Tennis Matters: I didn’t see the match-fixing
January 27, 2016The Co-operative Group: A noble business failure?
March 12, 2014The Co-operative Group has its place in the social and political history of modern Britain. Yet it is in deep crisis as its departing leader Euan Sutherland declares it ‘ungovernable’
On March 11th 2014 the following statement appeared on the website of The Co-operative Group
The Co-operative Group announces that Euan Sutherland has resigned as Group Chief Executive with immediate effect. Richard Pennycook, Chief Financial Officer, has been appointed as Interim Group Chief Executive.
The statement then quoted its former CEO’s damning indictment of its professionalism and governance:
“It is with great sadness that I have resigned as Chief Executive. I have given my all to the business and had hoped to be able to lead its revival. However, I now feel that until the Group adopts professional and commercial governance it will be impossible to implement what my team and I believe are the necessary changes and reforms to renew the Group and give it a relevant and sustainable future.
“Saving The Co-operative Bank and with it The Co-operative Group from administration was a huge task, but the changes required do not stop there, with fundamental modernisation needed to safeguard the future for our 90,000 colleagues and millions of members.
“The Group must reduce its significant debt and drive major efficiencies and growth in all of its businesses, but to do so also urgently needs fundamental governance reform and a revitalised membership.
“I will not accept the retention payments and long term incentive payments previously agreed for the delivery and protection of value in the Group and the Bank, even though this was successfully delivered. “I would like to thank all of the Co-op’s hard working colleagues for the support they have given me during my time. I wish them all well. The Co-operative has some wonderful people who deserve a great future.”
Concealing more than it says
Even without further background knowledge by the reader, the news item is of interest to any student of leadership. [Hint to tutors. Try redacting the name of the company and offer the resignation statement for class discussion.]
The resignation statement may be read as a farewell message, concealing more than it says. Why did the CEO fail to achieve the ‘fundamental modernisation’ he believed necessary? What does a revitalised membership imply? How do we interpret the statement that ‘The Co-operative has some wonderful people who deserve a great future.’
A missing story
As editor of LWD I am disappointed that after 1000 posts I have not reported one that dealt directly with the important history and current financial problems of the Co-operative Society. Even a juicy scandal earlier this year did not warrant a mention, although it led to the departure of Euan Sutherland’s predecessor. The story is one which includes one of the most powerful forces towards an alternative capitalism merging socialist ideals with self-help and corporate effectiveness.
What do you think?
I will offer more of the story as an addition to this post. In the meanwhile, I would be particularly interested in receiving the views of LWD subscribers who are unfamiliar with the history of the group, and their assessment of the situation as indicated in Euan Sutherland’s resignation statement.
Is there a ‘Leadership vacuum’ at Lloyds TSB?
November 14, 2011The Leadership Dilemma
The leadership dilemma has been reported as one of dealing with shareholder discontent. According to the Sunday Telegraph [13th Nov 2011]:
Major institutional shareholders are concerned at the lack of information from the bank since Mr Horta-Osorio left on medical advice two weeks ago …a number of investors said that they had not been personally contacted by Glen Moreno, the senior independent director, or by Sir Win Bischoff, the chairman, about the issue.
The sentiment among investors is that even if Mr Horta-Osorio returns to full health, it would be difficult for him to return because of the signal his absence – the result of “extreme fatigue” – has given to investors.
“It is clear the job was too big for him,” said one top 15 shareholder.
Another investor questioned why the bank was not speeding up its internal contingency plan.
Behind the headlines
The Telegraph article suggests that the company has failed to have addressed the reactions of its shareholders to the departure of Mr Horta-Osorio. Looking behind the headlines, I wondered whether the story was encouraged by parties dissatisfied with the performance of the board, and would welcome news that would discredit them before rhe appointment of an internal figure as interim CEO (Mr Moreno has been considered as a favourite candidate).
Another possibility is that powerful institutional shareholders see opportunity to exercise more influence over the Board’s decisions
What didn’t happen
What appears not to have happened is for a rapid line of communications to have opened up with the most influential stakeholders. While ‘wait and hope’ may have been a consideration, it is often a dangerous kind of strategy under conditions of corporate turbulence.
