Investors in Wm Morrison Supermarkets plc are being asked, at very considerable expense, to let current and former directors off the hook, scot-free, for repeated breaches of the Companies Act. Nobody is resigning because of this.
In a 20 page circular, giving notice of a general meeting on 6 March, the directors admit to having paid dividends and made share buy-backs from 2012 to 2014 when the company had insufficient distributable profits as shown by its audited accounts and did not take action it could have done to avoid this. Morrison’s ten well-paid directors twice overlooked this responsibility. A special resolution is now being sought to waive all claims the company may have against them, but it is being put to shareholders as just one part of an all-embracing resolution which also regularises the dividend payments and share buy-backs.
There is a huge conflict of interest between the directors and the shareholders in proposing a single, composite resolution. Shareholders should not be expected simply to excuse directors for such a basic failure and pick up the costs for doing so. There should be two separate resolutions – one for dividends and share buybacks, but another to relieve directors of their liability for costs which shareholders may wish to vote against. The top ten shareholders, holding 46.5% of the equity, should demand this.