The announcement in March last year of a proposed €29bn merger between the London Stock Exchange Group and Deutsche Börse looked set to be the crowning achievement of Xavier Rolet’s eight years as chief executive of an institution at the heart of the City of London.
The French former Lehman Brothers investment banker had restored the LSE to global leadership with a series of visionary deals. His bold, risk-taking style won him many devotees among investors who profited from the swift rise in its share price.
Then came Brexit. The UK’s vote in June 2016 to leave the EU scuppered the Deutsche Börse deal and raised questions over how long Mr Rolet should remain in his job. That has now broken out into a bitter public dispute, embarrassing the LSE board and threatening to undermine its role in encouraging high standards among public companies. The exchange now faces profound uncertainty over its future.
The disintegration started on October 19, when the company announced that Mr Rolet had agreed to step down next year and play a role in finding his successor. Donald Brydon, the City grandee who chairs the company, was effusive about Mr Rolet’s “remarkable achievements”. In return, Mr Rolet reminisced about his record of “taking certain risks and making bold moves”.
Two weeks later, the exchange’s careful choreography was destroyed. The Children’s Investment Fund, a 5 per cent LSE shareholder run by the activist investor Sir Christopher Hohn, accused the exchange’s board of dismissing Mr Rolet. It has called an extraordinary general meeting next month to vote on removing Mr Brydon and restoring Mr Rolet to his job until 2021.
Mr Rolet’s management style lies at the heart of the affair. He is a charismatic figure who has revived a moribund institution often disliked by its biggest customers when he took over in 2009. By rebuilding those relationships and a series of ever-larger deals, the LSE has gone from a mid-tier share-trading venue worth £800m into a £13bn data and clearing powerhouse.
That earned the chief executive many admirers — but the same qualities that drove his success have affected his relationships with close colleagues, and board members. Many of those who have worked with him describe him as a brilliant strategist but also domineering and sometimes rude. They also say that he often does not listen enough to other people.
“He is brilliant, ferociously bright, incredibly decisive, and very opinionated,” says one former adviser to the company. “He can be in broadcast mode at times,” says another, referring to Mr Rolet’s tendency to deliver long lectures. A number of people who have worked with him say he often stops listening in meetings and starts sending emails on a mobile device.
Boardroom conflict: LSE executives at loggerheads
Xavier Rolet, CEO
Education: Marseille Business School; French Air Force Academy; Columbia Business School
Interests: Beekeeping, viticulture, rally driving, fishing
Top posting: Co-head of global equity trading for Lehman Brothers in New York
Donald Brydon, chairman
Education: George Watson’s College, Edinburgh; University of Edinburgh
Interests: Music and opera, golf, watching Reading FC and collecting first world war postcards
Top posting: Deputy chief executive of BZW; chairman and chief executive of Axa Investment Managers
Four sources close to the board say its relationship with Mr Rolet has rapidly deteriorated in recent months.
The tension has not been confined to the LSE’s City headquarters. Several outsiders say they have seen email trails between Mr Rolet and his board members revealing fierce disputes. One centred on who would represent the LSE on an important City advisory group on Brexit. Mr Rolet clashed by email with Mr Brydon and then irritated some at the meeting by dismissing their views.
“It’s pretty obvious that there’s quite a bit of tension [between Mr Rolet and his chairman],” says one of the people who has seen the emails.
Other executives say he did not share information easily and sometimes sent accusatory emails. They say that Intercontinental Exchange, a US rival, has become a frequent source of irritation. During the attempt to merge with Deutsche Börse, Mr Rolet called ICE a “slash-and-burn” organisation, whose seven-month ownership of European rival Euronext was a “disaster” that “eviscerated” the company. Those comments prompted the Takeover Panel to force a clarification from the LSE.
To longstanding LSE employees, the board clashes remind them of the disputes between Mr Rolet and Chris Gibson-Smith, the exchange’s previous chairman, who left in 2015. By the end neither man was talking to the other, according to two people familiar with the relationship. “It was pretty bad,” says one. Mr Gibson-Smith could not be reached for comment.
Mr Rolet has not spoken publicly about his position, since both he and the company are bound by legal confidentiality over the terms of his departure. The LSE has declined to discuss the reasons for Mr Rolet’s departure. Mr Rolet could not be reached for comment on this article.
In recent months Mr Rolet has indicated that he planned to stay on for longer than anticipated before the Deutsche Börse merger fell apart, according to two people with whom he discussed his intentions. At a lengthy investor day in June, Mr Rolet was allowed to present the LSE’s longer-term plans. Investors have shrugged off the Deutsche Börse deal failure and the share price has risen by a quarter since the LSE said it was unlikely to proceed. At the same time, David Lester, head of strategy and tipped as a possible successor, left after 16 years.
Mr Rolet’s longer-term plans jarred with the board’s succession plans and in particular with Mr Brydon, an experienced City chairman who has held the role at Sage Group, Royal Mail, BZW Investment Management and the London Metal Exchange. “Brydon is not a pushover, he’s a strong man,” says one person who has worked with him.
The LSE board includes senior figures such as Mary Schapiro, former head of the US Securities and Exchange Commission, the US equity markets regulator, and David Nish, former chief executive of Standard Life. It is standing behind the chairman and its decision to begin the search for Mr Rolet’s successor.
The blow-up comes at a sensitive moment for the LSE, when London’s role as Europe’s financial centre is at risk from Brexit. The exchange is chasing the listing of Saudi Aramco, which provoked opposition from some investors over governance standards and is trying to secure prized City business, such as clearing, as the UK prepares to leave the EU.
Mr Rolet has predicted that as many as 100,000 City-related jobs could be at risk if the parts of the unglamorous clearing industry — which manages the risk of open deals on the world’s securities and derivatives markets — is forced to decamp to the EU. Other executives have openly dismissed the predictions. “The idea of 74,000 jobs being at risk is ridiculous, it’s more like 74,” John Cryan, chief executive of Deutsche Bank, said this week.
The dispute could attract fresh attention to the LSE from ICE or CME, although both US exchanges are cautious about doing a deal in the UK, amid the political and economic uncertainty of Brexit. The fight also threatens to undermine the institutional integrity of the City of London. Regulators at the Financial Conduct Authority and the Bank of England are watching the outcome closely, given the LSE’s critical role in financial markets trading and plumbing.
The dispute has already gripped the City of London, with many advisers and bankers calling and emailing each other privately to discuss it. Most regard the stability of the exchange as the most vital matter. “What would it say about London if Hohn were allowed to win?” asks one.
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