Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Outlook: No beating about the bush as Telewest's Singer gets bullet

Tainted research; Life after Browne

Thursday 01 August 2002 00:00 BST
Comments

Few companies would have dared fire their chief executive the day before he was due to announce half-year results, but since Telewest shares are already virtually worthless, the board must have figured it had nothing to lose. No beating about the bush with Adam Singer's departure. None of the usual guff about the man wanting to spend more time with his family or leaving to pursue other interests. No, the cable TV operator needs a different management style to take it through the next phase, so Mr Singer is history.

Mr Singer will presumably wait until his £1.2m pay-off cheque has cleared before recounting the full gory tale of his last days in the bunker, but there can be little doubt that a serious personality clash developed between him and the four independent non-executive directors who did the deed. Telewest is looking into the abyss and can only survive via a massive debt-for-equity swap. But unlike Barclay Knapp, Mr Singer's counterpart at NTL, Mr Singer isn't the architect of Telewest's mountain of debt. The debts pre-date him, and though he did persuade Telewest massively to overpay for Flextech, the pay-TV company he used to run, it doesn't much matter now since the payment was in shares, which have gone down the plug hole along with the rest.

If you believe the Telewest spin, Mr Singer was a media luvvie who much preferred strumming his guitar and driving around in his vintage Bentley to the serious business of digging up the roads and signing more cable subscribers. This rather ignores the fact that operationally Telewest improved in leaps and bounds during his reign. What is true is that he was used to getting his way and might have found it hard to tolerate the more consensual style the board thought necessary for the long slog of a debt restructuring negotiation. He was also too close to his major shareholder Liberty Media for some people's liking.

None the less, he wanted to give it a go. If Mr Knapp could pull it off, then surely he could too. Lack of backing from the board means little progress has been made so far. Everyone is understandably frustrated. So who are these non-executive axemen? The chairman is someone called Cob Stenham, who you may not have known once worked for Unilever. Moving swiftly on we come to Denise Kingsmill, an employment lawyer. She knows all about insolvency having originally come to public notice as defence lawyer to George Walker during the fraudulent collapse of the Brent Walker leisure empire.

With those two on board shareholders can have complete faith, now that Mr Singer is out of the way, that the debt swap and subsequent merger with NTL will be be brought to a swift and beneficial conclusion. Or not, as the case may be.

Tainted research

Much brokers' research has been revealed by the collapse of the technology bubble to have been either worthless pap or self-interested puffery. Wall Street's Jack Grubman and Henry Blodget are only the high-profile tip of a much larger iceberg. But the Financial Services Authority addresses the wrong issue in asking whether British investment research too should be regulated to expose conflicts of interest and monitor its underlying value.

Indeed the FSA's discussion paper on brokers' research is most interesting for its core statistic ­ that house brokers are twice as likely to recommend a buy as others ­ than anything else, unsurprising though it is. That and the mischievous suggestion that research from investment banks on companies that pay them a fee should be labelled as "promotional" or "marketing" material. Imagine large parts of the research produced by, say, Neil Blackley, Merrill Lynch's star media analyst, being assigned the status of little more than junk mail and you'll get the picture.

As it is, some house research is better read and followed than the general run of circulars, this in the possibly misguided belief that it contains inside information, or is at least particularly well informed. The spin and the recommendation you can take or leave.

Nobody needs the FSA to tell them that much brokers research is useless guesswork or the result of fee-driven bias. The real issue is the failure of fund managers to be more demanding on the sell side by refusing to pay for research of dubious quality and value. Nearly all brokers' research is paid for via soft commissions, the costs of which are passed on to the client. The cosy and potentially corrupt nature of this relationship was the subject of fierce criticism from the Paul Myners report on the investment industry, but it doesn't seem to have resulted in any underlying change in practice.

According to a recent survey sponsored by E-Crosnet, no firm of fund managers has considered paying for stock research via a cash payment, where they would presumably demand value for money, in preference to bundling it into conventional commissions. When the Myners report was published, the industry was given two years by the Government to set its house in order or face a Competition Commission investigation. We are now nine months away from the deadline, and that investigation is looking more inevitable by the day.

Life after Browne

Who could blame Lord Browne for wanting to go on and on by serving another six years as chief executive of BP? The man has no family to distract him from his love of the job, other than the surrogate one he has created from those closest to him, he is still only 54, and nobody can complain about his performance.

In the seven years that Lord Browne has been at the helm, the company has literally been transformed. Today BP is Britain's biggest company and the seventh largest in the world. Its value has quadrupled since 1995, largely on the back of some superbly timed takeovers of rival oil companies paid for in BP shares during a period when the industry was over a barrel and the oil price at a 10-year low.

Nevertheless, there are some legitimate grounds for concern. By the time he retires at the age of 60, Lord Browne will have been in the job for 13 years ­ which is one hell of a run compared with the four-year life expectancy of the average FTSE 100 chief executive. During that time, many of those who entered BP as equals have passed on. Another two are coming up for retirement soon in the shape of Rodney Chase, the deputy chief executive, and John Buchanan, the finance director.

Inevitably this has led to concerns about a cult of personality. Lord Browne is BP's anointed king, and everyone else is a courtier. He's becoming bigger than the company he runs. He's undoubtedly a huge asset. But he could equally well become a huge liability when suddenly he's no longer there. When Bob Horton became BP's chief executive in the late Eighties, it was a straight fight between himself and David Simon. When Lord Browne succeeded David Simon, it was a foregone conclusion in most people's eyes. As of today, there is no prince in waiting, even though BP insists the succession plan is well in hand. Six years may seem long enough, but time passes quickly and the greatest disservice Lord Browne could do to the business he loves is to leave it without an heir.

jeremy.warner@independent.co.uk

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in