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Morley Fund Management, one of the UK’s biggest fund managers, will vote against the re-election of most of Vodafone’s longstanding directors, including Arun Sarin, its chief executive, at the mobile phone company’s annual meeting on Tuesday.
Morley’s vote is a signal that the fund manager expects Sir John Bond, the former HSBC chairman who becomes Vodafone’s chairman at the meeting, to get a grip on the company’s flagging performance.
The meeting will be the first chance for shareholders to confront Vodafone’s board since the company warned last year of slowing revenue growth, lower profit margins and reduced free cash flow. In May it reported a record pre-tax loss of £14.9bn for its 2005-06 fiscal year.
Sir John, who has most investors’ support, including Morley, has been meeting some of Vodafone’s big shareholders in the past three weeks to discuss their grievances.
Morley, one of Vodafone’s top 10 investors, said: “We have a keen interest in the current situation at Vodafone and the challenges facing the company. Our current concerns are reflected in our voting where we have voted against some of the non-executive directors and also Arun Sarin.
“We have had a number of honest and robust discussions with the company and this dialogue is proving useful. We welcome the time and attention Sir John Bond is giving to addressing the issues.”
Investors holding between five and 10 per cent of Vodafone’s equity could vote against Mr Sarin’s reelection at the annual meeting or abstain, according to shareholders. The vote against Mr Sarin is unlikely to be enough to force him out of the company. Nonetheless, a 5 per cent vote against a serving chief executive would be embarrassing, said shareholders.
“It will become evident at the annual meeting that there is a degree of pressure on the chief executive,” said another of Vodafone’s top 10 investors.
A Vodafone spokesman said: “As far as we are aware, the vast majority of votes cast will be in support of the board.”
Another top 10 investor claimed a “silent majority” of Vodafone’s shareholders was not seeking Mr Sarin’s removal.
The investor said: “There might be people out there who could do a better job, but there might also be people who could do a worse job. Change is often dangerous.”
Many shareholders are keen to give Sir John time to conduct a review of the board, and to assess the management. One investor with reservations about Mr Sarin’s ability to run the company said it would not be clear until the autumn whether Vodafone’s new strategy was delivering results.