Scottish Mortgage reveals board reshuffle in aftermath of governance dispute

Scottish Mortgage Investment Trust has announced a shake-up of its board, following a row regarding the appointment of new executives.

Chair Fiona McBain will step down at the conclusion of the firm’s annual general meeting sometime in June, having served six years in the post and 14 years overall as a director at the flagship Baillie Gifford investment trust.

She will be replaced by Justin Dowley, who is the fund’s senior independent director and chairman of Melrose Industries, which is known for buying and turning around struggling engineering businesses.

Departure: Fiona McBain (pictured) will step down as chair of Scottish Mortgage Investment Trust at the conclusion of the firm’s annual general meeting sometime in June

A former investment banker, Dowley’s career has included roles at now-defunct merchant bank Morgan Grenfell, Merrill Lynch and Intermediate Capital Group, where he was also chairman.

Professor Patrick Maxwell will succeed him as senior director, subject to investor approval, while fellow board member Professor Paola Subacchi will retire once the AGM has ended.

Dowley said McBain had provided ‘essential continuity, reassurance and leadership during the extraordinary circumstances of Covid-19 and through a period of transition on the board and with the managers’.

The announcement of McBain’s departure comes days after fellow board member Amar Bhidé revealed he had argued with the chair and the board over Scottish Mortgage’s recruitment of two executives and exposure to unlisted companies.

Bhidé, a business professor at Tufts University in Massachusetts, told the Financial Times last week that the board lacked members with ‘professional investment experience’ and ‘desperately needed people who knew what they were doing’.

He added that McBain was ‘long past the point at which she had any independence’, adding that ‘her role so far as I can see is to protect managers from criticism and questioning’.

Tech giants: The value of Scottish Mortgage’s stakes in carmaker Tesla and e-commerce giant Shopify dropped by more than £11.5billion last year amid a global economic slowdown

The UK Financial Reporting Council’s corporate governance code recommends that board members serve up to nine years from the moment they become a director.

Bhidé further claimed that he had warned the fund about its illiquid investments, particularly with regard to Scottish Mortgage’s significant technology investments.

Baillie Gifford’s assets under management plunged by a record £113billion last year as interest rate hikes, economic slowdown and loosening Covid-19 restrictions sent the pandemic-induced boom in tech industry shares into reverse.

The value of its stakes in electric carmaker Tesla, where it used to be the second-biggest shareholder behind Elon Musk, and e-commerce giant Shopify dropped by more than £11.5billion. 

At an investor forum in January, Scottish Mortgage fund manager Tom Slater said 2022 had been a ‘humbling year’ as he admitted the group had erred in assuming consumer habits deriving from the pandemic would remain.

Over the past decade, though, SMT’s shares have risen by about 333 per cent, while its net asset value has grown by over 400 per cent, according to the Association of Investment Companies.

But Mr Bhide attributed the performance over the period to ‘an utterly aberrant period in financial history’. 

He warned: ‘Don’t delude yourself that you can keep playing this game.’

Scottish Mortgage denied on Friday that Bhidé had either resigned or been removed as a director but confirmed on Tuesday that he had left the company.

‘Bhide’s public moan might cue a pile-on from journos eager for knocking copy, but savvy investment trusts cognoscenti know better than to bet against Scottish Mortgage over the long term,’ said analysts at broker Jefferies.

Scottish Mortgage Investment Trust shares were 0.6 per cent higher at 666.2p on Tuesday morning, meaning their value has declined by around a third in the past 12 months.

This post first appeared on Dailymail.co.uk