Tesco boss slams short-termist investors

27th Sep 2010 14:10

Sir Terry Leahy is the latest person to criticise the City, although in his case it is what he sees as the short-termism of fund managers. Sir Terry, who steps down as Tesco chief executive next March, is forthright in his opinions of fund managers but he does not use as strong language as Business Secretary Vince Cable did about bankers. He argues in the Times that fund managers are interested in their quarterly returns and long-term prospects only interest them if they affect the current share price. Sir Terry urges fund managers to get more closely involved in the businesses that they are invested in and focus more on the long-term prosperity of the business. Tesco has never really appeared to suffer much from this apparent short-termism and a level of liquidity is always good in a market.Sir Terry's successor as chief executive of Tesco is Philip Clarke. On 16 August, he exercised an option over 217,825 shares under the Tesco plc Performance Share Plan. These shares cost him nothing and he sold them on the same day for 398.88p each, thereby raising nearly £869,000. The sale was two months after he became chief executive designate. Clarke does own more than 2.5m shares in Tesco so that does reflect his commitment. Other Tesco directors have been sellers, including times when they have exercised options. These individuals have to decide what is best for them and the taxing of the options will always play a significant part in that. However, it seems unfair to criticise other investors when they trade in shares when the directors of most companies do the same. There are times when investors need to vote with their feet but many can be extremely loyal to companies even when they get into difficulties. Short-termism is a problem whether it is by shareholders or management.