Al-Fayed plans new business watchdog

MAGNUS GRIMOND

Sir Richard Scott, the judge heading the arms-to-Iraq inquiry, and Michael Lawrence, former chief executive of the Stock Exchange, are two of the names on the list to head a new corporate governance watchdog being established by Mohamed Al-Fayed, Harrods chairman.

Mr Al-Fayed, who has been heavily criticised for his own business methods, will this week write to around two dozen large fund managers to drum up support for his new body. He has already had two meetings with Derek Fowler, chairman of the Railways Pension Trustee Company, a big pension group which has already indicated its intention to become more active in this area, and hopes to obtain enough support from other fund managers to set up a meeting to establish the feasibility of the project.

The idea is that the new body will act as a powerful and independent force to maintain best corporate practice and make directors accountable for their actions to shareholders and the investors they represent. Potential candidates to head the new body have not yet been approached, but a spokesman for Mr Al-Fayed said they would be seeking "someone of courage and determination, who is a seeker of truth and prepared to impose corporate governance which acts in the interests of ordinary shareholders." He suggested that Sir Richard and Mr Lawrence were both independent-minded men who fitted that description.

The initiative comes after the December announcement by the Railways Pension Trustee Company that it was becoming one of the first occupational pension schemes to introduce a corporate governance policy covering the companies in which it is invested. RailPen said then it would instruct the institutions which manage its pension funds to implement a code that involves voting at company meetings and taking a greater interest company performance and strategy.

Mr Al-Fayed was spurred into action after reading of the RailPen move and met Mr Fowler to discuss ways in which the influence of fund managers could be brought to bear on companies. His spokesman said Mr Al-Fayed would underwrite the new body initially, then take a back-seat role.

Mr Al-Fayed was at the centre of a stormy corporate governance controversy during his long-running row with Tiny Rowland over the ownership of Harrods. He also feels aggrieved about being denied board representation on the board of the Sears stores group at a time when he was the largest shareholder.