Allen consolidates his position at crisis-hit Granada

Granada brings in former ITC head to answer demands from the City for new blood

Internal links

Outlook

Houdini-like, Charles Allen has managed to survive being executive chairman of the biggest ITV company while the network lurched from one disaster to the next. Instead, Steve Morrison, Granada's chief executive, has been made to walk the plank and he formally announced his resignation yesterday. He will not be directly replaced.

As full-time chairman of Granada, Mr Allen wielded considerably more power than Mr Morrison. Mr Allen ran the show. Some investors clearly thought that should mean that Mr Allen should fall on his sword for the massive managerial mistakes at ITV – especially so for ITV Digital, the pay-TV business Carlton and Granada blew £1bn on.

However, it seems inevitable that a single ITV will be created, possibly in the next year, and that will need fewer directors to run it than the current separate managements that currently oversee the central ITV network centre, Granada and Carlton, the other major ITV company.

It seems that most Granada shareholders decided that you can't chuck out both the top directors at the same time. As the younger man, it is Mr Allen, 45, who should survive.

Earlier this year, the failed merger talks between Carlton and Granada did not envisage any role for Mr Morrison in the combined group. With no future in an upcoming single ITV, there was little point in Mr Morrison hanging around.

One industry insider said: "There was no career path left for Steve. There is still a tough road ahead for Granada. Why go through it when there is pain in the past and pain in the future?

"This move is not designed to placate any shareholder discontent. How could it when Charles Allen is still there?"

At 55, Mr Morrison is young enough to have a go at something else. His pay-off, of about £700,000, may have helped too.

Henk Potts, equity strategist at Barclays Private Clients, said of Mr Morrison's position: "It was a bit like being one of the wives of Henry VIII. You know you're going to get the chop. It's just a question of when.

"You cannot oversee something like the ITV Digital debacle and expect to survive. It was widely expected that someone would carry the can. Institutions sided with Allen."

Although Mr Morrison will be seen by most as the "sacrificial lamb", Granada would like us to believe the management changes confirmed yesterday are not retribution, but a way to draw a line under its past mistakes, with ITV Digital finally having closed earlier this year.

Mr Morrison's role and authority at Granada appears to be significantly less than the surprisingly central role allowed to Gerry Murphy at Carlton by his executive chairman, Michael Green. It would now seem that the future merged ITV will have as its chairman Charles Allen, a softly-spoken bachelor who has a reputation for treating underlings with courtesy (unlike many media barons). Mr Murphy, who has won fans in the City, would probably be chief executive of the combined ITV.

There have been too many ITV executives around. It was and remains a top-heavy and dysfunctional organisation. The numbers are slowly being reduced to a more sensible line-up of chiefs. The chief executive of ITV has gone, there is no director of programmes at ITV, Nigel Walmsley left the board at Carlton. Now Mr Morrison has moved on, after spending most of his professional life at Granada.

Mr Morrison is a former journalist and award-winning television producer. Critics have questioned his suitability to be the chief executive of a big publicly listed company and he appeared not to enjoy any particular following in the City.

Mr Morrison said: "Twenty-eight years at Granada is a very good innings and now I would like to turn my hand to something new."

There was certainly shareholder anger at Mr Allen but it appears not to have been directed effectively at the company – perhaps because Granada's non-executive directors, the usual channel for investor discontent, are headed by Gerry Robinson, the man who used to run Granada and anointed Mr Allen as his successor. Perhaps the best measure of dissatisfaction can be measured in the way Granada shares have been sold off in the past couple of years.

While, rumbling of discontent from shareholders about Mr Allen have been less than might be expected against a man who has presided over such a destruction of shareholder value, it seems impossible to find any investors willing to praise the Granada management. And it is hard to believe that Mr Allen can go on as chairman unless he can deliver an improvement in Granada's performance and not preside over any more major mistakes.

Paul Richards, an analyst at Numis, said: "You've got to have a balance between people with experience and the infusion of new blood."

Some investors however questioned the new structure at Granada, with two managers promotions to just below board level. Mick Desmond was yesterday appointed "chief executive" of broadcasting and Simon Shaps is "chief executive" of content. Jules Burns will continue as "managing director" of operations. Sir George Russell, a business grandee and former TV regulator, was brought in as non-executive deputy chairman.

A fund manager at one major Granada shareholder said: "That's three new roles created. It leaves five people doing the work that was previously done by two [Mr Allen and Mr Morrison]."

An analyst said it was surprising that an "old guard" figure such as Sir George, with no operational media experience, had been recruited. "You'd think you'd need someone with a fresh perspective," he said.

It seems that Sir George has been brought in not only to allay concerns that too much power is now concentrated in the hands of Mr Allen, but because the major strategic issue now confronting Granada is a regulatory one: how to get a merger with Carlton past competition watchdogs. Sir George, a former head of the Independent Television Commission, which oversees the commercial sector, will be based at Granada's headquarters.

ITV must find ways of improving its appalling recent audience rating record and hope that a sustained recovery in advertising will soon take hold. Mr Allen and Sir George will spend much of their time plotting a way to gobble up Carlton in the next 12 months, a deal allowed in the Communications Bill now passing through parliament. They must find a way of buying Carlton even though the combined companies would have more than 50 per cent of television advertising sales – a level of market share which would ordinarily lead to the competition regulators blocking the deal.

Carlton does not believe a merger is possible on this timescale and even appears to prefer the prospect of selling out to an American company instead. Mr Allen has plenty of battles to win ahead of him.