Davis has staying-power at Sainsbury's

THERE is little doubt that Sir Peter Davis is attracted by the idea of heading the Government's review of non-executive directors, having been invited to do so by Trade Secretary Patricia Hewitt. Now the board of Sainsbury's, where he is chief executive, is weighing up the proposition.

The supermarkets chain's own non-executives are likely to suggest he declines the offer and focuses instead on continuing his sterling work at Sainsbury's.

The company has strong views on good corporate governance. Davis was parachuted in to engender recovery but he is known to believe that it is generally preferable to promote from within. Two board appointments announced last December - Sara Weller and Stuart Mitchell - were part of a long-term plan. Davis is 60 and has always said he will step down as chief executive in another couple of years. Weller and Mitchell are being weighed up in the meantime and it is hoped that one of them will succeed him.

At Reed, Davis was chief executive and then chairman. At Prudential, he was chief executive and would have become chairman if the Sainsbury's job had not turned up. Promoting the chief executive to chairman is usually frowned upon by institutional investors and can make life uncomfortable for the new CEO, particularly if that person is an internal appointment.

Some hand-holding might be required in the early days if Weller or Mitchell made it to the top. In such an event, Davis would almost certainly step up to the chair. But he would stay for a limited period and insist on absolute clarity about his role. Then he would be free to take up as many Government offers as he wished.

Spent force

A CHIRPY phrase has been going round business circles lately: 'Kiss your spouse, hug your kids and go out and buy something.' The diktat emanates from the US and it has two applications - consumer and commercial. Shoppers are sporadically doing their bit to keep the economy growing but businesses are less enthusiastic. They do not have surplus cash to spend and the financial environment is not conducive to raising money.

Equity markets are volatile, bond markets nervous and banks more cautious than they have been in years. This twitchiness is rippling through the investment banking community.

Last year's profits from the sector were bad enough, but they were propped up by a robust performance from the bond desks. This year, even fixed-income has been weak. January is traditionally the busiest month for bond issuance but this year it was below par and February has proved little better. Investment banks were hoping to stage an early recovery in 2002. It has not happened. Nor is there much optimism for the future.

The handing out of bonuses is almost at an end. Redundancies are sure to follow. Being told to go out and buy is all very well. But when businesses are more worried about debt than investment and institutions are reluctant to take risks, the idea simply does not work.

Bondage

ROYAL Bank of Scotland on THursday provided a fresh clue as to why the big clearing banks remain so unruffled by the rash of recent corporate collapses. Chief executive Fred Goodwin said there is less chance of the banks being brought to their knees by bad debts this time because so many more companies have raised money in the bond markets than in the recession of the early 1990s.

Insurance companies and pension funds are the big buyers of corporate bonds. No wonder they are all reporting huge investment losses with their 2001 results.

Watching

SCHRODERS was so keen on Michael Dobson it offered him a £10.5m three-year pay deal and paid £33.5m for Beaumont, the company he founded in late 2000.

Now it is so keen to display its confidence in the future it is laying out £54m on a maintained dividend. The Schroder family still owns 48% of the business so perhaps that will mollify them as they study today's disastrous results.

Sceptical investors will be watching closely to see if the payout is justified. They will also be monitoring Dobson's performance to see if he is really worth his package.