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BP's Bob Dudley Joins FTSE 100 Exodus

BP's Bob Dudley is the third FTSE 100 chief executive to head for the exit in October so far

James Gard 4 October, 2019 | 11:34AM

Bob Dudley BP

BP’s Bob Dudley has joined Tesco’s Dave Lewis and Imperial Tobacco’s Alison Cooper among FTSE 100 chief executives announcing their departures this week.

Dudley, now 64, is retiring from the oil giant after steering it through the turbulent period following the Deepwater Horizon disaster in 2010. He has been in situ for just over nine years and the shares are up from around 388p to 488p in that time, but his biggest achievement is to have stabilised the firm in the wake of the disaster, restoring the dividend for income investors and rebuilding the company’s reputation.

BP was hit by billions in clean-up and legal costs in the US, which weighed on profits and made the company vulnerable to a takeover at the time. A crash in the oil price in 2014 was also a serious threat to the firm.

To replace Dudley BP has chosen an internal candidate, the current head of upstream Bernard Looney, to provide continuity. Still, Looney faces considerable challenges as the energy industry faces up to climate change, which has shot up the public and political agenda this year.

Tesco’s Dave Lewis can also be credited with crisis management as he took over following the accounting scandal which brought Tesco’s relentless growth under Terry Leahy to a juddering halt.

While Morningstar analysts think Lewis’s tenure has been a success, they think the new chief executive has plenty of work to do. Specifically they want new boss Ken Murphy to tackle the threat from discounters such as Aldi and Aldi with “more urgency and better execution”. Ioannis Pontikis believes Murphy will continue the company’s expansion in the wholesale market, and keeps the fair value for the stock.

But Morningstar columnist Rodney Hobson thinks Lewis should have stuck around longer to take more credit for the turnaround – unless he thinks things are about to turn sour.

Don't Panic

Should investors be worried by the trend, which seems to have accelerated as the year has progressed? Change at the top of companies is natural as industries become more complex, get disrupted and customers become more demanding. Tesco’s Lewis cited the “intensity” of retail as one reason for stepping down. There is increasing pressure, from fund managers to consumers, for executives to justify their salaries.

Wealth manager Killik & Co notes that these leadership changes are inevitable, especially as many of these bosses were brought in just after the financial crisis to “steady the ship”. Current political uncertainty is also a factor, with the October 31 deadline for Brexit possibly concentrating the minds of business leaders.

Lewis, Cooper and Dudley aren’t the only bosses facing the exit this year and next: there have been changes of management at WH Smith and BT this year, while Aberdeen Asset Management founder Martin Gilbert announced this week that he will step down from Standard Life Aberdeen next year.

While Lewis leaves Tesco with the turnaround at the supermarket more or less complete, at Imperial Tobacco's Alison Cooper is heading for the door after more than nine years and just as the industry grapples with the vaping crisis.

Morningstar’s tobacco analyst Philip Gorham doesn’t think Cooper's departure of Cooper was a surprise, given the company’s big bet on vaping and underperformance relative to global giant Philip Morris. He also thinks the departure of chairman Mark Williamson “may create a power vacuum that could paralyse Imperial at a time of fairly rapid industry evolution”.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BP PLC468.60 GBX0.70
Imperial Brands PLC1,696.80 GBX0.47
Tesco PLC228.46 GBX0.64

About Author

James Gard  is content editor for Morningstar.co.uk

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