June 9, 2010 / 1:33 PM / in 8 years

Investors dispute whom to oust at UK's Prudential

* Thiam has to go “sooner rather than later” -large investor

* Other shareholders demand Chairman McGrath’s resignation

* NAPF not seeking Thiam departure -source

By Raji Menon

LONDON, June 9 (Reuters) - Institutional investors are bickering over which Prudential (PRU.L) head they want on a plate as shareholder anger grows after the British group’s botched $35.5 billion bid to buy AIA.

There is some momentum behind a move to oust Prudential Chief Executive Tidjane Thiam, but some large shareholders said Chairman Harvey McGrath’s position is even harder to defend than his CEO‘s.

“If someone has to go, it should be the chairman and not the chief executive,” said one top-20 investor, speaking on condition of anonymity.

Thiam and McGrath have begun meetings with top shareholders as they seek to pacify investors enraged over the “bungled” handling of the deal to acquire AIG’s (AIG.N) Asian Arm.

Another large shareholder who will meet Thiam this week said: “If investors want someone’s head on a plate, it should be the chairman‘s. For him to agree for his chief executive to take a job at Societe Generale (SOGN.PA) at the beginning of this whole exercise was just crass judgement.”

But other large investors still say the buck stops at Thiam’s door.

“Subject to what we hear this week, Thiam’s position is getting increasingly untenable. McGrath is a more difficult one -- we would not want to see him go at the same time (as Thiam). But for Thiam, it’s a question of sooner rather than later,” said another shareholder due to meet Prudential management this week.

This investor also said management should forgo bonuses in the light of the money spent on the failed bid.

“They spent a lot of shareholders’ money on a deal that didn’t happen. I think they should be hit as well.”

Earlier today, Sky News reported that some of Prudential’s largest investors, including Legal & General Investment Management and Fidelity, are demanding a shake-up of the company’s leadership. [ID:nLDE6572M6]

Richard Buxton, head of UK equities at Schroders, said: ”Someone has to be accountable for 450 million pounds ($650 million) of losses as a result of the bungled deal.

    “Otherwise it’s carte blanche to every investment banker in town to encourage CEOs to do deals -- there’s no downside. (It will be case of) ‘Don’t worry, if (the deal) doesn’t happen, you’ll still be safe in your job’.”

    SUPPORT

    However, many investors believe a clearing out of top management would destabilise the British insurer at a critical point in the economic cycle.

    The National Association of Pension Funds, which is scheduled to meet Prudential management on June 22, will not be calling on Thiam to resign, a source close to the body said.

    NAPF members hold around 800 billion pounds of assets and control roughly 12 percent of the UK stock market.

    The top 20-investor said: ”Unless one thinks a break-up is imminent, which I don’t think it is, where is the benefit for a shareholder to have a company with senior management gone at this particular point in time? I don’t see any.

    “It’s almost like a reflex action where everybody says everyone has to fall on their swords. But if you take a more considered view, I am not sure that is the best way forward.”

    Another large shareholder due to meet Prudential management this week said: “We are in the camp that Thiam shouldn’t go. We are not wildly happy about how this deal has been conducted, but he does come across reasonably well operationally.” ($1=.6926 Pound) (Additional reporting by Joel Dimmock, editing by Will Waterman)

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