We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
Published online by Cambridge University Press: 12 September 2008
2 The term used to describe the institutions and mechanisms by which companies are made account able and controlled: Conyon, M. and Peck, S., ‘Recent developments in UK corporate governance’, in Buxton, T., Chapman, P. and Temple, P. (eds), Britain's Economic Performance (London, 2nd ed., 1997), p. 3.Google Scholar
3 SirBall, James, ‘Short-termism – myth or reality?’, National Westminster Bank Quarterly Review (1991)Google Scholar; Eltis, W., Fraser, D. and Ricketts, M., ‘The lessons for Britain from the superior economic performance of Germany and Japan’, National Westminster Bank Quarterly Review (1992)Google Scholar; Hutton, W., The State We're In (London, 1995)Google Scholar; and Williams, P., ‘Time and the City: short-termism in the UK, myth or reality?’, National Westminster Bank Quarterly Review (1991).Google Scholar For syntheses of academic opinion, see Milner, S. (ed.), Could Finance Do More for British Business? (London, 1996)Google Scholar, and Westall, A. (ed.), Competitiveness and Corporate Governance (London, 1996).Google Scholar
4 Hirschman, A. O., Exit, Voice and Loyalty; Responses to Decline in Firms, Organizations and States (Cambridge, Mass., 1970)Google Scholar; Gaved, M., ‘The rise of the institutional investor’Google Scholar and Mayer, C., ‘Corporate governance and performance: the evidence’Google Scholar, both in Westall, , Competitiveness;Google Scholar and Mayer, C., ‘Financial systems and corporate governance’, in Milner, Finance.Google Scholar
5 Hutton, , The State;Google Scholar, and Williams, , ‘Time and the City’.Google Scholar
6 Hutton, The State, is the most recent and publicised example of this view; by contrast, The Economist has recently stressed the idealised view of Germany and Japan: ‘Shareholder values’, and ‘Stakeholder capitalism’, 338 (10 02. 1996), pp. 15, 23–5.Google Scholar For an academic analysis, see contributions to Dimsdale, N. and Prevezer, M. (eds), Capital Markets and Corporate Governance (Oxford, 1995).Google Scholar
7 Or, in the words of Steve Nickell, those who believe the econometric results believe there is short-termism; those who do not believe the results, believe there is short-termism: Nickell, S., ‘A sceptical view’, in Milner, Finance, p. 29.Google Scholar Surveys of this work are found in Marsh, P., Short-termism on Trial (London, 1990)Google Scholar; idem, ‘Market assessment of company performance’, in Dimsdale, Capital Markets; and Nickell, S., The Performance of Companies (Oxford, 1994)Google Scholar representing, respectively, a defence of and an attack on ‘the City’.
8 For a synopsis of this view, see Mayer, C., ‘Stock markets, financial institutions and corporate performance’, in Dimsdale, Capital Markets.Google Scholar
9 Conyon and Peck, ‘Recent developments’, provides an up-to-date survey.
10 See, for example, Conyon, M. J. and Leech, D., ‘Top pay, company performance and corporate governance’, Oxford Bulletin of Economics and Statistics, 56 (1994)Google Scholar and Conyon, M. J., Gregg, P. and Machin, S., ‘Taking care of business: executive compensation in the UK’, Economic Journal, 105 (1995).CrossRefGoogle Scholar
11 Miles, D., ‘Testing for short-termism in the UK stock market’, Economic Journal, 103 (1993)CrossRefGoogle Scholar; idem, ‘Testing for short-termism in the UK stock market: a reply, Economic Journal, 105 (1995)Google Scholar; Satchell, S. E. and Damant, D. C., ‘Testing for short-termism in the UK stock market: a comment’, Economic Journal, 105 (1995)CrossRefGoogle Scholar; and Miles, D. and Timmermann, A., ‘Variation in expected stock returns: evidence on the pricing of equities from a cross section of UK companies’, Economica, 63 (1996).CrossRefGoogle Scholar
12 Church, R., The Rise and Decline of the British Motor Industry (London, 1994)CrossRefGoogle Scholar; Foreman-Peck, J., Bowden, S. and McKinlay, A., The British Motor Industry (Manchester, 1995)Google Scholar; Rhys, D. G., The Motor Industry; An Economic Survey (London, 1972)Google Scholar; and Williams, K., Williams, J. and Thomas, D., Why are the British Bad at Manufacturing? (London, 1983).Google Scholar
