Dilemma for big-name stores

IT cannot be coincidence that WH Smith, Boots and Marks & Spencer - names that, with the already much-diminished Woolworths, have dominated the High Street for two generations - are all struggling at the same time.

WH Smith has just sold the bulk of what remained of its overseas adventures to focus on trying to revive its trading at home. The credibility of Boots' brief Christmas revival has been dented by management's bleating about contributions to its pension fund when in reality these are nothing out of the usual, and today Marks & Spencer unveiled a flat trading update against a weekend barrage of leaks about the need for far-reaching strategic change because its recovery has stalled.

Each business is in the hands of relatively new management, noted for executive competence rather than merchanting flair.

Each is under pressure from institutional investors to deliver a prompt return to growth, and each in its way is probably destined to disappoint, not because as managers they are feeble but because the problems defy the quick and easy answers the City craves.

In part this is because so much of shopping has now moved away from the High Street to retail parks where these traditional stores are relatively under-represented so they no longer get the automatic footfall. In part it is because all three in their golden age were suppliers of commodity products for which they could charge premium prices because of the strength of their brand, convenient location and skilled space management, being the correct sizing of their outlets to the kind of business they were.

When those advantages are taken away - when location, fashion, pricing policy and brand image all turn negative - the business will languish because customers no longer know instinctively what it stands for. And there will be no quick and easy recovery because, to judge from the tenor of their public pronouncements, their managements don't know either.

Tunnel light

IT is perhaps a bit early to offer a postscript on the Eurotunnel coup, given that the saga will no doubt run for months yet, but a couple of observations might be made.

For all our talk of having a more vigorous share-owning economy than the French, the kind of coup that saw small investors oust the entire board could not happen in Britain for two reasons. The first is that the shareholder register of a listed British company of any size is dominated by the investing institutions-They would never agree to such radical action, given the uncertainties that come with it, and would block it if it were suggested by someone else.

Second, when British shareholders try to exercise their power they find it extremely difficult because they have effectively been disenfranchised by the structure of the market. Electronic settlement and stockbrokers' nominees have been useful tools to help the London securities markets cope with the explosive growth of the past decade, but the price has been to make it almost impossible for small investors to exercise most of their ownership rights.

It is similarly difficult for anyone seeking to ginger up a company to contact the shareholders, who cluster under the anonymity of stockbrokers' nominee names. Although Baltimore Technologies is tiny compared with Eurotunnel, those seeking to engineer change there are grappling with this problem.

Eurotunnel has, therefore, served to highlight a flaw in British governance that has been left untreated for too long. The fact most small shareholders do not appear on the shareholder register, do not get annual reports and have almost no

direct communication with the company in which they invest is a great inhibitor to effective and legitimate corporate governance in this country. Small shareholders have doughty champions in Gavin Oldham and others like him, but however loudly they shout they are too easily overshadowed by the big battalions in the wholesale markets and ignored.

Ironically, it has become obvious in recent months in speeches by Sir Iain Vallance and others that most company boards feel they should be more accountable to small shareholders than to City professionals in investing institutions. This is because small shareholders are genuine owners, investing their own money, while institutional shareholders are professionals investing someone else's money and therefore are like management itself - agents not principals.

The long-term health of governance in Britain requires that the link from companies direct to shareholders should be restored and nurtured. It would be a fitting outcome of the Eurotunnel saga, which in so many other respects seems destined to end in tears, if it could become the catalyst for the structural changes needed to restore genuine shareholder democracy in the UK.

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