Scottish Mortgage Investment Trust’s under-fire chairman will step down following a heated boardroom bust-up over governance rules.
Fiona McBain, who has chaired the FTSE 100 trust since 2017, will relinquish the role after the group’s annual general meeting in June and 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 usually quiet world of investment trusts.
Stepping down: Fiona McBain, who has chaired Scottish Mortgage since 2017, will relinquish the role in June and be replaced by independent director Justin Dowley
Bhide, who had served on the board since 2020, accused the firm of ‘a long series of procedural violations’ going back months and said his concerns had been ‘brushed aside’ by management.
He targeted McBain directly, alleging the chairman was ‘long past the point at which she had any independence’ and said her role was ‘to protect managers from criticism and questioning.’
McBain has been a non-executive director at Scottish Mortgage for 14 years, well beyond the maximum term of nine years recommended as best practice by the UK’s corporate governance code.
Bhide also expressed concern the trust did not have the processes in place to effectively monitor its large holdings in unlisted companies, which are usually much harder to sell than those traded on stock exchanges.
Large investments in unlisted companies was one of the key factors behind the collapse of the fund run by former star stockpicker Neil Woodford in October 2019.
Scottish Mortgage was further damaged last week when an attempt to force Bhide to resign backfired. Instead, he refused to go and went public with his concerns about the business.
He told the Financial Times he had been asked to quit following a disagreement over the appointment of new board members.
It also announced that Paola Subacchi, another director, would retire at the end of the AGM after nine years. An external search firm had been brought in to help with ‘further board refreshment.’
Dowley thanked Subacchi ‘for her substantial contributions during her nine years as a non-executive director’. He also expressed gratitude to McBain ‘for her 14 years of loyal and exceptional service to the company’.
Shares edged up 0.4 per cent, or 2.6p, to 664.8p.
Scottish Mortgage had a portfolio worth £12billion at the end of September. Over the last decade the trust has ballooned to become one of the UK’s most popular investment trusts after a series of well-placed bets in the tech sector. They included Tesla, Amazon, Nvidia and Chinese giant Tencent.
The trust’s value soared during the Covid-19 pandemic as demand for tech shares boomed, with the stock hitting a record high of around 1569p in November 2021.
But the group has been hit hard after the war in Ukraine, rising interest rates and surging inflation caused sentiment to sour on the tech industry.
Jemma Jackson of investment platform Interactive Investor said the public blow-up at the top of the trust could have ‘wider repercussions for the industry’ and that the firm’s planned annual general meeting in June was ‘likely to be a lively one’.
Matters were also made worse when James Anderson, the architect of its hugely successful investment strategy, left last April.
Jackson said: ‘Suddenly, the role of the independent board of directors is front and centre in a way seldom seen before.
‘That isn’t of itself a bad thing, but given the size, relevance and reach of the trust, it is a barometer of confidence in the wider sector.’
The stock is changing hands around 58 per cent below its record high, with almost all of its pandemic gains having been wiped out.