Support builds for GKN
APOLITICAL wind looks slowly to be building for scrutiny of the hostile Melrose £7.4bn bid for emblematic engineer GKN.
In the House of Commons, the Prime Minister assured MPs that the Business Department, headed by Greg Clark, will look at the deal and that the Government will act in the national interest.
It is hard to have great confidence in such pledges given fumbling over the response to other business issues including proposed job losses at Ellesmere Port following the Peugeot takeover of Vauxhall, the collapse of Carillion and the clumsy handling of the East Coast train franchise.
Sure, Whitehall has been consumed with Brexit but leaving the EU can hardly be an unalloyed success if our engineering base and infrastructure renewal is neglected.
Melrose is British so there is no immediate question of an overseas ownership test. But its declared interest in breaking up GKN and selling on the parts to the highest bidder within three to five years, irrespective of nationality, poses serious industrial and potential national security risks.
Professor Chris Carr of the University of Edinburgh Business School notes that GKN has demonstrated ‘global successes’ and restructuring competences, and dismisses City support for Melrose as shorttermist and shallow.
As a key defence contractor to the US, a provider of electric driveline technology to the motor industry and parts for RollsRoyce aero engines, GKN and the research which comes out of its labs is critical to the public interest.
Political fears about the bid largely have come from the left with union Unite lobbying Clark. Former Business Secretary Vince Cable makes no secret of his fears for GKN engineering under an aggressive Melrose management aiming for short-term profits. GKN customers, such as car maker Toyota, are ready to weigh in on GKN’s side.
Unite highlights the financial waste in the deal including the £140m of fees for City advisers should Melrose succeed. That is before we even consider the huge bonuses and dividends to Melrose chiefs Chris Miller, Simon Peckham et al when and if they dismantle the companies. Tory MPs in GKN constituencies, including Rachel Maclean at GKN’s headquarters town, Redditch, are rallying to the anti-Melrose flag.
But so far there are too few signs that ministers and Whitehall can be shaken out of complacency.
Pay overload
THE case for robust remuneration committee chairs is overwhelming. Yet they are rare, and too often where there is a row – Barclays, BG and Persimmon immediately come to mind – the response is feeble.
Now added to the roll call of inadequacy is Alison Horner, the chief people officer at Tesco, responsible for board pay at Carillion. Horner’s attempt to shift blame for fat cattery at Carillion onto remuneration advisers is not good enough.
The whole raison d’etre of these overpaid interlopers has been to give pay committees a cloak of expertise when they sign off on large and unjustified pay deals.
As a result companies in the FTSE 100 have encouraged the biggest gap to open up between pay in the boardroom and the average worker in the whole of Europe, at a whopping 129 to one.
There may be a good case for farming top staff out as non-executives to other FTSE companies to gain experience. But there is little to suggest Horner has been given much of a chance when it comes to rewards for the likes of her own boss Dave Lewis.
Moreover, she has more than enough on her plate fighting off Britain’s biggest-ever equal pay claim. Having failed Carillion stakeholders so badly she must be considered damaged goods.
GSK ambition
PHARMACEUTICALS is a long-haul enterprise and GlaxoSmithKline chief executive Emma Walmsley was always going to struggle in her first ten months.
She had a stroke of luck with the extension of life for asthma drug Advair as generics struggled with a safe delivery device. That enabled Walmsley to keep investors happy with a handsome dividend.
The future depends on a strong pipeline of new products, including a much-hyped shingles vaccine. The success of research chief Hal Barron in streamlining R&D and ramping up delivery also will be critical. A potential purchase of Pfizer’s health consumer brands clearly scares investors.
But fortune favours the brave.