Best-paid gig in town rains down £12m a head – but are the non-exes still independent?

Some 166 millionaires were created in the City on Wednesday. Well, strictly speaking, the fortunes of the investment professionals at the private equity firm Bridgepoint were not “created” in a single stroke. Rather, the act of listing the firm on the stock exchange crystallised the value of shares they already owned and allowed them to flog a few.

But, however you view the numbers in this £2.88bn flotation, or IPO, they illustrate how private equity is challenging investment banking for the status of best-paid gig in the financial game.

With €27bn (£23bn) under management, Bridgepoint is big – but not big like KKR, CVC or Blackstone. Yet the combined 78% pre-IPO stake of the fortunate 166 was worth £2bn on listing, or £12m a head on average.

The spoils are not distributed equally among the Bridgepoint brethren, obviously. One can see from the prospectus that the executive chairman, William Jackson, sold shares worth almost £8m in the IPO and was left with a stake worth £33m, or £42m after the shares rose by a quarter on the first day of dealings.

Frédéric Pescatori, head of operations in France and southern Europe, is sitting even prettier: he still has shares worth £85m after selling a bundle for £16m. Even at the bottom of the ladder, though, the juniors among the 166 are probably still looking at a million or two.

Still, one could take the view that Bridgepoint has been very successful and its stock-market value is the fruit of a couple of decades of effort since a management buyout by NatWest.

The same, though, cannot be said of the highly unusual – and very large – signing-on fees, billed as “initial fees”, that Bridgepoint has paid to its incoming non-executive directors.

Archie Norman, the senior independent director, got £1.75m, or £962,000 after tax, on top of his more-standard £200,000 fee for fulfilling the part-time role. Three other non-execs, including Carolyn McCall, chief executive of ITV, were handed £500,000 just for climbing on board.

They had to use the money to buy shares in Bridgepoint, and, yes, they’re all lauded individuals in UK corporate life. But, come on, upfront signing-on bonuses of this size for non-execs is pushing the limit of how far they can be viewed as independent directors, which is their status.

They are the people who are meant to be providing scrutiny through an outsider’s eyes. Maybe the arrangement looks normal from within the millionaire factory, but in commonly understood governance terms, it really isn’t.

“The Bank of England recognises that to pursue its mission it must reflect the diversity of the people it serves. That has not always been the case.”

No, that wasn’t Andrew Bailey, the BOE governor, promising on Wednesday that Threadneedle Street would do more to tackle racial systemic inequality. It was his predecessor, Mark Carney, in a speech in February 2017. Indeed, Carney, in the same address, said the central bank had three years previously “made diverse and talented a central pillar” of the first strategic plan.

You get the picture: the latest critical report by the Bank’s governing body, which found “material disparities between the collective lived experiences, career opportunities and outcomes of minority ethnic and white colleagues”, comes after years of promises of self-improvement by bank management.

One of the report’s suggestions is to make senior managers accountable through their pay packets for meeting inclusion targets. It’s a better idea than another round of Carney-style speeches.

Another results statement, another upgraded profit forecast for Next, the high-street retailer that makes the job look simple. That’s now six upgrades since the big downgrade at the start of lockdown in March 2020.

A lot of skill, tight cost control and strategic planning lies behind the outperformance, but the wonder is that the City is taken by surprise every time. The shares rose 7.5%.

At least three of the four factors cited by the chief executive, Simon Wolfson, to explain the “unexpectedly strong sales performance” in recent weeks could be detected by looking out of the window or following the news. There was hot weather at the end of May and start of June; fewer foreign holidays provided a boost to domestic spending; and consumers’ savings increased.

Wolfson expects things to slow down in the second half of Next’s financial year as some of those factors unwind. He’ll be right on the direction – but do not be shocked if things turn out better again.

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