Standard Life and Aberdeen Asset: One of the co-CEOs needs to go after their merger

Most companies eschew co-ceos for the simple reason that it's a bad idea, and if they're going to demand people lower down re-interview for their jobs, the people at the top should set an example

James Moore
Chief Business Commentator
Monday 06 March 2017 14:37
Sailing into choppy waters: Aberdeen Asset Management and Standard Life will have two CEOs after their merger
Sailing into choppy waters: Aberdeen Asset Management and Standard Life will have two CEOs after their merger

For a start, if they’re not the highest paid employee they’ll almost certainly be close to it. Jettisoning one of them gets the cost savings shareholders are usually promised off to a good start.

Moreover, if you plan to tell people lower down the corporate ladder that they’re going to have to re-apply for jobs they’ve been doing well in competition with someone from the other side, the people at the top need to set an example.

History will also show that on those rare occasions where this doesn’t happen, disaster often follows.

Chief executives like Martin Gilbert at Aberdeen and Keith Skeoch at Standard Life, typically have big egos, a lofty estimation of their own worth when set against other mere mortals, and rather clear views on they way things should be done at the companies they run. They also get used to people saying “that’s a brilliant idea” in response to their every pronouncement. Their underlings know their careers will be a lot more fruitful if they do that.

Despite the smiles, public expressions of amity and pledges to work together in the newly merged company’s best interests, one plus one rarely equals two. It more commonly results in head butting, back stabbing and simmering internal warfare as the loyal soldiers from each side form up behind their man.

The phenomenon of staff being seen as a company X person or a company Y person often persists for years after big mergers, even when the two sides have settled upon a single boss. It is that much harder to deal with when they can’t agree upon which CEO should stay and which should go at the outset.

The strong performance of the two companies' shares tells you that there is a fairly compelling business case for the deal between Standard and Aberdeen, an all share affair that will see Standard’s investors getting two thirds of the merged company and Aberdeen’s the rest.

Money management favours either giants or boutiques. Life has been getting increasing tough for those in the middle.

Combining these two, which have both been suffering net outflows of funds, will create a behemoth with £660bn under management.

Beyond their common Scottish roots, they favour stock picking, as opposed to tracking stock market indices, and getting together will give them the clout to square up to America’s big fund managers, and perhaps to pursue further deals.

But much will now depend on the two men at the top, who have been very closely linked to the successes of their respective businesses, and have substantial personal as well as financial stakes in them, playing nicely together.

Having two chief executives doesn’t violate any governance code, and the merged company will have an experienced non executive chairman in the form of Standard Life chairman Sir Gerry Grimstone (Aberdeen's chairman Simon Troughton will be his deputy) to serve as referee.

However, while financial services outfits occasionally do it, there is a reason most companies opt not to have two chief executives working together from adjacent offices at their corporate centres. It is because it's a bad idea, even if in this case, with both men in their sixties, they might not hang around for long after the integration is complete.

In fact, I would imagine that if companies in which they hold shares were to suggest having co-ceos while trying to sell a merger to either Standard Life or Aberdeen Asset fund mangers, they’d be given short shrift. And no wonder.

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