Business View: When the old boss hangs around, the only way is down

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The Independent Online

The corporate world will be a much less clubbable place without Sir Clive Thompson. Always affable and charming, if a little dotty, he insisted on addressing me as Tom when we chatted on Friday. The trouble is, if someone gets your name wrong and you don't correct them immediately, there is no good time to do it. So by the end of the conversation it was "Tom" this and "Tom" that until I thought I might just adopt the name.

A few minutes after we'd said goodbye, my phone rang. "Oh, Jason, I'm so sorry. I've been calling you Tom. I don't know what got into me." Well, if you've just been fired by the company you ran for 20 years, it's bound to fog your senses.

Sympathy aside, I feel Rentokil Initial's non-executive directors have done the right thing, albeit with all the subtlety of Luca Brazzi carrying out a hit for Don Corleone. Sir Clive had stayed on too long at Rentokil and it was a serious mistake letting him become chairman after he'd been chief executive.

When Sir Clive moved over to chairman, eyebrows were raised. The move was against the spirit - and to some extent the letter - of the corporate governance best practice that City investors and big companies have been developing over the past decade and a half. When I put this to Brian McGowan, who is stepping up from senior non-executive to chairman of Rentokil, he shrugged and said he'd seen chief executives make bad chairmen, but also good chairmen.

Maybe, Brian. But you know the argument doesn't wash. If you want a chief executive to come in and do a good job, they have to know they are in charge. And if the old boss is still there, however benign they are, their presence will haunt the place. Mr McGowan, as a sports fan, will remember how Sir Matt Busby's continued involvement at Manchester United, after he had retired as manager, hampered his successors until United ended up being relegated. In a sense, that is what has happened to Rentokil. Mr McGowan himself described the company as turning from an Arsenal into a First Division also-ran.

Sir Clive is on the board of another company where the ghost of the old chief executive is hanging over the new regime. At J Sainsbury, new boss Justin King performed a show of strength last week by getting rid of Stuart Mitchell, the managing director of the supermarkets business. This may be a good thing, it's a little difficult to tell. A lot of the troubles at Sainsbury's appear to be laid at the door of Sir Peter Davis, who has just made the move from chief executive to chairman.

To be fair, Sir Peter says he will go when they get a replacement - it's just they haven't found one yet. How ironic that one of the favoured candidates was Sir Clive.

Nice work...

While we're on Sainsbury's, why did Sir Peter receive 80 per cent of his bonus for last year? Profits fell. Sales fell. Margins fell. And he failed to secure a successor as chairman (for which he was to receive a bonus). Exactly what targets did Sir Peter beat?

No fair exchange

The jungle drums say the London Stock Exchange is back in merger talks with its German rival, the Deutsche Börse. This I cannot understand. Only a couple of weeks ago I sat in front of Clara Furse while the LSE boss said that the strategy she was pursuing in Europe was substantially different to that of her rivals in Frankfurt. She was after market share in trading while DB was after making as much money as it could from the trading.

Both see that, with a single financial market in Europe, it is illogical to have more than a dozen different stock exchanges. But countries view having their own stock markets as part of their national identities and are unwilling to sell out to the big boys - the LSE, DB and the Franco-Dutch crossbreed, Euronext.

So if no one will sell to them, shouldn't the LSE and DB get together? Leaving aside their strategic differences, there is a big barrier to a merger of equals: value. At €4.9bn (£3.3bn), Frankfurt's market is worth three times London's. This is twice the imbalance that existed when the last merger was called off.

Don't wait up for this deal.

j.nisse@independent.co.uk

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