CorpComms Magazine

Throughout history, the English Channel has been the site of many battles. The most recent tête-à­tête, however, centred on cheap train tickets rather than courtly ambition.

In 2006 Eurotunnel announced it would scrap a lucrative perk held by some of its original shareholders, which entitled them to unlimited £1 trips for life. The Channel Tunnel operator was heavily in debt and needed to refinance, so it seemed the perfect moment to scrap a benefit that was costing the company around £200,000 a year.

Many of the company's shareholders rebelled. Banding together, they formed the Eurotunnel Action Group and forced the company to compromise. In the end, investors who held the £1 perk were allowed to keep it; in return, they allowed their shares to become worth­less when Eurotunnel finally refinanced in April this year. Shareholders in the new company, Groupe Eurotunnel, receive a less impressive benefit.

In recent years, shareholder perks have fallen out of fashion as companies become less keen to attract retail investors. 'There was a time when perks got a lot of newspaper coverage, but these days they have almost disappeared,' says Richard Perks, European retail analyst at market research group Mintel. 'There's less interest these days in getting the small investor on board.'

Richard Hunter, head of UK equities at stockbroker Hargreaves Lansdown, agrees. 'I can't think of many new companies that have been offering perks in the last few years,' he says. 'It is an added cost to having a large number of shareholders.'

Hunter points out another cross-channel perk that also ended recently: the cheap trips offered by P&O, the ferry operator. 'The P&O channel crossing discount was one of the most famous perks around,' he comments. 'But when P&O was taken over by Dubai Ports World, it went right out of the window.'

Meeting obligations

Perks to attract shareholders to AGMs have also diminished considerably. There are a few examples left, such as super­market giant Tesco promising a 'small gift' to shareholders attending its get-together. Unilever, the food and household products company, promises investors a bag of company products and a hot lunch if they show up.

These firms are few and far between, however. 'Some companies provide giveaways to get shareholders to the AGM, but these days it is just as easy for shareholders to vote online,' explains Hunter. 'There was a move to try to get people to attend AGMs, but this is now falling away.'

This decline may have cost shareholders, but it saves companies in more ways than just the financial. When firms were keen to attract shareholders to the AGM, a common tool of persuasion was alcohol - on the house. 'Some brewery companies used to offer free beer but, perhaps understandably, this is no longer the case,' says Hunter.

One example was Grand Metropolitan, which in the 1980s hosted a free bar in a central London hotel. According to one attendee, no food was served - only drink, which ensured that many shareholders would get completely soused. Restaurant operator Whitbread used to own several breweries, providing suitable locations and plenty of alcohol for its AGMs. But Whitbread has since sold its brewery operations, while Grand Metropolitan merged with Guinness in 1997 to form Diageo, and a spokesperson for the company says there are now 'no incentives offered to attract shareholders to the AGM'.

As there are no specific rules on shareholder benefits in company law, companies can set up or dismantle perks as long as shareholders approve. 'Company law - and financial services law - deals with this issue through accountability and disclosure, by allowing the company and its shareholders to make decisions about what benefits might be available to shareholders and then disclosing them in the annual report and accounts and other publications,' comments a spokesperson for the Department for Business Enterprise and Regulatory Reform.

Care in the investor community

Much depends on how responsive a company is to the demands of its individual shareholders. Eurotunnel did not have to continue its £1 perk, but it did so anyway as a good­will gesture to its long-standing shareholders, according to John Keefe, a spokesperson for the company. By contrast, Dubai Ports World had little concern about scrapping P&O's cheap cruises - to the dismay of small investors.

Not all companies are throwing in the towel just yet, however. Despite the accompanying problems, perks remain a simple way to ensure shareholders are engaged with a company's products and services.

'For some time now, companies have been aware their shareholder lists are a good channel of communication,' says Hunter. 'If companies can provide products or services at a discount, or with some incentive, this focuses the minds of management members and reassures them that their shareholders are sampling their wares or the service they provide. Equally, the shareholders get a reduction in price for those products. This is often seen as evidence that those companies are trying to add shareholder value.'

Size (usually) matters

Some companies offer perks to all shareholders, regardless of size or length of ownership, but most have rules regarding who gets access to what. British Airways offers 10 percent off any BA fare for a shareholder and up to five companions if the shareholder owns more than 200 ordinary shares, while an investor in high street retailer Moss Bros needs only one share to claim a 20 percent discount.

Property companies such as Bellway and Persimmon offer bigger discounts for those who can afford a large invest­ment. Bellway gives a discount of £625 for every £25,000 spent on a new home, if the bearer has held 2,000 shares for at least 12 months before the reservation of the new home. Persimmon offers 2 percent off a property's value if 1,000 shares have been held at least 12 months before the purchase, although the saving is capped at £3,000 a year.

Right now, investors are likely to be dumping property shares regardless of the perk. Despite their general decline, however, shareholder perks should not be completely overlooked

- particularly if a company is keen to retain a retail shareholder base and keep its owners engaged with its products and services.

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