Fiona McBain, chairman of the Scottish mortgage bank, resigns after a row in the boardroom over board rules
The beleaguered chairman of the Scottish Mortgage Investment Trust is set to resign after a heated boardroom discussion over governance rules.
Fiona McBain, who has chaired the FTSE 100 trust since 2017, will step down after the group’s annual general meeting in June and will be replaced by independent director Justin Dowley.
Her departure comes less than a week after one of the company’s non-executive directors, Amar Bhide, launched an unprecedented attack on its corporate governance that has rocked the otherwise quiet mutual fund world.
Stepping down: Fiona McBain, who has been chairman of Scottish Mortgage since 2017, will step down from her role in June and be replaced by independent director Justin Dowley
Bhide, who has been on the board since 2020, accused the company of “a long string of procedural violations” going back months and said his concerns had been “brushed aside” by management.
He aimed directly at McBain, claiming that the chairman was “long past the point where she had any independence” and said her role was “to protect executives from criticism and questioning.”
McBain has been a non-executive director of Scottish Mortgage for 14 years, well past the maximum nine-year term recommended as best practice by the UK corporate governance code.
Bhide also expressed concern that the trust lacked the processes to effectively oversee its large holdings in privately held companies, which are usually much harder to sell than companies traded on exchanges.
Large investments in privately held companies were one of the main factors behind the collapse of the fund led by former star stock picker Neil Woodford in October 2019.
Scottish Mortgage suffered further damage last week when an attempt to force Bhide to resign fell through. Instead, he refused to go and made public his concerns about the company.
He told the Financial Times that he had been asked to step down following a disagreement over the appointment of new board members.
The company announced yesterday that both have since left the board.
It also announced that Paola Subacchi, another director, would retire after nine years at the end of the AGM. An external search agency was brought in to help with ‘further board refresh’.
Dowley thanked Subacchi “for her substantial contributions during her nine years as a non-executive director.” He also expressed his gratitude to McBain “for her 14 years of loyal and exceptional service to the company.”
Shares rose 0.4 percent, or 2.6 pence, to 664.8 pence.
Scottish Mortgage had a portfolio worth £12bn at the end of September. Over the past decade, the trust has become one of the most popular investment trusts in the UK following a series of well-placed bets in the technology sector. They include Tesla, Amazon, Nvidia and Chinese giant Tencent.
The value of the trust soared during the Covid-19 pandemic as demand for technology stocks boomed, with the stock reaching an all-time high of around 1569 pence in November 2021.
But the group has been hit hard after the war in Ukraine, rising interest rates and rising inflation caused sentiment in the tech industry to sour.
Jemma Jackson of investment platform Interactive Investor said the public outburst at the top of the trust could have “greater implications for the industry” and that the company’s planned annual general meeting in June “is likely to be a lively one.”
Matters were also made worse when James Anderson, the architect of the hugely successful investment strategy, left last April.
Jackson said, “Suddenly, the role of the independent board of directors takes center stage in a way that has rarely been seen before.
“That in itself is not a bad thing, but given the size, relevance and scope of the trust, it is a barometer of confidence in the wider sector.”
The stock is changing hands about 58 percent below its all-time high, wiping out nearly all of the pandemic gains.