Low Grade performance at ITV

October 17, 2009

GradeIt’s a bit rich of Michael Grade, outgoing chairman of ITV, to blame the media for a mess substantially of his own making.

Here’s a sample of Grade in action. Asked by Lord Fowler, chairman of the House of Lords communications committee, whether he was surprised about the length of time the process of finding a successor was taking, Grade replied as follows:

“What surprises me is the extent to which this has been played out in the public arena, which is unfortunate. We are certainly not short of advice from our colleagues in the fourth estate. Coming into work each day, I feel as though I am inhabiting a parallel universe…the ITV business is going very well.”

Really, Michael? If it were going that well, you would still be in a job and we would be deprived of a riveting media circus, featuring acts of startling incompetence by leading ITV executives, non-executive directors, head-hunters and, last but not least, ITV shareholders. Thank goodness some of the people below board level seem to know what they are doing.

Unpicking all this: once Grade’s ‘high-production value’ strategy was poleaxed by the recession, he was toast. Herein lay the first problem, because he then proved as amenable as a sea anemone asked to vacate its favourite rock at low tide. All right, he’d give up day-to-day management as chief executive, but he was going to cling on to being chairman come what may, albeit of the non-executive variety.

Grade’s contempt for corporate governance (the Higgs Report specifically calls for the roles of ceo and chairman to be split in public companies) is a lesson for us all and Sir Stuart Rose at Marks & Spencer in particular. Allowing Grade to combine the two roles in the first place was a fiasco in the making for which the ITV board and shareholders must also bear responsibility.

We are now seeing the results of that misjudgement played out. Grade, in staying on, evidently hoped to persuade some youngish, pliable patsy with digital experience to be chief executive, while he continued to lord it over the board. Simon Fox, ceo of a resurgent HMV, self-evidently had the digital experience, but proved no one’s patsy when he turned the job down. Matters were not helped at this juncture by a group of self-appointed ‘activist’ shareholders (Legal & General, Brandes and Fidelity), who insisted on having Tony Ball as ceo come hell or high water.

Ball is an able executive, who did well at BSkyB. But there were two things wrong with his candidature from the start. To begin with he is very greedy. His demands (a package of up to £30m over 5 years was reported) were politically unacceptable in the present climate and caving in to them would have made Sir James Crosby, the ITV non-executive director charged with finding a Grade replacement, look even more foolish – if that were possible in the wake of his ill-judged escapades as HBOS chief. Then again (not that this troubled our militant shareholders), no one who actually worked at ITV seemed to want Ball. Why? Because it would be like letting Alaric the Goth into Rome: after comprehensive sacking, the place would never be the same again.

As it turned out, these anxieties were academic. Ball over-reached himself, not only with the grossness of his financial demands, but in his determination to put his stamp on Grade’s successor as non-executive chairman. Only then did the ITV board and Russell Reynolds the headhunters seem to wake up. They’d got it all topsy-turvy: sure, they needed to replace Grade, but it was the wrong Grade they were replacing. Grade the chairman should have preceded Grade the ex-ceo. Duh! At least Grade has now had the grace to do what he should have done months ago: step down unequivocally.

Has the selection “committee” learned anything else from its mistake? Not really. Shareholders still seem set on a deluded course of appointing a chief executive whose brief is to be “anyone but ITV chief operating officer John Cresswell or any other ITV insider.” If I were Cresswell, I too would be leaving – having been bridesmaid at too many weddings.

Which is unfortunate, since Cresswell is rapidly emerging as the only sound candidate for ceo by default. Anyone who, like me, has grown a little confused about who remains in the race would do well to turn to Mediaguardian, where they will find a handy visual device entitled The Big Cheese Chart. It’s a perceptual mapping graph that plots the fortunes, or otherwise, of those who are contending for the crown jewel roles at ITV and Channel 4. To outward appearances, the process of digging ITV out of the mire looks stalled. All the credible City types selected by shareholders as suitable chairmen have ruled themselves out, with the exception of former BBC chairman Sir Christopher Bland. And without a chairman, there can be no hope of a chief executive either.

Interestingly, given the unpromising turn of events, ITV’s share price has soared 16 % this month – well above the market average. I would put this down less to the fact there is about to be a resurgence in the media sector’s fortunes and more to the fact that ITV has become such a basket case that only a takeover of some sort can solve its problems.

The question is, who would want to take it over? Whoever these people might be, they’ve already missed a bargain-basement opportunity, when the ITV share price was in the low 20ps earlier this year (it’s now back to about 50p). And that’s not even to consider any other obstacles in the way. Such as: ITV no longer has a USP, it has no credible digital strategy, a huge pension deficit and an over-manned sales force.

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