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The London Stock Exchange Group’s board is lining up its finance director as an interim head to prepare for the potential sudden exit of its chief executive Xavier Rolet.
The contingency move comes as activist investor Sir Christopher Hohn escalated a row with the exchange by demanding that the UK’s financial regulators step in to force the board to appoint a new chairman to end a governance crisis.
The LSE has come under fire from Sir Christopher’s vehicle, The Children’s Investment Fund, which holds a 5 per cent stake, since it announced last month that Mr Rolet would step down next year.
The investor has grown frustrated that Mr Rolet has been unable to explain the reasons for his planned departure, and has called an extraordinary shareholder meeting to vote on removing the chairman, Donald Brydon, and extending the chief executive’s contract until 2021.
In a letter to Mr Brydon on Tuesday, Sir Christopher said Mr Rolet was “being improperly threatened by the board with severe reputational damage unless he immediately steps down as CEO . . . or publicly confirms that he does not want to remain.”
He added that the situation “cannot wait for several weeks until the general meeting”.
“It seems to us that the Bank of England and the FCA both need to immediately intervene to instruct the board to appoint a new chairman.”
The LSE said in a statement: “In requisitioning the EGM, TCI triggered a process which we are now adhering to. As regards regulatory oversight, we have kept regulators abreast of developments throughout.
David Warren, LSE chief financial officer, is being considered as a temporary replacement for Xavier Rolet, chief executive
The row with TCI has highlighted to the board that the LSE lacks a back-up chief executive who could step in at short notice. As it operates systemically-important market infrastructures, such as stock exchanges and clearing houses, the position needs to be filled by an executive who has been approved by regulators.
That reduces the number of internal candidates available. The exchange’s board considers David Warren, the group’s CFO, a temporary stopgap to run its main executive role, according to two people briefed on its plans.
Mr Warren, the former chief financial officer of Nasdaq, has been at the LSE for five years.
The LSE, Mr Warren and representatives for the board of directors declined to comment on the contingency planning. The Financial Conduct Authority said it did not comment on any developments at the LSE.
The exchange opened the search for a permanent replacement for Mr Rolet in October. Last week it cancelled a meeting between the board and TCI intended to diffuse the tensions. It said it had a duty to present all the necessary facts to shareholders in a forthcoming circular.
Sir Christopher has been one of Mr Rolet’s biggest supporters and has been backed by another investor, Egerton Capital.
During Mr Rolet’s eight-year tenure, the LSE’s share price — adjusted for rights issues — has risen by around 500 per cent to more than £38. That has turned the LSE into a £14bn trading, data and clearing exchange.
Other large shareholders, including BlackRock, the Qatar Investment Authority, Invesco and Veritas Asset Management, are likely to play key roles in the debate.
The circular is due to be published, along with the date for the shareholder meeting, in the next two weeks.