To go more deeply
The textbook Dilemmas of Leadership examines the importance of trust based leadership[chapter 6] and the challenges presented by corporate turbulence [chapter 11].
Decline of a dynasty? Elisabeth Murdoch ducks board position on News Corp
August 6, 2011Elisabeth Murdoch has declined an invitation to be nominated for a place on the board of News Corp. The move signals a decline in the prospects of a Murdoch dynasty
Rupert Murdoch’s actions over a period of years suggests his intentions of establishing a Murdoch dynasty at News Corp. The story has all the drama of a TV soap opera with a dash of reality TV as well. Part of the interest has been over which sibling would be most favoured to succeed the tycoon.
Any Murdoch is better than none
It has been suggested by biographers that any Murdoch would be prefered to someone outside the family. This is harder to achieve in a world in which there are interested parties or stakeholders. These extend to institutional investors, and governments concerned with Corporate responsibilities for ethical governance.
As might be expected, the eldest son Lachlan was front runner for heir to Rupert before signalling his reluctance to pursue a career in News Corp although remaining on the board. This placed youngest son James as a front runner in the speculation stakes. The 2011 problems of governance in the proposed takeover of Sky may have weakened the chances of James, but arguably have weakened the chances of all the Murdoch family to take over at the top of News Corp.
Elisabeth
Rupert Murdoch has no prejudice against women as business leaders. Elisabeth Murdoch was for a while a front-runner as his heir, and has demonstrated considerable leadership flair in creating her own media businesses. However, Elisabeth has, like Lachlan implied that her interests would lie outside the top job at News Corp. However, her interests have remained intertwined with those of her father.
Although allegations of nepotism have been made, there can be little doubt of her capabilities to manage large media operations.
News Corp said Elisabeth Murdoch, 42, told [News Corp] directors that it would be “inappropriate” to join the board. She was expected to join the News Corp board after it bought Shine Group, the television production company she runs.
Prudence
Rupert’s eldest daughter Prudence MacLeod sits on the board of Times Newspapers Ltd, part of News International.
Then there’s Wendi
Rupert’s formidable wife Wendi has been considered a serious candidate for some while. A trust-fund established for their children has become a critical aspect within the power relationships in the extended family.
Leaders born and made
Dynasties provide rich materials for students of leadership. The eventual winners in the succession stakes sometimes justify what others call nepotism. Often however, second and third generation family members lack the entrepreneurial flair of the founders.
Murdoch Meltdown
July 17, 2011We concentrate on the turbulent weeks at the start of July 2011, after briefly reviewing the wider timeline of events.
BBC Timeline
The BBC gave a good summary of the timeline of events from 2000 to July 20th 2011. although for whatever reason, overlooked the dimension of police corruption which is also to be found within the story. The Timeline It begins with the appointment of Rebekah Wade (later Rebekah Brooks) as editor of News of the World in May 2000, and ends with her resignation as Chief Executive of News International, July 15th 2011
Resignation of a News Corp executive fuels the wider story
Within hours of Rebekah Brooks tendering her resignation as head of News International, her predecessor Les Hinton, one of Rupert Murdoch’s closest lieutenants in the United States, fell on his sword, saying that the pain his reporters had inflicted on innocent people was “unimaginable”. Mr Hinton has been the publisher of The Wall Street Journal since Mr Murdoch bought it in 2007 and his continuing presence was threatening to drag the media mogul’s prize US newspaper asset into the scandal.
Two symbolic events
Two events received particular media attention. They were presented as reflecting a callous culture, which ignored the impact of behaviours on members of the public who were already victims of tragic events. Each story involved journalists who had targeted families of victims of highly emotive tragedies. In the UK, the definitive episode involved tampering with the mobile of the murdered teenager Millie Dowler which may have given false hope to the family. Rupert Murdoch was to meet and apologise personally.
In the USA, allegations developed of hacking of phones of families of victims of the 9/11 World Trade Center bombings.
