Welcome to your weekly corporate governance briefing. In this issue, we look at the value of consultants, and the future of Odey Asset Management after its founder was accused of sexual misconduct. Before we get into today’s newsletter, don’t forget to get in touch about our AOB section. Overheard any nuggets of wisdom or wit in the boardroom that you might like to share? Email me your offering and I will consider it for inclusion (anonymised where appropriate, of course). As always, the latest stories and resources are on ft.com/board-network-members. If you have any membership queries, email [email protected]. Feel free to forward this newsletter to other directors. They can join FT Board Network via ft.com/board-network. Thanks for reading. Pink slips for ‘thought leaders’
Companies are rethinking consultants as they fret about the economic outlook © FT montage Cynics often point out that management consultants are ubiquitous and, once embedded, hard to get rid of. The latter is virtually part of the model at the largest firms, who fight hard for repeat business. But both the omnipresence and persistence of consultants are in question. Researchers at Bristol and Cardiff universities found, in a paper published in 2018, that seven countries accounted for some three-quarters of the global consulting market. Elsewhere in the world, companies take advantage of alternative sources of advice and support, from industry associations (as discussed here last week) to family business networks and government agencies. In other words, there is no hard and fast rule that you have to hire Boston Consulting Group or Deloitte, for instance. What is more, boards in the US, which heads the table of consultancy use alongside the UK, are starting to wonder whether they are getting their money’s worth from their advisors. A new report by Source Global Research shows more than three-quarters of US professional services buyers have cancelled some projects or scrapped new ones. Fully two-thirds have paused all existing project work. A growing number of companies expect fee rates to come down. No wonder consultancies are laying off staff. To an extent, this is the same old story that is repeated every time the economy turns down. Some reasons for looking for outside advice do not change. Boards and executives can still benefit from external views on strategy. It is sometimes easier to hire consultants to provide ready advice in novel areas outside the company’s core competencies, such as the use of artificial intelligence. (That is, of course, another reason why consultancies are veritable factories of “thought leadership” about how fast the world is changing.) Still, it is no longer quite enough for boards to justify renewing a consulting engagement on the grounds that “nobody ever got fired for hiring McKinsey” or Accenture or PwC (which faces its own issues in Australia over a tax leaks scandal). Big consultancies will survive. They almost always do. But if outside pressure makes buyers scrutinise consultants more closely, and forces sellers to raise their game, so much the better. Chart of the weekThe recreational vehicle is the “classic disposable income and interest rate sensitive item,” according to Michael Hicks, an economics professor at Indiana’s Ball State University. Hicks sees a drop in RV sales as a harbinger of economic gloom. Indeed, since 1985, a decline in camper sales has been closely correlated with recession. Data suggests the economy may be heading for a bumpy road – RV sales have plummeted in the past two quarters.
| Odey Asset Management to be broken up | Leadership: The firm is seeking to place funds and staff with rivals after struggling to stem a spiraling crisis kicked off by allegations of sexual misconduct by founder Crispin Odey. | | | JPMorgan to pay up to $290mn to settle Epstein accusers’ lawsuit | Legal: Court filings suggest employees for years debated continuing the bank’s relationship with the sex offender, who nevertheless remained a client despite his 2008 guilty plea for soliciting a minor. | | | Microsoft-Activision Blizzard deal temporarily blocked by US judge | M&A: The gaming industry’s biggest deal has been put on hold following a request from the Federal Trade Commission to block the $75bn transaction, until after internal proceedings determine whether the tie-up flouts anti-trust laws. | | | EY chief Carmine Di Sibio to retire after failure of split plan | Leadership: The global head of EY will retire next year after Project Everest, his plan to spin off the accounting firm’s consulting arm, fell apart amid bitter infighting. | | | | Best from elsewhereThe Consequences to Directors for Deploying Poison Pills | ECGI Working Paper Series Directors on boards that employ a poison pill to thwart a takeover attempt suffer several adverse consequences. These consequences include a decrease in reelection votes, a greater chance of being fired from the board and a decrease in the likelihood of being appointed to other boards, researchers found. Governance in the Age of Technological Innovation | Insead Directors Forum The board’s role is expanding as new technology drives greater interconnectedness between companies and sectors. Directors will need to learn how to harness their influence across internal and external business ecosystems in this new interconnected space, according to this fascinating report. How to Support Employee Productivity and Inclusion in a Fast-Changing Workplace | London School of Economics Business leaders can unlock productivity in their workforce by granting employees more autonomy over when and where they get work done. That’s according to a qualitative study of 100 financial and professional workers by LSE researchers, who also urged leaders to cut time sinks like excessive meetings.
From FT Specialist’s AgendaEU climate rules top of mind for global companies Multinationals around the world are girding for the EU’s new climate disclosure directive, which is far broader in scope than other regulatory regimes’ approach to emissions reporting. Compliance could be “key to remaining competitive in Europe.” AOBMeredith Whitney, once known as the “Oracle of Wall Street” for her prediction of the Great Financial Crisis, is relaunching her firm and predicting that there will be many fewer banks in the future amid headwinds like a potential US housing market slump and new bank regulation. Have words of wisdom to share? Email me. |