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The other news from Ted Baker – aside, that is, from founder and chief executive Ray Kelvin’s resignation – was the revelation that chairman David Bernstein will hang around until “no later than” November 2020. If he goes the distance, the 75-year-old former chairman of Manchester City will have clocked up 17 years on Ted Baker’s board.
Let us hope staleness in the boardroom is on the list of topics for law firm Herbert Smith Freehills to address as it explores the misconduct allegations against Kelvin, which the man himself denies. After all, it is not only Bernstein who is up for a long service award. Ronald Stewart, 70, a former Royal Bank of Scotland banker, has just completed a decade as a non-executive director.
Does familiarity breed fondness and a lack of independence? Are long-serving non-executives more likely to be blind to the shortcomings of executives and founders? This is well-trodden governance territory and the UK corporate governance code recommends nine years as the limit of formal independence for a non-exec.
There is a lobby that regards the code as a fussy and inadequate substitute for common sense. One can sympathise sometimes but the recommendation that non-execs say goodbye after nine years reads as simple common sense. There is something ridiculous about Bernstein declaring now that the board is “determined to learn lessons from what has happened”. He has been on that board since 2003, and has chaired it for the past six years, which ought to have been enough time to get a feel of the culture.
In similar vein, something has clearly gone seriously wrong with the whistleblowing procedures when 300 staff are signing an online petition to air their complaints rather than relying on the internal mechanism. Whistleblowing at Ted Baker, incidentally, is overseen by Stewart’s audit committee, according to the last annual report.
Ted Baker, one suspects, can survive Kelvin’s exit and prosper. It owns a decent brand, notwithstanding last week’s profits warning. Release from Kelvin’s control (let’s not call it an embrace) might be liberating. But a full boardroom reboot will be essential. It should not take Bernstein a year and a half to leave. Get on with it.
Aviva heeds Investment Association advice
With a salary of £975,000, a maximum bonus of almost £2m and an annual long-term incentive worth almost £3m, Maurice Tulloch, Aviva’s newly-appointed chief executive, should be motivated to get out of bed in the morning. And, after last year’s defenestration of predecessor Mark Wilson, he will know to concentrate on the day job and not get fancy ideas about taking a part-time gig on the board of BlackRock.
In one small respect, Tulloch’s pay package is different from Wilson’s. His pension allowance – the final piece on a modern executive’s multi-layered remuneration package – will be set at 14% of salary. That sounds generous but it’s a reduction from 28%. So Tulloch will get £136,500 for his pension whereas Wilson, on a marginally higher salary, was getting an almighty £288,000.
The change, reports Aviva, follows guidance to all companies from the Investment Association. The idea is that pension contributions, as a percentage of salary, should be aligned with the majority of the workforce. It is an issue of fairness, says the trade body, a judgment that is surely correct.
The practice of throwing large cash sums at top executives in the guise of pension payments has been one of the ugliest abuses performed by remuneration committees over the years. The devious logic is that, since high-earning individuals have invariably exhausted their tax-free pension contribution allowances, they somehow “deserve” something on top. It is self-serving and divisive nonsense – and always has been.
Good luck to the Investment Association as it tries to enforce some alignment between workers and executives. The trick is to ensure the latter are not given higher salaries by way of compensation for loss of an undeserved perk. Aviva didn’t attempt such sleight of hand, but others will.
Ashley’s Findel swoop
Even by Mike Ashley’s standards, this is novel: a mandatory bid for a public company. The target is Findel, an online general merchandise retailer where Sports Direct had been sitting on a 29% stake but has now snapped up a loose parcel of shares to go to 37%. At 30%-plus, the same price or better has to be offered to all shareholders, thus the forced offer.
Does Ashley actually want 100% control? One suspects not – 50.1% would probably suit his purposes just fine after past clashes with Findel’s board. It will serve him right if he ends up with 100%.