's profits? And why do those very same chief executives moan that while they would like to concentrate on long-term issues such as employee retention and customer satisfaction, they are under pressure from shareholders to prime the share price as quickly as possible?

Only a couple of days before Sykes' controversial assessment of the UK's investment community, a fund manager from Threadneedle Asset Management appeared to lambast all shareholders as greedy and shortsighted.

Well, to an extent M'lud. But fund managers have done as much as anyone to create illusory expectations of stock market returns and the Sykes inquiry could do worse than look at the way in which shareholder expectations can be more felicitously handled in future.

Clearly, some individual shareholders ask truly daft questions at annual meetings. But they are, in a way, small owners of those businesses and at least they turn up to make their voices heard. That is more than many major institutional investors and pension fund trustees do.

Sykes should look at these conflicts between big and small shareholders as well as the question of how investors can exercise stewardship over quoted companies without hopelessly tying the hands of management.

His agenda should also include the huge implications for the health of corporate Britain if the current drift into bonds and private equity actually marks an end to society's love affair with buying shares.

Underpinning what this attempt at a 'joined up' inquiry is all about should be the question of measurement. Just how do we measure the success of one company against another; how can we decide objectively whether one set of managers is head and shoulders above another?

And how can investors determine whether chief executive Bloggs should be ousted after a couple of sets of poor results or whether he should be given a longer breathing space?

Crucially, of course, this leads to the question of boardroom pay. One of Britain's top accountants told me last week that if a valid, long-term system of remunerating our bosses could be devised, most of the other problems which have absorbed countless corporate governance inquiries would evaporate.

When chief executives last an average of only four-and-a-half years in a job, this is, of course, a pretty tall order. But it should not be beyond the wit of some of Britain's brightest people to come up with a solution.

If Sykes, now the rector of Imperial College of Science, Technology and Medicine and a man with a passion for improvement, can generate the answer, he will do British business and its millions of investors a great service.

Pensions peril

For anyone still nursing the idea that the pensions crisis is simply a phenomenon of bizarre new accounting rules or a temporary dive in the stock market, drinks group Allied Domecq last week reinforced the point that Financial Mail has warned about for many, many months.

Despite an apparently prosperous underlying business, the maker of Beefeater gin, Malibu and Ballantine's was forced to issue a profits warning.

Not because drinks sales are heading down, not because chief executive Philip Bowman has made a pig's ear of the company's strategy - though de-stocking in Spain and the declining dollar are not helping - but largely because the amount the company has to pay to shore up the deficit in its corporate pension scheme has ballooned.

From the expected £16 million it has risen to more than £40 million. Out of expected profits of about £480 million, that is a nasty hit indeed.

But be warned: Allied will not be the last - nor the most badly stung.