BAT Smokes Out New Chair as Governance Reforms Hit Boards

Sky News has learnt that the board of BAT – the UK’s largest cigarette maker by market value – has instructed headhunters at Korn Ferry to find a successor to Richard Burrows.

Mr Burrows, who has chaired the Lucky Strike manufacturer since November 2009, is the latest in a string of blue-chip chairs who have become ‘timed out’ by governance changes which mean they lose their independence after holding a boardroom role for more than nine years.

The news of his impending exit comes just days after BAT’s new chief executive, Jack Bowles, took over from Nicandro Durante.

BAT’s intention to begin succession planning for the chairman’s role was disclosed in its annual report, published late last month, but has not previously been reported.

British American Tobacco headquarters in London
British American Tobacco headquarters in London

In the document’s nominations committee report, the company said: “The board considers the length of service of the members of the board as a whole and the need for it to refresh its membership progressively over time.

“Board succession planning remains a priority for the committee in 2019.”

It said directors had “given careful consideration to director transitions to ensure orderly board succession” and this year would be “focused on succession planning for the chairman and will have close regard to the requirements of the new Corporate Governance Code”.‎‎

Mr. Burrows, who also sits on the boards of Rentokil, the pest controller, and brewer Carlsberg, has retained a low profile relative to the £71.5bn market capitalisation of BAT.

A former governor of the Bank of Ireland, he is expected to step down by the time of next year’s annual shareholder meeting.

Richard Burrows to step down from BAT
Richard Burrows is to step down from BAT

The search for his successor is being run at board level by Kieran Poynter, BAT’s senior independent director.

While corporate governance watchdogs offer some flexibility to the nine-year rule for company chairs, the expectation is that dozens of FTSE-100 businesses will have to undertake earlier-than-expected searches for new chairmen.

Among those which have acted to comply with the new guidelines is Babcock International, the engineering group, which last week announced the appointment of its first female chair, Ruth Cairnie.

GVC Holdings, the betting group which owns Ladbrokes, is accelerating a search for Lee Feldman’s successor as chairman following a row over the sale of shares by him and the company’s chief executive.

At BAT, the change of leadership – which also includes the appointment of a new finance chief – follows a sector-wide share price decline prompted by investor concern over slowing sales growth.

Dunhill cigarettes made by British American Tobacco
Dunhill cigarettes are made by British American Tobacco

The ‎changing of the guard at the Lucky Strike and Dunhill maker came little more than 18 months after BAT announced the takeover of US tobacco group Reynolds in a $49.4bn deal.

Shares‎ in the company have, though, slumped by more than a quarter during the last 12 months amid declining growth in core tobacco products and uncertainty about the future success of its range of so-called next-generation products.

The latter category, which includes BAT’s vaping brand, Vype, and Glo, its tobacco pipe, are an increasingly important driver of cigarette manufacturers’ profits.

Under Mr. Durante, BAT’s efforts to grow its next-generation division included a number of acquisitions, including Ten Motives, a UK-based e-cigarette company.

His successor said last month that ‘new category’ products would generate £5bn in sales by 2023-24.

BAT’s London-listed rival, the Davidoff and West-maker Imperial Brands, ‎has also seen its shares slide during the last year.

It, too, is seeking a successor to its long-serving chairman.

Despite its weak share price performance, BAT remains one of the five largest companies in the FTSE-100 by market value.

BAT declined to comment on the appointment of headhunters to find Mr. Burrows’ successor.

Source
Author: Mark Kleinman