Blood on the carpet

OUR money man, ROBIN CURRIE, on why there’s a price on the heads of industry

BY the time you read this, Luc Vandevelde will be history. The charismatic CEO of Marks & Spencer will have fallen on his Per Una sword and his blood will be soaking into the store’s attractive range of designer carpets.

For anyone who’s been hiding under the sink for the last few weeks, I should explain that this departure was occasioned by the fall in M&S’s share price. And this in turn happened because of the general perception of M. Vandevelde, rather than because of the excellence, or otherwise, of Marks’ range of casual wear.

It’s fairly silly, though. It’s rather like firing the manager of a football club when the striker is caught at a lap-dancing club. Logic would suggest that you should discipline the striker, but ultimately the man who gets the boot is his boss. And like certain footballers, Vandevelde was disliked by a substantial element of the public who might otherwise have found it hard to say who he was. His real crime was to have been perceived as over-paid. And it’s the money that does it. If he’d been arrogant but poor, you’d never have heard of him. If incapable but modest, there might have been a boardroom coup. But because he was thought to be disdainful and - crucially - overpaid, there has to be an element of public humiliation.

The excoriation of a prominent executive is not a new phenomenon, particularly when there is an element of public interest. Let me digress...

Younger readers may not know that certain utilities used to be owned and operated by the State – water, electricity, buses, that sort of thing. These were monopolies and it was believed by a section of the political establishment that they were inefficient - which to some extent was true. But back in the late 1980s there was a panacea - if something didn’t operate to a given level of financial efficiency, it would be privatised.

The argument ran that competition was a basic human drive, and that divorcing demand from supply would allow room for different operators to compete. The ‘free market’ would allow the efficient ones to be rewarded and drive inefficient ones out of business, thus bringing down the costs of the operation.

One of the utilities thus treated was British Gas, whose incoming chief executive was a man called Cedric Brown. Brown received a major hike in his salary and was roundly condemned in public as a ‘fat cat’. He received enormous amounts of hate mail and was pilloried for getting - and keeping - a pay rise when his job had apparently not got any harder.

Now it’s not true in all cultures, but in the UK we like to believe that people should be rewarded in line with how hard they work for their dosh. Thus a jobbing plumber who nevertheless earns a huge income is perceived to have earned it by the sweat of his brow and it ‘feels fair’. The managing director of a privatised utility whose enormous salary is supplemented by bonuses which depend on share price - which depends in turn on forces beyond his control - is seen as a high-quality scrounger. And more to the point, he’s seen as somehow having wangled a free ride on a gravy train funded by us.

And this is why Luc Vandevelde has bought the farm. M&S isn’t a privatised utility, but it’s an institution. We use it and somehow we think that we own it. It doesn’t matter that the profits go to shareholders rather than to taxpayers. The public’s perception has been that they were being short-changed and that Luc V. was being paid too much and not suffering enough.

Of course, the issue is that some people add value to an operation by being associated with it, while others don’t. Luc Vandevelde and poor old Cedric Brown didn’t have the iconic status, whereas the likes of Richard Branson and David Beckham are perceived to enhance the things with which they are associated.

Which leads to the inescapable conclusion that we think we get rewarded for what we do. But actually it’s for who we are.




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Robin Currie is an Independent Financial Adviser specialising in green finances. He has offices in Exeter and Totnes. For an appointment, call him direct on 01392-411630 or e-mail robin.currie@btconnect.com.