Water boss 'flouts FTSE guideline'

THE chairman of Severn Trent is believed to have sparked a major boardroom split at the water group by asking directors to back his appointment to the top job of another FTSE 100 company - in breach of best practice guidelines.

Sources close to David Arculus, a former chairman of media group Emap, say his desire to add another major company to his portfolio of directorships has caused bitter disagreements at Severn Trent, which faces a regulatory review into its main business.

Though it is understood that the Severn Trent board eventually swung behind Arculus's demands, directors are now insisting that fresh blood is appointed to compensate for any potential loss of his time.

A company spokesman refused to comment on Arculus's intentions but said there was no question of him reducing his commitment at an important time - 'He has made it clear that his first priority and loyalty is to Severn Trent.'

Taking on a second FTSE 100 chairmanship would put Arculus in breach of the Higgs recommendations for boardroom standards.

One senior shareholder said: 'If Arculus is planning to take on another chairmanship, I can see no apparent benefit for Severn Trent shareholders, particularly as his time is already stretched between several directorships.'

Arculus is on the board of property group Olympia & York as well as Barclays. He also heads the Better Regulation Task Force on behalf of the Government.

Though it is not known which Footsie company has offered him a chairmanship, Arculus is also on the board of mobile phone company mmO2 where chairman David Varney plans to step down in the summer.

Arculus has signalled his intention to leave Severn Trent next year, but his continued tenure is seen as crucial as the company faces a review for its water division, which accounts for about 75% of overall profits.

The Severn Trent spokesman declined to comment on possible extra boardroom appointments and would not say whether the company had canvassed shareholders on Arculus, right, and whether it was prepared to breach the Higgs code.

Though these guidelines are recommendations only, shareholders are increasingly concerned that the demands of being chairman of a major company would make it difficult for one executive to head two major organisations.

One senior fund manager said: 'We would have to have a very plausible explanation of how Arculus thinks he could take on another FTSE role when he already has so much on his plate.'