Ousting LSE chair would disrupt search for new boss, agency warns

7 December 2017, 12:47

Removing the chairman of the London Stock Exchange Group (LSEG) would "destabilise" the search for a new chief executive, a shareholder adviser has warned, dealing a blow to the activist fund behind the year's most extraordinary City row.

Sky News has seen a note circulated on Thursday by Glass, Lewis & Co which urges the company's investors to oppose a resolution by The Children's Investment Fund Management (TCI) to oust Donald Brydon.

The recommendation makes Glass, Lewis the second major voting adviser in as many days to oppose the TCI campaign, and increases the chances of Mr Brydon surviving the vote scheduled for 19 December.

TCI has been fighting a campaign for the last month to get Mr Brydon sacked and reinstate Xavier Rolet, the exchange group's chief executive.

It was forced to abandon the latter part of its efforts last week when Mr Rolet stepped down a year early at the request of the company's board.

In its note to clients, Glass, Lewis said it saw "no reason to believe that the board failed to properly oversee the company during the CEO transition process or that it failed to act in the best interest of shareholders".

The agency also rejected the view expressed in a TCI presentation circulated earlier this week that Mr Brydon had lost the confidence of LSEG shareholders.

"Notably, the company's share price does not appear to have been negatively impacted by recent events including the dismissal of Mr Rolet and the CEO succession process.

"The removal of Mr Brydon at this juncture would do nothing to advance the dissident's initial objective of reinstating Xavier Rolet as CEO of the company and would destabilize the CEO search process that is currently under way."

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TCI, run by Sir Christopher Hohn, had argued that Mr Brydon's continued presence would deter the LSE's owner from attracting a high-quality replacement for Mr Rolet.

The activist has also said that Mr Brydon had a long track record of firing chief executives at companies he has chaired, including the drinks group Allied Domecq and Smiths Group, the industrial concern.

People close to the LSEG have said that TCI had inaccurately characterised the terms of Mr Rolet's exit, and said that Mr Brydon's planned departure in 2019 would be the best outcome for the company.

Last week, it wrote to TCI to accuse it of "damaging" one of the UK's most important companies by calculating "to upset the smooth execution of its succession plan" by carrying out a "public, concerted and highly personalised campaign".

The company's directors accused TCI of "negatively impacting Xavier Rolet's relationships with the board and has led to pressure on the company's relationships with its shareholders and other stakeholders".

The company said that David Warren, its chief financial officer, would become interim chief executive after Mr Rolet's sudden exit.

However, Sky News understands that Mr Warren has no interest in taking the job on a permanent basis.

Mr Rolet had been widely lauded for his transformation of the business into a key pillar of global markets infrastructure.

However, the row sparked by TCI's protests at Mr Rolet's "retirement" came as an even greater surprise to the City because he had planned to leave in any case if a merger between the LSE and Germany's Deutsche Boerse - which was ultimately blocked by regulators this year - had been completed.ā€Ž

Mr Rolet had been widely lauded for his transformation of the business into a key pillar of global markets infrastructure.

However, the row sparked by TCI's protests at Mr Rolet's "retirement" came as an even greater surprise to the City because he had planned to leave in any case if a merger between the LSE and Germany's Deutsche Boerse - which was ultimately blocked by regulators this year - had been completed.ā€Ž

An LSEG spokesman declined to comment on the Glass, Lewis note.