For savvy chief executives, it’s the oldest trick in the book: Join the company, take a quick look at the books, then slag off the dismal legacy you’ve inherited, declaring it’s in a far worse condition than anyone could have guessed.
So it is with Tesco boss Dave Lewis today.
OK, the shares tank in the short term, but you then spend your four or five years in charge watching the price start coming back to its old levels (picking up nice share price-based bonuses en route) and, with any luck, be named a corporate hero when you finally shuffle off to a comfy chairmanship somewhere.
It’s known as doing a Kitchen Sink – dig out every grime-encrusted corporate nasty you can find, slap on a bit more dirt of your own, then chuck in the butler’s basin while you’re at it. Dave Lewis’s recently sacked predecessor Phil Clarke didn’t do the dirty on his old boss Sir Terry Leahy, and look what good that loyalty did him.
It’s a skill doubtless taught at the best business schools, so we thought we’d offer our scores for a few of the best and worse kitchen sinkers in the FTSE.
Justin King, Sainsbury
No doubt Dave Lewis will have been reading the playbook of Justin King, the old boss of Sainsbury, who skewered his inheritance at the chain when he joined a decade ago.
He slashed the value of the business by £550m, wiping off millions from the value of everything from IT to the property estate. In what was a demolition of his predecessor Sir Peter Davis’s reign, he also said it would cost a further £200m to complete a disastrous upgrade of the grocer’s IT and supply chain.
He also cut the dividend and issued two profit warnings in eight days. Sound familiar?
Ashley Almanza, G4S
When Ashley Almanza got into the driving seat of the armoured van that was the under-fire G4S, the security company was reeling from a host of scandals, most amusingly the one in which it had been billing taxpayers for ankle tags of felons who were long dead.
His first move was a classic kitchen sinker: he slashed the value of G4S’s contracts and various business units by £180m, driving the business into an instant half year loss in 2013 of £87m, soon going on to flog off a host of businesses and “restructuring” others.
Rupert Soames, Serco
Fellow ankle tag scandal firm Serco took the same route. Rupert Soames, clearly inherited a decent bit of battlefield DNA from his granddad Winston Churchill.
When he took over at the top of Serco this year, he too slashed tens of millions of pounds off the value of loss-making contracts at the group, adding a further £20m or so of costs related to sacking staff and other “restructuring” costs. The company has cut its forecasts for this year’s profits three times.
Ross McEwan, RBS
Ross McEwan at RBS did his kitchen sink a few years after his predecessor, Stephen Hester, had already dumped a butler’s sink of muck on investors when he took over a few years earlier.
For McEwan, he decided a few months into his reign to rush out a further £3.1bn needed to be set aside to cover the plethora of fines the taxpayer owned bank could end up paying for selling toxic mortgage backed securities and misselling interest rate swaps to hapless small businesses.
The figures added to the tens of billions already written down against he values of bad loans and other assets. Mr McEwan was privately said to be rather miffed that the move was being dubbed a “kitchen sink” job.
Sam Walsh and Mark Cutifani, Rio Tinto and Anglo American
When the new generation of big mining bosses arrived over the last year or so, the multibillion pound writedowns of the their predecessors’ foolhardy overexpansion had already been done – more than £30bn was written off the value of mines at BHP Billiton, Rio Tinto, Anglo American and the combined Glencore-Xstrata.
But that didn’t stop the newcomers chucking more down the plughole when they arrived. At Rio, Sam Walsh joined after his predecessor Tom Albanese wrote off $14bn. He came in with the revelations of billions of pounds more losses on assets. Likewise, Mark Cutifani at Anglo American followed Cynthia Carrol-era writedowns with further hits and another bunch of massive disposals and thousands upon thousands of job losses. His writedowns added up to a near-billion dollar loss for last year.
Skilled kitchen sinkers all, but none can top the excellent work of the media-savvy Mr King, who timed his arrival just as Sir Peter Davis’s painfully long turnaround was starting to bear fruit with sales on the rise at last.Reuse content