It’s always tempting to refer to management ructions at media groups as “flutterings in the dovecoats” and to the individuals as “luvvies”, particularly if, like Chrysalis’s erstwhile non-executive director Sir David Puttnam, they have beards.
Trevor Nunn, heir apparent to the artistic directorship of the Royal National Theatre, has hit back in that fearsomely radical journal of new politics, Vogue, by saying that use of the term “luvvie” is as “disgusting as the word ‘yid’ or ‘nigger’.”
He is entitled to his view – I happen to think it is silly and (unintentionally) offensive – but I think he also misses a point in relation to business people in the world of theatre, film and television production. The use of the term “luvvie” in this context is surely benignly ironic. In my experience such people are – if I may be excused another vernacular term – hard bastards.
Take Puttnam, who resigned his non-executive directorship of Chrysalis last week, accompanied by Viscount Chandos. Puttnam was forged in the furnace of Goldcrest and was clearly unwilling, in his view, to see Chrysalis chairman Chris Wright (who also has a beard) allow history to repeat itself. For his part, Chandos is a former Kleinwort Benson merchant banker. No luvvie he.
As for Wright, you don’t build a successful record company, sell it to EMI, retain a near-50 per cent stake in the rump and sell some of it to purchase the Queen’s Park Rangers football and Wasps rugby clubs by being a softie.
Nor is Chrysalis bereft of business acumen. We must look forward to Yuletide to learn the complete picture with regard to the financial year that concluded at the end of August, but 1995 was sound. It showed a small pre-tax profit of a shade over 1m on a six per cent increase in turnover to 74.3m, albeit a performance fundamentally supported by the sale of its stake in Metro Radio. At the interim stage to the end of February, the story was one of increased turnover of some 13 per cent, while pre-tax losses remained consistent with last year. Cash-rich after the Metro disposal, Chrysalis has been investing hard in its music and radio interests and the City awaits news of the returns on those investments.
The City jury is, therefore, still out, but I think we have established that this is not a place for the faint-hearted, either by custom or practice. We could invest considerable time and effort exploring the specific circumstances that have caused the boardroom rift at Chrysalis, but if, as I hope I have demonstrated, it is just like any other tough company, managed by tough individuals in tough markets, then the departures of Puttnam and Chandos are symptomatic of a wider debate – namely, the role of non-executive directors.
A good gag is the one that asks for a definition of the difference between a non-exec director and a tea trolley. Answer: The trolley has a mind of its own and the director can carry more drink. Unfair to the legion of responsible and wise non-execs on the boards of UK plc perhaps, but indicative of a widespread distaste for the function that has been exacerbated in recent years by the Cadbury and Greenbury inquiries into aspects of corporate governance.
Tiny Rowland, something of a businessman of this century, memorably described non-exec directors as “decorations on a Christmas tree”. He should know. His defeat of what became known as the “straight eight” at Lonrho in the early Seventies endowed him with a lifelong appreciation for what non-execs liked to do behind (and to) executive backs.
More recently, Lord Weinstock – something else of a businessman of this century – used his valedictory AGM as managing director of GEC to accuse some institutions of using certain guidelines from the Cadbury and Greenbury committees “virtually as a means to persecute executive directors”. Sir Owen Green of the model post-war conglomerate BTR was another critic. I once sat at dinner next to Garfield Weston, chairman of Associated British Foods, who was delightfully dismissive of the role of non-execs (I would like to say that he described them as Mighty Whites, but he didn’t).
Now, it’s perfectly true that a case could be made by whatever committee supports the principle of non-executive corporate governance that it is precisely the role of non-execs to be a nuisance to such “autocratic” tycoons. But look at the names of those (and there are others) that I have mentioned in whose flesh the non-execs have been thorns. They have all provided fantastic returns for shareholders. Most of them (perhaps all of them, come to think of it) have received standing ovations from their shareholders at AGMs. Yet they would all have rather done it without a raft of non-execs in tow.
And then there are other sorts of companies that have brought shareholders to their feet. The list could be endless. But, to take but one such example, shareholders of DIY chain Wickes may care to reflect on what the non-execs could do with their corporate governance skills.
Corporate governance should be about a statutory and regulatory environment that protects shareholders, staff and customers, not about corporate luvvies that interfere with the good and fail to spot the bad. The Chrysalis tale has not yet fully run its course – so let’s not make any assumptions just now on who can and cannot deliver.