Northern Rock shareholders take their argument to the airwaves

An interesting aspect of the Northern Rock saga, is its demonstration of how weak shareholders can be in terms of influencing executive action particularly when events are moving quickly.

By going quietly, understandably, to the Bank of England to get emergency loans, Northern Rock management has been party to what appears to be the total dilution of shareholder value, or as good as, and at the same time the influence of shareholders. Northern Rock last year, I think was worth £5bn, today it is worth less than £400 million.

No wonder the shareholders are taking their case to the media. Sadly there is very little sympathy for their case from the media because the main shareholders now are hedge funds looking to see what might happen as the carcase is picked over. However many small shareholders were/are Northern Rock employees who have worked for the company for many years.

The hedge funds are not used to being so ignored but it would appear they are potentially sitting on major losses if as expected that Northern Rock is sold for a nominal sum. Certainly the driving force in sorting out Northern Rock appears to the UK government via the Treasury and Bank of England. The board of Northern Rock essentially all resigned last week. It is not often you see a FTSE100 publicly quoted company with no details at all on main board, audit committee etc - take a look at the web site.

Might the shareholders take their case to the courts. Certainly it is being managed by government as though it is nationalised. What is its exact legal entity currently and might this have issues for any decisions taken in this interim period. When companies talk about running the company on behalf of shareholders - remember that does not include banks which have had to run to the Bank of England.