An unfinished case
This post ends [17th July 2011] at the start of a week which promises more in the unfinished drama surrounding Rupert Murdoch and the business empire he founded. One interesting theme is being reported concerning his daughter Elisabeth, on whom it is reported he is now pinning his hopes to take the dynasty forward. This is certainly consistent with a story that has cropped up from time to time within biographic accounts.
Stuart Rose and the Beethoven Effect
July 9, 2009
Beethoven
Stuart Rose has won the acclaim of ordinary shareholders and institutional investors alike as CEO of Marks and Spencers. But his move to take on the powers of Chairman and Chief Executive has not been so widely approved. Is this a modern-day Beethoven effect?
Music lovers are brought up on the tale of Beethoven’s admiration of Napoleon and how it turned to wrath when Napoleon declared himself Emperor of France.
A work originally entitled “Bonaparte Symphony” … was renamed when Bonaparte crowned himself emperor, a move which angered Beethoven. As legend has it, the composer ripped through the title page and later renamed the symphony the Eroica, refusing to dedicate one of his pieces to the man he now considered a “tyrant”.
When Business Leaders fall …
The fall of a Business Leader can also be accompanied by a rapid flip ‘from hero to zero’ , as many case examples in LWD have illustrated. Recently a spate of examples accompanied the fall of failed financial executives such as Fred Goodwin.
The hero-to-zero effect in some ways is a throwback to the days of The Great Leader, a period during which charismatic personality was believed to be the driving force behind transformational change.
The Governance Issue
There has been uneasiness about the joint role since last year’s AGM. However, despite continued turbulent times in the retail sector, Sir Stuart’s track-record as entrepreneurial leader remains relatively intact.
At this week’s AGM he retained considerable support, although the Governance issue will not go away.
Sir Stuart has been under pressure from institutional investors for more than a year over the board’s controversial decision to allow him to hold the roles of chairman and chief executive, which is against best corporate governance.
[One] said if Sir Stuart were to stand down early as chairman, he should consider leaving the board altogether. Sir Stuart’s urbane response was to say he was “a servant of the board. If they wish me to stay I will be here until the latest July 2011.”
The Universities Superannuation Scheme called for Sir David Michels, deputy chairman and senior independent director to be made chairman at least on an interim basis. “If Sir David would become the chairman, and I would become the chief executive, it’s moving . . . back to the past,” Sir Stuart replied. And while Sir Stuart could charm the audience, he could not escape the words of Councillor Ian Greenwood, urging support for a motion for him to hand back [the Chairmanship] “Whatever happens we are not going away.”
The Wider Issues
Students of leadership will recognise the wider issues implied in the ongoing story of Sir Stuart Rose’s leadership. At one level there is the technical matter of corporate governanace. At another level these is the process through which a powerful leader appears to seize greater powers ‘in the interests of the company or country’.
In other words, the Beethoven effect.
Acknowledgement
Close examination of the Beethoven image reveals it to be an ironic comment on the great man’s coiffure, to be found on a blogpost by Charlie White
Magna emerges from shadows as deal for GM Europe unfolds
May 30, 2009Few people around Europe will have heard of Magna until this week. Now the venture capital giant emerges from the shadows in a proposed bid for GM Europe
The jobs of auto-workers in England and Germany are regional concerns as a deal is thrashed out to rescue GM-Europe from insolvency.
On Friday [May 29th, 2009] a deal was nearing completion after the customary last-moment surprises
Magna is close to signing a memorandum of understanding with parent company General Motors after gaining the advantage [over Fiat] in the race to acquire its European divison by offering to plug a short-term funding gap.
Lord Mandelson said he would seek an meeting as soon as possible with Magna to secure “cast iron guarentees” about the future of Vauxhall’s 5,000 jobs in the UK. He has already met Magna bosses face-to-face to secure assurances they will maintain production in the UK, but accepts jobs will be lost because of GM Europe’s excess capacity.
The global dimension of regional problems
The complexity of such deals unfolds as the public learns of key players around the world. In England, the story is how to protect jobs on Merseyside and Luton plants.
