LSE directors call in law firm over TCI row

Xavier Rolet has been chief executive of the London Stock Exchange since 2009

By Mark Kleinman, City Editor

Directors of the London Stock Exchange Group (LSEG) have called in a top City law firm to represent them in their escalating feud with the company's chief executive and an activist investor.

Sky News has learnt that Schillings has been hired to represent the exchange-owner's non-executive directors as they prepare a public defence of their case for announcing last month that CEO Xavier Rolet would retire next year.

The involvement of an independent legal adviser to represent the non-executive board members underlines the growing tension in the stand-off between them and The Children's Fund Management (TCI).

The hedge fund has called for the ousting of Donald Brydon, LSEG's chairman, and the renewal of Mr Rolet's contract until 2021.

City insiders said on Monday that in spite of the growing row, the LSEG's nominations committee was continuing its search for Mr Rolet's successor, with headhunter Egon Zehnder International supervising the process.

One source said that David Lester, LSEG's former chief strategy officer, was among the external candidates who are expected to be considered for the role.

Mr Lester, who left the company in July, was among the architect of many of the significant deals unveiled during the tenures of Mr Rolet and his predecessor, Dame Clara Furse.

The search for a new chief executive has been made increasingly urgent by the row over Mr Rolet's future, according to some shareholders, because the timing of his exit will be made imminent if TCI loses its battle to reinstate the current boss at a pre-Christmas EGM.

Last week, the LSEG called off talks with ‎Sir Christopher Hohn, TCI's founder, following his decision to requisition the EGM.

Several LSEG non-executive directors had begun to privately acknowledge that their tenure will become untenable if Mr Brydon is ousted at the forthcoming EGM.

A circular to be issued to shareholders prior to that meeting is likely to contain details of various infractions between Mr Rolet and fellow board members.

The LSEG announced last month that Mr Rolet would step down in 2018 after serving for almost a decade, a period in which he has won plaudits for the way he has positioned the company at the heart of the world's financial markets infrastructure.

The row sparked by TCI's protests at Mr Rolet's "retirement" came as an even greater surprise to the City because he had planned to leave in any case if a merger between the LSE and Germany's Deutsche Boerse – which was ultimately blocked by regulators this year – had been completed.

Sir Chris said in a letter to the board that he had received "no satisfactory answer" from Mr Brydon about the reasons for Mr Rolet's removal.

The hedge fund boss subsequently wrote to Mr Brydon again, urging him to waive a confidentiality agreement relating to the circumstances of Mr Rolet's resignation.

While confidentiality agreements are in place preventing both sides from publicly discussing details of the row, insiders said it would be bizarre if the board was standing in the way of Mr Rolet distancing himself from TCI's campaign.

The LSE said in response to TCI's original letter that it had "followed a proper governance process to plan an orderly succession for the CEO".

It added: "The FCA (Financial Conduct Authority) was kept informed throughout the process and emphasised the importance of the plan for an orderly succession.

"Xavier Rolet will be providing input into the process to identify his successor and is focused on his role as CEO until his successor is appointed."

The FCA is understood to have expressed concern about the escalating situation given the vital role the LSE performs in the infrastructure of financial markets.

City sources said the Treasury was also being kept updated on the situation, which has erupted at an important moment in the Brexit negotiations, with rival financial capitals attempting to lure much of London's lucrative clearing business.

The LSE, its non-executives and TCI all declined to comment.

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