The head of the National Audit Office was apparently the only candidate upon whom the 14 members of a specially convened selection committee at the school were able to agree. Now the trawl for a suitable replacement for Dr John Ashworth, who leaves in September, must begin anew.
Sir John's rejection of the post - one of the most prestigious in the British university system - is doubly embarrassing because the present director earns only pounds 88,616 plus the use of a Georgian house in Islington. If Dr Ashworth, who has no firm plans for the future, was asked to stay on he could reasonably demand an enormous pay rise.
When the school's governing court endorsed Sir John's appointment last December its members were assured that he had agreed to take the job if it were offered. But this week he announced his decision in a brief letter to Sir Peter Parker, chairman of the court.
"I deeply appreciate the honour and privilege of the invitation to be director of LSE. But after the fullest consideration I must decline . . . I am sorry if I have caused you difficulties in the past few weeks," he wrote.
Colleagues say Sir John, 62, simply enjoys his work, is happy with his pounds 90,000 salary and does not want to move. In any case, the LSE job would mean retirement after a five-year term while his present post offers a job for life.
Sir Peter is said to have spent weeks negotiating the post with Sir John. Unusually, staff say that head-hunters were not used in the selection process though they may have to be in the renewed hunt for a director.
Various possible replacements have been discussed, some more seriously than others, though there have been no formal applicants.
Raymond Seitz, former American ambassador to London, was mentioned as a possible successor but was apparently too busy. George Walden, the disaffected former Conservative education minister, would be thought a good catch by some.
But there will be no shortage of applicants. Even after government funding cuts the large number of foreign students at LSE will boost its reserves and the director will not have to face too many budget problems.
Other names which have been mentioned include Alan Budd, chief economic adviser at the Treasury, and Nick Stern, chief economist at the European Bank for Reconstruction and Development, but no decision will be made before the school's court meets in three weeks' time.
Dr Ashworth recently wrote in the Independent that he was leaving because of the university system's refusal to face up to its problems, but yesterday he did not think his job would be hard to fill.
"I am sure there will be hundreds of people who want the job. It might not be as good as it could be but it is certainly better than most," he said.
Contenders for the succession
Dr John Ashworth
Present director of LSE. His six-year term ends in September. No definite plans for the future. Former Salford University vice-chancellor and Professor of Biology at Essex. Failed to introduce top-up fees at LSE and to buy County Hall as its new home.
MP for Buckingham. Disaffected former minister, who will quit Parliament at the next election. No links with LSE, but was an education minister in 1984-87. Not afraid of controversy - recently called for reintroduction of direct-grant schools.
Senior managing director with the merchant bankers Lehman Brothers. Former American ambassador to UK. Floated for LSE job but said to be not interested. Member of the great and good, he is a trustee of the National Gallery.
Chief economic adviser to Treasury. Former Professor of Economics at the London Business School. Denies he has been approached by LSE and says he is happy where he is. A graduate of the LSE. There have been rumours he might leave the Treasury next year when he turns 60.Reuse content