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Mark Kleinman: This Post Office circus is obscuring the real drama

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Sky News’ City Editor Mark Kleinman writes a weekly column for City A.M.

Spare a thought for Korn Ferry, which has unarguably the toughest job in boardroom headhunting right now: finding an interim chair for Post Office Limited. 

A straw poll of my City grandee contacts produces an unsurprising answer: none of them would touch it with a bargepole – and for many of them that would have been the case even before the volcanic spat erupted between Kemi Badenoch, the business secretary, and Henry Staunton, the defenestrated chairman of little more than a year.

In the original statement on his departure, Badenoch implied that an interim successor would be in place imminently. It remains possible that one of the existing non-executives will be parachuted into the post in order for the government to fulfil that commitment, but the odds aren’t great.

And good luck with finding a permanent successor from the upper ranks of British business: Badenoch’s decision to attack Staunton so publicly in response to his allegations about the government’s approach to Horizon compensation payments will inevitably act as a deterrent to others who might have contemplated taking roles at government-owned companies.

The ‘he said, she said’ nature of their confrontation has been unseemly in the extreme, but worse, it has obscured the real issue at stake here – the fact that hundreds of innocent people have died before their names were cleared, all because of the venality and corruption of a cabal of people in influential posts.

Campaigner Alan Bates appeared at the House of Commons business and trade committee on Tuesday. Photo: ParliamentTV

There can be little doubt that a more formal investigation is required to assess the possibility of criminal behaviour by the individuals in senior jobs, or those instructed by them. Kevin Hollinrake, the postal affairs minister, has already signalled his desire to see this happen.

Just as importantly, as this week’s select committee session featuring Staunton’s excoriating evidence shows, there needs to be a major overhaul of the corporate governance arrangements within which government-owned entities such as the Post Office are run. The web of relationships between Whitehall departments, UK Government Investments and the Post Office board looks to have contributed to the mess which left hundreds of innocent sub-postmasters fearing that they would never achieve justice.

Whatever Badenoch says, the ITV serial Mr Bates vs the Post Office was a catalyst for many of the events which have unfolded since the turn of the year. Talk about making a crisis out of a drama.

London-listed R&Q needs a new insurance policy

Just what is going on at R&Q Insurance Holdings, the London-listed group which has been giving its investors more than the odd palpitation in recent months?

The company, formed in 1991 as Randall & Quilter, has seen its shares nosedive by more than 90% during the last 12 months amid concerns about its viability. Last October, it announced the $465m sale of its Accredited division to Onex Corporation, the Canadian investor – a deal designed to shore up its balance sheet. Much of the proceeds of the sale, however, appear to be earmarked for purposes other than paying down its debt-pile.

Now, I hear that Dan Schwarzmann, the PricewaterhouseCoopers partner best-known for his role in winding down the European operations of Lehman Brothers, has been drafted in to undertake contingency planning for R&Q’s insolvency should the deal not get approved.

“R&Q remains in constructive discussions with its lenders and regulators regarding the approval of its sale of Accredited,” a spokesman for the insurer said. “Any suggestion otherwise is incorrect.”

People close to the company acknowledge, though, that a warning in its deal circular that without shareholder and lender approval the company would face going concern challenges remains valid.

One said R&Q’s board remained confident that both sets of stakeholders would approve the deal, and that in any case, an insolvency event would be a Light Touch Provisional Liquidation under Bermuda law.

“Under a Provisional Liquidation (PL), they will essentially be restructuring the company with the expectation of exiting this structure in the future,” said one source.

There remain, though, myriad questions about the company’s governance, as well as the future of its legacy arm, which market sources say is now drawing interest from potential bidders. Expect developments in the coming weeks.

The Pru goes Hong Kong hunting

With a general election fast-approaching that Labour is odds-on to win, there is a growing premium attached to having well-connected political figures from the left on company boards. So shareholders in Prudential, the London-listed but Asia-focused insurance group, will be relieved to hear that Baroness Vadera, the former Labour minister who has chaired it for the last three years, is going nowhere.

I hear, instead, that the Pru has instructed headhunters at Spencer Stuart to help recruit a deputy chairman – a new position on its board. The additional director is, I understand, likely to be plucked from Hong Kong’s financial elite, reflecting the company’s geographical bias.

Anil Wadhwani, the Pru chief executive, has signalled his belief that Africa will also be of increasing focus for the group over the next decade, arguing that the continent presents an opportunity rivalling that of Asia. He has insisted that questions about the company’s domicile, its joint headquarters in London and Hong Kong, and dual listing in those cities, are not a priority at the moment. It would make sense for that to be reviewed at some point during his tenure.

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