Signal to expansionists in Warehouse dilemma

By Peter V O'Brien

Friday 6th June 2003

The muddle associated with the resignation of The Warehouse chief executive Greg Muir late last week should send warnings to companies about how to handle such events.

It may be sensible to issue bombshell announcements after close of business on a trading day but a statement made at the beginning of a long weekend and in relatively vague terms was hardly satisfactory, irrespective of requirements for immediate notification to the market.

There was no effective market in New Zealand for The Warehouse shares from close of business on May 30 until Tuesday. That gave people three days to wonder what was going on, with the inevitable publication of contradictory views about the reasons.

People outside the company saw The Warehouse's experiences in Australia as responsible for Mr Muir's resignation, a conclusion he and chairman Keith Smith said was wrong.

There was, and still is, an opportunity for both side to clarify the "differences in philosophy" because Mr Muir does not depart until July 31, when company founder Stephen Tindall steps in until appointment of a new chief executive.

Last week's announcement and subsequent speculation resulted in confusion and an uniformed market. The Warehouse shareholders had most reason to be annoyed about lack of detail about the resignation. Possible agreements about personal confidentiality may protect personal sensitivities, but are questionable when they lead to market uncertainty.

There have been many chief executive resignations worldwide over the past year and a growing awareness that some were the result of ultimatums. Mr Muir's resignation may not be in the latter category but transparency was not helped on Tuesday when Mr Tindall said on radio that Australia was an issue.

Mr Tindall was expected to be in charge of the company during the likely six months it could take to appoint a new chief executive. That should be some comfort to investors, a point seen in The Warehouse's share price on Tuesday when the morning price was near the close on May 30.

The wider issue remained, despite reasonable stability in The Warehouse's share price.

Companies should, or the Stock Exchange should force them to, make clear statements about reasons for sudden resignations. Investors have heard too often that "sudden" departure followed months of discussions about corporate performance and strategies.

Clear statements could require the use of expensive lawyers on both sides to prepare appropriate missives.

So be it. Companies are supposed to maintain and increase shareholder wealth, rather than submerging boardroom arguments in the interest of individuals.

The situation at The Warehouse should give a signal to expansion-minded groups, assuming the retailer's loss of its chief executive was related to Australian operations. It is more than coincidental that among recent departures of CEOs in New Zealand and Australia were 10 from companies that expanded in countries outside their home bases.

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