For a chairman to lose one chief executive may be unfortunate but necessary; to lose three in the space of five years looks more than careless. Yet John Hargreaves, chairman of Matalan, has now posed headhunters the tricky task of finding a successor to John King, who has been in the job less than three years.
King is not stomping off immediately. Nevertheless, when he goes, he'll take with him an extra year's salary to ease the pain of parting – which indicates either that he is not going voluntarily or that it has taken a heavy inducement to stop him quitting before a successor is found. No wonder investors in the retail group are uneasy.
Hargreaves may be taking more of a hands-on role in the business than a self-respecting CEO would like, but then he probably feels a strong involvement with the firm: he and his family own a majority of the shares (about 53%).
Working for an owner can impose very different demands on an employee, however senior. Such a dominant shareholding does not usually persist after a company has gone public, although the dominance in plenty of companies has continued long after the shareholding has gone. Lords Forte and Hanson, for instance, retained an air of ownership over their eponymous businesses even though the companies were quoted and the family shareholdings were minimal. Personality can prevail over financial fact.
Hargreaves undoubtedly has a strong personality. On the other hand, as a heavy investor in Matalan, he could be seen by outside investors as having a strong motivation for making the company a success. If that were the case, the shareholders might not be over-concerned about his role in the boardroom and beyond. But the problem is that Matalan has been a dismal investment over the past five years.
It came to market on a wave of enthusiasm for what appeared to be a retail phenomenon: a discount retailer operating from relatively low-cost sites and growing at a tremendous rate. But retail never stays still for long and its success was noted and emulated. Discounting became the rage of the high street. Prices were driven relentlessly down, with Primark showing the way. It may be an odd business to find inside Associated British Foods, but Primark produces up-to-the-minute designs at knock-down prices and sells them from sites that don't require an expedition.
The supermarkets have added to the pressure on Matalan, showing that they can sell basic jeans and T-shirts more cheaply than most consumers had ever imagined, as well as copying the catwalk fashions. And their clothes can be slung in the trolley along with the tea and biscuits, so beating Matalan on the convenience count.
Matalan's response is unclear. Diversifying its ranges into homewares has not brought salvation. Optimists thought King was at least con- structing a better-organised base from which the company could carry on the fight, but that does not amount to an encouraging future.
Hargreaves must feel frustrated with the predicament, particularly since his shares are now worth only a quarter of their peak. Yet it is not obvious that he has the answer to reviving Matalan. This may be why there are persistent rumours that he is looking to New Look for salvation, in the shape of a new chief executive.
Like Matalan, New Look was a family business that enriched the founders when it floated. Although outsiders were made chairman and chief executive, it was said that Tom Singh found it hard to let go of the reins. Neither did the business flourish at the rate that some had hoped. And along the way there were interesting diversions, such as the departure of one CEO after allegations of over-familiarity at an industry gathering. The chairman who dispensed with his services was then found to have been very familiar with the woman who had headed up the company's remuneration committee. It all kept the City entertained, but did little for the New Look share price or the morale of staff.
So in April 2004, Singh, backed by private equity houses Apax and Permira, took his business private again with a bid that, in retrospect, was far from generous. Shareholders who sold out then were not fully aware of Singh's ambitious plans for the company, nor his ability to realise them.
He retained a 23% stake in the company and, for a time, an active interest, particularly in the supply chain – his speciality. But he appointed a new chief executive, Phil Wrigley, and let him get on with running the show. The results have been dramatic. The company has expanded into larger stores and extended its ranges into men's and childrenswear. In a tough marketplace, its results for Christmas trading were among the more impressive.
Being out of the quoted arena has allowed the business to move faster than it might have done in the public eye, and there is now talk of a re-flotation this year or next – which would yield the founder another hefty profit. Singh is enjoying the success but without being in the driving seat.
The chairman of New Look – although it is a private company – is Richard Lapthorne, an experienced public company boss, currently striving to rebuild Cable & Wireless. The CEO seems happy with the arrangement. Perhaps Hargreaves should take note.