NEW YORK TIMES
Chief Is Toppled at British Aerospace
By STEVEN PROKESCH,
Published: Friday, September 27, 1991
Sir Roland Smith, the chairman of British Aerospace P.L.C., is resigning after a reported rebellion by large shareholders and the board of the company, which is Britain’s largest military contractor and exporter of manufactured goods.
By several accounts, Sir Roland’s downfall is a result of a clumsily handled share offering now under way, a sharp drop in the company’s profits, an autocratic management style and differences over the company’s efforts to diversify from the military and aerospace businesses.
“Some institutional investors have been very upset,” said an investment manager at a large British insurance company, who insisted that he not be named.
British analysts and newspapers said board members and senior executives, including Richard H. Evans, British Aerospace’s chief executive, were irritated by Sir Roland’s strong will and his tendency to act on his own.
“The professor’s style was a little bit more abrasive than other directors liked,” said Keith I. Hodgkinson, an analyst at Lehman Brothers International Ltd., referring to Sir Roland, a longtime marketing professor. “He would tend to dictate.”
Some analysts wondered today whether Sir Roland’s ouster would cause British corporations to question whether someone could really serve effectively as the chairman of several companies at the same time, a common practice here. Sir Roland was chairman of seven or so companies and a director of several others.
Unlike chairmen in the United States, chairmen of British companies often are not also chief executives and may not be deeply involved in the hands-on management of the company.
British Aerospace’s board said Sir Roland would be replaced temporarily by Sir Graham Day, the 58-year-old chairman of Rover, the car company that British Aerospace bought from the British Government in 1988. Sir Graham is also chairman of Cadbury Schweppes, the food and drink company, and Powergen, a new investor-owned power-generating company. He is a director of several other companies, including the Laird Group P.L.C. and Thorn EMI P.L.C.
Sir Graham said he would relinquish his duties temporarily at Rover and the other companies to devote time to British Aerospace. Efforts to reach Sir Roland, Sir Graham and Mr. Evans today were unsuccessful.
This is hardly the first board room coup at a blue-chip British corporation. The chairman of Midland Bank, one of the nation’s largest financial institutions, was toppled last March after the board decided he was not moving fast enough to revive the troubled bank.
Still, the abruptness of the British Aerospace announcement, coming late Wednesday night after a reportedly stormy board meeting, shocked many in the country. “The British way is to retire the person gracefully,” said Nigel Nicholson, director of the Center for Organizational Research at the London Business School.
In a front-page article today, The Independent, a British newspaper not given to sensationalism, called the resignation “one of the most spectacular and brutal board room coups witnessed in many years.” Several newspapers said Mr. Evans was a leader of the group of outside directors and senior executives who demanded Sir Roland’s resignation, which becomes effective Oct. 7.
Sir Roland, 62 years old, has been chairman of British Aerospace since 1987. He oversaw its diversification into areas like cars, real estate and construction. He has also been pushing the company to form partnerships in the aerospace business to reduce the high costs and risks involved in developing and building new products.
Like contractors everywhere, the company has been struggling to adjust to an era of much lower military spending by Britain and other countries.
Even the addition of different products has not helped much in these tough times. The British and American recessions and the economic slowdown in other European countries have depressed Britain’s real-estate and car businesses. Orders for civilian aircraft fell because airlines were hit hard by the recessions and a drop in passengers during the war against Iraq.
On Sept. 11, British Aerospace announced that its pretax profits in the first half of this year had plunged by 49.4 percent, to $:86 million ($139.4 million). It also disclosed that it expected a program to overhaul its businesses, which includes cutting about 10,000 jobs, to cost $:520 million ($900.9 million) by the end of 1993. As a result, the company said it would take a charge against earnings this year of about $:250 million ($433.1 million).
That means the company will suffer a pretax loss of about $:100 million ($173.3 million) for the year, Mr. Hodgkinson, the Lehman Brothers analyst, predicted.
Sir Roland’s problems culminated this month when plans for a $:432 million ($748.4 million) share offering by British Aerospace leaked out, depressing the company’s stock price.
In trading on the London International Stock Exchange, British Aerospace’s shares closed today at $:4.28 ($7.42), up 3 pence (5 cents). Earlier this month, the stock had plunged to a low of $:3.95 from $:5.55 on Sept. 8. Its 1991 high is $:6.64.
In a statement issued late Wednesday night, Sir Roland said: “In order to end damaging speculation about the future of the company, I have decided that it would be in the best interests of British Aerospace if I resigned now so that the management of the company can implement its strategy without any of the uncertainties which have surfaced since the announcement” of the share offering.