Well played, Michael Dobson, that was a terrific 14-year innings as chief executive of fund manager Schroders, one of the few grand old City names to flourish in the modern world. A loss-making company in 2001 now makes profits of £600m. Take a bow, have a party and enjoy your retirement.
Hold on, Dobson isn’t retiring at all. He is merely moving into the chairman’s office, a switch that – as usual on these occasions – looks like a triumph of chumminess over common sense.
There are good reasons why the UK code on corporate governance – born as a reaction to ancient boardroom scandals like Polly Peck and Maxwell – states baldly that “a chief executive should not go on to be chairman of the same company”. One individual can end up with too much power and resist new thinking. Boardroom virtues of independence and openness can be lost. The new chief executive operates under a shadow.
Schroders says it seeks “stability and continuity”. Almost any company, after a good run, could make the same plea. They all think their boardrooms contain only strong personalities. It is rarely a persuasive argument.
The code, it should be noted, is not an absolute prohibition. Non-compliers are told to consult their major shareholders. But, in Schroders’ case, this is hardly onerous. The family controls 45% of the stock and Bruno Schroder, a board member since 1963, has given a thumbs-up, which will tend to dampen outside dissent.
If they really don’t like it, non-family shareholders can always sell their shares. But there is wider principle here. Schroders, managing £313bn of other people’s money, is a firm we expect to read the riot act on governance to quoted companies. That job just became harder.
Schroders says there are cases where, having assessed the merits, it has approved of a chief executive becoming chairman – although it couldn’t name any immediately. Well, maybe, but the point remains. Dobson’s experience may be hard to replicate, but a firm of Schroders’ standing should be able to attract a top-notch chairman who is properly independent – and see the sense of doing so.
This article was written by Nils Pratley, for theguardian.com on Thursday 3rd March 2016 14.11 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010