By Andrew Moore, Director DAV Management
The recent fiasco with Philip Green around the BHS collapse and the pension’s debacle has yet again fuelled the argument about the rewards of top executives. Given the frequency of such occurrences, you could be forgiven for thinking that some – if not many – are actually being rewarded for failure.
There are many who feel that the current approach to executive pay, particularly in UK listed companies, is not fit for purpose and has resulted in a poor alignment of interests between executives, shareholders and the company.
Executive pay in the UK has more than trebled over the past 18 years, opening up a huge gap over average employee salaries and far outpacing stock market performance. The High Pay Centre estimates that the CEOs of Britain’s top 100 companies now make more than 180 times average earnings. So to some extent you can understand why public anger has risen over bumper pay deals.
Shareholders put their trust in the chief executive officer to deliver a healthy return on the investment they’ve made. It is therefore easy to see why they become impatient when the CEO is not only perceived to have failed in this mission, but then also appears to be rewarded for doing so.
In 2015 BP shareholders voted against a 20% hike in CEO Bob Dudley’s pay package to $19.6 million when the oil company posted a huge loss. The decision was subsequently overturned and Dudley still got his rewards. As a result of these and other examples, experts have warned that the government might step in with new laws governing executive pay.
Being a CEO of a major corporation today is a tough and undeniably risky job. The average tenure of CEOs in this category is growing increasingly short and the business news regularly runs stories of fallen idols. Recent statistics reveal that one-third of all CEOs appointed to guide major corporations leave the post within three years. In the minds of the general public, CEOs have gone from the lists of most admired to those of least trusted. While much of this can be put down to an unrealistically singular obsession with CEOs’ pay packets, it’s equally true that many don’t pay enough attention to the public’s perception of their performance. This is especially true where a CEOs standing is tainted by an error of judgement. Talented leaders are, at the end of the day, only human – they can, and do make poor decisions. They can alienate as well as inspire key people, miss opportunities and seemingly ignore obvious trends and developments. So what lessons can everyday leaders who aspire to the top table learn from the experience of those already there – or recently departed?
I’ve worked for and with a number of new CEOs over the years and been a big fan of those who, from the outset, have genuinely engaged with staff at all levels in the business and invested the time to take on board and interpret a wide range of views, not to mention getting a handle on the real strengths and challenges in their ‘adopted’ organisation. I appreciate that the pace of modern business has largely made the ‘honeymoon period’ a thing of the past, but can’t help thinking that spending the requisite time to blend the true potential of a business with the vision, drive and leadership of a new CEO, not only promulgates a shared sense of ownership but also creates momentum to deliver sustainable shareholder return. For me, this trumps short-term thinking and the implementation of pre-conceived ideas every time.
It also provides a means to avoid what is often the bane of the new CEO – the gloopy inertia that drains the lifeblood from fledgling strategy. To my point above, in many of today’s major corporates, a CEO’s tenure is relatively short-lived and the pattern of churn here seems disturbingly predictable: arrival, energy, action, initial impact, inertia, loss of momentum, politics, rear-guard action, return to the status quo, departure – and round it goes. It seems to me that breaking through this ‘gloopiness’ is key to a new CEO’s long-term success. Whilst I’m sure most will recognise this, it is clearly not that easy otherwise more would accomplish it. It’s a complex mix of resistance, anxiety and uncertainty and I believe the only way through is by direct engagement with staff at all levels but particularly middle management, where much of the corporate strategy is translated into operational direction.
In a previous article we considered the tendency towards isolation that many CEOs experience as they become more senior in their careers. This must be avoided at all costs if the breakthrough is to be achieved. Emotional intelligence is crucial in all of this and is the key to getting the best out of people across the business. CEOs with a higher Emotional Quotient (EQ) are likely to foster a greater level of connectedness with their teams, establishing clear channels for communication (both ways), creating the right culture for improved performance and driving behaviours that will deliver the desired outcomes. CEO’s that focus on developing genuine leadership capabilities that inspire people to engage with their vision and engage with their staff are far more effective and are likely to prove more successful in the longer-term.
Without doubt, the role of a CEO is tough but I certainly believe that if new CEOs display behaviours akin to those outlined above, they will be significantly less likely to fall victim to the curse of inertia, or perhaps later down the line, find themselves in Philip Green’s position being slated for the collapse of their business empire.
