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Sir Stuart Rose went on the PR offensive yesterday.
Fed up at criticism of the pay package of Marc Bolland, his successor at Marks & Spencer, Rose said: “If you pay peanuts, you get
a monkey.”
He tried to make it look as though the decision to prise Bolland away from Morrisons, ending in a deal worth £15 million, including £7.5 million for share options and bonuses forfeited in quitting the supermarkets chain, was part of a deliberate strategy.
“We are not some Mickey Mouse company which sat down on a Friday night and said Let's have a bit of fun'. It has been the culmination of months of carefully thought-out planning.”
So well done to Rose and his fellow M&S directors, then. But hang on. Whatever happened to succession planning? In Bolland, they may well have made a superb choice. However, they are taking a colossal gamble.
Until September 2006 and his arrival at Morrisons, Bolland's entire career had been spent at Heineken.
Bolland was an impressive CEO of Morrisons. I met him in the firm's Wimbledon store, and there was no denying his eye for detail, and the transformation he had wrought.
There is, however, a world of difference between selling food in a food shop and selling food and clothes in a shop that doesn't know what it is — which is where M&S finds itself.
Why, in one of its smaller branches, would anyone sell bras and men's jumpers alongside bread and scallops? M&S does.
Increasingly, with M&S, there is a feeling of it being a national curiosity — a familiar, friendly face but one that, if it is not careful, is in danger of occupying the business place in the national psyche vacated by Woolworths.
In the 21st century, the once-proud M&S pre-eminence has been sequestrated by John Lewis — a brand that does not go in for fancy messages, does not emit confusing signals and, by the way, keeps its food offering entirely separate.
When pressed about why he did not go internally for the next CEO, Rose has said there was no one who fitted the bill.
That simply isn't good enough. Tesco went inside for Sir Terry Leahy, and will almost certainly do so again.
Doubtless, if Leahy was struck down tomorrow, there is a piece of paper in a safe in Tesco's Cheshunt HQ containing his selection to succeed him — quite what M&S would have done in the same circumstances, heaven knows.
John Lewis also chose in-house, when Sir Stuart Hampson retired, picking Charlie Mayfield.
Where were the M&S directors demanding to know, why, amid the company's 75,000 employees, there was no one being groomed to take over from Rose, someone who had worked their way round the company?
The result is the big “golden hello” for the new man. Rose says this is not M&S's fault: “I would ironically call it a golden goodbye. I recognise it's a problem, but it's not a Marks & Spencer problem, it's an industry problem being created by what shareholders have been saying — keep these guys with skin in the game.”
Not only does Rose now seem to be borrowing lines from one of his adverts but he is conveniently ignoring the fact that M&S had no choice than to go outside — and to pay.
Robert Talbut, chief investment officer at Royal London Asset Management, came closer to the truth when he said the Bolland contract “seems closer to that which a distressed company would have to offer rather than a company that is supposedly not in distress”.
As ever, though, you're forced to wonder at the spineless nature of our institutional shareholders. Says Rose: “I have not had a single shareholder ring up to complain about it.”
The directors aren't bothered, the owners aren't bothered, so why should anyone else be?
M&S pays £15 million to hire the boss of Morrisons.
I can't believe old Michael Marks and Simon Marks, and the other M&S bosses down the decades who made sure the baton was passed internally (and managed to find someone to pass it to), would approve. But clearly, we live in different times.
With firms like these, our exports are in good hands
Anyone in Grosvenor Street in Mayfair last Wednesday morning who knew their businesspeople might have been forgiven for wondering what was going on.
Slipping into the offices of Hamilton Bradshaw, the private-equity firm controlled by BBC Dragon James Caan, were: Martin Broughton, chairman of British Airways and president of the CBI; Anthony Browne, Boris Johnson's economic adviser; Sir Andrew Likierman, dean of London Business School, chair of the National Audit Office and a director of Barclays; Roger Mavity, CEO of the Conran Group; Vivek Ramachandran, head of cash and trade at Barclays; Brian Shaw from UKTI, the Government's international business development arm; and Susan Searle, chief executive, Imperial Innovations.
The clue that this was not a hush-hush meeting to discuss some high-powered deal requiring regulatory approval came from the figure bringing up the rear — myself.
We were there, with Caan, to judge the London Export Awards 2010. The Evening Standard is media partner for the competition, organised by UKTI, supported by the London Mayor, and sponsored by Barclays.
Before we got down to business, Caan raised an important point: were we basing our decisions on achievements of scale or on dynamism and potential?
After some debate, we concluded that both was the answer. We wanted businesses that offered the prospect of longevity and solidity, while promising an exciting future.
Entries had flooded in, and we were presented with shortlists in all seven categories of a consistently high standard.
Indeed, if these awards are a barometer of the health of London's economy we have little to fear; our exports are in safe hands. After two hours of passionate discussion, we were done. Who won?
All will be revealed during the ceremony at the British Academy of Film and Television Arts on Wednesday.
Hands panto is no Pessina in Boots...
When we look back on the crazy, overheated period before the markets came crashing down, two deals stand out.
One was Guy Hands' £4.2 billion purchase of EMI, the other Stefano Pessina's £11.1 billion acquisition of Boots.
They were done at the same time — in the early summer of 2007 — just before Northern Rock collapsed and the sort of lending required to fund such spectaculars came to an abrupt halt.
Yet while Hands' travails at EMI are well-known — it recorded losses of £1.75 billion in the year to 31 March 2009 and must find up to £120 million to stay out of its bankers' clutches — little has been heard of Pessina and Boots.
Unlike Hands and music, Pessina knew his pharmaceutical industry, having created a network of chemists' firms across Europe. People will always need medicines (as opposed to wanting and paying for music).
And Boots is the UK's largest retailer, with 2700 shops. In earnings before interest, tax, depreciation and amortisation, it is second only to Tesco.
Pessina got a FTSE 100 company, one that in the same year to the end of March 2009 made profits
of £1.24 billion and can service
its debts.
He paid more, but there's no question: Hands paid too much.
