It’s a rum world in which the UK Government must take lessons in accountability from business. Compare and contrast the way BP ruthlessly dispatched its hugely successful CEO Lord Browne last week with the way Tony Blair continues to swan around the world enjoying the trappings of office long after all credibility and authority has deserted him. Both men wanted to hang on to their jobs for longer, both were aware that their legacies were tarnished, in Blair’s case by Iraq and in Browne’s by a series of mishaps in the US. And neither man trusted their likely successor not to try to avoid their share of the blame by pinning it all on them. But there the similarities end.
The difference is that, once Browne had lost a boardroom power struggle over the timing of his departure and another over his role in the choice of his successor, it was clear that if he hung around until his agreed retirement date at the end of 2008, he would be a lame duck – a leader only in name. That was as intolerable to him as it was to BP. For a man who, whatever BP’s current difficulties, is still rated as one of the giants of British business, responsible for building one of the few British firms that is genuinely world-class, the idea of staying under such conditions was humiliating. For BP, it would have been highly destabilising at a time when it needed one man in charge.
Yet if any such thoughts have entered Blair’s head, he’s certainly not letting on. He has been a lame duck for years, but it doesn’t seem to bother him. Inevitably, there is far more at stake for the country in the current state of affairs than ever there could be at a company like BP. Britain is at war in two places, faces huge internal security problems, a woeful education system and inadequate infrastructure. And unlike Browne,
Blair has few, if any, claims to be a great leader – at least in terms of his administrative achievements. Yet when it comes to holding Blair and his government to account, the British constitution seems hopelessly inadequate to the task.
The irony is that, until recently, British democracy looked in robust health. It was UK corporate governance that was in need of attention. Companies were often run as private fiefdoms, boards were little more than ornamental, underperforming bosses were impossible to dislodge, and executives lived high on the hog at company expense. That led to a series of scandals, such as Robert Maxwell’s raid on Mirror Group’s pension funds and, more importantly, a series of reforms designed to clear accountability on UK boards. Today, all public companies have independent chairmen and directors who represent shareholders’ interests and hold executives to account.
The result is that, in Britain, shareholders are unambiguously in control. Providing they have the votes, they can remove failing bosses and demand changes to strategy. Just before Christmas, shareholders removed four of the nine directors of Spirent, an ailing telecoms firm, and replaced them with their own candidates. Shareholders are currently in a stand-off with the board of Countrywide, which recommended they accept a management buyout that some investors think undervalues the estate agent group. Shareholder pressure has led to the gradual dismemberment of Whitbread, helping deliver a doubling of the leisure group’s shares over the last year.
British shareholder rights are a precious gift – not least because they are so rare. In Germany and Holland, for example, leading businessmen who helped draw up their own countries’ corporate governance codes have this week been engaged in moves designed to frustrate the will of shareholders. At ThyssenKrupp, chairman Gerhard Cromme wants to hand control of the steelmaker to an unaccountable foundation whose board nominees wouldn’t even have to face a shareholder vote. And at Dutch conglomerate Stork, chairman Jan Kalff has authorised the issue of enough shares to another shadowy foundation to defeat a move by shareholders to remove the entire board. In both cases, the bosses hide behind the weasel argument that they are seeking to protect the interests of all stakeholders, not just shareholders. But shorn of clear accountability, this is simply an excuse for management to secure its own position.
That’s bad news for German and Dutch shareholders. It means they can’t count on their companies being run in their interests, which is not what you want to hear if you’re a pension saver or you buy insurance from a company that invests in the stockmarket. It means you may have to work a little bit longer, or will end up a little bit poorer, just so some fat cat boss can hang on to the perks of office for a few more years. Nothing like that could happen in British boardrooms now. If one set of shareholders failed to hold management to account, another would come along and make an offer for the group and do the job for them. Good governance makes all of us better off. British politicians could learn a lot
from business.
Simon Nixon is executive editor of Breakingviews.com