UK delays review of business rates tax until autumn
LONDON (Reuters) – Britain’s finance ministry said it would delay publication of its review of business rates – a tax paid by companies based on the value of the property they occupy – until the autumn when the economic outlook should be clearer.
Many companies are demanding reductions in their business rates to help them compete with online retailers.
“Due to the ongoing and wide-ranging impacts of the pandemic and economic uncertainty, the government said the review’s final report would be released later in the year when there is more clarity on the long-term state of the economy and the public finances,” the ministry said.
Finance minister Rishi Sunak has granted a temporary business rates exemption to companies in the retail, hospitality, and leisure sectors, costing over 10 billion pounds ($14 billion). Sunak is due to announce his next round of support measures for the economy on March 3.
($1 = 0.7152 pounds)
(Writing by William Schomberg, editing by David Milliken)
Discounter Pepco has all of Europe in its sights
By James Davey
LONDON (Reuters) – Pepco Group, which owns British discount retailer Poundland, has targeted 400 store openings across Europe in its 2020-21 financial year as it expands its PEPCO brand beyond central and eastern Europe, its boss said on Friday.
The group opened a net 327 new stores in its 2019-20 year, taking the total to 3,021 in 15 countries. The PEPCO brand entered western Europe for the first time with openings in Italy and it plans its first foray into Spain in April or May.
Chief Executive Andy Bond said its five stores in Italy have traded “super well” so far.
“That’s given us a lot of confidence that we can now start building PEPCO into western Europe and that expands our market opportunity from roughly 100 million people (in central and eastern Europe) to roughly 500 million people,” he told Reuters.
To further illustrate the brand’s potential he noted that the group has more than 1,000 PEPCO shops in Poland, which has a significantly smaller population and gross domestic product than Italy or Spain.
The company, which also owns the Dealz brand in Europe but does not trade online, has already opened more than 100 of the targeted 400 new stores this financial year.
Pepco Group is part of South African conglomerate Steinhoff, which is still battling the fallout of a 2017 accounting scandal.
Since 2019 Steinhoff and its creditors have been evaluating a range of strategic options for Pepco Group, including a potential public listing, private equity sale or trade sale.
That process was delayed by the pandemic, but Steinhoff said last month that it had resumed.
“The business will be up for sale at the right time. It’s a case of when, rather than if,” said Bond, a former boss of British supermarket chain Asda.
Pepco Group on Friday reported a 31% drop in full-year core earnings, citing temporary coronavirus-related store closures.
Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were 229 million euros ($277 million) for the year to Sept. 30, against 331 million euros the previous year.
Sales rose 3% to 3.5 billion euros, reflecting new store openings.
($1 = 0.8279 euros)
(Reporting by James Davey; Editing by David Goodman)
Fashion-focused livery launch reveals new colours for Gasly, Tsunoda in 2021
Scuderia AlphaTauri debuted their colours for the 2021 Formula 1 season as drivers Pierre Gasly and Yuki Tsunoda unveiled the team’s new look with the livery for their AT02 racecars. The setting was a fashion-forward launch in the all-new showroom of AlphaTauri, Red Bull’s premium fashion brand.
Salzburg (AUSTRIA) – Formula 1 team Scuderia AlphaTauri served up a stylish preview of the new F1 season with a presentation of its 2021 livery alongside key looks from the upcoming Autumn/Winter 2021 collection of Red Bull’s premium fashion brand, AlphaTauri. The launch – held at AlphaTauri’s new showroom in Salzburg, Austria and presented digitally – marked the first time that drivers Pierre Gasly of France and Yuki Tsunoda of Japan have appeared together as teammates.
After a successful first season racing in AlphaTauri colours, the Italian outfit is looking to challenge the top of the ultra-competitive midfield in 2021, and the two young drivers have been assigned clear-cut roles. Gasly is Team Leader. The 25-year-old, who made his Formula One debut with the team in 2017 under its former name, Scuderia Toro Rosso, has earned two F1 podiums. During the 2020 campaign, Gasly’s maiden win at Monza was a defining moment for him and the team under its new name.
Tsunoda, 20, is the first Japanese driver to race in F1 since 2014, his promotion coming off the back of a fast, four-season trajectory from winning the 2018 F4 Japanese Championship and finishing third in the 2020 FIA F2 Championship to entering the top-level ranks this year. Expectations are high for his rapid style of learning to complement the experience of Gasly.
