Pru is in good hands

Some shareholders are criticising the CEO, but his strategy seems to be working.

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

Jonathan Bloomer has, according to his critics, lived down to his surname. In recent weeks, a vociferous minority of Prudential shareholders have been clamouring for his head, claiming he has upset them once too often. Since they are a minority, Bloomer seems likely to survive this attempt to unseat him, but he is on probation: one more mishap and he will be out.

The latest charge sheet, however, is a strange one. He stands accused of springing a surprise rights issue on investors and of staging a strategy about-turn. Whereas the growth story from Pru was all about Asia, now he wants to plough cash into the British market, argue his detractors.

Coming atop a failed bid in the US and an attempt at an over-generous remuneration package that received a thumbs-down, his critics deem him a hopeless chief executive.

Yet they remain a minority because their case is flawed. The bid for American General was lost to a US business prepared to pay more, but Pru walked away with a £600 million break fee, which does not look like bad business. Neither is it bad commercially to decide that the UK market is looking more inviting and that it would be sensible to pour more capital into it. This does not mean that Pru is no longer a bet on the strength of the Asian market.

As analysts saw on a recent trip to its operations in Vietnam and Malaysia, the company is growing fast in that area. If the UK is now looking brighter as well, surely that should be a bonus for investors. The rights issue to fund that UK growth was not foreseen by investors, but too much advance warning could have damaged the share price ahead of the fundraising.

Bloomer's mistake is not really that he has flip-flopped on strategy or misled investors. It is that he has failed to win the goodwill of some shareholders. The argument over remuneration deepened the hostility of those who had not warmed to him as the new boss of the Pru, even though it is the remuneration committee rather than the CEO that should bear the greatest responsibility for allowing a public row to develop over boardroom pay.

But even without that damaging debate, investors were gunning for Bloomer.

Preferring to do their criticism anonymously, they let it be known that they find him a touch too sure of himself, too clever by half and a bit of an opportunist. Yet these characteristics can be seen as positive attributes. Financial services businesses straddling the globe are complicated: they need clever people at the top. And in modern markets, where change is constant, companies need to be able to be opportunist and flexible.

At a conference in London this autumn, some business big-hitters gave their views on leadership. Lester Thurow, former dean of MIT and now its economics professor, opined that modern business leaders had to be a new breed.

Old-style leaders knew where they were going, how to get there and had staff prepared to follow. Today, he said, companies needed explorers at the helm, prepared to venture where the opportunities might be.

Rudolph Giuliani, the former mayor of New York, took a similar line, arguing that it was easier to lead a business when it was in crisis: 'Then everyone's heading towards one goal.' He was reflecting on his experience of restoring order to New York after the horrors of 9/11, but he now uses that experience in offering advice to businesses through his new consultancy.

Despite the attack on his leadership, Bloomer is not running a business in crisis. When he arrived in the chief executive's office, there was some sorting out to do, but he has been careful never to criticise the legacy of his predecessor.

That was Sir Peter Davis, who went on to run J Sainsbury with such disastrous results. Davis, you may recall, actually appeared in the television advertising for the Pru, but some felt the company might have fared better had his attentions been focused on the business rather than the cameras. Perhaps, having seen how he managed to spend £3 billion to so little avail at the grocer's, that judgment may be wrong.

But most of the Pru's problems now seem behind it. The mis-selling scandal that scarred the country's insurers has been dealt with, the ravages of the stock market downturn have been survived, and the groundwork is in place for the company to grow internationally.

That does not guarantee success. As another of the conference speakers, Sir Terry Leahy of Tesco, said, laying the strategy is only part of the battle. 'The difference between success and failure is the difference between implementing, say, 80% or only 50% of your plans.'

Bloomer may have failed to win friends among investors or to communicate effectively with the market. What he should be judged on, however, is implementation. He is confident that the figures will come out right.

If they don't, the investors calling for his departure will not be in a minority.

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