Mike Wells could front an ad for laid-back charm and American teeth but as head of the Prudential he gives out tough love.
On Thursday, he sunk his pearly-whites into a problem that long eluded his predecessors. He is putting M&G, the group’s fund management arm, in its place, clamping it together with the Pru’s life assurance business.
It solves many problems. M&G, with its strong UK bias, and the Pru’s mature UK operations, including annuities, lack the pizzazz of their American and Asian counterparts and look out of place in the Pru’s line-up.
If parcelling up the UK business accelerates the shift to a more capital-light structure, that is to the good.
It will be all the better if it attracts buyers, if only for the annuities book, and hearten shareholders who have pressed for a Pru break-up for at least a decade. In the meantime, the new UK division will share a letterhead and a budget.
Mr Wells expects to extract about £145m a year in cost savings. That could lift UK operating profits by a tenth.
The orthodontically-radiant Mr Wells semaphored another message to staffers who might bare their teeth at the new order. Just look around, he says. Six fund management groups are going through pain of merging with rivals just now. This way, M&G escapes that.
Why didn’t it happen before? The Pru talks about a confluence of circumstances. M&G’s performance is recovering. Prufund, the Pru’s rejigged with-profit business, is gaining ground thanks to the needs of cash-rich, time-poor individuals for smoothed investment returns.
But the merger would not have happened under Michael McLintock, who headed M&G until last year.
He orchestrated the Pru’s toppy purchase of M&G in 1999 and was fiercely protective of his creation.
He was also for a while the Pru’s highest paid director and a contender for the chief executive’s job.
Anne Richards, his successor brought in to cut M&G down to size, will be co-deputy chief executive of the new M&G Prudential. Her boss will be John Foley, currently head of the Pru’s UK insurance business. She will sit as his deputy alongside Clare Bousfield, currently Mr Foley’s right-hand woman.
Whatever the name, there is no mistaking where the power lies.
ENRC: Not so privileged
Do we really need lessons in legal best practice and governance from our old chums at ENRC — the miner that remains one of the only two FTSE 100 constituents to date to hail from Kazakhstan, Borat’s old stamping ground?
You might think not, says Jonathan Ford. Once described as “more Soviet than City”, the group delisted from London in 2013 amid fierce recriminations and ruthless purges of disillusioned non-execs by its Kazakh owners.
Nonetheless, and a little bizarrely, ENRC (now renamed ERG) is at the centre of an important wrangle about the legal rights of companies cast under suspicion by the claims of whistleblowers.
The case dates from 2010, when an informant told the company that there was corruption in its ranks. The board dispatched lawyers to investigate and they duly disgorged dozens of lever-arch files of interviews and data.
The problem came when Britain’s Serious Fraud Office launched a criminal investigation.
ENRC said that reams of the stuff was legally privileged and refused to hand it over. The SFO disagreed, went to court to be permitted to obtain certain documents, and won, a judgment against which ENRC now hopes to appeal, although it has yet to receive leave to do so.
Without actually reading the documents in question, it is hard to know what lies behind all this.
But ENRC has grounded its beef in the legal idea that communications between a company and its lawyers should always be private.
It argues that it is being punished for “doing the right thing”. Had it swept the case under the carpet or not investigated it diligently, it would not now be handing over potentially sensitive evidence to the SFO.
While superficially persuasive, this is actually a curious line of reasoning. Directors of UK companies have wider duties to consider than legal tactics when informed of possible wrongdoing. They must get to the bottom of what happened, and co-operate fully with the authorities if anything fishy has indeed transpired.
Legal privilege is an important principle, but extends only to the advice a lawyer offers its client and to documents created for the purpose of obtaining advice in connection with litigation. It does not extend to concealing facts beyond that.
The real truth about legal privilege is that it encourages companies to use costly lawyers on sensitive cases in the hope of asserting privilege and thus keeping everything under wraps.
That’s a nice earner for lawyers. Predictably, the Law Society has rushed to condemn any curtailment. A glance at the fees charged by Decherts, the law firm that did the Kazakhs’ digging, tells you why solicitors might be anxious. The bill? A cool £16.3m.
Law on privilege: firstname.lastname@example.org