Thursday was a glorious day for Rangers. First of all the Pinsent Masons independent Report confirmed that there were no links between Mr Whyte and Mr Green – at least if you read the headlines to the media reports!
Then Malcolm Murray stepped down as Chairman, to be replaced by Walter Smith.
All was well in the Ibrox garden – the lion would lay down with the lamb – and all of the bears would be united!
And surely season ticket sales will start imminently!
But there needs to be a curmudgeon somewhere … and I am he.
Some questions – what are Mr Smith’s qualifications for being non-executive Chairman of a PLC?
Why did Mr Smith turn down the Chairman’s job last summer, only to take it now?
Have his wishes for the “new Rangers Football Club” been fulfilled so far?
Why did he refer to the “new” Rangers Football Club?
Why is he at the head of the PLC and not the “football company”?
Can he even be described properly as an “independent” Chairman?
I will offer some thoughts on these below.
First of all the statement announcing the change …
The Rangers International Football Club plc today announced that Walter Smith has been appointed Non-Executive Chairman of the Board. Walter Smith is widely acknowledged as the Club’s most successful manager. Under his leadership, the Club enjoyed two immensely productive spells and he is one of the most highly regarded figures in British football.
He succeeds Malcolm Murray, who agreed to step down as Chairman, and Walter Smith’s appointment was a unanimous decision of the Board.
The Board believes that the new Chairman will bring stability, experience and a wealth of knowledge to the Club.
What factors should a PLC consider when appointing a non-executive Chairman?
Various documents have been issued by and on behalf of the Stock Exchange answering that very question. So, for example, we read the following:-
In considering the selection of the Chairman …, two factors should be taken into account.
First, prospective directors will need commercial experience that is relevant to the company’s business and wider operating environment.
Second, they will need the right functional experience to fulfil all necessary board and committee roles.
- is likely to be an experienced UK plc NED
- may have a successful track record as a Chairman who has built and led professional and effective boards, although prior experience as a Chairman is not an absolute requirement for the role
- will need to be well respected by the investor community, and will show a clear understanding of the requirements of institutional investors.
It may also be an advantage if the Chairman has experience in corporate finance, mergers and acquisitions, and bid defence.
In practice, to fulfil these criteria, the Chairman is most likely to have:
- prior experience within a listed company as a chief executive or CFO.
- previous responsibility for a business equivalent to, or larger in scale than, the company for which the candidate is being considered. Candidates from alternative backgrounds will usually need to bring a demonstrable record of success, coupled with extensive experience as a NED, to be considered qualified for the Chairman role.
(NB – all emphases added.)
Now these are NOT statutory requirements. They are guidelines. It is made clear that companies can consider factors outwith those mentioned, but following the Stock Exchange’s guidance on “corporate governance” would never seem to be a bad idea.
Does Mr Smith posess the desired qualifications, experience or attributes?
The main factors mentioned are, I think, as follows:-
- Commercial experience relevant to the company’s business
- The right functional experience to fulfil all necessary board and committee roles.
- Be an experienced UK plc NED
- Will need to be well respected by the investor community
- Will show a clear understanding of the requirements of institutional investors.
- Experience in corporate finance, mergers and acquisitions, and bid defence.
- Prior experience within a listed company as a chief executive or CFO.
- Previous responsibility for a business equivalent to, or larger in scale than, the company for which the candidate is being considered.
- Demonstrable record of success, coupled with extensive experience as a NED
The Chairman’s role in a PLC is much more than in a private limited company. He is there to represent the interests of shareholders and investors, and sometimes to act as a brake on the executive directors. His role is not the day to day running of the business – that would make him an executive, but an overarching supervisory position.
Mr Smith has a great track record of success in football. He has had limited commercial involvement in business outside football.
As he himself acknowledged in an interview in the Scotsman:-
“I don’t particularly see myself as a long-term Chairman, in the sense that I would always think the job would be for someone who has far more business acumen than I have got.
“But we have been going through a ropey period, even after the club going on the stock market last December and everyone thinking it would settle down. That hasn’t been the case. There has been a wee bit of turmoil.
“So hopefully we can get the club settled down again. If we can do that, then I think that will be the initial phase of what we try to do. We will see what happens after that. But I certainly don’t see myself as being in the position for a long, long time.
“It is obviously a departure for me. When I was asked by Charles Green to go on to the board as a non-executive director last November, I thought ‘Well, that’s a change’.
“So this is something I never expected to happen. I didn’t particularly look for it either. But due to a whole set of circumstances it has come around. For anybody, it is an honour – albeit a surprising one.
