RUTH SUNDERLAND: Boardrooms should not mix with private equity houses

Not so long ago growing up as CEO or chairman of an FTSE 100 company was the pinnacle of success in the business world.

Not so much now. Increasingly, the men and women in top positions in UK-listed companies are presenting themselves as poor associates compared to private equity barons.

They are nakedly aware of the great wealth they could tap into if and when they disembarked.

Boardroom envy: Men and women in top positions at UK listed companies increasingly present themselves as bad relations, compared to private equity barons

Boardroom envy: Men and women in top positions at UK listed companies increasingly present themselves as bad relations, compared to private equity barons

Spin doctors routinely defend CEOs against criticism of fat-cat rewards by pointing out how much more they could get in the private equity sphere, where rewards are shrouded in secret.

Many have taken the private equity route, including former Sainsbury boss Justin King, Glen Moreno, the ex-chairman of Pearson, and Iain Conn, one-time chief executive at Centrica.

The rewards for those who succeed can be enormous. Sir Terry Leahy has made huge sums of money from his stake in The Hut Group and the B&M discount chain – probably far more than he made in his three decades at Tesco.

He is now advising US private equity firm Clayton, Dubilier & Rice on its bid for Morrisons, where he is reportedly seeking to become chairman.

He could be a brilliant choice, and someone who would have great insight. In theory, the Morrisons board could fire the current chairman and install Leahy in the £500,000-a-year post.

That would be a lot easier, cheaper and less distracting than a controversial takeover bid, but it would also mean that everyone involved would miss out on multi-million dollar jackpots.

Over the years, CD&R has compiled an amazing list of advisors from the ranks of the FTSE greats.

Among them is Sir Nigel Rudd, who is also chairman of Meggitt, one of the UK’s defense firms targeted by US private equity.

Then there’s Liam Fitzgerald, who was the CEO of FTSE 250 health care group UDG for 16 years. CD&R is seeking to acquire that company in a £2.8 billion deal.

It is reminiscent of the way some politicians use a period in government, where they are relatively low paid by elite standards, to a rich afterlife.

George Osborne, the former Chancellor, with his string of high-paying jobs, the latest at investment banking boutique Robey Warshaw, is probably the main exponent.

There is nothing wrong with someone looking for a second career, especially not a well-paid one. But greed can overcome better judgment, as it did with David Cameron and Greensill.

And the traffic – of which the public is largely unaware – between boardrooms and private equity houses does raise questions.

Is it healthy for someone who runs a major UK company to see their job as just a way station on their way to greater personal rewards? What about potential conflicts of interest?

There are legitimate concerns about private equity offerings to UK listed companies.

But can CEOs look at these objectively, if they already have ties to that industry, or if they know they can package it up later?

No rush to raise rates

When will central banks start phasing out the emergency measures they have put in place to protect families and businesses during the pandemic? This was the question on everyone’s mind at the Jackson Hole meeting yesterday.

The US Fed has made $120 billion a month in asset purchases. Stocks on Wall Street hit new highs after Chairman Jerome Powell said the Fed could begin winding down later this year.

The Bank of England set out an exit strategy from its £895 billion program earlier this month. But the UK economy, like that of the US, is at a delicate crossroads.

Governor Andrew Bailey believes the recent increases in inflation are temporary – a view confirmed when the UK’s CPI rate fell from 2.5 percent to 2 percent for July.

Inflation remains a concern due to supply bottlenecks and staff shortages that could push up wages.

Employment held up well, albeit with support from the leave scheme. As Andy Haldane, the Bank’s former chief economist, has argued, the economy has the potential to recover like a feather due to pent-up demand from a population liberated from lockdown.

He is right about the mind. At a performance of Singin’ In The Rain at Sadler’s Wells this week, you could feel the sense of liberation and the determination to have a good time in the atmosphere again.

On the other hand, there is the threat of the Delta variant. Central banks will remain cautious when it comes to reversing emergency measures or raising interest rates.

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