Sports Direct has ambitious expansion plans that include becoming the ‘Selfridges of sport’ © PA
Dear readers,
Holidays throw working life into stark relief. Now summer is over, executives afflicted with autumnal blues may be ready to seek out a new challenge. Annual meetings held this week suggest a number of executive positions could soon be up for grabs. But could any vacation be relaxing enough to warrant joining the board of Sports Direct?
Some independent shareholders say the aggressive UK sportswear retailer should appoint a new chair better able to temper boss Mike Ashley’s impulses. This is not just about offences against fireplaces but ambitious expansion plans that include becoming the “Selfridges of sport”. Sports Direct is kicking a new spending scheme into gear after reporting pre-tax profits fell 59 per cent in the year to April.
Current chair Keith Hellawell has done a poor job of mediating between independent shareholders and executives. He hung on to his job this week, but Lex thinks he should move on. We look forward to seeing who has the courage — and competence — to put themselves forward.
Of course, Mr Ashley might consider the role himself. Founders have a habit of making the switch from chief executive to chair as a halfway house between running the show and calling it quits. British property industry grandee Tony “Pidge” Pidgley became executive chairman at housebuilder Berkeley after 33 years as chief executive. It should be noted, however, that his remuneration remains the highest in the company.
Tabloids have compared Mr Pidgley’s hefty pay packet with that of both Wayne Rooney and Cristiano Ronaldo in recent years. Berkeley knows which way the wind is blowing and has volunteered to cap next year’s package. Lex thinks this makes sense even if we believe it is poor form for shareholders to agree to long-term incentive plans then carp at their size. Better to demand changes to what was a badly designed plan.
The love affair between executives and long-term incentive plans heavy on share awards has been backed by the bull market in stocks. If the market turns, however, they can provide motivation to leave. Shares in household goods group Reckitt Benckiser have tripled over the past decade but sales growth is now slowing and payouts could fall. Four of the top 10 senior executives have quit recently. We think shareholders should follow in their footsteps.
At Swiss pharmaceuticals group Novartis, chief executive Joseph Jimenez would prefer for his legacy to be an as-yet elusive growth phase to come rather than the last difficult few years. New boss Vasant Narasimhan will be one of the few medical doctors to head a pharma company. Lex thinks his appointment fits with the company’s attempt to become more science-focused. But Dr Narasimhan is young and relatively inexperienced. The future of the troublesome eyecare business Alcon needs careful consideration. Returning cash would be an early win for the new boss.
Almost as many CEO job openings are created by crises as by planned successions. James Henderson, chief executive of Bell Pottinger, has resigned after the PR business was accused of stirring up racial hatred in South Africa. Founder Lord Bell made his name defending the indefensible, but there is nothing to support here. The campaign scandal highlights the risk of focusing on political projects over corporate business. Lex thinks it unlikely that Bell Pottinger will survive in its existing form.
Commonwealth Bank of Australia, on the other hand, is unlikely to be derailed by alleged failings. A scandal triggered by claims that its ATMs could be used for money laundering has claimed the scalp of chief executive Ian Narev. The bank is reassuringly solid commercially. Ross McEwan of Royal Bank of Scotland is being tipped as a potential successor. Lex acknowledges the similarities between the two banks, including a propensity for regulatory upsets. Otherwise, differences are stark. CBA makes money for a start. Mr McEwan could find the bank an easier place to run than RBS.
New jobs and new pay deals need a supportive backdrop. So far, markets seem unperturbed by North Korea’s latest nuclear tests — even if one resulted in an earthquake felt in China. Macro hedge funds that bet on movements of rates, currencies and commodities will find little opportunity as a result. Lex reckons that even when markets are moving, these investments have proved serially ineffective at creating value.
From man-made commotions to acts of God. Lex thinks listed, well-capitalised reinsurers can cope with the destruction working its way across the Caribbean towards Florida. Hedge funds and other “alternative” reinsurance investors may struggle. The cold logic of markets means that the devastation is likely to improve premiums.
If hurricanes, nuclear war and returning to the daily grind get you down, why not opt out altogether and strap on one of HTC’s $600 virtual reality headsets? The company is burning through money and could do with the sales. The post-holiday reality check can at least wait until the week is over.
Have a good weekend and stay out of the bad weather,
Elaine Moore,
Lex writer
Email the Lex team at lex@ft.com