The FT has reported this morning that:
Companies hard hit by Covid-19 may have to put dividends on hold if they are facing a cash squeeze but have large pension shortfalls, the UK regulator has warned.
They added:
David Fairs, executive director of regulatory policy with the Pensions Regulator, said retirement schemes should “not be the only creditor feeling the pain” if a company is struggling to recover from the impact of the pandemic.
There are, of course, companies who are struggling after the Covid crisis. Pension fund contributions often take the hit in this case, coming (it seems) at the bottom of the pile of priorities in many cases, with significant pension deficits existing in many companies.
I am delighted to see this attitude from the regulator. Employees have a higher claim on a company than its shareholders. It is the shareholders who, after all, take the residual risk in any company, not those who do or have worked for it. I hope that this new bias is pursued: it is right and proper.
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I take your point….. but frankly, I am shocked that this even needs to be said.
Shareholders are (or at least should be) at the bottom of the pecking order in terms of pay-outs. Of course dividends should be suspended if there is even a possibility of there being in sufficient cash to meet other obligations. In my view, directors that approve dividends in these circumstances are acting illegally.
The fact that it is “news” when the regulator makes this point shows what a sorry state capitalism is in. Remember all the bleating about the suspension of bank dividends with hard luck stories from pensioners who would have to tighten their belts due to a lack of a dividend? Too many have forgotten what it is to be an equity holder and risk taker.
In the last decade 28% of companies have paid out more in dividends than they have earned in profits…..
This is the bias
My research on this out very soon….
I don’t doubt you are right…….. but surely even the most red-blooded, capitalist would call it a scandal.
🙂
Obviously – if the workers do the ‘value work’ that helps to generate turnover and therefore returns then hopefully the penny has dropped as to why they should be more highly valued in the first place rather than be seen as disposable?
Smaller companies value their workers because it’s necessary. Larger companies don’t. (There’s nothing more soul destroying than the Annual Appraisal, purely a tick-box exercise.) Some companies are seemingly at war with their employees – they go bust.