Political Donations Stir U.K. Shareholder Revolt at NEX Group

  • Shareholder group ISS says investors should veto new donations
  • CEO Spencer has been prominent donor to Conservative Party

Michael Spencer’s NEX Group Plc, the electronic trading and financial technology company formerly known as ICAP Plc, is facing the prospect of an investor rebellion at its shareholder meeting next week after asking for authority to make 100,000 pounds ($129,300) in political donations.

The NEX board approved donations of 5,000 pounds each for five candidates in last month’s U.K. general election who ran against Liberal Democrat opponents backing the pro-European ‘Remain’ campaign, according to a notice of the company’s 2017 annual general meeting. Board members also want the authority to make further political donations of 100,000 pounds in the period up to next year’s annual general meeting, the document said.

Michael Spencer

Photographer: Simon Dawson/Bloomberg

But Institutional Shareholder Services, which often sways around 20 to 25 percent of investor votes at a U.K. annual general meeting, is advising subscribers to vote against granting authority for any more donations at NEX’s meeting, scheduled for July 12.

“Shareholders are likely to question whether this was an appropriate use of their funds -- the directors are free to contribute from their own funds in line with individual inclinations, in line with ISS policy,” the group said in a written report seen by Bloomberg News. “Given explicit political donations were made since the previous AGM, shareholder support for this particular item is not considered warranted.”

Spencer, who is NEX’s largest shareholder with a 17.6 percent stake, has said he voted against Brexit in the June 2016 referendum. Still, he is a former Conservative Party co-treasurer and has been a prominent donor.

“The board felt it extremely important that the U.K. government had a clear mandate for the country to negotiate the best possible deal for the U.K., following the decision to leave the European Union, in order to ensure that the position of London as a financial center of Europe is maintained,” NEX said in the report, dated June 8. “The board believes that these donations were in the best interests of the company and its shareholders.”

An NEX spokeswoman declined to comment on Tuesday.

Spencer has made efforts to defend London from the potential damaging impact of Brexit, coming out swinging against European efforts to pry London’s lucrative clearing industry from the country. Britain dominates euro-denominated clearing, which is seen as one of the most vulnerable dominoes in the City after the country leaves the EU.

ISS also only gives qualified support for the group’s remuneration report, on account of concerns over earnings targets.

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