Friends disunited

Published on Saturday 2 February 2008 14:51

WHEN he blows out the candles on his birthday cake this Friday, Sandy Crombie will make a wish that he'll still be in charge of his destiny when he reaches 60 next year.

Far from being given full credit for turning around a company that was on its knees and leading it to the stock market just over 18 months ago, the chief executive of Standard Life has been dogged with speculation about who will succeed him.

Last week, the rumour mill cranked up a gear with the names of likely candidates such as Otto Thoresen, chief executive of Edinburgh neighbour Aegon UK – better known for Scottish Equitable – thrown into the melting pot.

The latest gossip was inevitable following the will-he-won't-he departure of highly regarded Trevor Matthews as Standard's head of UK life and pensions, a key lieutenant who played a vital role in the company's transition from basket case to membership of the FTSE-100.

Matthews was also the heir apparent, the plain-speaking Australian who had arrived at the firm's Lothian Road headquarters at a time when the company was – by some accounts – a busted flush. He'd taken a gamble, leaving a secure and senior job in Japan with Manulife to join a struggling Scottish company not only in need of modernisation but some firm foundations to ensure it stayed in business.

Matthews was a breath of fresh air, popular with the staff and a huge asset when the company began its roadshows to sell the share issue. But his tenure would prove to be a short one, as his chief executive refused to step aside or give the signal that the top job would one day be his. The waiting and the uncertainty were too much for 55-year-old Matthews, who told a colleague: "Do you think I flew half way around the world to be somebody's number two?"

Last week he finally took the decision to accept the offer of the top job at Friends Provident, the struggling life assurer whose chairman, Adrian Montague, had been impressed with the change of fortunes and culture at Standard Life.

On Tuesday, as the 2pm board meeting got under way at Standard's offices in Edinburgh's Lothian Road, Matthews sat around the table fiddling with his Blackberry. During a break in proceedings he approached the chairman, Gerry Grimstone, to tell him that he'd been offered and accepted the job at Friends. It was agreed that it would not be appropriate for him to stay on for the second half of the meeting.

Crombie was philosophical about the loss of what some felt was his biggest asset. "With people writing about this for weeks it hardly came as a surprise," he said. "Of course I am disappointed to lose a colleague. Trevor has made a good contribution to our business."

But behind the mutual admiration, insiders say the two soon began to see the future differently, not least over the leadership of the company. Matthews' ambition was quite clear, but so was Crombie's determination to hang on to his job. In recent months, the clash of styles was also becoming obvious: the Australian winning friends and plaudits in the City and the media for his upfront attitude towards the industry, for his chumminess and charisma. Crombie represented the company's more reserved and muted approach, distancing himself from any setbacks and seen as responsible for the twists and turns in strategy that had impacted on the share price.

With rumours that the two could not even look each other in the eye, Crombie insisted that they got along fine. "I am an easygoing person. Trevor and I had a good relationship," he said. "Companies generally are not surprised these days by people coming and going, and life goes on."

But last week there appeared to be a redefining of Matthews' contribution. While commentators regarded him as the man who helped change the company and its outdated and arrogant business practices, Crombie insisted that a lot of the transition from mutuality to the public arena was under way or had already happened by the time Matthews arrived. "I had to take control of the life business in the early days and all the underpinning decisions were in place," said Crombie. "We had some tough decisions to take in 2004 and the masterplan was drawn up. I am not diminishing Trevor's contribution, but the products and so on were already here."

Matthews' departure was seen as weakening the board, but Crombie said his own role remains unchanged. "It doesn't affect me in any way. I have said before that I have no intention of retiring before 60. I am taking the UK team directly to me and there will be no pause in the progress.

"Our strategy is unchanged. Our primary way forward is organic growth and we will continue to deliver organic growth."

But with the share price in retreat and the company rotating from mutual to listed status, organic growth to acquisitive growth, there has been talk of unrest on the board, with some speculating that Matthews did not approve of the bid for Resolution Life.

Gerry Grimstone, the chairman, said this was simply untrue and that Matthews was the director with most to gain from a successful bid. "The board was unanimous on Resolution and Trevor Matthews was positively enthusiastic about it," he said, pointing out that Matthews would have run the closed life funds, equal to about 80% of what Standard Life would be buying. "We would have been barmy to have gone into it if the bloke who was going to run it was not enthusiastic.

"There has been a bit of revisionism about this. In fact, he presented the strategy on why we should do it. There were 10 board meetings (on the bid] in 11 or 12 weeks and every director was present and not one of them was in opposition to the strategy."

The merger with Resolution, which was recommended only for Pearl Assurance to counterbid with a higher offer within a couple of hours, led analysts and investors to question that strategy and whether it had left Standard Life exposed to predators.

With the markets taking a closer look at the company ahead of annual results next month, Grimstone said there was no talk of a merger or takeover and that most attention seems focused on Asia rather than UK-oriented life companies such as Standard Life. "I would be surprised (if there was a bid]. Apart from Resolution we have not had the slightest whisper," he said. "I do not lie awake at night worrying about who might bid for us."

He admitted some regret that the acquisition had not come off. It had been an opportunity to produce some excellent returns for shareholders. "I regret not getting it. Nobody likes trying and losing, but it would have been worse to overpay for it."

Crombie's job, however, remains under the spotlight and he can expect to be questioned at the results announcement. But Grimstone said the board was fully behind him. "We would only part company with Sandy if we thought he was not doing the job or if he indicated a wish to retire. Neither is the case.

"It has become a bit of a soap opera. He is 58 and doing a good job. There is some impression being put about that the board is not on top of this, but we regularly review the situation."

Grimstone acknowledged there were different styles between Crombie and Matthews, and that Matthews was ambitious to become a chief executive. "He was certainly in the running to become CEO of Standard Life but he decided a bird in the hand is worth two in the bush."