Hermes chief calls for “moral compass” amid Panama tax scandal and Pfizer inversion deal

Saker Nusseibeh, chief executive of Hermes Investment Management, the fund firm owned by the BT Pension Scheme, has called for a “moral compass” to navigate issues such as the now ditched Pfizer tax inversion deal with Ireland-based Allergan and the Panama offshore tax leaks scandal.

Asked about the Pfizer-Allegan deal by BBC radio’s ‘Wake Up to Money’, he said: “In some ways inversion, which is what the Americans call this, links to what we just said earlier about the need for ethical businesses and the need for some kind of moral compass which goes beyond what is legal and what is not legal.”

He said Pfizer was using a perfectly legal loophole that President Obama opposed and noted that there were probably a lot more deals to be done in the pharma and biotech space. He said that a deal that’s purely based on the tax rate probably “is now out and that loophole has been closed”.

Asked about the benefits to shareholders about such deals, he said: “This is a very interesting point, which is the difference between short term pressures on companies to try to increase profits, which often will involve deals to make it look better, and the pressure towards sustainability which is something that we at Hermes go on about.“So you’re right, deals just for the sake of financial engineering do not work in the long term. What we should talk about is sustainable business models that benefit the whole wider community.

“Personally I think it’s morally wrong”

The interview moved onto the news about offshore accounts raised by the Panama leaks. Nusseibeh, who founded the 300 Club of leading investment figures, had this to say: “Again, it’s a little like the Pfizer-Allergan deal.

“There’s a question mark: If you’re going to keep your money offshore, why are you keeping it in the one part of the world that has very lax laws and does not declare what you’ve got?

“Look this is a personal view and I’ve got to be sensitive, but personally I think it’s morally wrong.” He added there was a lot to be said in support of the US tax system: “I hated the American system when I worked there because it’s got an aggressive tax system. But remember, it’s based on the idea that citizenship has responsibilities as well as rights.” The Panama leaks shone “a big light on the big movement of money of the super rich”.