July 25, 2024

Earn Money

Business Life

stop paying dividends while the state is bailing out the economy

How typical of lawyers to disagree.

Two firms today took totally opposing views of how to rank the interests of shareholders against those of staff. Both admitted they could not tell what the future holds, but while Ince cut its dividend, Knights cut its staff’s wages.

Across the UK, boards are making the same decision: is it responsible to eat into rainy day funds to pay investors when unprecedented chaos is sweeping into every one of their markets?

The default answer has to be No. Unless there are specific reasons Covid-19 puts you in a particularly strong position — and I can’t think of any — it can’t be worth the risk.

Not only are directors obliged to look after the long-term safety of their business, but the chances are they will at some time be relying on some form of state support. Either directly through loans or grants for furloughed staff, or indirectly through the fact that the public is paying hundreds of billions of pounds to prop up the private sector. They have a moral duty to reduce the risks they pose to staff or the state.

If you don’t like the moral argument, take the selfish one. Had EasyJet not just paid out

£174 million to its shareholders, the Government might not have refused its plea for aid.

Most companies get it. A further 14 cut the divi today, taking the total scrapped up to £4 billion. But others still don’t.

Daily Mirror publisher Reach says it’s minded to pay, while banks are still doling out billions.

Lawyers, the media and bankers. All we need is estate agents, and it’ll be the same old gang heading for the stocks.

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