Prudential is preparing for a board shake-up by drafting in city heavyweights

By SIMON DUKE FOR MAILONLINE
Updated: 17:22 EST, 1 October 2010

The Prudential is drafting in a pair of city heavyweights as part of a major boardroom shake-up following its bungled £23bn bid for Asian rival AIA.

The impending appointments of Sir Howard Davies and Paul Manduca are seen as laying the ground for the removal of the insurer’s embattled chairman, Harvey McGrath, who has become the lightning rod for shareholder anger over the collapsed takeover deal. 

City sources told the Mail that Davies, a former head of the Financial Services Authority, and former fund manager Manduca will initially be drafted in as non-executive directors of the insurance giant.

All change: New recruits could pose a threat to the insurer’s embattled chairman

However, it is expected that the duo will soon be elevated to more senior positions in the Pru boardroom. James Scott, the 72-year old senior independent director, could stand down as soon as next year, while the chairman’s position is also likely to become vacant in time.

McGrath and chief executive Tidjane Thiam came under sustained fire over the summer after failing to win the backing of shareholders for their eye-watering AIA bid.

The collapsed deal has cost the Pru some £370m, including a hefty break fee for AIA’s owner, bailed-out American insurance giant AIG.

Critics believe McGrath should have done more to restrain his ambitious chief executive, who had been at the helm for just five months when his plans to swallow his main Asian rival came to light in the spring.

A campaign to remove McGrath and Thiam won the support of a number of large institutional investors, but the agitation has died down in recent months as profits have continued to grow, particularly at Pru’s fast-growing Asian wing.

One erstwhile rebel told the Mail that he is now inclined to ‘let sleeping dogs lie’ after failing to marshal enough support for a boardroom coup.

However, other sources said Davies was an obvious candidate to replace McGrath.

Apart from his spell running the FSA, he served on the board of Wall Street giant Morgan Stanley during the financial meltdown and is a former deputy governor of the Bank of England. Manduca, meanwhile, has been praised for his efforts as senior independent at supermarket giant Morrisons, where he oversaw the appointment of new boss Dalton Philips when his predecessor Marc Bolland
defected to Marks & Spencer.

Manduca, a former boss of Rothschild Asset Management, recently announced plans to step down from the supermarket.

Prudential (up 10.5p to 647p) declined to comment.