Browne's retirement opens succession race

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The Independent Online

Lord Browne of Madingley, the chief executive of BP, is expected to make clear tomorrow that he does not intend stay on at the helm of the oil giant beyond 2008 when he reaches 60.

Despite pressure from some quarters for BP to scrap the mandatory retirement age for executive directors, Lord Browne will rule out remaining as chief executive beyond his 60th birthday in 18 months' time.

BP is also expected to use tomorrow's announcement of half-year results to pour cold water on another option canvassed in the City - that Lord Browne could step up to the chairman's role by replacing Peter Sutherland rather than leaving the board altogether.

Speculation about Lord Browne's future has been fuelled in recent days by a note from an oil analyst at Merrill Lynch arguing that his impending retirement posed a "potential medium term risk" for shareholders and suggesting that he might stay on longer in the job.

Over the weekend, one of BP's big institutional investors, the Co-Operative Insurance Society, joined the debate. Ian Jones, the society's head of responsible investment, said he saw no reason why Lord Browne should step down in February 2008 "as long as he continues to perform and wishes to carry on".

Lord Browne took over as chief executive in 1996, since when he has engineered a series of transforming takeover deals which have turned BP into Britain's biggest company, closed the gap between it and the world's biggest oil company, Exxon Mobil, and cemented the group's position in Russia and China.

Succession planning began more than two years ago with the appointment of potential successors to the BP board. Internally, the two candidates thought most likely to succeed Lord Browne are Tony Hayward, head of exploration and production, and John Manzoni, who runs BP's downstream refining and marketing operations.

But concern is developing in some quarters that BP has not made sufficient progress and there is likely to be pressure on the company to make an early statement clarifying its intentions.

One source with close links to the company said that despite the flurry of speculation and comment in recent days, nothing appeared to have changed.

"In February 2008, Lord Browne will have done 12 years in the job. He has always said he would go at 60 and make way for a successor and logic dictates that is what will happen," said the source. "If BP was going to change in some fundamental way which meant that Lord Browne staying on for another 18 months or two years would make a big difference, it would be a different matter. But I don't see that happening."

As for the option of elevating Lord Browne to the chairman's job, it was pointed out that BP had also been extremely rigorous in abiding by corporate governance rules which say that the chief executive of a FTSE100 company should not move into the chairman's role.

Some investors are thought to believe that would be counter-productive in any event and could potentially damage the company by denying the new chief executive a free rein.

Although he is set to sever his ties with BP, Lord Browne has always made it clear that he has no intention of retiring from corporate life in general when he reaches 60. "This is not retirement, this is a change of circumstances," he said recently.

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