Business View: Morrisons may be an institution in Yorkshire, but in the City it's a dinosaur

By Jason Niss
Saturday 11 January 2003 01:00
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Sir Ken Morrison was in a bad mood on Friday. When we spoke to him on his way home to Swaledale, it was clear that Britain's bluntest grocer had had more than enough of the City and its fancy ideas.

But though he may not like it, there is a price to be paid if William Morrison is going to win the hand of Safeway. And it is more than just the £2.5bn in shares that Morrisons has put on the table.

For a start, it appears increasingly likely that Wal-Mart will put in a rival offer. It could be in league with J Sainsbury (though why it wants to give a leg up to a wounded rival is beyond me). While this bid could easily run aground on competition issues, it will slow down the process. As we all remember with Bank of Scotland, which started with Abbey National as a suitor, saw off Lloyds TSB and ended up with Halifax, anything can happen once the regulators are involved.

However, the real price Sir Ken will have to pay is in terms of the shape and future of Morrisons. Up till now he has run it as a virtual family business. At 71 he is beyond normal retirement age, yet he is still chairman and chief executive. He has no non-executive directors, no remuneration committee, no audit committee. Now that Associated British Foods and GUS have reformed themselves, Morrisons shares (with British Land) the dubious honour of being the last major bastion of old-style, dictatorial governance. Indeed, while British Land has the wrong sort of non-executive directors, Morrisons has none at all.

Sir Ken, though, is nothing if not responsive to change. He is going to appoint two non-executive directors if the Safeway deal succeeds. But they will make up less than a fifth of the board rather than the required third.

Sir Ken is not splitting the role of chairman and chief executive. The chairman of Safeway is David Webster ­ an articulate, admired operator ­ and it might have been a sensible gesture to keep him on. Forget it.

And what about the succession? Sir Ken has two joint managing directors. The impression most people have got this week is that Bob Stott is the heir presumptive, but as he is approaching 60 the chance of the unknown buying guru Marie Melnyk taking the reins can't be discounted.

The fact is that, however brilliant a retailer Sir Ken his, he cannot maintain this detachment from the City and its views about how a company should be run. Later this month the Government will joint the debate with its post-Enron pronouncement, and you can bet Patricia Hewitt's idea of corporate governance will not accord with Sir Ken's.

Sir Ken is playing a high-risk game. He is allowed to get away with his splendid isolation because he is a storming success. But he is getting old and he is taking a massive gamble. He needs to have a structure that will cushion him if anything goes wrong.

Running companies, like running supermarkets, has changed greatly over the last two decades. Sir Ken is an innovator in one, but a dinosaur in the other.

Loony lefties

As futile gestures go, the Lib Dems' opposition to the British Energy bailout really has to take the biscuit. The opposition benches apparently plan to vote against the enabling Bill that the Government is bringing in the next couple of weeks.

But are they sure they want to do this? I'm enough of an anorak to have read this Bill. What it does is repeal part of the Electricity Act of 1989, which set power privatisation in motion, so that if the restructuring fails, the Government is allowed to renationalise British Energy.

Not only is this the first time a Labour government presenting itself as a competent Conservative one has mentioned the dreaded work "renationalisation", it is the first time this Government has repealed a piece of legislation from the Thatcher revolution of the 1980s.

Is this a turning point? Probably not. It's hard to see Labour rediscovering socialism in our lifetimes. But given the Lib Dems' stance of being more left than Labour, it's a rather foolish motion to oppose.

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