Heroes & villains of business 2007

A difficult year has muddied some of the grandest reputations in business. But 2007 also had some bright lights. Nic Fildes reports
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The Independent Online

In football parlance, 2007 has definitely been a game of two halves. In the first six months of the year, it was relatively smooth sailing for the UK's business community which had entered the year still drunk from the heady days of 2006 when the FTSE 100 hit highs not seen since the tech boom. With commodity prices booming and private equity firms merrily breaking the bank to take over ever-larger targets, it looked as if competition for the business personality of the year would be intense.

Yet the sub-prime crisis and subsequent credit crunch have left many reputations in tatters. The slowdown in consumer spending has hit the high street hard in the run-up to the crucial Christmas season, and fears of a downturn in advertising spend have also been felt in the media sector. In short, the UK market is heading into 2008 in the most negative frame of mind since 1992.

Yet a few reputations continue to cast a shadow across the market. According to an Independent straw poll of analysts, the standout candidate over the past year is Arun Sarin, the chief executive of Vodafone, for his successful swoop on India's Hutchison Essar and, more generally, seeing off his detractors.

The Vodafone share price has continued heading in the right direction as the strategy set out by Mr Sarin continued to offset concerns about the mobile phone market. He has also withstood pressure to sell out of the company's US business, arguing there is still more upside to be had.

The enthusiasm for Mr Sarin's strategy was evident at the company's annual meeting in the summer when the Indian-born businessman withstood an onslaught by an activist shareholder group led by the former Marconi boss John Mayo. Shareholders rallied around Vodafone's board, embracing Mr Sarin's growth strategy and turning on Mr Mayo. Yet those same commentators pilloried Mr Sarin the year before when more than 15 per cent of its shareholders refused to vote to reappoint him, citing a lack of faith in his ability to guide the company through structural changes within the fast-moving telecoms sector.

Robert Grindle, at Dresdner Kleinwort, said: "Vodafone had one of the most under-rated management teams in 2006, but Arun Sarin's initiatives have started to pay off as the rest of the market declines. Despite the scepticism over the past few year about emerging markets growth and mobile data take-up, Vodafone's growth story is improving. Mr Sarin has stuck to his guns and proved his point. His bets are paying off."

Andrew Darley, at KBC Peel Hunt, said: "Vodafone is in a very difficult position in a commoditising market. The temptation for Arun Sarin may have been to tread water, but instead he has adopted a brave strategy and had courage in his convictions."

Other contenders from the communications sector included Peter Erskine, the outgoing chief executive of O2, and James Murdoch, who has stepped up from the chief executive of Sky to head News Corp's European and Asian operations and to chair Sky. The move all but cements his position as heir to the throne of his father's media empire.

The promotion follows an eventful year for Sky, which became embroiled in an all-out war of words with Virgin Media and its largest shareholder and figurehead, Sir Richard Branson. Despite a number of potentially damaging regulatory investigations into the company's behaviour, Sky's operational performance over 2007 was impressive.

While it continued to forge ahead in the pay-TV market despite the continued growth of Freeview and the threat from a rejuvenated Virgin Media, formerly NTL, and BT's new TV platform, Sky also took on its competitors in their own backyard with its new broadband package. After surging through the 1 million-customer mark, Sky won itself plaudits for becoming the fastest growing broadband company in the UK.

The performance must have been particularly satisfying for Mr Murdoch given the public outcry when he was appointed four years ago. Analysts lined up to pay tribute to the 34-year old. Cazenove analyst Matthew Walker summed it, arguing: "Despite initial concerns regarding James's appointment at Sky, he has won over investors and his strategy is seen as being hugely successful and well executed."

The retail sector is bracing itself for a disheartening Christmas. With few retailers yet certain just how bad it could get, analysts proved reticent in selecting a sure-fire performer in the sector. Stuart Rose, chief executive of Marks & Spencer, who took the plaudits in last year's survey, has continued to add to his reputation but the plaudits went to Charlie Mayfield, the chairman of John Lewis, as the department store owner continued to outpace its struggling rivals.

