King heads for Bank crown

MERVYN King must have a spring in his step. One by one, the Bank of England's deputy governor has seen his key rivals to succeed Sir Eddie George in the City's top job assigned elsewhere.

Financial Services Authority chairman Sir Howard Davies, who has been seen as King's most likely rival for governor, has been persuaded by Gordon Brown to stay at his post for a further 18 months, taking him through to January 2004. Davies made it clear to Brown that he was not prepared to linger at the FSA for a further five years, and wants to head in a different direction, perhaps returning to the private sector.

The 18-month compromise means Davies stays on until the FSA has implemented market abuse regulations and brought mortgage brokers and general insurance under its umbrella.

Having taken it on the chin for the FSA's role in policing Equitable Life in the final months before it closed to new business, Davies will also be around to deal with the fallout from the Ombudsman's report and the broader study by Justice Penrose, which is probing the archaeology of the Equitable collapse.

Howard Davies is the second candidate for governor to shuffle off the stage. Former Goldman Sachs chief economist Gavyn Davies has already secured the illustrious and challenging job of chairman of the BBC. This removed him from the Threadneedle Street stakes.

Who, aside from King, is left? City intelligence is that the next incumbent has to understand fully the conduct of monetary policy as well as markets. That knocks out many of the investment banking and stockbroking grandees who might once have been considered.

Two names from Whitehall being bandied about are Rachel Lomax, a former Treasury insider who is now Permanent Secretary at the Pensions Department, and Gus O'Donnell, the Treasury economist who attends MPC sessions in an ex officio capacity.

If Brown is interested in recommending a woman to the Prime Minister, then DeAnne Julius, who sits on the Bank's court and has a bundle of non-executive directorships, is seen as a potential candidate, having recently taken British citizenship.

Among experienced and knowledgeable outsiders is Andrew Crockett, the Bank's former international director, who has presided over the Bank for International Settlements in Basle with great distinction for several years.

There can be little doubt, though, that with the departure of the Davies duo for other pastures, King is emerging as strong favourite. He will have to be careful not to slip on a banana skin in the run-up to the final choice early next year.

Browne's desserts
IT IS somewhat unfortunate for Lord (John) Browne and his jolly band of BP directors that the oil major's 2001 annual report should be released just as petrol prices at the pump are on the rise.

The sight of Browne and his cohorts earning some £25m between them in pay and options will be enough to give motorists apoplexy as they fill up at BP Connect's pumps.

The connection they will not make is that the payouts to directors for last year have nothing to do with the latest price increase at the pump, which is the fault of OPEC's tight production controls, George Bush's rantings on Iraq and the conflagration in the Middle East.

In fact, BP under Browne has developed into one of Britain's world-class companies. A series of shrewd deals in the United States, when oil and gas prices were low, enabled it to absorb Amoco in 1997 and California-based Arco in 2000.

Browne not only steered his company through the anti-trust rapids, but went for a full integration of operations which saved shareholders billions of pounds.

It is for this that Browne is collecting £5.7m this year and stands to earn £20m over four years. He has hit the gusher put in place when big shareholders gave their approval to a long-term incentive plan which pays out for performance against rival companies.

On these pages we have been highly critical of 'fat cat' pay, bonuses and incentives for executives who have failed to deliver anything but grief to shareholders, employees and pensioners.

We remain opposed to payment for failure. The converse of this is that world-class company directors deserve to be fairly rewarded.

As a result of the efforts of Browne and his colleagues, BP's pensioners will not be among those licking their wounds as the bosses seek to shift them out of final salary pension schemes.