The Unlikely Chairmen: Ofcom thought it a good idea to draft in a restaurateur to chair Channel 4

It's hard to fathom the rationale of some recent high-profile corporate appointments

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

What qualifies someone as the ideal company chairman? We know that Sir Ian Prosser is deemed not to fit the bill, at least according to some shareholders in J Sainbury. But why is Sir Peter Burt the right man to chair the newly created single ITV company? And what makes Luke Johnson, the former pizza promoter, top choice to chair Channel 4?

The Higgs report had much to say about the chairman's role, but little about the qualifications required, other than that it ought not to go to a previous chief executive. Not all shareholders would concur, and since the Higgs views were incorporated into the Combined Code on Corporate Governance, several chief executives have advanced within their organisations, such as John Sunderland at Cadbury Schweppes and Matt Barrett at Barclays.

A CEO moving to the chairman's office will undeniably have more knowledge and understanding of the business than an outsider. When all is well, and the new chief executive must merely keep the business trundling along, this may be ideal. But when fresh thinking is required, any incoming CEO will find that the presence in the chairman's office of the architect of the current state of affairs may be a problem. That is what perturbed investors about the plan for Sir Peter Davis to graduate from CEO to chairman at J Sainsbury, when it seemed the company was in danger of failing its degree.

Those who can divine a strategy at Sainsbury beyond mere survival are not convinced that it's the right one. Davis has flung money at the problem of Sainsbury's dwindling market share but has not persuaded the City that he has a failsafe plan to fight off the concerted attack from Tesco and Wal-Mart. Finding a CEO prepared to undertake this daunting task was hampered by Davis's intention to stay on as chairman.

Justin King, who has bravely stepped up to the challenge, has not been a chief executive before, although, with a background at Asda and Marks & Spencer, he should know his potatoes from his pavlovas. Yet his thoughts on how to give Sainsbury new life may be quelled by the looming presence of Davis, a formidable figure who has run such diverse organisations as Reed Elsevier and the Prudential.

The Sainsbury board thought the solution was to recruit a strong deputy chairman to eventually succeed Davis. For an unfathomable reason, they settled on Prosser. There followed one of the more embarrassing episodes the City has witnessed in a long time. The former Six Continents chairman was simply unacceptable to many investors. How this potential reaction had escaped the headhunters White- head Mann, the firm's advisers and its directors is a mystery.

Institutional investors had only recently made clear their lack of appreciation for Prosser's attitudes and achieve- ments, forcing him to demerge Six Continents amid disparaging comments on his concern for shareholder value. No matter how just or unjust their complaints - and the figures show Prosser to be by no means the worst offender the Footsie has produced - the hostility was strong enough to register on barometers far from the Square Mile.

Yet Sainsbury blithely announced the appointment. Shortly afterwards, Prosser did the wise thing and resigned. It was an unedifying and avoidable spectacle that can have done little for King's confidence in his new employer.

It was clear that investors had become more proactive in chairmen's appointments.

The ousting of Michael Green from the chairmanship of the merged Carlton and Granada demonstrated the more muscular approach.

But although it may be relatively easy to judge who is an unacceptable chairman, it is not clear to me who the City judges as deserving. That Green was persona non grata because of his involvement in the costly ITV Digital debacle is understandable, although it would mean that the equally culpable Charles Allen could hardly be allowed to stay on as CEO. Why, though, should a former chief executive of the Bank of Scotland be the ideal chairman? Burt confesses to being obsessed with golf and having taken little interest in the media. He is best remembered in City circles for losing the battle for NatWest to his rival, Royal Bank of Scotland.

Did the City feel he deserved a consolation prize? Perhaps former bankers give investors confidence: the man temporarily holding the ITV reins is Sir Brian Pitman, the former Lloyds TSB chairman.

There is still some head-scratching, however, over the appointment of Johnson as chairman of Channel 4. The regulator, Ofcom, thought it a good idea to appoint the proprietor of assorted restaurants to the role although, apart from a brief spell as an analyst, he had not exhibited any particular interest in the media. He did, though, author a book in the 1980s that may hold a clue to his new-found status. It was called How to Get a Highly Paid Job in the City. Aspiring chairmen should get a copy.

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