16 May 2020 00:32
The Skype dismissal of Rico Back as chief executive of the Royal Mail should not come as a shock. The very notion of the chief executive of one of the nation's biggest front line employers sitting it out in Switzerland while postal workers have been on the battleground in the Covid-19 epidemic was unacceptable. Royal Mail chairman and former BA boss Keith Williams, who will temporarily take the reins as executive chairman (without any lift in pay), has done the right thing. Back off: Rico Back's near two years ias Royal Mail chief exec has been fraught with governance failings Back's appointment looked sensible when it was made. As the architect of Global Logistics Systems (GLS), Royal Mail's profitable European parcels service, he looked to have ideal skills to lead the business.
The biggest shift taking place in deliveries in the UK, speeded up by coronavirus, is from snail mail to parcels delivery. Whereas the Royal Mail has all the mechanised sorting it needs for the letter post, it is way behind on parcels. Back looked the best person to fix it. His near two years in the job have been fraught with governance failings. The £5.8million buyout of his contract with the GLS was extraordinary and tested the limits of company law. Even more worrying was Back's unwillingness to compromise his personal lifestyle to take on one of the most demanding chief executive jobs in Britain. Even in normal times his commute from his Swiss idyll to London – while colleagues were fighting off dogs at the garden gates – was unacceptable. It showed a lack of commitment to the fraught task in hand, including dealings with the highly engaged Communications Workers Union. The idea that the Royal Mail board, responsible for producing stamps with the Queen's head, should think it fitting for the chief executive to live overseas was all wrong. That may have been tolerable if he had been successful in guiding the necessary processing and logistics reforms. But to be overseas through a crisis on the scale of the present one was unconscionable. His absence rightly outraged union leaders but was also a source of huge disquiet inside Royal Mail headquarters and on the board. Williams has risen to the challenge of the chairman's main job, which is to sack a chief executive. Back lacked an understanding of what is expected of a company with a public service remit, and had little obvious empathy with a workforce of more than 160,000. He leaves with what, in boardroom terms, is a frugal pay-off worth £1million. In sharp contrast, posties and sorting office staff are to get a bonus worth £200 for working through a pandemic. Pitiful. Marked down As the successor to Neil Woodford at fund manager Invesco Perpetual, Mark Barnett always had a hard gig. His predecessor's stellar record at Invesco, where he earned guru status for value investing, was always going to be a hard act to follow. Barnett's mistake was not value investing but too closely sticking with dud stocks – such as Provident Financial and Allied Minds – long after Woodford had fled the scene. The reality of equity markets and fund management in the most recent bull market, and now in the Covid-19 era, is that gains have been driven by a handful of US tech stocks, such as Amazon and Apple. Value investing is out of fashion as we learnt from the greatest exponent of all, Warren Buffett. His Berkshire Hathaway group lost £41billion in the first quarter. The performance of Barnett's main funds Invesco Income and High Income has been lamentable. Over the last three years both plunged more than 40 per cent in value against a 13 per cent drop for the FTSE All Share over the same period. Barnett is paying the price as much for organisational failure as his own mismanagement. Invesco has repeated the mistake it made when Woodford left by appointing 'me too' deputies. They might not know how to change direction if they tried. Speedy response The share price surge in response to reports that BT wants to cash in by selling a stake in distribution arm Openreach tells chief executive Philip Jansen what he needs to know. It would be a good way to pay for a quicker roll out of superfast broadband. Improving the speed and reliability of the network will be all the more important if Virgin Media merges with O2, creating a more formidable full service competitor. Boom.