It was back in March that chief executive Arun Sarin ruthlessly succeeded in clamping down on the old guard at Vodafone’s management, who were critical of his management style. Sir Christopher Gent, the man accredited with turning Vodafone from a small mobile UK-based operator into the largest mobile operator in the world, resigned his position as President for Life.
Gent’s resignation came hours after one of his principal allies, Vodafone’s chairman Lord MacLaurin of Knebworth, publicly backed current Sarin.
Reports of bitter board dispute first emerged on February 27, when Vodafone shocked the markets with a warning that its growth rate was to slow to between 5% and 6.5% in fiscal 2007, compared to a forecast 6% to 9% this year. It also said that between 23bn and 28bn pounds ($40bn and $48.7bn) would be wiped off from the value of Vodafone’s assets, mostly related to its $188bn takeover of the German conglomerate Mannesmann AG.
The boardroom meeting prior to this announcement to discuss the asset write-down reportedly got heated at best as a group of old guard board members thought to be loyal to Gent sought to oust Sarin, due to his readiness to consider offloading Vodafone’s crown jewels, namely its wireless assets in Japan and the US.
Sarin survived but the following weeks were dominated by bitter back-biting and an apparent whispering campaign against Sarin. This added to the already poisonous atmosphere after a number of frustrated Vodafone shareholders openly questioned Sarin’s leadership and global strategy, and called for asset sales in order to ensure greater returns for shareholders.
It didn’t take long for Sarin to begin his fight back, and one of Gent’s old guard was soon given his marching orders, with departure of chief marketing officer and executive director Peter Bamford in March. Another Gent man, Vodafone’s deputy chief executive Sir Julian Horne-Smith, is scheduled to leave the company in the summer, and former finance director Ken Hydon departed after the company’s annual meeting in July last year.
Following these high profile departures, all eyes then turned to two people: Penny Hughes, chairman of Vodafone’s remuneration committee, who was also reportedly one of those Vodafone’s executives with misgivings about Sarin, and MacLaurin, who despite his declaration of loyalty to Sarin, is scheduled anyway to be replaced this year by HSBC chairman Sir John Bond.
In April it was revealed that MacLaurin would remain with Vodafone, after accepting two minor roles with the operator. His roles are as an adviser to the operator, and chairman of the charitable Vodafone Group Foundation. The market interpreted that decision as MacLaurin’s reward for his public backing of Sarin.
The other remaining likely candidate for the chop was therefore non-executive director Penny Hughes, who has been on the Vodafone board since September 1998. She has decided not to seek re-election at the AGM, said the operator in a statement.
Penny Hughes has been a fine, active non-executive director and did an exceptional job for Vodafone when chairing our Remuneration Committee, said MacLaurin in a statement.
Once Hughes steps down, along with MacLaurin and Julian Horne-Smith, at Vodafone’s AGM on July 25, Sarin will have appointed all the current executive directors at Vodafone.
The other change is the replacement of Paul Hazen, who is currently deputy chairman and senior independent director. Hazen has been on the board since 1999, but he will be replaced by Vodafone board member John Buchanan. Buchanan is also currently the chairman of the UK orthopaedics group Smith & Nephew Plc.
According to reports, investors and shareholders were worried over Hazen’s apparent lack of independence, because of his strong ties with Sarin. Hazen was formerly a director at AirTouch, the US group bought by Vodafone in 1999 and where Sarin worked for 17 years. He is also currently chairman of Accel-KKR Telecom which Sarin ran for a while.
There has been speculation in the UK media that shareholders are unhappy over the way that Sarin has tightened his grip on the board. Shareholders are also reportedly upset that Sarin (via his neutered chairman MacLaurin) has cancelled shareholder meetings until the new chairman takes over. This has effectively removed the opportunity for shareholders to air their grievances with Vodafone’s management.
Vodafone is set to publish a strategic review at the end of May, aimed at allaying investor concerns over slowing growth in Europe and its recent retreat from Japan, when it sold its profitable Japanese operation to the Japanese internet service provider Softbank Corp.
Vodafone did not respond to Computer Business Review’s request for an interview.
