BP's decision, now apparently set in concrete, to force its chief executive, Lord Browne of Madingley, into retirement at the ripe old age of 60 is corporate governance gone mad. If Lord Browne were bored, restless and felt he had already achieved as much as he was ever likely to at BP, then fair enough, but this is very far from being the case.
His energy and commitment to the job is as high as it has ever been, and more to the point, he plainly doesn't want to go. If there was a way that could be found for him to stay, either as chief executive or as chairman, he would.
Yet by the look of it, it is already too late for second thoughts. Positions have been taken, decisions made, announcements prepared. Lord Browne is too honourable an operator to attempt to rock the boat at this late stage in the process of succession planning. The last thing he would do is risk a boardroom rift by pushing the point. Yet it really is quite absurd that a company of such size and achievement should find it necessary so slavishly to follow the corporate governance book.
Other global corporations - notably HSBC - find it perfectly acceptable for the chief executive to serve out his time as executive chairman, and indeed have even managed to elevate the practice into an important attribute of their own particular style of corporate governance. In most of these cases the advantages of continuity and experience outweigh the possible downside of introspection and inertia.
This may be particularly the case in "Big Oil", an industry that in its fundamentals is still much the same today as it was 40 years ago. As one of the industry's most experienced and accomplished operators, both in terms of his strategic thinking and operational management, Lord Browne is a huge asset whose expulsion from the company because the rules stipulate that executives retire at 60 is an act of almost wanton recklessness.
Shell, I guess, is a salutary lesson in what can go wrong in companies with executive chairmen chosen from their own ranks. The situation eventually erupted in scandal when it was found that an overbearing Sir Phil Watts was routinely overstating his reserves. His juniors were all too scared to blow the whistle. Yet even Shell has announced it is lifting the obligatory retirement age rule so as to allow the chief executive, among others, to stay longer.
Obviously there will always eventually come a time to move over and let someone else have a go. Yet the lack of any obvious successor at BP has created something of a vacuum where there are a number of contenders jostling for position. They cannot all win. When one of their number emerges victorious, the others are highly likely to walk in frustration. The elevation of Lord Browne to executive chairman would allow for a smoother and less damaging transition.
Still, too late now. Peter Sutherland, the chairman, has made up his mind and Lord Browne is reconciled to his fate. In nearly all cases, a change at the top after a prolonged period of outstanding success comes later to be seen as a clear sell signal. This may be even more so with BP, as Lord Browne's departure in 2008 may well coincide with the top of the oil price cycle.
I can think of only one notable exception to this rule, which is Tesco. Here again, an outstanding chief executive, Lord MacLaurin of Knebworth, was obliged to retire and sever all connections with the company at 60, though he still endearingly uses the "we" of the football terraces, as if he still belongs, in referring to the company's affairs. There followed the then unknown quantity of Sir Terry Leahy, who arguably has been even better. It would be nice to think the same might happen at BP. Unfortunately, it is much more likely that it will not.
ITV: time for some serious talking
Meanwhile, in another part of the forest, the clamour for Charles Allen's head on a platter is again reaching deafening proportions. Might the ITV chief executive jump before he's pushed? Quite possibly. Mr Allen has been thinking a lot about his future of late. He would be less than human if he hadn't. Leaving aside the negative press and City comment, which you would need the hide of a rhinoceros to ignore, he'll be 50 later this year, an age which nearly always concentrates the mind on the possibility of pastures new.
But he remains determined not to be hounded out, and as far as I can see he still has the support of his board in this endeavour. Mr Allen can no doubt be accused of failings in his management of ITV, but he's also the victim of profound structural change in the commercial broadcast market, and for that he cannot reasonably be blamed. This makes his treatment shabby and distasteful. In such an environment, even the most brilliant broadcaster would find it difficult, verging on the impossible, to please either advertisers or investors.
Many of the former blame the present sogginess in the advertising market directly on the plummeting ratings of the core ITV1 franchise, which is struggling to produce the mass market audiences advertisers really want. Yet as things stand, there is no alternative, so some are choosing not to advertise at all. Nearly all of them complain loudly of lack of flair and creativity in the programming schedules. Little if any of the regulatory concessions ITV has achieved by way of reductions in the licence fee have gone back into programming.
Instead, it has all gone to investors. Yet it has failed to make them any happier either. With the shares at less than 100p, many are wondering why the board didn't back the 130p offer mooted by Goldman Sachs. The fact that had that bid succeeded, ITV would now almost certainly be heading for the bankruptcy courts, unable to service the massive debts the bid involved, I guess doesn't much concern them. The financing was based on highly optimistic forecasts of advertising revenues that now look like cloud cuckoo land.
In any case, Mr Allen needs rapidly to break the present impasse. If he is to go, he'd like to choose his own timing. It may already be too late for that. Either he wants to stay or he doesn't. If it's the latter, then the sooner he goes, the better for everyone. If it's the former and Mr Allen has a clear view of where he wants the company to be in five years' time and how he proposes to get there, then through his chairman Peter Burt he must set it before the City and invite his shareholders to back him or sack him.
Sarin needs a vision for Vodafone
From one beleaguered chief executive to another, Arun Sarin of Vodafone. He'll survive his Waterloo at today's shareholders' meeting, despite another embarrassing departure in his top management team yesterday and the pre-announced decision of some of his biggest shareholders to oppose his re-election as a director. But will he survive the new chairman, Sir John Bond? Nearly £20bn of announced capital returns over the past year alone has failed significantly to defuse the hostility. Some want him to sell the US assets and give them back yet more cash. Others simply believe he's not up to the job.
Whatever the immediate reasons for this unhappiness, the underlying cause is much the same as at ITV - a business suddenly caught in the midst of profound change where the old monopolistic models are fast breaking down. How does Vodafone stay ahead of the game in these circumstances? How does it protect its existing revenues at all?
For many in the City, Mr Sarin has yet to come up with convincing answers. It seems strange that a company born only recently into the crucible of such profound technological change as mobile telephony can so quickly have matured. Strange, and also justifiably open to criticism, for the secret to corporate longevity is entrepreneurial restlessness and invention, and there is not a lot of evidence of this at Vodafone right now.
As in F Scott Fitzgerald's The Great Gatsby, to have faith, investors need to believe in the green light, the orgastic future that year by year recedes before us. Mr Sarin hasn't yet provided them with a reason to think that tomorrow he'll run faster, stretch out his arms farther....Reuse content