Time for change at Mothercare

MOTHERCARE ought to be a success story. The brand is one of the best-known on the High Street, the product range is narrowly focused and customers want it to work. Yet the company is struggling. There have been three profits warnings since October, each one more dire than the last.

The City's view of Mothercare is reflected in a stock market capitalisation of little more than £130m. This is a fraction of last year's £509m turnover, and implies a belief that the company's situation can only deteriorate.

The man at the top of this sorry business is Alan Smith. In the chair for the past six years, Smith was originally recruited to the helm of Mothercare's previous incarnation Storehouse, which incorporated Bhs. His chief executive is former Storehouse finance director Chris Martin.

Smith and Martin sold Bhs to Philip Green for £220m in May 2000. Recent reports suggest Bhs is worth at least £800m. Green is good at spotting potential winners. He quickly turned round Sears, minus Selfridges. Under Sir Bob Reid and Liam Strong, Sears had been allowed to languish for years. Green bought it for a song and made fortunes from it.

Mothercare should not be allowed to go the same way. The company is crying out for tight retail management. If shareholders want to see recovery under their ownership rather than somebody else's, they need to call for changes at the top.

Direct action

LORD Simpson is leaving the board of HBOS entirely of his own accord. We know that because HBOS tells us so. The bank also says that every director on its board is up for re-election at this year's annual meeting. The company thought this was only right as it was formed from the merger of Halifax and Bank of Scotland last summer and none of the shareholders has had the chance to vote on the new board.

Institutions should relish this chance to assess the top team. Many large investors believe all companies should offer up their directors for re-election on an annual basis. Opponents say such a move would encourage short-termism, but this is misguided.

If directors are doing a good job, they will be retained. If not, shareholders can vote them out. Annual re-election would simply increase accountability. As for HBOS, its longest-serving board director is Sears stalwart Sir Bob Reid. He joined Bank of Scotland in 1987.

Stuffees return

LIFE in the loan market was simple in the 1980s. US and European banks arranged deals for international corporates and syndicated them among a group of lenders. Some borrowers were popular and their deals were easily arranged. Some borrowers were less popular and that was where Japanese institutions came into their own.

Known in the trade as stuffees, the Japanese banks were so keen to break into the international syndicated loan market that they would take the debt nobody else wanted. The world has moved on since and loans are rarely as straightforward as they used to be.

The latest piece of exotica to hit the headlines is the synthetic collateralised debt obligation, whereby lenders sell purely the risk attached to a loan. This market was worth almost £100bn last year, and financial regulators are worried about it.

The most risky category, known as CDO equity, seduces purchasers with rates that look generous until the underlying loans collapse. One of the key questions facing regulators is who buys these potentially dangerous instruments. Insiders say some of the biggest buyers are Japanese insurers - stuffees all over again.