The great mystery of why the board of the London Stock Exchange wanted to drop Xavier Rolet as its chief executive is finally revealed. Sort of. He’d had a long innings but “aspects of Xavier Rolet’s operating style were also important factors”, says the LSE’s circular to shareholders.
What does that mean? It means lawyers have been working overtime, which has been the case at the LSE since October, when Rolet’s departure was agreed and announced as part of a “succession plan”. The circular – the LSE’s defence of chairman Donald Brydon – describes how a “negotiated document” was drawn up to deflect media inquiries. Nobody was allowed to say that Rolet had, in fact, been told he had to go by the end of 2018.
The LSE calls its approach to communications “typical” but its constipated strategy invited trouble. It arrived when Sir Christopher Hohn, from the activist TCI hedge fund, stated that Rolet had been pushed out against his will and demanded his reinstatement. The farce continued, culminating in Rolet’s immediate departure on Wednesday. Note this detail in the circular: in the final stages of the affair, relations between Rolet and “certain members of the senior management team” deteriorated.
Rolet and the non-executives brought this mess on themselves in roughly equal measure. Brydon should have known that, when a long-serving and successful boss leaves, you can’t give shareholders the brush-off: you have to explain why. Rolet, having agreed to go and having secured a £13m pay-off, should have killed TCI’s talk of a comeback at the outset.
The show now rolls on to 19 December to consider TCI’s other proposal that Brydon be sacked. It is safe to predict that the chairman will survive. Most fund managers, like the governor of the Bank of England, know that boards have a duty to change the chief executive if they spot warning signs.
“Aspects of Xavier Rolet’s operating style” – with no elaboration – is a comically clumsy construction, but the board made a unanimous judgment that was backed by regulators. That’s life – and any personal animosity between Rolet and Brydon is now beside the point. TCI is wasting its time.
Justice served – better late than never
The joint statement ran to only two sentences but the financial settlement between Lloyds and Paul and Nikki Turner is a significant moment in the great HBOS Reading debacle. Lloyds, which bought HBOS in 2009, is finally recognising the heroic efforts of two victims who helped to expose a huge fraud for which six people were imprisoned after a trial earlier this year.
“Lloyds Banking Group is sorry for the significant personal distress the Turners have suffered and acknowledges their vital role, over more than a decade, campaigning tirelessly for justice for all the victims of the criminal conduct at HBOS Reading Impaired Assets Office,” said the statement.
The wording could have been better. It is not clear what, precisely, Lloyds is admitting it did wrong. That, presumably, is because allegations that the bank tried to cover up the fraud are still being investigated.
But, just in case anybody has forgotten what the Turners went through, consider this detail: HBOS and Lloyds, between them, made 22 legal attempts to repossess the couple’s house. The terms of the financial settlement were not disclosed but one hopes Lloyds was taken to the cleaners.
Auditing the auditor
Still on HBOS-related matters, the Financial Reporting Council, the audit regulator, also offered a mea culpa of sorts, even if its chief executive, Stephen Haddrill, preferred the ugly phrase “a learning point”.
“We should have adopted a more proactive approach to our early inquiries in relation to HBOS,” he said. You bet. HBOS, the second biggest failing in British banking history, collapsed in October 2008, seven months after it had reported a profit of £5.5bn. The position was crying out for a fast but thorough probe of KPMG’s audit of the bank’s 2007 accounts.
The result of that inquiry, however, came only in September this year, when the council concluded there was no prospect of a finding of misconduct against KPMG. The process was disgracefully slow. In future, the council will also explain the reasons for its decisions, which it has finally now done in the KPMG case. Hurrah for progress – but it should not have taken persistent pressure by the Treasury select committee to get to this point.