Big investment houses are accused of not engaging enough with companies on governance issues, although the reality is that many more conversations take place behind the scenes than get reported.
Investors certainly care about how the businesses they invest in are run, and a glance at the chart will tell you why. When there are serious failings in the boardroom, such as those demonstrated this week at Kazakh miner ENRC, shareholders eventually feel it where it hurts most.
ENRC has underperformed the rest of the UK mining sector by a significant margin over the past year despite more than doubling its profits in 2010 on the back of the global commodities boom. The chart shows why corporate governance cannot be an add-on for a fund manager. It is a fundamental part of the process which, in this case, has unsurprisingly led to many investors giving the company a wide berth.
Most examples of poor corporate governance are less glaring than the unedifying spectacle of last Wednesday's defenestration of two of ENRC's non-executive directors. Sir Richard Sykes and Ken Olisa were shown the door, it would seem, for having the temerity to do their job – holding the executives to account. It was the first time in 10 years that a director of a FTSE 100 company has been voted off the board at an annual meeting.
At the heart of this debacle is the dominance of a trio of founding shareholders who pledged a hands-off approach when the company floated in London in 2007 but have since ignored that promise. Together with fellow FTSE 100 miner Kazakhmys and the Kazakh government, the three have a stranglehold on the company's shares, fewer than 20pc of which are freely available to outside shareholders.
This would ordinarily have precluded a float in London, and a special exemption had to be granted to allow it to go ahead on the grounds the company was big enough for the few shares in the free float to represent a liquid market. The events of the past few days have cast doubt on the wisdom of that decision.
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