The real danger amid M&B's power struggle

We know all about the problem of staff churn. It's no wonder the industry can't retain staff when employment prospects are poor, bosses are unsupportive and people feel they are not valued. Such is life on the board of our biggest managed company, Mitchells & Butlers (M&B).

It's got to the stage where the game of musical chairs at M&B is turning to farce as the power struggle for control of the company rumbles on. It is currently looking for its fourth chairman in 18 months — and still hasn't filled the chief executive vacancy four months after chief executive Adam Fowle's departure.

The exit of chairman Simon Burke last Thursday was left unexplained — he'd only lasted five months. For the moment there's an acting chief executive, Jeremy Blood, and an acting chairman, Bob Ivell. Also last Thursday non-executive director Michael Balfour stepped down — both Burke's and Balfour's details had been erased from the M&B website by noon.

The company has a revolving door of independent board directors as they struggle to work with M&B's two largest shareholders, Joe Lewis and Elpida, who are looking to exert as much control as possible on the company.

The rumour mill has gone into overdrive again. My sources talk of turmoil on the M&B board between independent directors and the two majority shareholders. One suggestion is Burke found a non-executive nominee of his blocked and felt his only option was to step down.

A second source went further and suggested Burke had offered up a preferred candidate for the chief executive position — and found it vetoed.

Another rumour doing the rounds is that Fowle decided his position was untenable in March after a number of acquisition and disposal recommendations were blocked by the two largest shareholders.

The situation does indicate a fundamental weakness in corporate governance. It has clearly been proving impossible to keep the two large shareholders' interests — with a total shareholding above 40% — in balance with the remainder of the share register.

M&B has now clocked up a half-decade of board-level disruption and uncertainty, if you count the R20 period of involvement stretching back to 2006. It is remarkable that M&B has still been delivering operationally during that period. It is surprising, though, that Lewis is willing to risk the disaffection of the key operational staff at M&B in the current fashion.

The danger for Lewis and his Elpida co-investors is that the unstable situation they have created on the M&B board ends up spreading through the company's real talent.

M&B might well have the UK's best licensed retail property portfolio — but ex-chief executive Tim Clarke used to argue it had the "best people" too.

Great property remains great property — great people can move on. And performance can slip very quickly. This matters to the wider pub world because M&B has been a flagship for how successful a modern pub offering can be, a balance to the depressing closures narrative beloved of the national media.