13 Rhys, , Motor Industry, Table 9.2, p. 312.Google Scholar
14 Williams, K., Haslam, C., Johal, S. and Williams, J., Cars: Analysis, History, Cases (Oxford, 1994), pp. 144–6.Google Scholar
15 This is amply covered in the literature referred to above. Church's recent identification of the strangling hold of Nuffield's production ethos on the company identifies a constraint on change, but fails to explain how, and why, the owners failed to correct management failings in an era of corporate governance: Church, R., ‘Deconstructing Nuffield: the evolution of managerial culture in the British motor industry’, Economic History Review, 49 (1996).CrossRefGoogle Scholar
16 The most noticeable instance of this is when ‘too much emphasis is placed on short-term profit which is detrimental to R and D and investment and hence to long term growth’ and managers ‘are concerned about the current share price’: Nickell, , Performance, pp. 22, 25.Google Scholar
17 A detailed analysis of BMC accounting results is given in Bowden, and Maltby, , ‘“More a national asset than an investor's paradise”: financial management and the British Motor Corporation, 1952–68’, Accounting, Business and financial History, 8, 2 (1998).Google Scholar
18 Thomas, W. A., The Finance of British Industry, 1918–1976 (London, 1978), pp. 171–2.Google Scholar
19 £19.3m. (1952/53); £3.5m. (1955/56); £9.5m. (1958/59); £5.2m. (1963/64); and £4.7m (1966/67).
20 Over the same period, Ford's cash holdings were normally well below ten per cent of share holders' funds.
21 Thomas, , Finance, pp. 151–2.Google Scholar
22 British Motor Corporation, Chairman's Statement, Annual Report for the financial year ended 07. 1955.Google Scholar
23 Warwick Modern Records Office: MSS.226/AU/1/1/3: 12 Mar. and 13 May 1952. These Austin minutes reveal that only 52 per cent, and less than half the existing ordinary and preference shareholders in both Austin and Morris, gave immediate approval to the offer, although this rose to 98 and 95 per cent respectively by 13 May 952.
24 For example, Stock Exchange Gazette (25 11. 1955), p. 3679 and (Mar. 1959), p. 990.Google Scholar
25 This was the biggest investment project in the company's history, involving £15m. (1959/60), £20m. (1960/61) and £14m. (1961/62), all to be financed from existing rather than new capital.
26 The Statist (28 11. 1959).Google Scholar
27 Stock Exchange Gazette (03. 1959), p. 3456.Google Scholar
28 The Statist (1 12. 1961), p. 1100 and (16 Nov. 1962), p. 483.Google Scholar
29 ibid. (10 Jul. 1964).
30 Stock Exchange Gazette (7 05 1965), p. 470 and (23 12. 1966), p. 865.Google Scholar
31 ibid. (26 Nov. 1965), p. 730.
32 For example, The Statist (5 03. 1960), p. 371Google Scholar; (1 Dec. 1961); and (16 November 1962), p. 1266; and Stock Exchange Gazette (23 04. 1965).Google Scholar
33 For example, The Statist (10 05 1963), p. 403.Google Scholar
34 See, for example, Stock Exchange Gazette (01. 1957), p. 1684Google Scholar; (14 10. 1960), p. 1266; and (6 Jan. 1961), p. r3.
35 See, for example, ibid. (26 Nov. 1965), p. 730.
36 See, for example, ibid. (26 Nov. 1966), p. 864.
37 ibid.
38 ibid. (12 05 1967), p. 492.
39 ibid.
40 Blake, D., Financial Market Analysis (London, 1990), ch. 6.Google Scholar
41 i.e. a positive difference between the fair and the actual price.
42 BMC, Annual Report and Accounts (1959, 1960 and 1966).Google Scholar
43 By 1960, pension funds had widened and deepened their industrial portfolios, although in the case of BMC their presence was extremely small. Clayton, G. and Osborn, W. T., Insurance Company Investment: Principles and Policy (London, 1965)Google Scholar detail the growth in insurance companies' equity holdings, whilst the [Radcliffe] Committee on the Working of the Monetary System (1959) Report, Cmnd. 827, provides the best overview of the financial institutions' growing involvement in industry equity generally during the 1950s. A more recent survey, with a discussion of the wider implications, is given in Hannah, L., The Rise of the Corporate Economy (London, 2nd ed., 1983).Google Scholar
44 An insurance company which sold 13,000 shares on 19 Dec.
45 An account holding 3, 021 shares on 17 Jan., one holding 84,000 shares on 1 Aug. and an account holding 13,000 shares on 19 Dec.
