Don't confuse the issue: just call it pounds 2m a year
Saturday 31 August 1996
Personally I rather lean towards the latter view, but with important provisos for there is a lot wrong with the way Mr Simpson's package has been constructed. The Financial Times was surely wrong when it said in a leader this week that the construction of Mr Simpson's pay was a mere "quibble" if he fulfils the hope that so many have of him. It is one thing to back high rates of pay, quite another to condone a cavalier approach to the issue.
I've never met Mr Simpson but I doubt that his track record is all it is cracked up to be. Mr Simpson earnt his reputation at Rover, where he is credited with bringing about a revival in the fortunes of the British car industry. This may have been no more than hype. BMW certainly believed the story when it bought the company for a bumper price. Now it's not so sure, for Rover has turned out to be a bit of a dog (sorry), in urgent need of massive investment to revive its fortunes. At Lucas too, Mr Simpson's performance was less than remarkable, though to be fair he wasn't there long enough to prove his worth. Persuading the Germans to pay top dollar for a pile of old junk is no doubt a talent of sorts; whether it is right for the task of injecting new life into the old dinosaur of GEC is another thing.
But let's give Mr Simpson the benefit of the doubt and accept that he is the man for the job. Certainly the City seemed pleased enough with his appointment. In the old days greater men would have done it for next to nothing, simply for the honour and prestige of it. But that was all a long time ago and nobody does that any longer. So let's also assume that pounds 10m is what it took to dislodge him from Lucas, where with the threat of takeover hanging in the air, he stood to get a bumper payoff just by sticking around. There's no point in being a cheapskate in these things; if pounds 10m is what it took to secure the right person, GEC is absolutely right to agree it.
Where GEC's remuneration committee went wrong is in trying to obfuscate the package with golden hellos, phantom options, feather bedded pension arrangements and the like. Furthermore, pretending that the bulk of the package would only kick in if Mr Simpson "performs" was just plain silly. In truth the performance criteria have been set so low that Mr Simpson is likely to earn his share options merely for the inconvenience of getting out of bed in the morning. They are about as challenging as climbing a mole hill.
Ironically, GEC would have got a much better reception from its City shareholders if it had simply been honest about it and said that pounds 2m a year was his salary. As it is, the company now faces the prospect of an embarrassing climbdown. Not that Mr Simpson can object to a change in terms. Until he joins GEC, he's out of a job.
There's sweet justice in David Elstein's appointment as chief executive of the soon-to-be-launched Channel 5. As head of programmes at BSkyB, Mr Elstein was responsible for Rupert Murdoch's unsuccessful bid for the franchise.
He spent long months preparing what insiders said was far the most impressive of all the rival proposals, only to have the rug pulled from under him when BSkyB decided to bid a joke price which not in a month of Sundays would ever have stood any chance of success. Now finally he's got his wish after all.
I doubt he'll miss BSkyB very much. Mr Elstein is basically a BBC man at heart, and at BSkyB he was responsible for the bits that nobody watches, Sky1, Sky News and the like. Now he'll get his chance to go head-to- head with Michael Grade at Channel Five minus One. Should be fun.
There was a curious coincidence of stories from Hong Kong this week. Jardine Mattheson, headed by Henry and Simon Keswick, found itself uncomfortably back in the news after its part-owned fund management offshoot, Jardine Fleming, was lambasted by Hong Kong regulators for failure to spot "rat trading", an age-old scam whereby you book the trades to yourself if they make money and to your client if they don't. Meanwhile their brother, Sir Chips Keswick, who independently runs Hambros bank in the UK, found himself under attack from a bunch of Hong Kong... I was about to write spivs, for that is how Sir Chips would probably describe them.
In fact Regent Pacific is a reasonably well-known, in Hong Kong at least, fund management and arbitrage group. That it was recently involved in an acrimonious battle for control of the GT Chile Growth Fund in which it was accused of breaking virtually every rule in the book is neither here nor there. Its chairman, Jim Mellon, was certainly in no mind to pull his punches as far as Hambros was concerned. Announcing a 3 per stake, he described Hambros as an underperforming, undermanaged company. Warming to his theme, he continued that Hambro's board was "beautifully decorated but in urgent need of repair". Now I know it is the fashion in Hong Kong to knock the Keswicks but I suspect that Mr Mellon is onto a loser here.
Hambros is not an investment trust trading at an obvious discount to its break-up value, Mr Mellon's usual targets. Though it has bits which could no doubt be sold off, it is basically much like any other niche- market medium-sized investment bank. It is a people business and its value is in the eye of the beholder.
Hambros no doubt deserves to have its cage rattled a little, but actually most of the criticisms Mr Mellon is making are about two years too late. Changes have been made and it is hard to see what else might be done without destroying Hambros' main selling point as one of London's last remaining independent merchant banks.
Oh, and here's something else Mr Mellon might care to reflect on. Even in the days when buying a London investment bank was all the rage, Hambros didn't receive a single takeover approach. I may be wrong, but it looks as if Mr Mellon has chosen his target badly here. But who really knows what his game is. He's trying to float Regent. Maybe what he really wants is for Hambros to buy him out.
The Hanson demerger show grows worse and worse. The revelation that Millennium, a part of Hanson which is run by Americans, is registered in America, whose shares are to be listed in America and whose assets are largely North American too, is being forced to base itself in Grimsby for tax reasons, seems rather to say it all. The Hanson phenomenon is ending in farce.
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