The trouble with journalism and news reporting is that most of the writers pass comment on things which they invariably have little or no personal experience of.   Some are able to separate their egos or ambitions from the subject and present a balanced view, but all too often a writer can become drunk on the power they have to influence other people’s opinions.

In an age of social news-casting on Twitter and one-click searches on Google, the skill of the investigative journalist is steadily being eroded. As audiences, we are sometimes too ready to jump on news stories that may only have taken 30-minutes to research and produce.

The upside is that we gain access to our news more quickly, but the downside can be that we’re eating more and more ‘half-baked’ dishes that can sometimes lead to a bad case of indigestion..

Take this weekend’s Bahrain GP. As I check the Google-sphere there are some 2,218 news articles online, mostly from reporters who’ve never visited Bahrain or almost certainly were not in the Kingdom during the grand prix weekend.

You’ll have learned, if listening to those who lived the GP first-hand, that their experiences differed greatly from the views reported back home, or spouted by opposition MPs in the House of Commons.

It has become increasingly obvious that our news and opinions are being spun by those whose interests are more aligned with the performance of their title’s ad revenues, rather than any deep seated need to inform.

* * *

The catalyst for this article is Lotus’ CEO Dany Bahar, and whilst he’s no buddy of mine, I do feel drawn towards correcting some of the misunderstandings I have read in the press today.

The Daily Telegraph newspaper sensationally reported this morning that the chief executive of Lotus has a clause in his contract that entitles him to a bonus if the car maker is sold. The implication of this statement is that Bahar has been fattening up the goose (i.e. Group Lotus) for a feast (i.e. the sale of Lotus to the highest bidder), at which he will celebrate his good fortune.

The reporter, Graham Ruddick, then goes on to say, “Mr Bahar’s contract, seen by The Daily Telegraph, says he is entitled to 5pc of the enterprise value of Group Lotus if it is sold or 5pc of the value of its shares if the car maker is floated on a stock market anywhere in the world.

“The potential payment comes on top of a guaranteed annual payment of at least £1.2m, including a £600,000 salary and performance-related bonuses.”

As we have written about the future of Lotus ad infinitum, I won’t bore you again by recapping all the ins and outs. If you’re new to the subject, you can catch up via the articles below.

The author of the Telegraph article closes by saying, “A spokesman for Lotus declined to comment”, which is usually reporter-speak for ‘they’re hiding something’.

Consequently, the impression I gained from reading it was this is another nail in the coffin of the beleaguered Lotus CEO – the greedy ba****d, and we (the great unwashed) should rise up and kick his skinny behind all the way back to his native Switzerland. Good riddance.

* * *

But putting aside any personal opinions you may have on Bahar’s stewardship of the Hethel car company, it’s worth bearing in mind the following.

A CEO’s contract is usually a fixed-term agreement (unlike most employee contracts) containing a number of clauses including the nature of their remuneration package (usually a mixture of base salary and a bonus based on meeting pre-agreed performance criteria, which is likely to be paid in either cash, shares or both).

The contract also usually contains a restrictive non-compete clause (should the CEO be poached or attempt to leave and join a competitor), plus a 12-month (or more) notice period on either side. The reason for this is because most senior executives, by the very nature of their non-compete agreements and highly-paid roles cannot simply leave one source of employ and join another – it can often take years to find their next challenge.

Likewise, there simply aren’t that many positions open at any one time, so the contract aims to both dis-incentivise the CEO from leaving and the company owners from using him or her as a scapegoat for political contretemps.

The other likely feature in the contract of a CEO brought on board to turnaround an ailing business, is some (significant) incentive to raise the ‘value’ of the business, either if the business is subsequently floated and receives a significant injection of new investor capital or is sold – either way shareholders of the company agree to reward a CEO for increasing their wealth and this can often result in the CEO receiving millions in compensation.

This is ‘normal’. There is nothing exceptional about such an agreement and therefore nothing can be implied about the intentions of either Proton or Bahar, without further evidence that a plan had been hatched to deliberately exploit Group Lotus for the short-term benefit of either DRB-HICOM/Proton or the Lotus CEO.

* * *

Despite the Telegraph being unable to reach Lotus for comment, I found it to be quite straightforward to reach out to Lotus’ Director of Communications, Thomas Hofmann, who responding to my request in less than 20 minutes.

As expected he was unable to comment on the specifics of Bahar’s director contract, but he was able to confirm that:

“Dany Bahar remains totally committed to Lotus and his over-riding priority is securing the future of the company and protecting its employees.”

Fair enough. That sounds like the kind of neutral statement one would expect from a corporate communications man.

He went on to explain:

“Dany officially never made a secret out of the fact, that Lotus COULD be sold one day – but that was always meant to happen after the long term business plan was successfully executed.”

As already said, it’s in the nature of a CEO’s employ when turning around a non profit making business, to focus on an earn-out from its potential sale or flotation.

Whether such a transaction goes ahead depends very much on what most benefits the shareholders of the business, and therefore it’s entirely possible that Dany’s lottery ticket may in fact NOT come up during his time at the helm of Group Lotus.

So, as the standard line used by Will Smith and Tommy Lee Jones in the movie, Men in Black says – “Move Along, Nothing To See Here.”

Hopefully this helps you draw your own conclusions from the news you read, without getting blown along a path by yet another poorly researched exposé.

Written By

Steve Davies

Steve is an investor, private equity advisor and former Partner at KPMG, PwC and Bain.   Most importantly he's a life-long car enthusiast, mountain biker and active sports enthusiast. He designs and builds technology platforms and is the architect behind Transmission.

More from this author

Privacy Preference Center

%d bloggers like this: