The many vetoes over Ecclestone's successor

07/12/2013
NEWS STORY

Three weeks ago Donald Mackenzie, the co-chairman of CVC, the private equity firm which controls Formula One, told a London court that if the sport's 83 year-old boss Bernie Ecclestone is found guilty of "anything that is criminally wrong, we would fire him." As Pitpass' business editor Christian Sylt has revealed this was not the biggest news from Mackenzie's testimony in the case which surrounds CVC's acquisition of F1 in 2006. There are two reasons for this.

Firstly, Ecclestone had already revealed to Pitpass at the end of last year that if he is found guilty of wrongdoing CVC "will probably be forced to get rid of me." Secondly, Mackenzie also revealed in court that the Royal Bank of Scotland was "extremely careless" when it lent 1.6bn to F1 in 2006 as it was based on a valuation of the business by accountancy firm Ernst & Young which was supposed to be independent but in fact came from the bank itself. Clearly that is more significant news but, nevertheless, by reiterating that he would fire Ecclestone if he is found guilty of a crime Mackenzie sent out a reminder that CVC chooses who sits in F1's driving seat. However, that doesn't mean to say that its choice will end up in charge.

Speaking to American television network CNN during the week Sylt revealed that Ferrari has a veto over Ecclestone's successor. It means that when the time eventually comes to select a new F1 boss CVC will be able to choose whoever it wants but the appointment could be blocked by Ferrari.

It follows comments by Ecclestone before the Brazilian Grand Prix in November when he said that his "ideal" successor would be Red Bull Racing team principal Christian Horner. "It needs someone who knows the sport. If someone comes in from outside, a corporate type, I don't think I could work with them. It wouldn't last five minutes," said Ecclestone.

In a statement, Horner said that whilst he is flattered by Ecclestone's comments, he is "fully focused" on his role as team boss and has a long-term contract. Ecclestone told Sylt that the reason he named Horner is "he happened to be walking past and somebody said to me 'what happens when you go, what's going to happen?' Christian walked past and I said 'what about him? he is a good guy.' Firstly CVC would never agree and secondly Ferrari would have a say."

Ecclestone admitted that Ferrari needs to give consent to his successor and this is confirmed in the prospectus for the stalled flotation of F1 on the Singapore stock exchange. It states that "we must obtain the written consent of Ferrari prior to the appointment of any person as our chief executive officer if within the past five years, he or she has held a senior executive office or an ownership interest of 5% or more in any Team or automobile manufacturer which either owns more than a 5% interest in a Team or is a supplier of engines to a Team."

Additionally, Ferrari's chairman Luca di Montezemolo sits on F1's nomination committee and the prospectus states that one of its responsibilities is to "review and recommend candidates for appointments to the Board."

Di Montezemolo has already commented on Ecclestone's reference to Horner as his successor as he said on Italy's RAI television earlier this week "Ecclestone sees Horner as his successor? As the years go by, he more and more enjoys making jokes and I'm happy he still has the desire to do so." That looks like a good indication of whether Ferrari would give its consent to Horner taking over F1's driving seat though it remains to be seen whether he really is a contender.

As F1's controlling shareholder, CVC would choose Ecclestone's successor and earlier this year a source close to the private equity firm told Sylt that "the business is too small to have a successor lurking in the ranks. The successor almost certainly has to come from externally."

F1 only has 313 staff and 10 senior management with no deputy or chief operating officer waiting to take over the driving seat. In 2011 David Campbell, the former European chief executive of entertainment group AEG, was hired to run F1's corporate hospitality division. He was tipped as a successor for Ecclestone but as Sylt also revealed he left after just over a year.

Other names from outside the sport have included Justin King, chief executive of supermarket chain Sainsbury's, and Sir Stuart Rose, the former boss of its rival Marks & Spencer.

During the court case it came to light that the FIA also has a veto over Ecclestone's successor if F1 is sold and the new owner wants to replace him. This veto caused some confusion as it seemed to suggest to some observers that the FIA could stop CVC from firing Ecclestone. In fact, it is only when F1 is sold that the FIA's veto comes into play.

It means that Ecclestone's position is ultimately protected through not one but three vetoes - one from Ferrari, one from the FIA and, crucially, one from CVC which can decide whether to keep or drop him. Ecclestone could of course decide to step down voluntarily but that doesn't look likely. In his usual defiant manner he told Sylt "I'm not going anywhere."

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Published: 07/12/2013
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