“To be quite honest, I don’t think there was anyone else on the board prepared to do it! It’s as simple as that and I can include myself in that a bit.
“When you are asked to become manager, you obviously think you have got the background and credentials to do the job. But when you are asked to be the Chairman, you are never sure, because I’ve never been a business person and I was never really a member of the board before.
“So it will be a completely new departure for me. But we have got other experienced people on the board, so hopefully over the next period we will get together and try to take the club forward.”
Mr Smith’s frankness is admirable.
On the other hand, he effectively is admitting that he does not know what the role entails and will rely on other board members to help, which is a derogation from the role of a PLC Chairman.
One also wonders what he means by saying “I was never really a member of the board before.” Does he mean before November? Or is he saying that his involvement in the last six months has not been “real”?
Perhaps though I am being unkind to Mr Smith regarding his business acumen, and he is being too modest. (I should also say, before anyone else does, that I am not claiming that my own business skills are better than Mr Smith’s, but then I am not the Chairman of a PLC).
Roosternet Global LLP
After all, Mr Smith was, for some years, a partner in a business engaged in “Acquisition and exploitation of the rights to the roosternet software technology within the world excluding Israel and the countries forming the European economic area.”
Mr Smith, along with other names not initially known for their business expertise, such as David James, former England goalkeeper; Mauricio Taricco, former Spurs player; Gus Poyet, Brighton manager and former Spurs player; Goran Bunjevcevic, former Spurs player; Paulo Wanchope, former Derby and Manchester City player; Archie Knox, former football manager and assistant manager; Glenn Hoddle, former Spurs player and former England manager and Duncan Ferguson, well-known pigeon fancier, were al partners in Roosternet Global LLP.
That business is now closed, but the limited public information available suggests that it had assets of around £50 million and debts of half that, so clearly it was a major operation.
Maybe Mr Smith has skills he can bring from his involvement in the exploitation of roosternet technologies to the benefit of Rangers.
Alternatively, it may simply be that, back in April 2004 when Mr Smith became a partner, this was seen as a suitable, appropriate and entirely legal method of tax-efficient investing. And, after all, it should not be forgotten that Mr Smith was not, from information made available publicly, a beneficiary of any of Rangers’ notorious (although, as matters presently stand, generally legitimate – apart from a few of them where the paperwork was wrong) EBT schemes.
Might Mr Smith’s knowledge an interest in Roosternet technology have persuaded him not to take the EBT route?
Maybe someone could ask him?
So, to conclude this section, Mr Smith, apart from his frolic into Roosternet Global LLC, seems to be without any of the business experience, proven expertise and connections desirable (although not obligatory) in a PLC Chairman. He seems therefore to be there as a figurehead – a sign that all is well – a sign of unity.
What about Last Summer When Mr Green Offered Mr Smith the Role of Chairman?
Readers might recall that, last summer, Walter Smith appeared at literally the last minute with an offer from a consortium of Rangers-supporting businessmen to buy the assets from under the nose of Sevco 5088 Ltd to whom the administrators had a binding agreement to sell Sevco Scotland Ltd.
However both Duff and Phelps and Mr Green rejected this. However Mr Green offered Mr Smith the role of Chairman at that point.
Mr Smith declined, saying last June:-
“I would like to clarify the background to the offer of £6m for the assets of the club which I announced on Thursday.
“The offer was made to the administrators before the Charles Green consortium had concluded their transaction to acquire the assets. We felt it necessary to have a fall-back position to secure the club’s future. We have since made the same offer of £6m to the Green consortium through Zeus Capital.
“Our offer has been rejected and they have made a counter-offer inviting us to join their consortium.
“However, the current business plan is not in accord with our understanding of the present circumstances of the club and the way forward, but we would prefer to leave them to proceed in their own way and we wish them good luck in their endeavours.
“Members of our consortium had met with Charles Green and Zeus Capital prior to the CVA (company voluntary agreement) meeting and it had been agreed that we would be provided with significant information which would give us comfort as to the identity of the consortium members, their strategy and their funding capacity.
“This information had not been forthcoming by the date of our offer.
“We are therefore withdrawing completely from the process to enable Charles Green and his consortium to move forward.
“We very much hope the verbal assurances they provided to us – and the public statements made – are adhered to and that the club will therefore be financed and managed with appropriate governance and can go forward in a sustainable manner.
“We wish the new Rangers Football Club every good fortune.“
Maybe someone will ask the new Chairman how the business plan changed. In what way did the Green bid NOT protect the club’s future?
What did he mean by saying that he wished the “new” Rangers Football Club every good fortune? In what way was this a “new” club? Are we now at the position where both the Chairman and the Director of Communications have publicly stated that the present Rangers is a “new” club? Yes – we are.