46 An account holding 61, 875 shares on 2O Jun.
47 Eagle Star and London & Manchester Assurance exercised limited voice between 1953 and 1967, most noticeably in 1953, 1955, 1956, 1957, 1958 and 1959 and 1964 (Eagle Star) and 1958, 1959 and 1961 (London & Manchester).
48 National Bank sold 172, 700 and 139, 559 shares in Dec. and Mar. respectively; Midland Bank 63, 789 shares on 4 Jun. and 57, 346 on 16 Jan.; and Royal Bank of Scotland disposed of 118, 921 and 82, 397 in separate transactions during Jun. 1960.
49 Closures were on: 2 Apr., 38 accounts, holding 103, 017 shares; 16 Apr., 33 accounts, holding 67, 432 shares; and 30 Apr., 18 accounts, holding 55, 016 shares.
50 Mayer, , ‘Financial systems’, p. 21.Google Scholar
51 idem, ‘Corporate performance’, p. 191.Google Scholar
52 Franks, J. and Mayer, C., ‘Hostile takeovers and the correction of managerial failure’, Journal of Financial Economics, 40 (1995), pp. 163–81CrossRefGoogle Scholar; Jenkinson, T. and Mayer, C., Hostile Takeovers: Defence, Attack and Corporate Governance (Tübingen, 1994)Google Scholar; Mayer, C., ‘New issues in corporate finance’, European Economic Review, 32 (1988)CrossRefGoogle Scholar; and idem, ‘Ownership: an inaugural lecture’, Warwick Economic Research Papers, 402 (1 02. 1993).Google Scholar
53 Gaved, M., Ownership and influence, mimeo (LSE, Institute of Management, 1995), p. 84Google Scholar; and idem, ‘The rise of the institutional investor’, in Westall, Competitiveness.
54 Gaved, Ownership, p. 85.Google Scholar
55 ibid., p. 88.
56 ibid., p. 86.
57 ibid.
58 Interview, Tom Richardson (Oxford, 11. 1995)Google Scholar; interview, R. Stormonth-Darling and G. Owen (our thanks to G. Owen for giving us access to the transcript); interview, Michael, Edwardes (London, 05 1996)Google Scholar; Hague, D. and Wilkinson, G., The IRC – An Experiment in Industrial Intervention: A History of the Industrial Reorganisation Corporation (London, 1983)Google Scholar; Turner, G., The Leyland Papers (London, 1971)Google Scholar; and Whyte, L., One Increasing Purpose – The Annals of an Investor (London, 1984).Google Scholar
59 BMC, Annual Report (1963), p. 15.Google Scholar
60 Adeney, M., Nuffield: A Biography (London, 1993), p. 187.Google Scholar
61 ibid.
62 The three trusts accounted for 29.3 per cent of BMC ordinary shares.
63 Florence, P. Sargant, The Logic of British and American Industry; A Realistic Analysis of Economic Structure and Government (London, 1953), p. 304Google Scholar; and see also the discussion of passive family investor pressures in Church, R., ‘The family firm in industrial capitalism’, Business History, 35 (1993).CrossRefGoogle Scholar
64 Investors Chronicle (29 11. 1960).Google Scholar
65 BMC, Annual Reports.
66 Conyon and Peck, ‘Recent developments’.
67 Given the absence of data on managerial pay, we are unable to trace the relationship between pay and company performance.
68 Stormonth-Darling interview, p. 1.Google Scholar
69 ibid., p. 4.
70 ibid.
71 ibid., p. 1.
72 Gaved, Ownership, p. 88.Google Scholar
73 ibid.
74 See above, pp. 185–8.
75 Gaved, Ownership, pp. 84–8.Google Scholar It was not an unusual occurrence for Prudential; it had famously intervened in GEC in 1959: Jones, R. and Marriott, O., Anatomy of a Merger (London, 1972), p. 236.Google Scholar
76 Richardson interview.