In Germany, according to the usually well-informed Der Speigel
The future of troubled carmaker Opel has become a key political issue in Germany as election campaigning begins. Many politicians favor a proposal by the Austrian-Canadian auto parts supplier Magna, but the plan involves massive risks …
The regional struggles have themselves been heavily influenced by decisions in America over the future of the extremely ailing parent company General Motors which is widely reported to be days away from filing for Chapter 11 bankruptcy.
GM, which has lost nearly $90 billion since 2005, is expected to file bankruptcy in U.S. District Court in New York, where rival Chrysler LLC is undergoing a court-ordered restructuring. President Barack Obama also plans to address the nation Monday on GM’s planned court restructuring.
Clearly, deadlines in Europe are connected with an Obama rescue plan in the States. His political strtegy itself is struggling to deal with political opposition.
Back to Magna
LWD has kept an eye on the happenings at Magna International since 2007.
Our earlier interest focused on the attempt by Magna to take over Chrysler, and the potential influence of Magna’s backing from Russian billionaire Oleg Deripaska.
So the global reach of the story being discussed in pubs in Luton and Liverpool now can be seen to extend to America and Russia.
What happens next?
Watch out for more interest in Magna’s rather unusual corporate governance arrangements.
Mr Stronach emigrated to Canada in the 1950s, and built up a successful auto-business. One of its interesting features is its Governance structure. According to the company web-site,
In 1971 Mr. Stronach introduced his management philosophy, known as Fair Enterprise, to Magna. Fair Enterprise is based on a business Charter of Rights that predetermines the annual percentage of profits shared between employees, management, investors and society, and makes every employee a shareholder in Magna. These rights are enshrined in a governing Corporate Constitution
These considerations may not have been as important as the financial arrangements being brokered at preseent, but may well find favour among the European players in this complex matter.
Corporate Governance and Leadership: The Missing Link?
May 13, 2009A new e-venture will generate research into Corporate Governance. Will this provide a powerful route to improved leadership theory and practice as well?
A new corporate governance venture has been announced [July 12th 2009] which will examine the intersection of investments with environmental, social and governance issues.
This initiative is supported by the Investor Responsibility Research Center (IRRC). It is particularly welcome at a time when links between business actions and their social, environmental and economic consequences are becoming increasingly salient to us all.
The new venture will be known as The Corporate Governance Network (CGN), and will provide an online community for research in all areas of corporate governance. Its director, is Lucian A. Bebchuk, William J. Friedman and Alicia Townsend Friedman Professor of Law, Economics, and Finance, and Director, Corporate Governance Program, Harvard University.
CGN will coordinate a range of e-Journals, subscriptions to which will be free during its start-up phase [May-October, 2009]. Subscriptions require signing up via the Social Science Reseach Network (SSRN) site.
Of particular interest to Leaders we deserve subscribers may be the e-journal on Corporate Responsibility & Management
This journal distributes working and accepted paper abstracts that deal with all aspects of governance related to the field of management, broadly defined and including general management, negotiations, and entrepreneurship. The journal welcomes research with a focus on how management affects and is affected by corporate governance and on using tools and methods from the field of management to study corporate governance. Topics of interest include, but are not limited to, how corporate governance affects leadership, management, and entrepreneurship within firms, how corporate governance shapes and is shaped by internal firm processes, and case studies of corporate governance.
And
Corporate Governance: Actors & Players
This journal distributes working and accepted paper abstracts that deal with the different types of actors and players in the field of corporate governance. The journal welcomes research with a focus on using tools and methods from accounting, economics, finance, law, management, sociology, and psychology to study how different types of actors and players affect or are affected by corporate governance arrangements and practitioners. Topics of interest include, but are not limited to, studies related to CEOs and other executives, controlling shareholders, boards and directors, shareholders, creditors, employees, and gatekeepers (including lawyers, auditors, financial advisors, rating agencies, shareholder advisers, and the media).
Leaders we deserve welcomes this initiative and encourages researchers to explore it for publishing and networking opportunities.