Gulf Keystone’s rewards don’t suit a listed firm

Mark Kleinman
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AS AN oilman, Todd Kozel, the boss of Gulf Keystone Petroleum, knows a thing or two about extracting things that are buried far from view.

Hardly surprising, then, that the most sensational information in the Aim-listed company’s 2012 results was only to be found deep down in the text. Massive bonuses, expenses, company loans to executives: you name it, it was in there.

No stranger to investor ire about his pay, Kozel may be banking on the idea that shareholder fatigue will allow him to win the day.

He should think again. M&G’s nomination of four new directors in an effort to make Gulf Keystone’s board independent is being backed by a string of other institutions.

The mud-slinging doesn’t stop there, however. People close to the company say it is now trying frantically to discredit the M&G nominees as being riddled with conflicts of interest.

It should concentrate on cleaning up its own affairs. Closer scrutiny of Gulf Keystone’s accounts reveals that it paid Mehdi Varzi, the director who chairs its remuneration committee, more than £700,000 last year, including a £620,000 share bonus.

That is unacceptable, and Kozel must know it. Investors would be doing the entire London market a favour if they engineered Varzi’s exit at the earliest possible opportunity.

If directors want to continue rewarding themselves in this manner, they should first abandon the cowardly approach of slipping the numbers out and hope that nobody is paying attention. Then they should make a reasonable offer and take the company private.

If they wanted to shatter the impression of a cosy oligopoly, then fireside chats involving the chief executives of Britain’s six biggest banks were unlikely to achieve it.

Yet until this week, the bank bosses envisaged just such a forum – outside the auspices of the British Bankers’ Association (BBA) – to hammer out a response to last week’s report from the Parliamentary Commission on Banking Standards.

Not any more. Sources say the taskforce idea has been dropped, partly because the bankers recognised the futility in resisting many of the commission’s proposals.

After Sir Mervyn King’s broadside against bank lobbying, though, questions about the industry’s main trade body continue to hang in the air. Senior bankers are voicing renewed doubts about the value of the BBA as a lobbying vehicle given the extent to which it has become discredited in Westminster.

“There is a feeling that with scores of members of all sizes and nationalities, it is becoming impossible for the BBA to represent us all effectively,” said a director of one of the largest UK banks.

Some are now pledging to fight for a sharp reduction in fees during discussions next year. The BBA’s post-Libor troubles are not over yet.

“Be very afraid”. “Shoot first, ask questions later”. As threats go, a signature on a document headed with the Financial Conduct Authority’s (FCA’s) logo might appear comparatively empty.

Yet while the public rhetoric of the regulator’s executives (those were the words of Sir Hector Sants and Martin Wheatley respectively) has quietened in recent months, its behind-the-scenes behaviour has toughened.

A move to force bankers to sign attestations in relation to their firm’s conduct involves numbers far more widespread than previously disclosed.

Understandably, bank executives are less keen to sign on the dotted line, to the extent that some who work for large foreign banks are taking legal advice in an attempt to force the FCA to back down. Let battle commence.