The ousting of Angus Monro as chief executive of Matalan, the fabulously successful discount fashion chain, is indeed curious. Plenty of commentators have declared themselves baffled as to why he should have been unceremoniously dumped at a board meeting last Friday (April 27). As people were fond of saying when Peter Mandelson left government office for the latest time, the move raises more questions than answers.
The simplest and most straightforward answer is the one that commentators, anxious to appear on the pace and well informed, are unlikely to give: we don’t know. So, in the absence of any knowledge about the in-fighting in the Matalan boardroom, we’re left with saying that Monro is a good bloke who deserves better from the Hargreaves family, owners of 52 per cent of the shares.
I don’t think this will do. Institutional shareholders will want to know more, if they don’t know more already. It simply isn’t good enough to run Monro’s version of events, however unfairly treated he apparently has been.
This is not necessarily because there is more than meets the eye in this story of top-level sacking. There may be less than meets the eye, by which I mean that it may simply have been one of those failures of business chemistry that lead to bust-ups. They happen all the time, reminding us that businesses are run by fallible human beings, rather than by highly efficient, coldly scientific automatons.
But what we do have here is a high profile and orchestrated departure. How else to explain the high visibility and timing with which it was conducted? Last week, Monro was giving profile interviews to newspapers, speaking warmly of his high regard for Matalan founding father John Hargreaves. By Friday he was out, apparently asked for his resignation by the same Hargreaves patriarch.
Now, it may be that Hargreaves can’t stand being spoken about admiringly in public. But, in the unlikely event of that being true, it hardly warrants firing his chief executive. So, it leaves open many of those questions beloved of conspiracy theorists.
Did Monro know that Hargreaves wanted him out when he granted those interviews mid-week? If so, was he not being somewhat economical with the truth when he spoke so warmly about his proprietorial board colleagues and his plans for the future of Matalan? If he did know that he was about to face a board ambush, what was he doing giving these interviews if not trying to get his reaction in first?
Turn the questions around the other way: If Monro didn’t know that he faced a Friday coup, what was the company doing allowing him to go public on his vision for the future? For the sake of shareholders, who saw the value of their investment collapse by some 15 per cent on the news of Monro’s departure, shouldn’t the company have ensured that Monro knew he was about to face the bullet before he addressed the media?
We’re in fools-or-knaves territory here and there is no point pretending otherwise by talking about the shock of Monro’s departure and the bemusement of the City. The City and the media have been used and I have to say that it doesn’t smell very good. That said, there are some eternal truths about corporate governance and management that could bear reiteration under these circumstances.
I’m going to refer to some precedents, but first I should make it clear that I make no direct comparison between these precedents and the circumstances of Monro and Matalan. I simply believe that they illustrate business factors that are relevant when examining the fall of a high-profile chief executive.
The first is what we might call the Ernest Saunders factor. As head of Guinness, ahead of the arrangements made around the acquisition of Distillers that precipitated his downfall, Saunders resented the fact that he enriched the brewer’s family owners and was, in his view, shown insufficient reciprocal appreciation. Tough, that’s what chief executives are paid for and that’s what shareholders demand.
The second factor is the syndrome whereby Marks & Spencer chairman and chief executive Sir Rick Greenbury had been there so long and done so much for shareholders that he seemed to believe that he had security of tenure. Big mistake: shareholders own companies.
The third factor is the dangerous belief in your own publicity. Last year, as chief executive of weapons-to-bread conglomerate Tomkins, Greg Hutchings appeared to believe he was both indispensable and untouchable. Again, big mistake: the gravy train does not accept reserve bookings.
As I say, I direct no accusations at Monro along these lines. But in the light of these precedents – and many others besides – we should not feign surprise when, like Icarus, high-flying chief executives ascend to heights too close to the heat of their shareholders and fall to earth with a bump. It happens. Reasons usually emerge subsequently.
I don’t say that it’s a good thing. But it probably isn’t all bad either. Shareholders pay handsome packages to chief executives and they expect to call the tune as well as pay the piper. Incentive packages are there ultimately to enrich shareholders, not executives. Shares and their performance are also the only incentives that matter. It may not be fair, but capitalist life isn’t. And some stick as well as carrot doubtless encourages the others. So don’t whinge when it happens.
George Pitcher is a partner of issue management consultancy Luther Pendragon