J Smart – the directors and some concerns

J Smart (LSE:SMJ) is a family-run firm.  John M. Smart worked 50 years for the company and dominated it for the 29 years to 2017 as Chairman. He presided over an almost unbroken record of profit. John M. Smart has now retired, but his legacy lives on, in terms of extreme conservatism on the balance sheet, dividend levels and strategic direction.


His sons, David W. Smart, Chairman and Joint Managing Director, and John R. Smart, Joint Managing Director, now dominate the board
David, at 49, has been with the company for 23 years and on the board since 2010, and owns 12.8m shares (31.4%). Dividends received from the company in 2022 £0.41m; 2021 £0.41m.
John R Smart, 52, joined in 2002 and has been a director since 2013.  He too has 12.8m shares. Dividends received from the company in 2022 £0.41m; 2021 £0.41m.
Both have experience elsewhere, one in quantity surveying and one in property surveying. They are thought of as slightly more progressive than their father
There are two other executive directors: Alasdair Ross, 60, joined the company in 1989 and was appointed a director in 2012 (owns 0.15m shares), and Patricia Sweeney, 53, joined 2011, and was appointed director in April 2017 (owns 0.15m shares).
All directors earn the same salary of £123,800, with just a few benefits and pension scheme payments tacked on. No element of their remuneration is based on performance metrics.....
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Integrity
The hiring of non-executive directors is seen by these down-to-earth builder types as unnecessarily increasing costs and administrative burdens for no discernible benefit.  Thus, there is no protection for minority shareholders from NEDs should the executives turn on them.
2022 Report: “The Board recognises that it has not complied fully with the Code in the areas of appointment of Non-Executive Directors and the establishment of Nomination, Audit and Remuneration Committees and the re-election of executive Directors. It also has not complied with the principles relating to division of responsibilities, evaluation of the Board and individual Directors. The Board considers that due to the nature of the company including its size, lack of complexity and the ownership of the Company that to follow all the principles of the Code would be onerous and would provide no discernible benefit to the Company or shareholders.”
In my experience with these family-dominated firms the NEDs are of limited value. Protection comes from the character of those with power.  Are the instinctively decent?  Do they have habits of fair dealing? Are they loyal?
On this front we have some supportive evidence:
Exhibit 1: Waiving dividends.
The family have forgone millions of pounds in dividends over the years, simply by refusing to take them.  When asked why they do this they express the view that they don’t need it and by waiving “shareholders cannot accuse them of self-dealing” – this shows an extreme impulse to behave well. The former chairman and father of the joint MDs has said of his family’s dividends that they were better off if they were reinvested in the business, and “How much money do you need?!” (an interview by Duncan MacInnes)
Exhibit 2: They run a tight ship.
Their office is a dated non-descript 1960s o