Wednesday, 7 September 2011

easyJet – showing the way?

More fun and games in the Boardroom at this iconic company.

Sir Stelios Haji-Ioannou with his family controls about 37 per cent of easyJet’s shares. He has just demanded a vote to remove Professor Rigas Doganis from the airline’s board of directors. He blames Doganis for allowing easyJet to buy new aircraft at the start of the year, shortly before it announced a steep increase in first-half losses.

Professor Doganis is the former chief executive of Greece’s Olympic Airways which, we might remember, was the subject of a lengthy and drama packed (it’s Greece!) closedown in 2009 after it became insolvent, several times over. Was the Professor invited onto the easyJet Board before or after that disaster – if before, what conflicts of interest were declared? - and if after, why on earth, why?

Stelios is right to want to purge this Board and re-direct this company towards solid Competitive Strength instead of the mindless and reckless expansion of capacity that seems to obsess The City, financial pundits and this company’s directors. He knows that simply Big is not necessarily Better. The last three years ought to have taught even the thickest of Market Analysts that sales expansion based on leveraged debt (such as purchases of rapidly depreciating assets) is suicidal.

The key to massive comparative Competitive Strength is simple, it is Excellence. In everyday language that means outstanding operational, behavioural and managerial competence. Perhaps that was why the easyJet Board recruited the Professor? Hang on, can anyone remember Olympic Airways’ customer service reputation? So that wasn’t the reason.

In 2001 Zook and Allen of Bain & Company published "Facts about Growth" in which they demonstrated that "only 1 in 7 companies generates sustained, profitable growth and creates long-term shareholder value". It is easy to see why this is true as long as this quality of non-executive director remains in influence. How and why such people are appointed is the big question. And that brings us to the key influencers and the fundamental structure of the Finance Industry as it currently exists. So long as the same closed community of people keep on giving each other jobs, subscribe to their “don’t rock the boat” Mutual Protection Club, and trade benefits and influence, to keep on doing that they have always done the way they have always done it – nothing will change.

If our economy and our way of life is to survive, we face a big choice - it is not Capitalism versus an alternative (a what? Socialism doesn’t work, Statism doesn’t work, Dictatorship can work but only as a temporary fix, and our way of life won’t survive any of them) – it is between Capitalism The City Way or Capitalism with Common Sense.

Stelios wants Common Sense – he is right, we all need it. And that means different thinking to enable different actions - and that is our special expertise.

Capitalism or .... Common Sense is brought to you by Steve Goodman & Tony Ericson, partners in ChangeWORLD & Achievement Coaching International where we help businesses to learn different thinking to enable different actions that deliver the different results that Make a Big Difference. It is one of our "Excellence Quartet" of blogs promoting the cause of Excellence as the key to prosperity. We publish a new article on one of these blogs every month or so using a recent business/financial topic to highlight different perspectives and conclusions from those obtained using conventional thinking and techniques. You can read the other three blogs at - Exceeding Expectations - You're having a laugh ... seriously-Business Bloop of the Month Award

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