Sir John Banham (chairman): Good morning everyone. This is the beginning of an entirely new chapter in the life of UK plc and I think it is right that we begin our board meeting with a discussion of how we think the board is going to add value to the business. That’s why we’re here and you’ll be thrilled to know, therefore, that I do not intend to talk at all about the niceties of UK corporate governance. In my experience I’ve seen more value destroyed by undue adherence to the latest corporate governance fashion than I’ve ever seen created by it. Just as the role of the US Senate is to advise and consent, so it seems to me the role of the board is to advise executive management and to consent to major proposals that management might put forward. By “advise” I mean advise on strategy because it must be the most important aspect of any business that it has a strategy that makes sense. Legend has it that someone once asked a major UK retailer, probably Marcus Sieff, what were the key factors for success in his business. His reply was “Location, location and location.” Nowadays most chairmen of major plcs ought to be replying “Strategy, strategy and strategy” – or perhaps in an era of a knowledge-based economy it ought to be “People, people and people.” There are a string of developments which are going to affect UK plc in the way it operates and our first job is to be absolutely sure that we have in place a strategy that reflects, and is robust, in these circumstances. The sorts of thing I have in mind are the effect of the digital revolution and of the euro; the major demographic and socio-economic changes that are underway; and the way that regulators are going to dramatically affect almost every business. We also need to understand the likely changes in domestic and international policy and politics. As we think about our strategy for UK plc we have to be able to answer the most important question of all: to what customer problem or opportunity is this a solution? If you’ve ever asked that question of somebody selling equity derivatives you’ll know what I mean. Of course, deciding strategic direction is the easy part. What really is difficult, to borrow John Harvey-Jones’s words, is making it happen. We need to make sure that we’ve got the systems in place, the structures, the skills, the management style – and they all need to be pointing in the same direction. So much for “advise”, what about “consent”? We will probably look at 100 items on our board agendas over the coming year and frankly, for 95 of those, we could all be on holiday. We could just nod as they went past and we will add no value, but with five of them – or maybe only two a year – we will be literally betting the future of the business, and we need to make sure that on our watch serious mistakes do not happen. The key thing for the board is to make absolutely sure that we recognise these two or three things coming towards us and that we clear the decks and make absolutely sure that we devote all the time necessary to getting these two or three things right. Finally, there’s another role for the board beyond advising and consent: we need to be sure that we are properly managing our relationships with our key stakeholders – the people whom are employed in the business, our suppliers, the local communities and most importantly in this context, the financial markets, the people who own us. This is not easy. If we get it wrong two things will happen. Firstly our strategic strength will be seriously impaired. A lagging share price and a low rating will mean that we are constrained as we consider our strategic opportunities to acquire other businesses. When I took over as chairman at Kingfisher some three-and-a-half years ago, the City analysts disliked our corporate conglomerate structure. They thought that each of our UK businesses was in serious trouble. They had driven the share price down to something like £2 a share; last night it closed at around £8.30 a share. The one conclusion you cannot draw from what’s happened is that a chairman makes any serious difference. The lesson you ought to be drawing is that somehow or other there was a complete mis-communication between the business and the financial markets, and as weetsÿ¯.
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