STAGECOACH founder Sir Brian Souter caused history to repeat itself yesterday after announcing he will resign as chief executive to become chairman of the Perth-based transport group.
Souter, 58, will replace current chairman Sir George Mathewson when he retires in May. Martin Griffiths, Stagecoach’s highly-regarded finance director, will take over as chief executive.
This is the second time Souter has given up the reins of the firm he co-founded with sister Ann Gloag in 1980.
Mike Kinski became the first outsider to head up Stagecoach when he joined from ScottishPower in 1998, reporting to Souter, who was then executive chairman. Two years later, Kinski left abruptly amid rumours of a management bust-up.
He was replaced by finance director Keith Cochrane, who resigned in 2002 following a steep decline in profits from the company’s US business.
The departure of Cochrane – who now heads up FTSE 100 engineering giant Weir Group – persuaded Souter to return as Stagecoach’s acting chief executive. He resumed the role on a permanent basis in December 2002.
The latest management reshuffle includes the appointment of company secretary Ross Paterson as finance director. He will join the board along with a new non-executive director who is expected to be appointed by May.
The company said two-thirds of its revamped board – excluding the chairman – will be non-executive directors.
However, a spokesman for Stagecoach refused to clarify whether Souter would be styled as an “executive” or “non-executive” chairman. Mathewson is currently deemed to be an independent member of the board.
“Sir Brian will devote as much time as is necessary to discharge the normal functions of a chairman,” the spokesman said. Pressed further on the vagueness, the spokesman replied: “That is just the way we have chosen to describe it. I don’t think it makes any difference in the way they [Souter and Griffiths] will conduct their respective duties.”
In a letter to staff, Souter said he and his family were “committed major shareholders” with a stake of about 25 per cent. He added that he would remain “heavily involved”.
This has raised concerns among some investors who are worried Souter will not give the new chief executive enough freedom to run the business effectively. This is one of the reasons why the UK code of corporate governance recommends that a chief executive should not go on to become chairman of the same company.
Anticipating dissent on this issue, Stagecoach said its board believed retaining Souter’s industry knowledge would be to “the benefit of the company and all of its shareholders”. Critics such as ShareSoc, which represents small investors, said this was a standard excuse for “blatantly ignoring” the code.
A spokesman for shareholder advisory group Pirc questioned why the announcement came just hours before yesterday’s noon deadline for issuing instructions on voting at Stagecoach’s annual meeting. He added: “It is a little bit coincidental this was issued so close to that deadline. If they had announced this two weeks ago it might have informed our recommendations.”
At least one major shareholder has defended the move, but conceded some investors were understandably nervous given Souter’s previous attempt to step back from the company.
“But they say this time around it is a succession plan and they are very comfortable with it,” one source said.
Shore Capital analyst Karl Burns said Griffith’s appointment to chief executive was “evolution rather than revolution”. He remains positive on the stock, which closed 4.2p lower at 293p.
Brian Souter and his sister, Ann Gloag, found Stagecoach with just two buses
Stagecoach floats in London valued at £134m, compared with £1.7bn today
Souter stands down as chief executive to become executive chairman
Souter returns to the role of chief executive after Keith Cochrane resigns
Souter retires as chief executive to become chairman
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Sunday 19 May 2013
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