Pearson succession draws fire from City analysts

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The Independent Online
Pearson's long-awaited management succession plan, unveiled yesterday, drew immediate fire from analysts and disappointed some key shareholders. The shares fell 11.5p to 676.5p, a drop of 1.7 per cent.

The appointment as deputy chairman of Dennis Stevenson, the man credited with saving aircraft leasing company GPA from financial collapse, was viewed as a positive step. Mr Stevenson will take over as chairman in the spring, when Michael Blakenham, the last of the Cowdray family to take an executive role at Pearson, steps down. Mr Stevenson is also expected to resign from his high-profile role as chairman of the trustees of the Tate Gallery.

But analysts questioned the appointment of Marjorie Scardino, the little- known chief executive of the Economist, who takes over from Frank Barlow, the managing director, at the end of the year, becoming the first chief executive of a FTSE 100 company.

"So Pearson now has a journalist for a chief executive, a journalist [John Makinson] for a finance director and a management consultant as chairman," said one leading analyst who has been critical of Pearson in the past. "I rest my case."

"We haven't heard of her, and we wonder whether she can be up to the job, given her background," added another analyst.

"This is certainly disappointing because [Ms Scardino] is not a big hitter," Louise Barton, analyst at Henderson Crosthwaite, said. "Running the Economist is far different from running a major PLC."

There was also concern that the appointment came from within Pearson's empire. "They should have gone for a true outsider," complained one analyst.

But Pearson senior executives dismissed the criticisms. "The City always reacts this way," Mr Barlow said. "But the City also always gives new chief executives some room and some time."

He added: "When they get to know her, they will see how capable she is."

The appointments, which were decided last month but delayed by contractual negotiations, mark the end of a series of management changes aimed at preparing for the retirement of Lord Blakenham and Mr Barlow. Between them, they oversaw the transformation of Pearson from a collection of luxury companies such as fine china, oil exploration, financial services and publishing into an integrated media giant, worth nearly pounds 4bn at yesterday's market price.

All the same, the company has been a takeover target in recent months, following a disastrous foray into the CD-Rom and games cartridge market in the US and persistent criticisms in the City that the company continued to lack focus.

Ms Scardino, an American-born lawyer and one-time newspaper publisher, is credited with growing the Economist businesses, particularly in the US. She said she would spend the next few months "looking closely at Pearson and at the opportunities".

She added that she and Mr Stevenson had "no strategic prejudices, and will start with a clean slate". Neither executive would discuss strategy in detail, but it is believed the board of Pearson has not ruled out dramatic changes, which could include the sale of some key assets, or perhaps the spinning off to shareholders of the television subsidiary.

All the same, Ms Scardino said: "We will do what we think is right. If it popular to do something we won't just do it if we think it is wrong. We will stand our ground."

Scardino at the top, page 3 Comment, page 23