Nick Bubb, of Pali International, said: "John Lewis has finished the year with a bang, particularly with the growth of their online business. Retailing has become all about multi-channel and he has got this down to a fine art." Mr Bubb said one to watch out for next year will be Kate Swann, the chief executive of WH Smith. "She has defied the critics, under-promised and over-delivered."

In a beleaguered banking sector, the prize has to go to Sir Fred Goodwin. The chief executive of Royal Bank of Scotland came out of a brief period of M&A cold turkey to beat Barclays and buy ABN Amro in the biggest banking takeover ever. Sceptics poured scorn on Sir Fred's three-way consortium with Santander of Spain and Belgium's Fortis even before the debt markets froze. But Sir Fred drove the deal through. "It is an astonishing asset to have got, given the markets and the obstacles that were in the way," says Mike Trippitt, an analyst at Oriel Securities.

Two other contrasting stars stand out. Eric Daniels, the chief executive of Lloyds TSB, has no desire for celebrity status but his bank's steady UK growth and low risk suddenly looks attractive. Peter Sands, chief executive of Standard Chartered, has had a good first year in the job as its markets in Asia, Africa and the Middle East continued to boom.

In terms of growth, the mining sector has impressed as the demand for raw materials from China and India continued to fuel commodity prices and consolidation. However, a changing of the guard at the top of BHP, Rio Tinto and Anglo American means some of the most influential leaders still have to prove themselves.

Marius Kloppers, the new boss of BHP Billiton, took less than a month to settle in to his new job before launching what could be the largest takeover in corporate history with a 67bn bid for rival Rio Tinto. The situation will be a test for new Rio chief Tom Albanese, who had already pulled off the largest mining deal to date with the $42.9bn (21.3bn) takeover of aluminium giant Alcan.

An honourable mention goes to Brian Steer, the chairman of UK biotech Gyrus after the mid-cap keyhole surgery specialist attracted a near-1bn takeover offer from the Japanese digital imaging giant Olympus. The offer was pitched at a near-60 per cent premium to Gyrus's share price.

Annus horribilis

Not since the collapse of the tech boom has the business sector had so many pariahs as the sub-prime crisis, the credit crunch, the Northern Rock collapse and the furore around the private equity sector ruined many reputations. Chief villain in the banking sector was of course the hapless Adam Applegarth, whose use of wholesale markets to fund his breakneck growth plan for Northern Rock fell to pieces when the markets froze in August. Some analysts have sympathy with Mr Applegarth and none spotted the extent of the trouble ahead. But others could not resist a touch of Schadenfreude at his downfall after one too many lectures on the difference between the housing and mortgage markets.

The credit crisis has shredded reputations across the Atlantic and several of Wall Street's "masters of the universe" found they were no longer masters even of their own destiny. In five years at the helm of Merrill Lynch, Stan O'Neal had fought to change the firm's paternalistic ethos with a strategy of risk taking and a push into exotic derivatives trading, but it became clear the bank was ill-equipped to cope when the mortgage markets went into a tailspin. One day, Mr O'Neal was predicting a $5.5bn write-down; three weeks later the figure was $7.9bn.

But the year's biggest loser in the US has to be Chuck Prince, whose tottering leadership of Citigroup lasted until November, when board members finally echoed the calls for his resignation that had been building among analysts. Mr Prince had said 2008 would be "the year of no excuses" a phrase that would haunt him as the world's biggest bank again missed its revenue and cost savings targets, and then took losses of more than $15bn on US mortgages.

Conrad Black, erstwhile ex-proprietor of The Daily Telegraph, would vehemently and no doubt eloquently reject his characterisation as a villain of the year, but that was the conclusion of a Chicago jury, who found he had defrauded outside shareholders in his collapsed media empire and then tried to obstruct justice.

For the controversial private equity industry, this year has neatly divided courtesy of one man Stephen Schwarzman, head of the Blackstone. The New York giant's initial public offering in June made Mr Schwarzman one of the richest men in the world, worth about $8bn. Yet the highly public offering focused the minds of regulators on both sides of the Atlantic who had begun to cast suspicious eyes over the massive tax breaks enjoyed by the industry.

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