Comment: Souter’s smooth change won’t ruffle the City

DING-DING, more room on top. Sir Brian Souter’s decision to change seats from chief executive to chairman at Stagecoach can be seen as a milestone – even if the founder of the transport group has driven down this road before.

Souter left the top role in April 1998 when Stagecoach was rolling along nicely, operating businesses from Britain to Sweden, and from Hong Kong to New Zealand, along with Chinese toll roads, Prestwick airport and a train rolling stock leasing division.

At that point, Souter decided it was time to step back from day-to-day management to focus instead on business development opportunities, while Mike Kinski of ScottishPower was installed as chief executive.

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However, after the embarrassingly ill-judged and damaging acquisition of the Coach USA business in 1999, Souter again took over the chief executive’s role in July 2002 to fix the damage, replacing Keith Cochrane, now boss of Glasgow-based Weir Group.

His reprise of a move to the chairman’s role from next spring comes as Stagecoach is seen as a successful business again. The past decade has been much happier for the Perth-based company, which has undergone significant geographic and operational retrenchment to become focused on UK buses and trains and a more simplified, money-making US operation.

Of course, some will say yesterday’s key management change – with Stagecoach finance director Martin Griffiths becoming chief executive – flies in the face of the “Cadbury code” on corporate governance.

This frowns on chief executives becoming chairmen in the same company because of the paradoxical possibilities of too cosy a relationship between the two main members of the board or the new boss being inhibited by the back seat driving of the old boss. Perish the thought.

However, Cadbury has a “comply or explain” clause, and it is arguable that Stagecoach – and its independent investors – would lose far more than they would gain by a slavish genuflection to theoretical best practice.

Investors in Stagecoach know that even in its streamlined, de-risked form the company retains a strong entrepreneurial spirit – the Souter family own 25 per cent of the shares – and Sir Brian epitomises that spirit. It would be a lot of expertise to jettison in order to keep Cadbury sweet.

In addition, Griffiths may have been the group’s finance director for 12 years, but he has clearly been more than a mere numbers man for quite some time, regularly addressing wide-ranging operational matters, and unlikely to be anyone’s boardroom patsy.

He is very well known to the City, as is Stagecoach’s new finance director, Ross Paterson, effectively Griffiths’s deputy for several years. Stagecoach’s managerial gear change is smooth.

US probe into RBS and Iran won’t worry Hester

AMERICAN authorities are investigating Royal Bank of Scotland about possible sanction-busting dealings with international pariah state Iran, following New York’s $340 million fine of Standard Chartered over the issue last week. A senior risk manager is believed to have departed RBS because of the probe.

RBS chief executive Stephen Hester will probably be phlegmatic in terms of potential regulatory fines, despite the damage to the bank’s reputation and the unwelcome diversion that such probes bring. Remember, RBS is also being investigated internationally for possible Libor rate-fixing.

The scale of punishments is manageable by banks, such as Barclays £290m fine for Libor-fixing. If it is fined then RBS will probably just divert some of its operating profits – which are currently being siphoned off to clean up the bank’s balance sheet from previous management’s indiscretions – to pay regulators while the bank keeps to its broader recovery programme.