Lang's tortuous route to the right destination

City & Business

An awful lot of people would like to see inside Ian Lang's head. The Trade and Industry Secretary's bombshell decision last week to ignore the advice of the Monopolies and Mergers Commission and to block the two electricity generators' bids did many things, but it certainly didn't clarify the Government's position on competition policy. His thinking remains a mystery.

That isn't everyone's view, of course. Mr Lang's supporters insist the decision represents a bold and more pro-consumer approach and a shift away from the line taken by his predecessor Michael Heseltine, who was more interested in promoting national champions capable of competing on the world stage. If that meant hurting the consumer back home, so be it. Mr Lang, we are asked to believe, is no longer prepared to toe the Hezza line. The electricity decision heralds the start of a definite shift in policy.

I'd like to buy this, but it does not ring true. Mr Lang has many talents, but bold independent thought is not one of them. The cynical would suggest that is precisely why he has risen to become one of the Prime Minister's favourites. He has now been in the job almost a year and until last week he showed not the slightest sign of diverging from the Hezza doctrine. Most notably, he allowed GEC's takeover of the nuclear submarine maker VSEL - a classic case of fostering a domestic monopoly in the hope that it could cut a dash on the world stage.

No, I suspect the driving forces behind Mr Lang's decision were (1) political expediency, (2) fear and (3) good old-fashioned pique.

Political expediency, because of the growing revolt on his own backbenches. Ever since the leak of the MMC report in the Economist a fortnight ago, right-wingers like John Redwood (who helped privatise the industry when he was at the DTI) and Norman Lamont have been up in arms.

Fear, because of a growing conviction that the merger frenzy among electricity companies will simply go on and on until the industry is reduced to a single monolith unless the Government stands up and says "Enough". The recent tilt by Southern Co of the US for National Power would only have strengthened this view.

Pique, because of National Power's extraordinary decision to revive its bid for Southern Electricity (no relation) even before Mr Lang had come to a decision on the MMC report. National Power wanted to re-activate the bid as a "poison pill" to deter the Americans. But it proved to be a crass error. There's nothing a proud minister hates more than feeling he is being publicly "bounced" into a decision.

Mr Lang made the correct decision last week, but probably not for the right reasons. It is much too early to suggest there has been any change in policy.

Small is beautiful

Most business journalists devote their energies to large companies. The chairman of a Footsie firm only has to scratch his nose to find himself in the following day's headlines. Meanwhile smaller firms can achieve momentous things (and perpetrate catastrophic cock-ups) with no one taking the slightest notice.

That's a pity. For very often it is smaller firms that have the most exciting ideas, products and business techniques. More nimble than large companies, they also get there first. And while large companies are net destroyers of jobs, it is small companies that are creating fresh jobs. They will shape the economy into the next millennium.

The Independent 100 ranking of Britain's fastest-growing independent firms is our attempt to redress the media balance. With Price Waterhouse, we've been running the survey for six years. Some of our winners have become household names.

Millions of people now read Loot, the free-ads newspaper group, which has featured in the rankings for six years running. Real ale lovers know all about J D Wetherspoon, the pubs chain which made it into the rankings in 1991. Incidentally, its founder appears this week in the "My First Million" slot on page 3. Diners-out are familiar with Group Chez Gerard (1992). Bus users, and soon rail passengers, travel using Stagecoach Holdings (1993). The list goes on and on. And some of our erstwhile tiddlers are tiddlers no more. The computers company Madge Networks (1992) is now quoted in the US and worth more than half a billion pounds.

According to Price Waterhouse, the 119 companies that made it into the Independent 100 and Middle Market 50 rankings this year have together created more than 18,000 jobs and generated an extra pounds 2.4bn of sales over the last five years. Not bad at the best of times, phenomenal when you consider the economic climate since 1990.

Old pals act

The shipping group P&O was famously the worst-performing Footsie company last year. Apart from an encouraging spurt in January, the shares have gone nowhere again this year. Some investors would like to see the long- serving chairman Lord Sterling thrown overboard. But if they expect the non-executive directors to do the dirty work, they will find little comfort in the latest annual report.

Old readers of these pages will recall that the non-execs are hardly the most independent bunch. Lord Hambro, 65, is of course head of Hambros, the merchant bank which receives handsome fees from P&O. John Steele, 67, a former civil servant, has long received payments from P&O in his separate role as a consultant.

Their loyalty to Lord Sterling looks even more assured after last year's largesse. They each received a 32 per cent increase in directors' fees to pounds 25,000. Mr Steele was paid an additional pounds 37,000 in "professional fees". Sir Peter Cazalet, 67, another non-exec and a Sterling acolyte for 16 years, made do with a 27 per cent rise to pounds 33,000. Perhaps Rodney Galpin, the former Standard Chartered boss and a new recruit to the non- exec ranks, will be more inclined to stir things up.

Meanwhile, shareholders who believe non-executive directors should be genuinely independent, can at least register their protest. They have the opportunity to vote against the re-election of Lord Hambro at the AGM on 17 May.

They might also think twice before approving the new long-term executive bonus plan. This promises to pay out if P&O comes no lower than 60th out of 100 in the ranking of Footsie companies by total shareholder return. The man responsible for a scheme which will reward below-average performance? Step forward, Lord Hambro, chairman of the remuneration committee.