Different non-executive directors have different core competences. Some are good at passing the port with an avuncular smile. Others are good at garrotting double agents with piano wire. A board needs strength in depth, which is why BP has hired Sir John Sawers, former head of MI6.
Surprisingly, no one seems surprised that a real life “M” has joined the leadership team of the oil company. To be fair, Sir John spent just five years running the UK’s foreign secret service, where strategy was his thing, rather than strangling traitors. Before that he was a career diplomat, notably ambassador to Egypt.
The oil minister of Berserkistan could still feel nervous of Sir John if he believes the non-exec saw the saucy snaps taken of him at that honey trap in Istanbul in 2003.
For the 74-year period during which the UK government held a big stake in BP, the company was suspected in the oil industry of providing MI6 agents with cover, via foreign jobs. Such stories may well be urban myths, universal in character if specific in local detail. A big US insurer is rumoured on Wall Street to have a similar relationship with the Central Intelligence Agency.
These tales are erosive of trust, as illustrated by the problems that Huawei, a Chinese telecoms group reputedly linked to the People’s Liberation Army, has in winning US contracts. US IT companies such as Cisco complain they face similar difficulties in China.
Sprinkling boards with ex-spooks is a funny way for companies to demonstrate their arm’s length relationship with the state. The riposte is that in most of the world, all large companies are assumed to harbour spies. At any rate, Sir John could find he has interests in common with Igor Sechin, chairman of BP’s Russian partner, Rosneft. Mr Sechin is widely believed to have served in the KGB.
The joke in the City is that British Land built a skyscraper nicknamed “The Cheesegrater” so it could look down on Land Securities, whose “Walkie Talkie” is shorter. Over-reach and tall buildings have been toxic twins since the Tower of Babel. This is a point investors should recall as they assess annual results from BL and its larger rival.
BL has reported first, with Land’s numbers due next week. On the face of it, the BL team led by Chris Grigg has performed impressively. Net asset value — the sliver of the property portfolio attributable to each share — is 20 per cent higher at 829p. Profits before tax rose 5.4 per cent to £313m.
NAV is the preferred measure of performance in real estate, because profits can be tweaked up with property disposals. The benchmark has little solidity in routs of the kind experienced in the late noughties, though. Then, NAVs tumbled.
Mr Grigg has read the current cycle shrewdly, raising debt and equity to invest. Projects like the Cheesegrater have gone swimmingly, with 84 per cent of the speculative build either let or under offer. Rents are rising apace thanks to the UK economic recovery.
But the white-bearded deity of real estate may be poised to smite tower builders. If inflation and base rates rise, so would bond yields, reducing the appeal of dividend-rich stocks such as BL. The prospects for a share that has appreciated 70 per cent in three years depend on the private sector smoothly taking up slack created by a lessening of central bank support.
Lady with a plan
A 76-year-old guesthouse owner has inadvertently bought enough shares in an Aim company to trigger a mandatory bid. Alan Bennett, the Chekhov of the suburbs, filed this report from Malvern*.
Judy was dusting her Royal Doulton when I popped into Wyche Keep B&B. She looked poorly.
“Is it your sciatica, love?” I asked.
“That, and the Takeover Panel,” she sighed, “When they came to the door I thought they were from the Gas Board. But they said they’d come to enforce Rule Nine of the Takeover Code.”
There was a copy of the Malvern Gazette on the pouffe, open at a story headlined “Go-getter Gran Mounts Audacious Raid on Belize Oil Explorer”.
I said: “You got muddled and filled your boots before the placing, instead of after. Like when you ordered two identical cardies from Littlewoods.”
“They said everything would be fine if I sold down below 30 per cent,” Judy said, “But the news spread and the B&B filled up with M&A bankers. Anthony Gutman ate all the custard creams and Simon Mackenzie-Smith cleared me out of 50 pences for the payphone.”
“They can’t expect you to bid,” I said.
“Course not,” Judy replied angrily, “New World Oil wouldn’t even rank as a chopped liver deal for a BSD like me. I’m talking a $20bn-plus bid for a Fortune 500 name. And I’ll tear the board all new ones if they resist.”
It was definitely time for me to go. I quietly confiscated the cooking sherry on my way out, as a precaution.
* In our dreams
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