More boardroom angst at M&B

The apparent blocking of a move to appoint Archie Norman – and two others – to what is one of the biggest jobs in the eating and drinking-out market will certainly have raised eyebrows this weekend. The retailer and former politician was according to the Sunday Times set to take the chair at Mitchells & Butlers before the appointment was black-balled by its biggest shareholder Joe Lewis. It is, suggests the paper, the latest sign that Lewis is exerting considerable influence over the inner workings of the company, prompting “friction” in the boardroom. Last January he voted down the company’s remuneration scheme and recently put a second non-executive director (NED) on the M&B board, which he was entitled to do. But the latest NED means that Lewis and fellow investors John Magnier and JP McManus, who hold 17.5% of the shares, now have between them four independent directors in the M&B boardroom. It also means that the M&B board now comprises eight non-executives PLUS Drummond Hall as chairman, meaning that there are so many bums on seats that it is starting to resemble a golf club committee rather than an effective PLC board. Why the British tycoon, who owns 23% and also controls Tottenham Hotspur Football Club, would want to reject Norman’s ascension to the chair is not immediately apparent. The retailer forged an excellent reputation leading a turnaround of Asda before the supermarket business was sold to America’s Wal-Mart, and is generally well regarded in business circles. The Sunday Times suggests that Norman would have been the “ideal replacement” – his recent appointment at ITV was greeted with enthusiasm by investors in Britain’s biggest commercial terrestrial broadcaster and the paper suggests he would have been warmly welcomed by the institutional shareholders of M&B. Norman is said to have been made aware that he was the favoured candidate but is yet to have received a formal proposal. Further, following the report in the Sunday Times, M&B itself has taken the usual step of announcing that Piedmont – the investment vehicle of Lewis – had vetoed a further two candidates to succeed Drummond Hall in the position of chair. Incredibly, as well as blocking a successor to Hall, Piedmont is said to have requested the resignation of M&B’s senior independent director Simon Laffin. In a statement to the stock exchange, it said: “The majority of the board of Mitchells & Butlers notes the recent press speculation regarding the increasingly difficult relationship between the Board and a small number of its largest shareholders. “In particular, the majority of the board would like to bring to shareholders' attention two actions by a shareholder representative of Piedmont Inc, which together could potentially undermine the independence and effectiveness of the board. “The first action taken was the frustration of the appointment of an independent Chairman to replace Drummond Hall, who has made public his intention to step down. The nomination committee of the board put forward three independent candidates for election to the position of Chairman, all of whom were vetoed at the final stage by a nominated representative of Piedmont who had been involved in the process from its beginning as a member of the nomination committee. “The second action was requesting the resignation of the senior independent director, Simon Laffin, advising him that if he did not, a small number of large shareholders would vote against his election at the January 2010 AGM. “The panel on Takeovers and Mergers has been approached and a submission will be made imminently regarding the cumulative evidence that a number of shareholders have been seeking to gain control of the board and of the company to advance the interests of a small group of shareholders at the expense of others. “The majority of the board is continuing to work to strengthen the Board through further independent appointments, and to identify an independent candidate to succeed the chairman, Drummond Hall, urgently.” This is incendiary stuff: it would seem to be all-out-war in the M&B boardroom. But it at least shows that Lewis & Co are not going to be able to boss the situation. The rest of the M&B board had to do something – aside from anything else, what would taking three heavy-hitting people quite a long way down a recruitment process, and then binning them all at the behest of its largest shareholder, do for M&B’s reputation? Nevertheless, this cannot be good for the company. Analysts that I speak to all agree that one of the foundations that M&B’s success was built on, aside from some great assets and good brands, was stability. A stable board and a stable top team allowed to get on with the job of driving volumes and profits through its 2,000-strong business. It must be of some frustration to M&B’s top executives, led by CEO Adam Fowle, that the weekend after the company turned in some respectable full-year figures, complete with a significant upturn in recent trading (like-for-like sales in the last eight weeks ahead 3.2%), the biggest talking points at M&B continue to be about things other than the company’s performance. After burning £500m of cash in some disastrous “off the field” antics, and a string of high-profile departures, it would be nice for the conversation to return to the business of running pubs and restaurants. M&B is still pretty good at that.