Pick on the Big Guy(s)

We’ve currently got four FTSE C-Level searches live; three FTSE-100, one FTSE-250; two CFOs, two CEOs. It’s a great coup, but the stories behind them are also very telling of the market.

Last year we saw what was branded as ‘Arab Spring’; the uprising in several ‘Arab’ nations, entire populations typically fighting against tyrant leaders, leading to the overthrowing of rulers and ruling families. The scenes were spectacular and gained virtual universal support.

Fast forward a year and we are seeing a similar phenomenon; this time in and around large company board rooms. The perennial media target, the ‘fat cat’, has bred even faster than his/her feline namesake can and has, in the eyes of the media at least, taken residence in every sizeable boardroom in the land. Welcome to ‘Shareholder Spring

It started with that new age dawn of the hunting season, 6 months before the ‘Glorious-Twelfth’, Banker Bonus Season. Stephen Hester was the first ‘grouse’ in the hunter’s sight (read about that here “Interfering Bankers”). The man that despite reducing the RBS balance sheet by a staggering £600bn and overall doing a better job than any city analyst expected (against adversely moved goalposts) was a banker, and thus didn’t deserve to be paid.

Unfortunately he bowed to political pressure and didn’t take his bonus. Thus the seed was sown. A section of the public who are seemingly as adverse to personal hygiene as they are to banker’s bonuses, set up camp outside one of the nation’s most important churches as a protest…against someone or something.

Bob Diamond was next. Despite running a business to great success, against a backdrop of a global financial crisis, without Government assistance or infamous ‘bailout’, he was vilified for taking a large remuneration package (of which he gives c25% to Charity). Cue a shareholder revolt, and subsequent media adulation.

Next came the copycats; then came the activists protesting outside AGMs (despite not being shareholders); then came encouragement from Institutional Investors (usually driven personal, political or strategic motives) and then finally came the Shadow Cabinet’s Laurel & Hardy tribute act: Ed Miliband and Chuka Ummuna who as usual had no fresh ideas of their own, but didn’t let it stop them criticising everyone else’s and joining the band-wagon jumping.

Since then virtually every FTSE-150 AGM (and plenty of others) has been marred by a similar revolt.

Back to our current workload.

Let’s be candid, forced change of C-Level execs is good for our business and our industry. We thrive on Executive churn. Every time an executive leaves a position, he/she needs replacing. Thanks to Lord Davies of Abersoch’s assistance, that replacement is encouraged to be female and thus is more difficult to effect, and less likely to be able to be found internally. Ker-Ching.

However, putting selfishness aside, this isn’t good for business; our economy; business confidence, and overall; our country.

Two of our current roles are replacing CEOs directly forced out through a shareholder revolt. CEOs that haven’t posted a financial loss, nor missed city expectations. They have not even seen an abnormal drop in share price over the last two years (obsessions about shareholder value being the usual tool of media corporate hatred) – and yet shareholders and their cohorts, have revolted over the levels of Executive remuneration.

More telling are the other two roles. These are replacing individuals that have simply ‘had enough’.

CEOs of large public businesses typically don’t *need* to work. They have slaved very hard for decades, been well remunerated along the way, and by the time they have had a couple of years in the big seat, have a net worth ensuring financial stability (and pension) that most of us can only dream of.

FTSE-100 CEOs typically perform that job because they want to, not because they need to. Therefore once the enjoyment is at least partially removed through largely ignorant berating of their actions, it is hardly surprising that the individuals call it a day, deciding that enjoyment gained from a couple of NED appointments is a better bedfellow to improving a golf-handicap – or tending to their 350 acre Oxfordshire Arboretum.

The last few days alone have seen two further FTSE-100 CEOs announce their accelerated departure, not through a shareholder revolt, not through normal retirement (both are mid-50s) but solely their decision as the role was not what they want it be – crucially, they are not being left to run the business they lead, instead having to fight the attitude from shareholders, general vigilantes, blood-hungry media…and opposition politicians. Who can blame them?

But this has left two further businesses without a leader. Is that what Shareholders need to protect their interests? The loudest voices don’t care about shareholder interests; they’re not shareholders – merely puppeteers.

…and those two are just the ones that have been announced. I know of three further announcements that will likely be made in the next month or so, C-Level execs that have simply decided that it isn’t worth it – get out before the vigilantes start on them.

Plenty more fish in the sea

Here’s where the story gets interesting. The stock response to Execs (and bankers) threatening to leave is “Go… Plenty more where you came from”. Except there aren’t.

FTSE-150 C-Level Execs are difficult to find at the best of times. The skills required are typically unlike any other role. Businesses within the FTSE-150 are huge – it accounts for c90% of the entire market capitalisation of the London Stock Exchange. Big companies need big experience. Big experience comes from Big companies….and yet the actions of shareholders is persuading the C-Level Execs in waiting to look outside of the environment.

Through the four C-Level searches we are working on, I have had conversations with well over a dozen current C-Level execs in the last 2 days alone, and swapped emails with many more. Most are looking at their options despite being happy within their role and their business, and exceeding all performance metrics. Why? To avoid being targeted by the next band of (semi) ignorant protesters who fail to see why ‘anyone needs to earn more than £XXX’.

Worryingly, most of these individuals are now looking outside of Public Companies. Five conversations this afternoon alone, with five individuals who have all grossed over £1m in the last 12 months, discussing roles which will see that remuneration increase significantly, have all ended in the same way – It just isn’t worth it. Now a good head-hunter can turn that around, and in 3 of those instances I have, but the criteria and opportunities they will consider are still narrower.

