Sir Desmond wins stay of execution
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Your support makes all the difference.United Utilities yesterday failed to resolve the future of Sir Desmond Pitcher as executive chairman, but pledged to take "immediate action" to determine his fate after holding an unscheduled board meeting.
The company is expected to reveal the outcome of an internal review into Sir Desmond's position when it announces half yearly results in late November. It will be largely by Derek Green, the replacement for Brian Staples who was recently ousted as chief executive.
Last night big shareholders backed away from calls for Sir Desmond's immediate resignation, but insisted that he would have to leave the group by the end of the year. "The board ignores the shareholders' view at its peril. You can't push water uphill. There are such things as extraordinary general meetings," complained one leading investor.
The board meeting was convened after institutional investors called for Sir Desmond's resignation, following concern over his role in the surprise sacking of Brian Staples last month. Mr Staples was forced to resign after a long-running rift with Sir Desmond, with United saying he had lost the confidence of the board.
Sir Peter Middleton, chairman of BZW and a United non-executive director, held meetings with 10 big investors last week to assess the level of discontent. He was told shareholders wanted the appointment of a new non-executive chairman by Christmas at the latest, though some apparently called for Sir Desmond to go immediately.
A statement released after yesterday's board meeting said the United directors had heard "reports" on the views of institutional investors from Sir Peter and Jane Newell, another non-executive. Directors then "considered a number of matters arising".
The statement continued: "The board is aware of the succession issues regarding the chairman, Sir Desmond Pitcher, and the chief executive, Derek Green, and is taking immediate action to resolve the position. There will be a further announcement in the autumn."
Like Sir Desmond, Mr Green is due to retire from United in the year 2000, leaving two gaps at the helm to be filled. The group added that the board remained "in full support" of the action to remove Mr Staples and directors backed the statement unanimously.
United said it did not intend to make any further statements until the announcement later this year. "We want to draw a veil over this process to avoid further publicity. We're looking to restore an atmosphere of calm," said a company source.
The board meeting began at United's Mayfair headquarter at 1pm and lasted for about 2 hours. It was attended by five executive directors, excluding Sir Desmond, and five non-executive directors. Afterwards Sir Desmond and Sir Peter left the building together.
Big investors were disappointed at the lack of information, but welcomed the talk of "immediate action" as a positive move. "We're reasonably happy with the outcome. The company is now working behind the scenes to sort out the succession question and this is clearly a commitment to change things. But we cannot wait longer than the autumn," said one shareholder.
Another added: "I'm inclined to interpret this statement as saying there'll be some positive action. That means the board realised shareholder value would be enhanced by appointing a new, non-executive chairman."
But other shareholders were disappointed at the "lack of clarity" in the statement and questioned how the review would operate. "We're unimpressed by this. What is still outstanding is the question of exactly who runs the company. We know who owns it but we don't know who runs it. We won't stop the pressure," said another investor.
According to one source close to United the succession debate would widen beyond Mr Green's existing operational investigation, which was launched after Mr Staples' departure. It was unclear last night whether Sir Desmond would remain chairman of the board committee responsible for new appointments, or pass the job to Sir Peter.
"The succession issue will be conducted by the board jointly and severally," said the source. The next scheduled board meeting is not till the end of next month.
Analysts predicted the discussions would now focus on the exact retirement date for Sir Desmond. "He may push to stay on till next July's annual general meeting, or until the spring. What's clear though is that he will now go before 2000, passing responsibility for finding a new chief executive to a replacement non-executive chairman," one analyst explained.
Sir Desmond is likely to receive a pay-off worth more than pounds 600,000. He has a two year rolling contract, with a basic salary last year of pounds 310,000.
It also emerged yesterday that Sir Peter has ruled himself out of the job of replacement non-executive chairman, despite speculation last week.
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