Richard Cousins’ arrival as a non-executive director of Tesco was greeted with much fanfare in October 2014. It came soon after the supermarket group confessed to a £263m overstatement of profits. A beleaguered board required reinforcement and Cousins was a perfect heavyweight appointment. He is the successful no-nonsense boss of Compass Group and came with his own crisis-fighting experience, having been recruited by the contract caterer after a 2006 scandal involving a UN contract. Nobody was surprised when Tesco bumped Cousins up to be its senior independent director (SID) last April.
Now he has resigned from the board with immediate effect. Why? No one wants to offer a proper explanation, which is feeble. Non-executive posts can run for 10 years. If the senior person in the role has quit after two, shareholders expect better than a brush-off. They, after all, paid Cousins’ £115,000 fees last year and the SID is meant to have a direct connection with the owners.
Cousins, it might be said, is the resigning type. Five months before joining Tesco’s board he left Reckitt Benckiser’s, saying the role was consuming too much of his time. That is unlikely to be the reason this time. If it was, it would be stated, as would any other innocuous cause. Shareholders must assume a serious falling out.
In as far as anything can be read into the Tesco chairman John Allan’s vague scripted remarks, a clash of some variety seems likely. Allen thanked Cousins “for his strong contributions to the deliberations of the Tesco board”. Did he mean too strong for the tastes of the chief executive, Dave Lewis?
The loss of a single non-executive director, even a senior one, is not a disaster, but Cousins’ departure comes at an intriguing moment. Under Lewis, Tesco has been rightly praised for halting its loss of market share. The restoration of customer-first trading principles, however, has done little for the share price, which had a good 2016 but is still roughly where it was when Lewis arrived, also in 2014. Nor is there even a promise of when dividends will restart. Maybe Cousins, like some Tesco shareholders, was frustrated by the slow pace of recovery.
In praise of ‘Fat Cat Wednesday’
The beauty of the High Pay Centre’s “Fat Cat Wednesday” calculation is that the methodology is easy to understand and the result striking.
Last year the median chief executive of a FTSE 100 company earned £3.97m, which was about £1,000 an hour – if one makes a few generous assumptions about how many long hours and weekends were worked and how few holidays were taken. So it takes about 28 hours, or two and a half working days, to reach £28,200, the average earnings for a UK full-time employee.
We should not be surprised by the result, because it roughly tallies with the 129:1 pay ratio that prevailed between FTSE 100 chief executives and the average worker in the same firms in 2015, the last year in which it is possible to make informed estimates. Expressing the numbers in terms of hourly earnings merely brings the bald data to life.
Opponents of compulsory publication of pay ratios for individual companies will probably hate the exercise. They keep telling us that pay ratios are too crude and they would probably say the same about Fat Cat Wednesday.
After a couple of decades of discontent over boardroom pay, however, a touch of coarseness is no bad thing. Twenty years ago, the pay ratio of workers to bosses was less than 50:1. The increase has happened in part because executives’ pay schemes, stuffed with annual bonuses and medium and long-term incentive plans, have become so complicated. Crude measures at least cut through the self-serving corporate noise about “pay for performance” and give a real-world readout.
Theresa May, a declared fan of the mandatory publication of pay ratios, should take note. The prime minister should resist the corporate lobbying against the proposal and insist on the fullest possible disclosure. Pay ratios alone will not reverse inflation in boardroom pay, but they do tell a tale in a way that strikes a chord and require companies to explain their thinking on pay to the outside world.
Cherry-picked takeover target
The world of industrial cranes and cherry pickers has never seen a takeover scrap like it. Little old Lavendon, a company on few investment radars a couple of months ago, has been the subject of an extraordinary tit-for-tat bid battle between TVH of Belgium and Loxam of France. The first bid was at 205p a share in November, but on Tuesday TVH upped the stakes to 261p with its third increased offer. The Lavendon share price, at 266p, says Loxam will be back. All this for a company whose shares were 140p before the fun started.
Brexit and the weakness of sterling only partly explain the action. It is now clear that Lavendon was grossly undervalued by the market. Credit is due to M&G for sitting on its 18% stake throughout the saga. Others have sold out to TVH, which now has a 20% stake, but M&G has stuck with its holding and now, if it wishes, can scoop top price.
