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Top job roles should be filled internally

    The appointment of Ian Livingston as the new trade minister at the House of Lords was a surprise.

    Livingston, the former chief executive of the BT Group, has been credited with increasing the telecom giant’s fortune by cleaning-up services to global corporations and entering the pay TV market as a potential rival to BSkyB.

    But Livingston’s unpaid government appointment means he will sacrifice a pay package of over £10 million. It says something about the persuasive powers of Prime Minister David Cameron and shows that the 48-year-old Borehamwood and Elstree United Synagogue member has made financial sacrifices for the public good.

    His attitude contrasts that of Stephen Hester, who took on the far more complex role at the Royal Bank of Scotland (RBS) but never came to terms with the fact that he was working for the government and the taxpayer.

    Rows with the Treasury over bonuses soured his relationship with Chancellor George Osborne.

    Hester’s departure leaves a hole at the top of RBS that is going to be tricky to fill from outside because of concerns about government interference and the recognition that high pay will not be possible until RBS is fully back in the public sector.

    In addition, there is no notable internal candidate to take over from him.

    Contrast this with BT, where head of retail Gavin Patterson was swiftly chosen to succeed Livingston as CEO.

    As a rule, Britain’s most successful companies chose CEOs internally.

    The new bosses of GlaxoSmithKline, Diageo, BG Group and Tesco were all selected internally.

    This is different to Marks & Spencer — a company that has looked outside for its next CEO and failed to rediscover the stability of its glory years in the 1990s.

    Invariably chairs are often chosen from outside because of governance rules that favour separation between the chairman and CEO.

    But this method of appointment should not be taken as an absolute.

    At HSBC, creative thinking led to former finance director Douglas Flint being appointed as the banking firm’s latest chairman.

    The message is clear. Company boards must focus more on succession rather than simply reaching outside when seeking to fill vital internal posts.

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