Lucrative exit for Premier Foods' chief is small fry compared to RBS bonus wheeze
Surprise departure of company chief executive chimes with banker bonanza
There’s a history of impatient boards refusing to give chief executives sufficient time to do their jobs, resulting in a rapid turnover of top executives, particularly at ailing companies. Occasionally, it’s the other way round, as in the case of Michael Clarke at Premier Foods, the struggling Mr Kipling cakes to Hovis, Bisto and Oxo group.
After just 18 months at the helm, Clarke has has quit, saying his work there is done. The £750,000 (€876,000) a year chief executive now plans to reward himself for his year and a half’s hard graft by taking his son on a snowboarding holiday and his wife on a beach break.
While Clarke seems mightily pleased with his efforts, the stock market took a rather more dim view of his decision to quit, marking Premier shares down by as much as 12 per cent. There was initially a fear that Clarke might know something the City didn’t and had decided to quit while he was ahead.
The Premier board accompanied news of their chief executive’s surprise departure with the somewhat opaque explanation that he was “potentially considering moving on to pursue other business opportunities”.
What that means, apparently, is that while he has nothing firm lined up yet, he’s received a couple of approaches and sees himself doing a big job in Britain or the US. As he told one reporter: “Now people know that I am available.” After his holidays, of course.
Premier Foods is undeniably in better shape now than when Clarke first arrived from US food giant Kraft in 2011, having cut a large chunk out of costs and lopped several hundred million off the group’s still considerable debt pile via the sale of brands including Branston pickles. But Premier still has a long way to go before it is restored to full financial health.
Just as boards should show some loyalty to chief executives tasked with turning a business around, so chief executives should show some loyalty to their company, particularly those on £750,000 a year plus £150,000 pension payment. Not to mention the £500,000 or so chunk of his recruitment bonus Clarke is entitled to walk away with.
Any company offering Clarke the top job he so clearly wants might well be advised to consider whether he’ll dump them too should something better come along when the task is still only half done.
The next few weeks are going to be extremely expensive for the bailed-out Royal Bank of Scotland, still 82 per cent- owned by the British taxpayer.
Regulators in the UK and US are close to imposing fines on the bank expected to be in the region of £500 million as punishment for its part in the Libor-rigging scandal. At the same time, it’s bank bonus season again and RBS is preparing to reward its investment bankers – those working in the division responsible for manipulating Libor – with payouts totalling perhaps £250 million. Last year, the bonus pool amounted to almost £400 million and RBS and the government apparently believes that paying out significantly less this time will calm the storm of public protest sparked by the payments a year ago.
Such a belief shows how little the banks have learnt in the years since the financial crisis first struck. The size of bonuses matters, of course, but it is the fact that these payments continue to be made at all – and at a taxpayer-supported bank – that really makes the public seethe. And the timing of the bonus round, just as the bank is hit with massive penalties for rate-rigging, could hardly be worse.
As many as 30,000 jobs have been lost at RBS since the financial crisis started in 2008 and, as the banking unions said: “This is no way to repay the country’s patience,” with ordinary bank workers and taxpayers “paying the price for greed at the tops of RBS”.
The £500 million fines may not be the end of it for RBS either. The US authorities want the bank to plead guilty to criminal charges on Libor-rigging, a move which could leave the bank wide open to costly lawsuits for years to come. Fears over the potential costs of such legal actions meant shares in RBS slumped 6 per cent yesterday, wiping some £2.5 billion from the value of the bank – yet another massive loss for the taxpayer. – (Guardian service)