GEC boss faces City backlash: Institutions to oppose Weinstock's re-election

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The Independent Online
LORD WEINSTOCK, managing director of General Electric Company since 1963, is facing a damaging City revolt over his decision to stay in the job for at least another two years after turning 70 later this month.

Leading institutional investors plan to vote against his re-election at the company's annual meeting in September. Under the Companies Act, directors over 70 have to be re-elected every year.

'If he comes up for re-election, we will have to vote against,' said one angry institutional investor. 'If a company is patently successful, the age of the chief executive is not so much of a problem. But that is not the case at GEC. The company is doing nothing, just building up cash with little idea of what to do with it.'

Another added: 'You wonder what Lord Weinstock still has to offer. He was hinting five years ago that he was planning to step down, but here he is planning to stay on even longer.'

A substantial vote against Lord Weinstock's re-election would send a shockwave through British business, where there are more than 200 directors of quoted companies aged over 70, with many in their mid-to late-80s. Britain's oldest director, Dorothy Bailey, of the ship repairers, C H Bailey, is 90.

Lord Weinstock, one of the foremost businessmen of his generation, virtually created the modern GEC through the takeovers of Associated Electrical Industries and English Electric in the 1960s and, more recently, the acquisition of Plessey. However, he has come under increasing criticism for failing to give the group clear direction.

In particular, many observers believe that GEC has missed the opportunity to take a strategic position in the development of computers, and has produced no coherent answer to the decline in defence business since the end of the Cold War.

Many investment institutions oppose the idea of directors over the age of 70 as a matter of principle, but their anxiety is especially acute in the case of Lord Weinstock.

'If he had sorted out the succession at GEC, we would not be so concerned. But there is no sign that he has,' said one fund manager.

The City was disappointed by GEC's 1993 results on Wednesday, which showed an increase in profits of only pounds 3m to pounds 866m. The company had made no substantial new acquisitions during the year, and the dividend increase of 0.5p to 10.82p was at the low end of expectations. The shares, which have underperformd the stock market for more than a decade, immediately fell 8 per cent to 270p.

'The market was more disappointed that Weinstock is staying than in the poor results,' said Jim McCafferty, electronics analyst at Hoare Govett Securities. 'If he is not involved in the middle of some deal that requires his presence at GEC, there is no reason for him to stay on.'

Many shareholders are most frustrated that GEC has given no hint of the management succession. 'Some institutions feel they should have a better sight of the management succession, given that Lord Weinstock is turning 70,' said Mark Lambert, an analyst at NatWest Securities.

An institutional investor warned: 'It is particularly worrying that Weinstock may be trying to settle the succession on his son, Simon. There is absolutely no way we could countenance this. We cannot have people trying to establish a dynastic succession in companies they do not even own.'

The inside candidates are Simon Weinstock, the commercial director, David Newlands, the finance director, and Peter Gershon, managing director of GPT, the telecoms operation.

Lord Weinstock tried to forestall criticism of his decision, saying that he had been taking less of a leading role in the company for some time. GEC's management was likely to become more collegiate, he said. Shareholders were sceptical, however, complaining that this was simply dodging the issue.

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