An ousting is more likely to prove successful if shareholders gang up behind the scenes than if they shout their displeasure from the rooftops
Anthony Bolton, the Fidelity fund manager who formerly ran the investment group’s top-performing special situations fund, last week gave some insights into how best to take a corporate scalp.
In an interview with Stephen Sackur on BBC News’s Hardtalk, Bolton made clear that an ousting is more likely to prove successful if shareholders gang up behind the scenes than if they shout their displeasure from the rooftops.
Bolton earned his “quiet assassin” nickname over the way in which he stopped Michael Green, the former head of Carlton Television, becoming ITV’s first chairman in 2004. On that occasion Bolton, who has taken a string of other corporate scalps in his 30-year investment career, said news of his campaign to deny the cigar-chomping Green the top job was in fact leaked by others.
Most of the senior investors and business people I speak to these days believe the time has come for changes at the top of Scotland’s two biggest banks, Royal Bank of Scotland and HBOS. Neither bank has covered itself in glory of late. RBS overpaid for ABN Amro last summer, then ended up having to write down its assets by £5.9 billion due to exposure to subprime lending. This forced the bank to tap its shareholders for an extra £12 billion in a rights issue and sell off key parts of its business.
On Friday., the payback came. The bank unveiled a pre-tax loss of £691m. This was less than half the £1.7 billion that some were predicting but it is the second biggest loss in British banking history.
HBOS, which was no less reckless at the height of the credit bubble, has avoided the embarrassment of falling into the red. Yet the bank is also firmly in the doghouse. Its half-year profits slumped 51% to £1.4 billion partly due to exposure to a different sort of subprime, and the bank is now understood to be mulling a sale of non-core subsidiaries such as Clerical Medical, Insight Investment and BankWest, an Australian outfit.
Both RBS and HBOS could be in for an even more white-knuckle ride in the months to come as they learn to contend with mounting defaults and delinquencies on conventional loans as economic gloom intensifies.
So what does Bolton, whose private passion is composing classical music on his Sony laptop, believe is the best medicine for the highly-paid bankers who led their banks into this pretty pass? The question is relevant, not least because the banks’ self-inflicted wounds are starting to infect the wider economy.
Unsurprisingly, given his own preferred modus operandi, Bolton did not single out any particular heads he wants to see roll. When pressed he made it clear the time has come for at least some of the guilty men — who could be said to include Lord Dennis Stevenson and Andy Hornby of HBOS and Sir Tom McKillop and Sir Fred Goodwin of RBS — to fall on their swords.
Having recently stepped back from active fund management and eschewed bank shares, Bolton is unlikely to wield the dagger himself. The quartet of bank executives cannot afford to be complacent, however. Another group of quiet assassins would appear to be waiting, quietly, in the wings. The jungle drums would suggest it is probably Tom McKillop who needs to watch his back the most.
Clever Trevor’s challenge
Talk about jumping out of the frying pan and into the fire. Trevor Matthews, the down-to-earth Australian who left Standard Life amid some acrimony last January, was legally allowed to take over as chief executive at Friends Provident last week, having spent the statutory six months on gardening leave.
He is, however, arguably joining an insurer that is in even worse shape than was Standard when he joined the still mutual Edinburgh group in July 2004. Friends Provident lacks Standard Life’s brand strength and is suffering because it can’t seem to sell anything at the moment. The group wants to get shot of its 57% stake in asset manager F&C as well as its Lombard wealth management business. Buyers would appear to be thin on the ground.
Matthews, who talks more intelligently about things like “wraps” and “platforms” than anyone I know, is well placed to reinvigorate the former Quaker institution’s group pensions and protection businesses and to expand these into new territories. But even clever Trevor cannot buck the market.
Iberdrola’s power play
The notion that Scotland’s biggest energy company, ScottishPower, should fall into foreign hands became a hot potato, at least to nationalists, in 2006.
However, the utility’s owner, Iberdrola, of Bilbao, has skilfully neutralised patriotic paranoia since the deal was completed and is showing further political nous with the latest appointment to its main board. The Bilbao company has named Samantha Barber, a well-known nationalist, as a non-executive director.
Iberdrola wants to portray the appointment of Barber, also chief executive of Scottish Business in the Community, as a signal that it wants a “consumer” voice on its board. In my view Barber is more likely to have been appointed because Iberdrola recognises the importance of maintaining strong lines of communication with the government of Alex Salmond.
This Scottish Agenda column was published in the Sunday Times Scotland on 10 August 2008.