THE HUMAN FACTOR

THE HUMAN FACTOR - Were he not his father's son, Nick Ritblat would be the obvious contender for CEO at British Land. But investors are wary of such family advancement.

by Patience Wheatcroft, business and City editor of The Times
Last Updated: 31 Aug 2010

Were he not his father's son, Nick Ritblat would be the obvious contender for CEO at British Land. But investors are wary of such family advancement.

By the end of summer, the fraught debate over the Higgs Report should have quietened and a watered-down version of its recommendations have been incorporated into the Combined Code on Corporate Governance. But Derek Higgs himself could be heading straight into another boardroom controversy.

The ex-investment banker is a non-executive director of British Land, one of the more colourful publicly quoted companies. The vexed issue on which its directors must pronounce is whether to appoint as new CEO the son of the current boss.

Superficially, this seems a no-brainer. British Land is not a family company in which the top job automatically passes from father to son. It's a public company in which the majority of the shares are held by institutional investors. Although it's often referred to as 'John Ritblat's British Land', this is not a reflection of actual ownership but of the forceful personality and proprietorial attitude of the man who has shaped the business.

But the reason that Higgs and his fellow directors face a quandary is that Nick Ritblat is a genuinely deserving candidate for the role of CEO of a leading property company.

Not only has he studied at the knee of one of the doyens of the sector - his father - but he has earned respect in the property world for the vision and negotiating skills he developed as a British Land director.

Were he not his father's son, he would be the most obvious contender.

Outside investors, however, are always wary of such family advancement within public firms. Those with long memories point to the unhappy end of the Trusthouse Forte empire after Lord Forte handed over the reins to his son, now Sir Rocco. The diminutive, exuberant Italian had built the business from a single coffee bar into the international hotels and catering giant that was entrusted to his rather less out-going offspring, an Oxbridge-educated accountant. When Gerry Robinson's Granada made its bid for THF, the City backed the Irishman, doubting whether Rocco could deliver as his father had. That he was on a pheasant shoot when the bid was delivered did not help his case, even though he was by no means the only businessman to don breeches and head for the country mid-week.

Sir Rocco has since built up his own collection of luxury international establishments, but its success has done nothing to dissuade those who shout 'nepotism' at the sight of a surname appearing twice on a list of directors.

David, now Lord, Sainsbury was the cousin of his predecessor at the helm of the eponymous grocer. As the largest private shareholder in the group, he had more claim than most to at least some say in the running of the business. But he presided over one of the group's unhappiest periods.

Now there is no longer a Sainsbury on the board and Sir Peter Davis, who in a previous stint at the company concluded he would never reach the top because of the family domination, is trying to restore its fortunes.

Lord Sainsbury, meanwhile, seems happier in his role as science minister.

Although GEC had long outgrown the formal definition of a family firm, Lord Weinstock, who had made it what it was, appeared determined that his son Simon should succeed him. Those who knew Simon were not convinced that he was the right man for the job, nor that he wanted it. Sadly, his premature death put an end to the debate, but the issue crops up in other companies, not least in the one that employs me, News Corporation, where Rupert Murdoch's two sons are both in senior positions.

At British Land, what concerns investors is not merely the relative capability of Nick Ritblat but his ability to function effectively as CEO if John, having grudgingly split his current role, were chairman.

Any incoming CEO might ponder whether an existing family relationship within the firm could add to the tensions. Robinson, now chairman of Allied Domecq as well as the Arts Council, is the BBC's latest company doctor.

He has been set to work sorting out family companies and has pointed out one consistent failing: a blurring when it came to delineating exactly who was in charge. He was looking at small, private businesses, but the message is the same in large public firms.

The Higgs Report tries to construct a series of checks and balances of power in the boardroom, but personalities and relationships are what count.

When a father and a son find themselves in the senior roles in a business, the struggle for power may not be to the long-term advantage of the company. Even if the older man moves aside, how easily might he let go of the levers?

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