In July 2014, Experian (EXPN) chief executive Don Robert resigned so that he could chair the group. This sort of move risks 'groupthink' and is in breach of corporate government guidelines. Both investor advisory groups and some major shareholders objected.
The received wisdom was that former chief executives who chair the same group come with preconceived ideas that could unduly influence strategy and pay. They could be defensive about past decisions, and inhibit new chief executives from making necessary changes of direction. The Experian reshuffle was needed, though, because of growing criticism about Robert’s predecessor, Sir John Peace. He had been chairing not only Experian, but also Burberry (BRBY) and Standard Chartered (STAN).
Chairing more than one company at a time also conflicts with good corporate governance – the suggestion was that Peace had spread himself too thinly. Robert held the fort for two years before being replaced by Mike Rogers, who has chaired Experian ever since.
Checks and balances on directors have come a long way since then. New guidance in the UK came in 2018 with the Corporate Governance Code. Differing regulations between the US and the UK, together with the greater pool of investment monies, are often cited as a reason for companies preferring to list in New York. Experian, though, takes a different tack. Rogers says that the group prides itself on its internal controls, which go “above and beyond” what the code requires.
A US primary listing might not be on the agenda, but two thirds of Experian’s revenues are generated there. The UK and Ireland account for only 12 per cent of its revenues, while 15 per cent come from Latin America, mainly Brazil. The group operates in 32 countries, and positions itself as “making a profound and positive difference to people’s lives” through the sensitive business, customer and consumer information it holds in a staggering 1.5 billion personal and over 200 million corporate files.
Commercial and personal customers can shape their financial and other decisions through buying both access to and analysis of this big data. For example, UK postcodes and demographic profiles can suggest buying and voting habits.
The major worry must be data security. Earlier this month, arch-rival Equifax (US:EFX) was fined over £11mn for failing to prevent UK personal data being stolen in 2017. Not long after Brian Cassin had replaced Robert as chief executive of Experian in 2014, personal details of over 15mn American T-Mobile customers were compromised as part of an Experian hack. Those risks have not gone away. In its 2023 annual report, Experian recognised that: “external cyber security threats to businesses continue to increase in complexity and evolve in nature and scope. Our threat-informed defence programme concurrently monitors and targets the most active threats to mitigate and reduce risks.”
Other threats are the rise of nationalism and populism, which could herald more protective trade and investment controls. Inflation, higher interest rates and climate change are also taking their toll. Meanwhile, billions of pounds have to be spent every year to invest in new products and service lines, vital for laying down the foundations of future growth and for maintaining an edge over the competition. Generative AI is being harnessed to innovate products and drive operations. That risk has to be tightly controlled. And all this while steps are being taken to restructure the group’s businesses in continental Europe, Asia and the Middle East.
How much should a chief executive be paid for managing such a complex group and staying on top of the many potentially damaging challenges? That’s far from academic. Cassin ranks amongst the highest paid chief executives in the UK. Over the last eight years, he’s received over £50mn and now owns over £20mn of Experian shares. When he took over in 2014, the market valued the group at £10bn. At its AGM three years later, a quarter of the votes were cast against the group’s remuneration policy. Today, Experian is worth about £25bn and, despite the risks, regarded as a defensive stock with a high barrier to entry. The pay policy this year had 94 per cent support. During Cassin’s tenure, long-term investors have seen the share price almost triple.
Nothing, though, lasts forever. According to the 2022 UK Spencer Stuart Board Index, chief executives serve for 5.4 years on average. A few years ago, the Harvard Business Review suggested that their intensity of work often leads to burn-out after about seven. Only a sixth last beyond nine years, the length of time that Cassin has been in his role. Rogers has chaired the group now for seven years.
The thinking behind the governance code is that time erodes independence of thought. It suggests that nine years is long enough for non-executives. No doubt succession plans are in place, but it seems that investors would be reluctant to see either Cassin or Rogers leave.
