Schroders was accused of driving a coach and horses through boardroom best practice after promoting its long-serving chief executive, Michael Dobson, to the role of non-executive chairman.
Corporate governence experts expressed concern that such a major investment group, which owns stakes in numerous British blue chips, was flouting the standards it normally expects from other companies.
Mr Dobson said that he would stand down as chief executive on April 4 and take over from Andrew Beeson as chairman at the same time. His successor as chief executive will be Peter Harrison, who was hired in 2013 as head of equities and has been seen for some time as the heir apparent.
Lord Howard of Penrith, the senior independent director who led the search, acknowledged that ordinarily chief executives should not be promoted to chairman but argued that this was an exceptional case.
“It is clear to the board that Michael Dobson is the outstanding candidate for the role. Michael brings continuity at a time of change and the company will retain his experience and expertise, which make him particularly well qualified to assume the chairmanship as judged by the board’s assessment criteria,” he said in a special letter to shareholders.
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Mr Dobson had been an exceptional leader of the business for 14 years and was the board’s unanimous choice, Lord Howard said.
Amid further change in the boardroom, Massimo Tosato, the global head of distribution, announced that he was leaving on December 31, while Ashley Almanza, a non-executive director who heads G4S, will leave on April 28.
Alan MacDougall, the head of PIRC, the governance consultants, said: “The Schroders board has driven a coach and horses through one of the central principles of the UK governance code. If it’s good enough for other FTSE 100 companies, why is it not good enough for Schroders?
“This is going to make Schroders’ position when it is dealing with companies it is invested in, very difficult where they have similarly unacceptable arrangements,” he added.
“The Schroders board has driven a coach and horses through one of the central principles of the UK governance codeAlan MacDougall, the head of PIRC, the governance consultants
The Institute of Directors also criticised the move. Oliver Parry, the governance adviser at the IoD, said: “Although we understand Schroders’ desire for continuity, this should not come at the expense of board independence.”
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Schroders’ approach to its own boardroom stands in sharp contrast to its stance in 2008, when its executives publicly opposed the elevation of Sir Stuart Rose, now Lord Rose, from chief executive to executive chairman at Marks & Spencer, saying that the retailer was “setting an appalling example”.
Shareholders dislike the phenomenon because it is seen as tying the hands of the new chief executive and creating a board culture too wedded to the strategic thinking of the previous regime.
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Mr Dobson said that the controlling Schroder family and “eight to ten” other shareholders had been consulted over the past few days and most saw the logic of it. He added: “I’m sure there will be some who don’t like it and will vote against it.” Search consultants were not used, he said.
He said that Schroders looked at the practice on a case-by-case basis at the companies it invested in, sometimes voting in favour, sometimes against. “We look at each case on its merits.” It supported Lord (Mervyn) Davies’ promotion to chairman at Standard Chartered in 2006 but was against Sir Bill Gammell’s elevation at Cairn Energy in 2011.
Schroders reported an 8 per cent rise in underlying pre-tax profits to £609.7 million for last year after receiving net inflows of £13 billion. Assets under management climbed from £300 billion to £314 billion. A final dividend of 58p makes an 87p total, up 12 per cent.