Ninety One chair’s Russia role is a governance failure for City asset manager

The war in Ukraine has set off a swift business exodus from Russia, the flight of western directors from Russian companies’ boards and a good deal of soul-searching among asset managers about what, as ESG-focused stewards of investors’ capital, they should do next.

Not everyone it seems got the memo.

As of Tuesday morning, the chair of Russia’s Norilsk Nickel was Gareth Penny, a British businessman, educated at Eton and Oxford, who has held that role since 2013. Penny was also still sat in another chair’s seat, at UK-listed Ninety One, the asset management arm spun off from South Africa’s Investec in 2020.

This is nearly two weeks after the Institute of Directors said that in its view, it was morally “no longer tenable for British directors to be involved in governance roles in the Russian economy”. It is also a week after the violence and destruction in Ukraine, and the increasing ostracism of Russia from the global economy prompted a rash of resignations from Russian company boards.

Penny told the Financial Times he was “in discussions with the board of Norilsk Nickel and am following a process that will conclude in the coming week. The outcome will be the correct one.”

He was paid more than $300,000 for his Norilsk chairmanship and various board committee roles, according to company reports. With a background in South Africa’s mining industry, he was a credible candidate for the position, which involves participating in the “interaction of the company with capital markets and government agencies”.

At least part of that job has vanished. UK-listed global depositary receipts in Norilsk were among those suspended by the London Stock Exchange this month.

The nickel producer and Vladimir Potanin, its biggest shareholder and a former Russian deputy prime minister, have not been placed under sanctions. In fact, Potanin is reported to have spoken out against Kremlin plans to seize the assets of foreign companies withdrawing from Russia, arguing it would “take us back a hundred years, to 1917”.

But Norilsk is part-owned by Rusal, the aluminium producer hit by US and UK sanctions. Rusal, in turn, is part-owned by En+, the London-listed group in which oligarch Oleg Deripaska is a significant shareholder. Roman Abramovich owns a small stake in Norilsk.

Leave aside the impossibility of untangling any of Russia’s extractive companies from the machinery of the state, and the ethics of Penny’s dual roles. This is a ridiculous situation for Ninety One, which forms part of the FTSE 250 index.

On Tuesday, the asset management group — which touts its ESG credentials and its commitment to “active stewardship” — told a third party, in a message seen by the FT, that its “current position” was that “this remains a decision for our chair in his personal capacity”.

This is not just feeble but wrong. Ninety One’s ESG stewardship does not appear to extend to the position of its own chair. The chair’s standing arises from a decision of the board as a whole, points out one governance expert.

There should at least be a proper process whereby a board judgment is made as to the suitability of Penny’s two hats — either morally or simply in terms of the shepherding of a business that claims to follow the purpose of “Better firm, Better investing, Better world”.

When asked by the FT, chief executive Hendrik du Toit said Ninety One had “engaged with our non-executive chair . . . and have shared our views . . . We believe he will come to the right decision.”

Rishi Sunak, the UK chancellor, has reached his own conclusion on the responsibilities of asset managers at this time. Following a meeting with the industry, Sunak this week welcomed announcements that investment groups would sell their Russian assets and urged “firms to think very carefully about their investments in Russia and how they may aid the Putin regime”.

Assets managers, such as BlackRock, are taking billions of dollars of losses on Russian securities left unsaleable by the market shuttering and sanctions prompted by the invasion of Ukraine.

Ninety One’s du Toit this month warned about “playing to the gallery” and said he was worried about “the level of government influence over private business decisions”.

One can only wonder what his chair makes of that.