Shareholder spring flowers into a cultural revolution

Marc Sidwell
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CYNICS say no matter who you vote for the government always gets in. Not so at Aviva. Yesterday’s announcements proved the shareholder spring is not just a season of discontent – it’s becoming a revolutionary movement.

The repudiation of the FTSE 100 insurer’s remuneration report in May was quickly followed by the resignation of chief executive Andrew Moss, an admission that the vote was less about fat pay packets and more directed at the 58 per cent collapse in Aviva’s share price under his stewardship. The company has now accepted the rebels’ cause as its own. Yesterday’s letter from new executive chairman John McFarlane promised a brave new dawn, with a fresh strategy built around narrowing focus, boosting capital strength, improving financial performance – and listening very much more carefully to the “legitimate concerns” of shareholders.

There were few fond words in his plans for the running dogs of the old administration: “We have had too many changes of strategy”; “Our financial statements are cumbersome”; “Shareholders find our business difficult to understand”; “we aim to implement a leaner and more agile operating culture, a higher performance ethic, and a less layered and bureaucratic management style”. Ouch.

Caught up in its revolutionary fervour, the group isn’t hanging around. Announcing that it would be purging 16 non-core business segments involving £6bn in capital yesterday morning, by the afternoon it was announcing its intention to sell up to 25m shares in Dutch insurer Delta Lloyd, a divestment that could be worth £288m at current share prices.

A cultural revolution is also in the works, with four layers of management marked for liquidation and a re-education process for the survivors set to be spearheaded by David McMillan, former chief executive of general insurance for the UK and Ireland, under the grand-sounding title of director group transformation. It promises “a group-wide cultural and values change programme to achieve a high-performance ethic, employing stretch goals and more rigorous performance management”. Apparently the regime will not be placing corporate newspeak under house arrest.

This current reforming flurry is however only groundwork for the appointment of a new chief executive, promised for early 2013. Meet the new boss, same as the old boss? Not now the shareholders’ flag is waving over the democratic republic of Aviva.

Marc Sidwell is City A.M.’s managing editor.