Before I get into this, first the disclaimers:
- I’m not going to say anything that is not public knowledge, or could not be worked out by anyone who stops to think about it
- I’m not saying I’m for or against the current AFC Board or any shareholder(s)
- I’m using the term ‘Arsenal’ to apply to the football club and the holding company, for simplicity – for this argument there’s no practical difference.
- Also Stan Kroenke equals KSE for my purpose, and similarly Alisher Usmanov equals Red & White Holdings
Okay, so first a few basic background facts:
Arsenal is now controlled by Stan Kroenke, who holds about two-thirds of the shares.
This means anything that requires a majority vote among shareholders, Stan wins.
Arsenal is a publicly listed and limited liability company, so there are numerous rules and laws that apply to all its dealings.
These include the rule that directors are appointed by a majority of voting shareholdings, which means 50 per cent + 1 share.
Also an AGM will be held, and all shareholders are entitled to attend and to vote on resolutions.
Now here’s an interesting thing: although over 95 per cent of Arsenal shares are now held by two people, the number of shareholders overall has not reduced much since before Stan and Mr Usmanov appeared on the scene.
How can this be? Well because a lot of people held blocks of 4, 8 or 16 shares, which had been in their families for generations. Many of them sold all but one share so they could make some money without losing the fact that they owned a little bit of the club that their family might have been supporting for close to 100 years.
Also, many single shares bought in recent years are held by individual fans who have bought them for reasons of loyalty and emotion, so did not take up the offers from either SK or AU.
Most of these people will not get rid of their remaining shares unless forced to. So the shareholders now consist of two very rich men with no emotional attachment to the company they own, plus several hundred other people with a tiny proportion of shares but a huge attachment to the ‘company’. I would suggest this is almost unique in business.
Next month is the Arsenal AGM. The Board will sit together on the podium, with two thirds of the shares between them. The difference this year to every other year is that every share on the podium will be owned by Stan.
Stan isn’t the Chairman, but even so it would be most unusual if he were to not turn up. (It would also be strange if he didn’t say anything. He said nothing last year when he was the largest – but still a minority – shareholder, but it seems almost inconceivable he will not even have a prepared statement for shareholders and fans this year.)
Alongside Stan will be the Chairman. Even if you haven’t been to an AGM and seen this for yourself, you are probably aware that the Chairman does not have a great reputation for – well, let’s say for running the meeting efficiently and effectively. He has a tendency to get a little confused sometimes. Nevertheless, if the practice of previous years is followed, the Chairman will be the one who stands up, reads statements, gives answers to questions received in advance, and takes the meeting through resolutions.
Ivan Gazidis will also be there, and of course we all know he has a defined role as Chief Executive. The other directors, though, do not have roles that are so clear cut. The perception of many minor shareholders and supporters is that most of the remaining directors do not contribute very much. I’m not making any personal judgement on them here, I am merely recording what people have said to me.
So there are the cast of characters. Now, the next interesting fact is that directors of public companies do not serve indefinitely; they come up for re-election. The idea of this is to prevent the board becoming stale and entirely self-serving. Obviously it’s not perfect, but when profits are being made then the shareholders are generally happy, so directors get re-elected unless they choose to retire. Football clubs have an extra dimension to this, though – they have fans as well as shareholders, and the fans don’t want profits, they want trophies. In Arsenal’s case, many of the shareholders – the vast majority in numerical terms – are also fans. Of course this big majority of people hold only a couple of per cent of shares, so they can never decide to band together and win a vote, but that doesn’t stop them making their feelings known.
So picture the scene: at this year’s AGM let’s suppose it is the turn of Peter Hill-Wood to be re-elected to the Board. (I haven’t checked if it’s his turn, but the usual practice is that a third of the directors have to be re-elected each year on a rolling three-year cycle.) What has happened in the past is that the Chairman has read out the resolution – to re-elect X to the Board – and asked for a show of hands. So far, in my experience, when he says “All those in favour,” most raise their hands – a few are just too lazy. Then he says “All those against”, no one moves, and he declares “Carried unanimously.”
But this year, suppose he says, “It’s my turn to stand for re-election, all those in favour” – well Stan had better be sure he raises his hand because I’m not convinced that many other shareholders will. Suppose Stan isn’t paying attention and keeps his hands in his pockets, the Chairman will then say “All those against”, and what if a large number raise their hands at this point? They might be thinking – and this is conjecture of course, based on what I’ve picked up from talking to people – do we want a chairman who seems to have outlived his usefulness, and who no longer owns any shares? This could be rather embarrassing! Of course, if Stan votes then Stan wins – and there won’t be any resolutions put forward unless Stan supports them. But even so, a show of hands against this sort of resolution would send a very strong message to the watching press, as well as to all supporters. Effectively it would be 67 per cent in favour of re-electing the Chairman, about two per cent against, with 30 per cent abstaining. (I make the assumption that R&W aren’t going to publicly declare a position one way or the other on such matters.) But in the meeting itself, it could be one hand in the air supporting the Chairman and 300 against him. Now that would be an interesting meeting.
I’d say that Ken Friar would be fairly safely re-elected on a show of hands, but as for the others, who knows? If Stan has remained silent up to this point, he might not be too popular himself. And I wonder if it came to this, whether any of the Board would take the hint? Even if they didn’t would Stan take the hint and take action later? Who knows? Stan has pretty much kept his views to himself so far.
There are a few games to go until the AGM at the end of October. Football fans generally have very short memories, though 8-2 is going to be hard to gloss over. Depending on the number of wins in the next five or six weeks, I sense it could be the most interesting AGM for a very long time.