If we want our businesses to be the best, we need the best leaders (and the best talent to aspire to be the best leaders). The best leaders don’t need ‘us’ as much as ‘we’ need them. Treat them like an Arab dictator and they will depose themselves and go into hiding.

24 Comments on “Pick on the Big Guy(s)”

  1. Interesting Blog, can’t say I agree with it all, but do agree with the risks of pushing business leaders away.

    Out of interest, how do you, and other businesses, view some one who had been a CEO of a business that has been ousted? or whose business has seen it’s share price drop significantly?

  2. Great Blog, controversial and flies in the face of public opinion, or what the media tells us public opinion is.

    Struggling to disagree with anything you write above though! Good informative article.

  3. Sorry Gary, I know these people are your clients, and well done an operating at that level, that is quite an achievement, but these people are parasites. They demand massive salaries for doing very little. They have usually not taken massive risks with their privates lives, most have been born with a silver-spoon, had a priviledged upbringing and are now earning millions of the back of others peoples work.

    It is about time they are brought down a peg or three.

    The notion that they are irreplacable is ludicrous. They are far from the most talented people in the business and have just been raw lucky. Luck should not automatically gain massive riches.

    Sarah

    • With respect Sarah, bollocks. FTSE-100 CEOs are an immense breed. Yes many went to public school, but whether you like it or not, public schools breed the best so it’s hardly a surprise.

      The average FTSE CEO has worked bloody hard for many many years, 70-100 hours per week, often more, 52 weeks per year.

      To belittle them as nothing special demonstrates ignorance, stupidity or sheer jealousy.

  4. Great piece Gary, echoes what I am sure are the business communities real thoughts and what real Shareholders need to hear.

    It’s all too easy to make business leaders appear the villans when in fact they are often the victim.

    The media is the real villan in all this.

    Good analogy to the Arab Spring too. Not heard that. Very accurate

  5. Good blog, usual high standard, usualy controversial subject. 😉

    Love it.

    One question, would you consider Rebekah Brookes for a role? or has she fully tarnished her reputation?

    What about stripped knight, Fred Goodwin?

  6. How can you defend these people? Taking huge salaries whilst robbing others of theirs. CEOs should limit their total pay, not just salary, to a maximum of 10x the lowest paid person in the business. Any fat cat exec is devoid of all morals if they take more than that.

    It is utterly immoral to suggest that these people need to earn that level, and if they really are in a position where they don’t need to work, why take any salary at all?

    What can you do with £10m that you can’t with £5m?

    Clear the lot out and take a few thousand off the growing dole queue. They would do no worse a job.

  7. More interesting insight. Envy you meeting that level of individual and I suspect that the majority of their detractors have limited and most likely zero experience of meeting such indivduals.

    There does seem to be a huge element of band wagon about the current movement, not sure it is fully understood by the protesters , let alone justified.

    Good blog again though Gary.

  8. Interesting subject. I find it difficult to defend these guys, Bob Diamond making £20m+ is not a ‘just’ paygrade, not even close to equality, but the points you raise bring interesting questions. I guess I don’t know enough of the PLC life to really comment, not that it stops the revolting shareholders.

    Good blog, great insight.

    Thanks

  9. If even a CEOs colleagues don’t agree with a remuneration reward, how can the public be expected to have sympathy and go along with it? There is simply no reason why a marginally bigger job deserves a massively inflated reward. Greed Culture.

  10. Great blog Gary, and eloquently put. Too many people complaining about things they know little about.

    Very interesting findings gained from someone who actually does have contact with such people!

    Well done.

  11. Good Blog. Whilst I can’t say I have sympathy for CEOs and their ilk, I do agree they are being treated unfairly and the media/public hatred and obsession is largely misguided.

    I don’t doubt these individuals do a very big and full job, perhaps they aught to be a bit more open as to their day etc.

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  13. Great piece Gary. Set the record straight for the CEOs who put the shareholder’s interest as paramount, and from whom the shareholders have benefitted greatly, yet have now tunred on them from a position of ignorance and mob mentality.

    Nice blog to redress the balance.

  14. Brilliant blog Gary. I’m sure you will get heated, disagreeing comments, but everything you say above hits a huge chord with me and just about everyone I know.

    These guys are the people we need to be encouraging and motivating to stay within our businesses, not demonise them and force them into retirement.

    Rich

  15. Great blog and interestign comments. As someone that sits amognst these senior execs, anyone who does not feel they justify the reward they receive if frankly deluded. The rewards stated are typically biased, enormously, towards performance, and the even then, usually as share awards which are worthless for several years to ensure longevity of performance.

    It is with irony that Mr Chaplin followed this blog with the “Stop Whining and Work Harder” piece. Most of the protestors could do with reading that blog before the collect their placard from a non-shareholding protest organiser and march on a corporate HQ.

    It is also the job of politicians to stem this nature of opinion for it will damage the countries reputation. To see certain members of the opposition bench fuelling the protesting is deplorable and evidence as to why they should never again be allowed to lead this country.

    With regards

    Robin

  16. I’ve sympathy with your views Gary, but I do wonder if their workaholic lifestyles and immense salaries lead to them losing a little touch with reality and behaving a little arrogantly. If these people paid more attention to reputation management at bonus time, perhaps they would get away with it. Bob Diamond should be getting the message out in the marketplace that he gives £5m a year to charity more effectively, so people remember that rather than the £15m that he keeps.

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