Good corporate governance is when the board acts of its own

Good corporate governance is when the board acts of its own accord to head off what it sees as a potential problem for the future.The strategy established by Mr North is to sell off the property assets of the group, return the money to shareholders, and then to manage the hotels under contract.This is fine as far it goes, but it was never clear that Mr North was the man for the hard graft of operational management and brand development that now awaits. Mr North is an accountant with little experience of hotels or brand management. Bad corporate governance is when the board is forced to act under pressure from its shareholders after the company has already sunk into crisis. Mr North’s appointment was widely seen as a reward for the years of loyal service he had given Sir Ian as finance director, first at Bass, then its later incarnation as Six Continents. The chairman, David Webster, must take over until a replacement is found.What’s going on here? Richard North was nobody’s choice as chief executive of InterContinental when it was born out of the demerger of Six Continents some two years ago – except perhaps from that of Sir Ian Prosser, the former chairman.

Mr North was forced to mount a somewhat undignified charm offensive to get the City to accept him at all and, although the company’s performance since then has been fine, his power base has always been shaky.David Webster, an old warhorse of a company chairman with more campaigns of action behind him than he cares to remember, only joined the board at the time of the demerger and didn’t become chairman until last January He owes Mr North no loyalty at all. This is not the sort of backdrop you would expect for the public execution of a FTSE 100 chief executive. Indeed it is virtually unprecedented for a CEO to be ousted in such circumstances.Richard North behaved with dignity and honour when told by the non- executive directors of InterContinental that his services were no longer required, but it is not hard to see why he’s so miffed. What has made the process more humiliating still is that he was summarily dismissed, without a successor in sight. What more did the bastards expect of him? In his own mind, he’s delivered. If he’s right, then he would indeed have been mad to pay his own lowly rated paper for Abbey’s more expensive fare.InterContinental The shares are at an all time high, there’s no apparent crisis on the horizon, profits and revenues are rising, and last week’s strategy update was as well received as these things ever are in the City.

Mr Crosby insists that the strategy is already working for shareholders, and that the potential for further profitable growth is huge. The HBOS plan, which is to chip away at the soft underbelly of the big high street banks in current accounts, small business banking, corporate lending, long-term savings and general insurance is fine as far as it goes, but it will take time to deliver results, and if the housing market has peaked out, then the company’s core mortgage business can only go one way.Going head to head on price and quality of service with the giants of the banking world is a noble cause with big benefits for consumers, but the payback for shareholders is a good deal less obvious Price wars are nearly always commercial suicide. To Mr Crosby’s mind, the risk Banco Santander is taking as an out-market player taking over a bombed-out brand in need of very substantial investment is a good deal higher than the one he would have taken had his board allowed him to go for a consolidating merger with Abbey.Yet the trouble with trying and failing is that it invariably concentrates attention on the inadequacies of existing strategies. It would have been a great deal for Abbey’s shareholders, but at best a neutral one for HBOS’s.HBOS insists that it is better to have tried and failed than not to have tried at all. Here was the opportunity to bring about another big consolidating merger in the UK banking sector. It might have been considered negligent to have passed it over.Furthermore, HBOS has at least had the opportunity of examining its nearest rival in intimate detail as a result of the limited due diligence it has been allowed to run on Abbey. That in itself must be worth something.What it would have confirmed is that though Abbey has made progress in closing off its problem businesses, there is still a mountain to climb in reviving the brand.