Alliance Boots and an an offer Richard Baker couldn’t refuse

July 21, 2007

boots-directors-group.jpgRichard Baker quits as CEO of Alliance Boots after discussions with all-powerful Stefano Pessina. Although offered a new job with a generous remuneration package, he judges the role to be too toothless,and leaves the company.

I managed to extract the above happy families portrait of the Alliance Boots board before the airbrushing began. In our story today we learn why the photograph will shortly change. This version shows, left to right, Steve Duncan, Stephano Pessina, George Fairweather, Richard Baker, Scott Whewhy and Ornella Barra. Now read on …

The story so far

Cherished British Drug company Boots merges with European partner, whose wealthy owner, Stefano Pessina, becomes deputy chairman in the new company, Alliance Boots.

The amicable arrangement suggested that in any leadership transition, Mr Pessina would be a cuckoo in the nest. In short order, chairman Sir Nigel Rudd resigned. further friendly discussions were followed by a takeover by private equity firm KKR. The move was presented openly as a vehicle which would install Pessina as its main driver

KKR and Stefano Pessina had made it known that they wanted to keep the top team intact. But for all the continuing expressins of good will, the inevitable was to happen.

Thursday July 12th 2007, Richard Baker decised to accept a severance deal that would be worth some £10 million. It seems as if they made an offer for him to stay, or decline with honor. In an interview with the he says

“Stephano is a gentleman. He has been as good as his word with me every step of the way..I am confident about the future of the company ..I have looked everyone in the eye at Nottingham [corporate HQ] and told them that”

.

Another top retail executive, Scott Wheway, is also leaving, again in an amicable fashion.

Not too difficult to predict

The story has been followed in earlier posts. It struck me that in the original merger between Boots an Alliance, the new board had a majority of former Boots executives. But the Alliance side was the more profitable, and Stephano brought with him a sizable shareholding and considerable personal wealth.

It was not difficult to predict what would happen. I noted earlier this year that

If takeover is successful, I am not expecting many of actual board members to retain their positions.

And so it has come to pass. Not brutally. But Pessina has enough power to be magnanimous. Mr Baker may not have had much temptation to stay on when the alternative was a £10 million incentive to leave, with more chances of securing a new leadership role elsewhere.

Leadership lessons

I’m not sure of the leadership lessons here. Perhaps it is that self-made billionaires are not all ego-crazed narcissists. Maybe absolute power is not always accompanied by absolute ruthlessness.


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