Institute of Directors is worth saving – if it is done quickly

Sadly, the Institute of Directors director competence framework offers few clues about what to do when your organisation is threatened with sudden implosion. The blurb for the IoD’s training courses talks about the importance of “working collaboratively” and “seeking feedback at every stage of your development pathway”. Top tips, no doubt, but tricky to adopt when your lovely Pall Mall hangout has become a place of plots, intrigue and explosive allegations.

Barbara Judge has stepped aside as IoD chairwoman to fight 41 allegations against her in a report seen by the Times, including complaints that she bullied staff, made racist and sexist comments, and tried to co-opt IoD personnel to help organise a show for her private fashion range.

The high-profile deputy chairman, Ken Olisa, is backing Judge and talking of an attempted coup to unseat her. Meanwhile, the organisation’s director general, Stephen Martin, is suspected of being part of it. An email from Olisa, as reported by Sky News, accuses Martin of covertly recording a conversation with Judge.

How can the IoD’s council, the guardian of its constitution, defuse this situation? Whatever the council decides, it needs to make a decision quickly. If that implies an immediate clean sweep at the top, with the rights and wrongs of the specific allegations determined another day, get on with it.

The IoD, established by royal charter in 1906, had an excellent reputation until now. It has been willing to criticise obscene pay awards at big companies and take a stand against governance abuses. It is worth saving – but its credibility may not survive a drawn-out drama.

Waitrose may have fallen back for good

For five years, until the most recent one, operating profit in the two halves of John Lewis Partnership ran within very narrow bands. The department stores turned in £215m-£250m and Waitrose supermarkets produced £230m-£310m. The consistency was remarkable.

In the latest showing, the department stores have continued to do their stuff, generating £254m. But Waitrose went backwards sharply – profit of £172m was down by one-third in a year, and 44% below the peak of 2013-14.

The partners may have to get used to these leaner returns from Waitrose. The chain was never going to be immune for ever from upsets in supermarket land. Indeed, Waitrose has done well to protect its corner until now.

It is also not a surprise that gross margins took a thump from the fall in sterling. All supermarkets have had to take some inflationary pain on the chin. Waitrose’s profit margins at the operating level, however, were still 2.7%, and there’s no shame in that. It is roughly the average for the sector.

Self-help remedies have mostly been swallowed: fewer managers, flexible working, no new store openings, and investment in better distribution. It all helps, but it’s hard to buck a tough market. It is possible Waitrose has passed the lowest point for profitably, but the road back to £230m-plus may be long. When gross margins are “reset”, as Waitrose puts it, they tend to stay that way.

Aviva buoyant amid global uncertainty

It’s odd now to remember that after the EU referendum in June 2016, shares in the insurer Aviva fell 20% to 350p amid fears that the roof was about to fall on the UK financial services industry. With hindsight, that price was a bargain.

Two dividend increases later, Aviva is back at 509p and virtually the only mention of Brexit in the review of 2017 by the chief executive, Mark Wilson, was in a positive context. With the whiff of economic uncertainty in the air, large corporate customers are preferring to deal with big insurers, he reports. About 60% of Aviva’s earnings come from the UK and it won business in all those dull but huge product areas: pensions, bulk annuities and workplace benefits.

Aviva’s relatively relaxed view of Brexit could be deluded, of course. If recession or a serious slowdown happens, insurers will suffer, whatever the cause. They are geared to market activity. But the passporting concerns that obsess the big banks don’t bite in the same way. Aviva’s operations in France, Italy and Ireland are separately capitalised subsidiaries, so there ought to be few serious operational hiccups.

In the meantime, Aviva, as with Legal & General earlier this week, is awash with cash and full of ideas for how capital can be deployed profitably. The dividend yield in both cases is more than 5%. That suggests Brexit stills hangs heavily over the sector, but it’s not entirely obvious that it should. On current form, big insurers and asset managers have less to worry about than, say, car manufacturers, steelmakers or farmers.