Davis Puts David on the Spot; CITY&FINANCE

Daily Mail (London), July 2, 2004 | Go to article overview

Davis Puts David on the Spot; CITY&FINANCE


Byline: ALEX BRUMMER

NO company chairman wants his departure announced through a leak to the BBC's 10 o'clock news. For someone like Sir Peter Davis, who has scaled the dizzy heights of business at Reed, the Pru and latterly Sainsbury, it is a humiliating parting of the ways.

One cannot help but think that Davis, for all his qualities, failed to align his own interests with those of employees and the broader body of shareholders (of whom I am one).

It ought to be a golden rule in business that big remuneration packages should only come with performance. Sainsbury may have performed better than the Footsie during Davis's five years at the helm, but it has gone backwards in market share and earnings have gone nowhere. Yet over this period he has taken [pounds sterling]10.4m out of the company.

Davis managed this because he was able to keep the family's blind trust, run by Judith Portrait on behalf of Lord (David) Sainsbury, on side. But while Davis focused on the family shareholders, with 38pc, City institutions were impatient (details Page 81).

They saw [pounds sterling]3bn of capital investment vanish down the plughole without proper returns. When we on these pages sought to draw attention to flaws in the company's new expensive information technology and warehousing systems, it demanded a retraction.

It now turns out that the chief executive Justin King will have to run old warehouses parallel with the new distribution systems because the handling of the investment has been so poor.

Over the coming months as Philip Hampton, the new chairman, and King seek to come to grips with the company's failures, we can expect to see some sort of kitchen-sink job. There are likely to be big writedowns of non-food stock as the company flogs it off cheap. There will also be writeoffs of the distribution kit.

This hit, together with those being taken on sales and margins, means there are some meagre days ahead before Sainsbury can start running again. It looks to be a far sicker company than Marks & Spencer. …

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