Clock ticks in BP race to pick chairman

BP, having searched for a new chairman for 18 months, BP now has to find one in as many weeks.

Its severe case of succession planning is the most prominent example of an increasingly common issue: the difficulty in finding suitably-qualified candidates to chair big international companies when the global downturn has tarnished the reputations of many.

Paul Skinner, chairman of Rio Tinto, was on the brink of being appointed at BP. But after a barrage of criticism last week from leading shareholders over Rio’s controversial $19.5bn deal with Chinalco, it became clear he was no longer acceptable and he ruled himself out of contention.

The previous runner-up, has also ruled himself out by committing to another job.

So BP is back, if not to square one, then to an early stage in the process: looking again at the short-list drawn up by Anna Mann, its regular headhunter, and trawling for new names.

Samuel Johar, chairman of Buchanan Harvey, a rival headhunter, says: “What they need to do now is start again with a blank sheet of paper and take a fresh look at all possible candidates, including ones they might have rejected in the past.”

With Peter Sutherland, chairman since 1997, due to step down in April and prepared to extend his tenure only for a few months longer, BP and its advisers do not have much time.

The search is all the more complex because there are several other similar companies fishing in the same pool of talent. Rio thought it had found its new chairman to replace Mr Skinner with the appointment of Jim Leng, chairman of Corus, in January. But Mr Leng fell out with chief executive Tom Albanese over the Chinalco deal, and resigned less than a month later.

Anglo American has also failed to appoint a new chairman. Last October Cynthia Carroll, the chief executive, and some London-based directors had selected Sir John Parker, chairman of National Grid, but were blocked by other board members who felt the next chairman should be from South Africa.

At BHP Billiton, chairman Don Argus has not announced a retirement date, but the company is expected to begin its search this year. There are several candidates on its board who could be suitable, including former Ford chief Jac Nasser and former Westpac bank boss David Morgan.

Like those companies, BP requires a chairman skilled both in business and at managing political relationships. That already narrows the field down to a relatively small number of names.

It also would be much happier with a chairman with experience of oil and gas, an industry that presents unique challenges in terms of technical knowledge.

Sir John Parker, who has supporters among some investors and advisers, probably would not fit the bill, although he was for two years a non-executive director of BG Group. People familiar with the situation say he is not talking to BP.

Other names suggested for the vacancies at BP and elsewhere include Sir John Rose, the chief executive of Rolls-Royce, Sir Michael Rake, the chairman of BT, John Buchanan, a former BP man now chairman of Smith & Nephew, and Niall FitzGerald, former chairman of Unilever. None of those has a background in the oil business, however. Royal Dutch Shell chose a chairman from outside the industry in Jorma Ollila, the former chief executive of Nokia, but by his own admission he took a long time to learn the ropes; time that BP may not be able to spare in this turbulent period for the oil industry.

Headhunters agree that the best procedure for BP would have been to appoint a non-executive director to the board who could have been groomed to succeed, as Mr Sutherland was for two years prior to becoming chairman.

But Sir William Castell, the former president of GE Healthcare who joined the board in 2006 and was seen in that role, has ruled himself out.

With the clock ticking, BP may be forced to compromise on its criteria. Shareholders have no guarantee that its alternative will be more effective than Mr Skinner would have been, had he been given the chance.

See Lex ft.com/lombard