Issue of the week: the bust-up at the London Stock Exchange
A bitter corporate governance row has raised important questions about transparency in public companies
When the London Stock Exchange announced the departure of its chief executive Xavier Rolet in October, the group’s chairman, City grandee Donald Brydon, was effusive about the Frenchman’s “remarkable achievements”, said the FT. But within a fortnight, the situation had begun to look much less friendly. The Children’s Investment Fund – a 5% LSE shareholder run by the activist investor Sir Christopher Hohn – had accused the board of unfairly sacking Rolet, and concealing the fact by inserting gagging clauses in his exit deal. Hohn called for Rolet to be reinstated and for Brydon to be fired, triggering a bitter dispute that has split the City. Ahead of a potentially inflammatory and embarrassing shareholder vote, the LSE has finally called time – ruling that both men are out. Rolet is stepping down with immediate effect; and Brydon will leave in 2019.
The outbreak of peace hasn’t come a moment too soon, said Aimee Donnellan and Iain Dey in The Sunday Times. Fears were “mounting” that a weakened London Stock Exchange “could fall victim to an opportunistic takeover bid” as a result of the “acrimonious split” on its board: Intercontinental Exchange, the owner of New York Stock Exchange, “has long coveted the LSE”. Moreover, the timing of the bust-up couldn’t have been worse, given that the LSE is trying to defend London’s role as Europe’s financial centre – and retain key business such as euro clearing – ahead of Brexit. Hence, perhaps, the intervention this week of the Bank of England governor, Mark Carney, who declared himself a “bit mystified” by the row, said Nils Pratley in The Guardian – though he made it clear that the “Carney cavalry” was not about to arrive to save Rolet. Brydon and the other LSE nonexecutives were “shockingly arrogant in not explaining their thinking” on Rolet’s ousting to shareholders. Now, it seems, we may never know the full story.
“Activist investors do not usually revolt to stop the chief executive of a business leaving, so the crisis at the Stock Exchange is a striking event,” said John Gapper in the FT. Hohn wanted to know why the board had asked Rolet to depart, seeing how he had excelled in raising the LSE’S value to more than £13bn. But that might have involved being candid about some of Rolet’s failings, not least his “domineering management style and dismissiveness towards others”. It is tempting to insist that “shareholders need the truth, the whole truth and nothing but the truth”, but no company – not even the London Stock Exchange – “can bear too much transparency”. Disclosing all the tensions in boardrooms “would make corporate life insufferable”.