The shock announcement prompted a 70p fall in United Utilities' share price to 699p - wiping pounds 370m off the its market capitalisation - and left analysts and investors scrambling to re-assess the group's multi-utility strategy.
The departure of Mr Staples, who was on a two-year contract and may be eligible for a pay-off of about pounds 500,000 - tightens the hold on the company of its executive chairman, Sir Desmond Pitcher.
But the turn of events dismayed a number of institutional investors. One large shareholder said: "It was never clear why United Utilities needed an executive chairman and a chief executive so it was clear that one of them was likely to go. But it is highly debatable whether Sir Desmond emerging as the survivor will add anything to shareholder value. He has an image problem and nor is the rest of the board very impressive.
"On the narrow matter of Staples versus Pitcher I would have said the score would be Staples one, Pitcher nil."
According to the company, the six non-executives on the board met Sir Desmond on 24 June and told him that it was their unanimous belief that Mr Staples should go because they had lost confidence in him.
Sir Desmond sought the advice of the group's advisers, Dresdner Kleinwort Benson, its corporate brokers NatWest Markets and its lawyers Slaughter and May before agreeing that Mr Staples had to go.
He was told of the board's decision after arriving for work yesterday morning and left the group's premises almost immediately. Mr Staples had been with United Utilities for three years, joining it from Tarmac Construction where he was managing director. He led the takeover by North West Water of Norweb which created United Utilities.
Among the criticisms levelled at Mr Staples were his alleged failure to communicate with the board, particularly in respect of the size of provisions needed to cover losses on a sewage contract in Bangkok. Mr Staples is also said to have fallen out with the remuneration committee.
The picture of events emerging from the Staples camp is flatly contradictory. It is said that Mr Staples too came to the conclusion that it was not tenable to have both an executive chairman and a chief executive and that if United Utilities was to restore its rating in the City and win greater shareholder support, then Sir Desmond would have to stand down from executive duties.
However, before he was able to marshal support for this plan of action, Sir Desmond moved against Mr Staples in what came down to a straightforward boardroom tussle with Sir Desmond able to count on his supporters among the non-executives.
The non-executives include Eric Clark, who sits with Sir Desmond on the board of the Merseyside Development Corporation and, like Sir Desmond, is a former managing director of Plessey Telecommunications and Office Systems in Liverpool, and Frank Sanderson, 69, chairman of Acumen Technologies and chairman of United Utilities remuneration committee.
The other non executives are Sir Peter Middleton, chairman of BZW, Alan Pendleton, who has served on the board since 1987, Dr Rodney Leach, former chief executive of the Trident submarine builder VSEL, and John Seed, the former chief executive of South Western Electricity.
Sir Desmond, 61, joined the board in 1990 and became chairman in 1993 having previously been chief executive of another North west business institution, The Littlewoods Organisation.
There was no hint that Mr Staples' position was in jeopardy when the group reported its 1996-97 results at the end of May. Profit before tax and exceptional charges came in slightly below analysts forecasts at pounds 444m. But the group said that "excellent progress" had been made integrating North West Water and Norweb, and was confident of meeting its target of achieving savings of pounds 474m by March 2000.
United Utilities also said that the disposal programme launched after the Norweb takeover had substantially beaten targets, having raised pounds 460m against a forecast of pounds 350m.
In yesterday's announcement of Mr Staples departure, the board said that it remained confident in the group's strategy although current trading was slightly below market expectations.
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