“The decision to go for Pierre and Yuki in 2021 was taken because Scuderia AlphaTauri’s philosophy is still to give talented young drivers from the Red Bull Junior Program the opportunity to step up to F1 and to educate them – this is why Yuki now gets his chance,” explained Team Principal Franz Tost. “With Pierre on Yuki’s side we have an experienced driver, who can help our Japanese rookie to develop faster, but at the same time we can aim for good results. I think this pair is the best possible scenario to achieve both our targets, and I’m also confident this will be a successful one.”
In 2020, Scuderia AlphaTauri won best livery by a landslide, and the team’s all-new, matte blue and white racecar livery took center stage with the drivers at the fashion event, anticipating the 2021 model that will debut at pre-season testing in Bahrain on 12 March. The test is the precursor to an unprecedented 23-race schedule, and in preparation for the demanding calendar both drivers have spent time at Red Bull’s Athlete Performance Center for intense fitness testing.
“I’m ready to take on the role of team leader. Yuki is a very quick driver, and he will help us move the team forward – we will work together to achieve that,” said Gasly, the team’s all-time top points scorer. “I really believe last year was the team’s best in terms of the way it worked, the development, the performance and the way it managed the race weekends. I’m always hungry for more, and I’m sure we can achieve great things in 2021.”
Tsunoda, who was honored with the Anthoine Hubert Award for best Formula 2 rookie in 2020, added, “I’ve been lucky enough to spend some time with Scuderia AlphaTauri ahead of the season, so I’m already developing strong relationships and learning a lot from them – including Pierre, who is an incredible talent. My main goal is to learn quickly and deliver results as soon as possible, and I’m really excited to get started.”
The launch at the AlphaTauri Showroom not only gave Gasly and Tsunoda a preview of the AlphaTauri Autumn/Winter 2021 fashion collection, but the drivers had the chance to select their new off-grid looks ahead of the season start.
Ahmet Mercan, CEO AlphaTauri, summarized: “This is a triple reveal at a unique point of time: a new AlphaTauri Showroom where fashion meets F1, a first look at the AW21 AlphaTauri collection and the unveiling of the new Scuderia AlphaTauri F1 livery and driver pairing.”
Scuderia AlphaTauri fans don’t have long to wait for racing action: The FIA Formula 1 season kicks off at the Bahrain Test on 12-14 March, in preparation for the Bahrain Grand Prix on 28 March.
The potential of Open Finance and the digitisation of tax records
By Sudesh Sud, Founder of APARI The world is undergoing huge changes at the moment. Between coronavirus pushing the economy...
ECB plans closer scrutiny of bank boards
FRANKFURT (Reuters) – The European Central Bank plans to increase scrutiny of bank board directors and will take look more...
Where are we with Open Banking, and should we be going further?
By Mitchel Lenson, Non-Executive Chairman, Exizent Open Banking has the power to revolutionise the way we manage our money, but...
Oil extends losses as Texas prepares to ramp up output
By Ahmad Ghaddar LONDON (Reuters) – Oil prices fell from recent highs for a second day on Friday as Texas...
What will become of our banks and their channels in 2021?
By Mark Aldred, banking specialist at Auriga As we embark on the new year, 2020 will hopefully become distant but...
Three ways payment orchestration improves financial reconciliation
By Brian Coburn, CEO or Bridge, When Luca Pacioli, the 15th century Venetian monk, invented double-entry account keeping, managing financial...
Circular Economy must be top of the business agenda in 2021
By Andrew Sharp, CEO of CDSL, the UK’s leading appliance spare parts distributor The last year has been one in...
Analysis: Carmakers wake up to new pecking order as chip crunch intensifies
By Douglas Busvine and Christoph Steitz BERLIN (Reuters) – The semiconductor crunch that has battered the auto sector leaves carmakers...
Bitcoin steams to new record and nears $1 trillion market cap
By Tom Wilson and Stanley White LONDON/TOKYO (Reuters) – Bitcoin hit yet another record high on Friday, and moved within...
What does cybersecurity look like for the financial sector in 2021?
By Neill Lawson-Smith, managing director at CIS The landscape is changing incredibly fast, with cybercriminals using the most up-to-date technology...