Why Chairman of the PLC, and Not of the Football Board?
Back in June 2012, Mr Green’s offer to Mr Smith was, according to STV, to be Chairman of the football board. As the structure now is, there would be nothing at all wrong with that. The football company is NOT a PLC. Accordingly the strictures described above do not apply.
In addition it would be far more appropriate for the Chairman of the football board to provide active support to the manager of the football team than for the PLC Chairman to do so.
Mr Smith rejected the chance to take up such a role last summer. Now, cynical observers might say that his consortium could have been hoping that Mr Green’s takeover would fail, and thus allow the Park/McColl group to pick up the pieces. The successful share issue prevented that happening.
It would be ungracious therefore to ask Mr Smith why he decided not to add his expertise to the “new Rangers Football Club” when he had the chance last summer.
Is Mr Smith “Independent” Enough to be the Independent Chairman?
Here again the Corporate Governance Code provides some help. As the guide states:
The Code makes a distinction between non-executives who are independent and those who are not. To qualify for the former category, an individual must not only have the necessary independence of character and judgment but also be free of any connections that may lead to conflicts of interest.
The Code makes it clear that someone will not normally be considered independent if:
- they have been an employee of the group within the previous five years;
- they have a ‘material business relationship’ with the company or have had one within the previous three years, including an indirect relationship as a partner, director, senior employee or shareholder of an adviser or major customer or supplier (this would catch a partner from, for example, the company’s audit firm moving on to the board after retirement);
- they receive remuneration from the company in addition to director’s fees or they participate in the company’s share option or performance-related pay schemes or they are members of the pension scheme;
- they have close family ties with any of the company’s advisers, directors or senior employees;
- they hold cross-directorships or have significant links with other directors through involvement in other companies or bodies (this works against the ‘old boys’ club’ method of appointing non-executives: George is finance director at company A and sits as a non-executive on the board of company B; Harry is chief executive at company B and sits as a non-executive at company A);
- they represent a significant shareholder;
- they have served on the board for more than nine years.
Now Mr Smith was an employee within the last five years. He is inextricably linked to Rangers, proudly boasting of being a “Rangers man” and a life-long Rangers fan.
Now, there is absolutely nothing wrong with someone with those attributes being a director. I am not saying that. However, this is a PLC. The Chairman’s role, as independent protector of investor interests, is NOT necessarily the same as protecting the interests of the “Club”.
Take a simple example. Let’s imagine that, in a couple of years, one of Rangers’ young star players is bought by Manchester United for £10 million. The Rangers fan would want that money to be spent on new players, or on high wages for free agents, even where there might be sufficient quality in the existing team to achieve the targets set for it. The financial investor, as opposed to the sentimental investor, might want the money to be kept in the company to be paid out in dividends. This is a very simplistic dilemma but one which faces football clubs regularly (although not always over a £10 million transfer!)
No groups of fans ever chant about their team’s balance sheet. Rarely will a Chief Executive be praised for debt reduction. Instead the constant refrain is “why are we not buying better players?”
How does Mr Smith propose to deal with these conflicts? I think it is almost impossible that he would take the investors’ side rather than the fans’.
Even if Mr Smith was a member of a Rangers Pension Fund, this would not compromise him, as it related to the now liquidated company and thus could have no bearing on his role in the newco.
There is no doubt that, based on his past experience and indeed on his own comments, Mr Smith does not fit the expected mould for a PLC non-executive and independent Chairman.
Does that mean that he cannot be Chairman? Of course not.
However, especially in a situation where major investors seem potentially to be in conflict with each other and regarding the make-up of the Board going forward, is he the right man to resolve these issues?
If Mr Green has gone, along with Mr Ahmad, what about the shareholding of, for example, Richard Hughes – top man in Zeus Capital? If he has lost two of his three men at the heart of Ibrox in the circumstances we are all well aware of over the last few months, does this affect his commitment to his investment?
The Easdale brothers want their place on the Board. They want to expand their interest in Rangers. Do they want to play an executive role, or do they see a seat at the Blue Room table as recognition of their standing in Scottish society, and a gesture of defiance to those who unfairly question their business ethics.
And one wonders how Mr Smith would deal with the question, should it arise, of Mr McCoist’s future?
Most football management careers end in failure. Mr McCoist is Mr Smith’s protégé. Should the manager’s future be at issue, could Mr Smith agree with the CEO wielding the axe?
Is his appointment, at the end of the day, the 2013 equivalent of Mr McCoist welcoming the Green consortium in 2012, just in time for the fans to overcome reluctance to buy season tickets?
Posted by Paul McConville