Be careful what you wish for

The management of Miller Group is being undermined by its owners – including Keith Miller’s cousin James – who say the internal mechanism set up (by James) to allow them to trade shares with other owners is not transparent (pages 17 and 30-32). In reality, the rebels, most of whom have contributed neither cash nor sweat to the success of an outstanding company, believe they could make more by selling all their shares, and with them overall control of the company, on the open market. Perhaps they’re right. Although bearing in mind that housebuilding shares are presently being slaughtered in that open market, that view might be severely tested.

Miller runs the company as a quasi-public concern. In addition to annual shareholder presentations, a third of the group’s board is made up of

non-executive directors. Many shares traded within the firm are owned by about 280 employees, enabling them to share in the wealth they create. The result of this is that last year the 75 rebel shareholders split a £7m dividend.

Contrast that with the (admittedly rather extreme) example of Erinaceous. The company is publicly owned, so has to comply with all kinds of legal obligations. It is required to employ non-executive directors, who act as the custodians of corporate governance. And Erinaceous had top drawer non-execs. Non-executive, later executive, chairman Nigel Turnbull actually wrote the 1999 Turnbull Report on corporate governance, described at the time as “a beacon to non-executive directors”. Others included Lord Razzall, a Liberal Democrat peer, Lord Poole, a former adviser to John Major, and Nicholas Fry, a partner in KPMG. And the result? Erinaceous was raided by the Serious Fraud Office, breached its banking covenants and ended up £168m in debt.

Turnbull’s beacon does not appear to have illuminated much for Erinaceous’ custodians of corporate governance, although they still managed to grope in the darkness for more than £200,000 in salaries last year. They also

rubber-stamped the £736,000 pay-off to chief executive Neil Bellis and Lucy Cummings, his sister-in-law. So almost £1m of shareholders’ money, about 6% of the company’s market value, was spent – and on what, exactly?

Miller’s structure may be messy, but it’s not half as messy as a badly run, badly supervised public company. Bearing in mind the manner in which Erinaceous’ woes came to light, it’s hard to argue that a firm like Miller Group is less transparent than a public company, or that Keith Miller is wrong to be so determined to keep the firm in private hands. And good luck to him. Meanwhile, Miller’s rebel shareholders ought to be careful what they wish for.

Denise Chevin, editor