Sky board takes a beating
AS GOOD an executive as James Murdoch may have been at satellite broadcaster Sky his reappointment as chairman in January was always going to be a huge mistake.
It cocked a snook at Britain’s rigorous corporate governance code. Now he has received a bloody nose from nearly 30pc of shareholders, which hardly represents a vote of confidence given that family-controlled Twenty-First Century Fox has a chunky 39.1pc of the shares.
Sky’s nodding dog directors, headed by the normally combative deputy chairman Martin Gilbert, have embarrassed themselves and Sky. Governance maven Royal London notes Sky needs a strong independent chairman to protect the minority interests of investors.
Murdoch may have a brilliant understanding of the European media market. But he would be the wrong person in the wrong place if, as expected, Fox decided that enough time has elapsed since James was chased out of town by the phone hacking scandal and Fox decoded to make a bid for the minority.
The signs are that many of the ducks are lined up for such an approach. Sky is showing great initiative in terms of technological innovation, such as multi-faceted ‘Q’ box, and has built its European presence through the buyout of Sky Deutschland and Sky Italia. But investors are not really buying into the growth story. The company continues to gain new subscribers, adding 106,000 in the latest quarter. However, at a time when the FTSE100 has been in frisky mood the shares have tumbled a near-20pc over the last 12 months.
The shadows over Sky are considerable. Its sports coverage may be light years ahead of competing channels in terms of quality but rivals are pecking away at its market share.
Similarly, Sky Box Office and Box Sets offer much of the good stuff coming off the US Home Box Office pipeline but many users are accessing programmes online using Netflix, and Amazon is also making an impact.
These are trends chief executive Jeremy Darroch needs to worry about when he is not in the counting house totting up pay which reached £17m in 2015, before dropping to a third of that in the last financial year. The great hope on the horizon is the launch of Sky’s mobile phone service which will give it the wherewithal to compete with the ‘quad play’ (TV, mobile, internet and land lines) offered by Virgin Media, part of John Malone’s Liberty Global, and BT.
The difficulty is launching mobile from a standing start is not easy as BT found before it snapped up EE, giving it a huge share in the UK telecoms market.
Moreover, it is not absolutely clear that consumers like having all of their entertainment and communications in the same basket.
Rather than become a lightning rod for criticism Murdoch should regard his current sojourn as temporary and set in motion a process to find an independent chair.
He will be required to step aside in any case should Fox run out of expansion ideas in the US and decide to come calling at Sky again.
Not Wells
ANYONE who witnessed the beating which Wells Fargo John Stumpf boss took at the hands of Senator Elizabeth Warren and the Senate banking committee a couple of weeks ago cannot be surprised he has been thrown into the outer darkness. Wonder is that he even contemplated sitting it out.
All the goodwill Stumpf built up as a great survivor of the financial crisis collapsed as he sought to plead ignorance of a sales culture which incentivised employees to open up 2m accounts, without customers’ knowledge, to cash in on cross-selling incentives. Successor as chairman and chief executive officer Tim Sloan has been chief operating officer since November 2015 and cannot claim to be a clean pair of hands. However, his background in corporate and investment banking gives him distance for the false customer scam.
Stumpf may have reason to be sore. After all, Jamie Dimon is still in place at JPMorgan Chase despite the ‘London Whale’ trading fiasco and the record fines paid by the bank for bad behaviour. Similarly, Lloyd Blankfein is ensconced at Goldman Sachs after various problems ranging from sub-prime mortgages to allegedly shoddy work for the Malaysian sovereign wealth fund 1MBD.
Some bankers seem to have been born with a brass neck.
Wasted floats
BOTH the FTSE 100 and the FTSE 250 indexes have surged since Britain voted to ‘leave’ the European Union.
Good sense would say that with the stock market in such fine fettle there was no better time to go public. yet in the last few days several companies including Oxford based TI Fluid Systems and PureGym have pulled their flotations, citing market conditions. Another potential initial public offering, waste management group Biffa, is reportedly struggling.
Could the cold feet on equity markets be more about caution over hyped goodies offered by private equity which seldom leaves enough on the table for individuals and funds?
Brexit is too feeble an excuse.