High noon in the City (a television drama)

Michael Green appeared doomed last night but his fight for control of a merged ITV reflects the tension between shareholders and directors

In the City's version of High Noon, Michael Green, a self-made multimillionaire and one of the most powerful men in British television, has until midday today to step down from the business he built from nothing into a £1.5bn giant over the past 30 years, earning himself a fortune of up to £100m.

But this battle, which began badly for Mr Green last night, is about much more than him or his business, Carlton Communications. For the row between the out-of-pocket shareholders who want him out and the directors who are standing by him goes to the heart of a big question: who controls British business?

Is it the non-executive directors, supposedly there to represent the interests of shareholders but often accused of serving the interests of the executive directors who gave them their jobs? Or is it the pension funds and other shareholders who actually own companies, on behalf of ordinary punters whose savings they invest.

The background is Carlton's merger with Granada, a £4.5bn deal bringing together the two big ITV companies for the first time. Mr Green was to be chairman of the new ITV company, providing a triumphant pinnacle to his career. Last night, the Granada board failed to back Mr Green ­ removing his last real hope of surviving a humiliating campaign to oust him.

This is already the most aggressive and public campaign by shareholders in decades, and has struck fear into boardrooms across the country. If Mr Green does not accede to shareholder demands, they threaten to call an extraordinary general meeting and vote him out of office.

But this brutal assault reflects the growing impatience of investors with the performance ­ and pay policies ­ of some executive directors, who run companies day to day. And it bespeaks a mounting belief that the traditional avenue of expressing dissent, a word in the ear of a non-executive director, simply does not work.

There have long been concerns about the track record of Mr Green and his opposite number at Granada, Charles Allen. But they have pulled off a coup by steering the merger of the two companies through regulators; the Department of Trade and Industry cleared the deal this month, without demanding big concessions.

The outside world thought this was enough to save the jobs of Messrs Allen and Green, though only while the merger is bedded down, giving them a year or 18 months, after which they would step down with dignity, generous pay-offs intact.

Fidelity had other plans. Among the biggest fund managers in the world, Fidelity decided one of the two had to go and settled on Michael Green, a volatile character said to be difficult to work with. After the deal was cleared, Anthony Bolton, the key fund manager at Fidelity, told Carlton's non-executive directors that the merged ITV must have a chairman appointed from outside the two companies.

Having failed to convince Carlton's non-executives to act, Mr Bolton went to other shareholders and put together investors who together own a third of Carlton to stand behind him. The shareholder group signed two letters, delivered to a shocked Carlton last week, that demanded a new chairman for the merged company "as a substitute for Michael Green".

Sarah Wilson, chief executive of Manifest, an organisation that advises investors, said: "This sort of public deadline is unprecedented. Governance issues are usually settled in smoke-filled rooms. Then someone has a quiet word in the chairman's ear."

This time, the non-executive directors ­ part-timers who provide independent supervision ­ decided to side with Mr Green. Sir Brian Pitman, a former chief executive of Lloyds TSB, is the senior non-executive director at Carlton. He was told in at least two meetings with Fidelity's Anthony Bolton that Mr Green must be jettisoned. Fidelity also put its demands in two letters given to Sir Brian last week. The letters were signed by other leading Carlton shareholders ­ big City names such as Legal & General and Schroders ­ who made up what, in effect, was a war party.

Carlton's non-executive directors would not pick a fight with shareholders lightly. As well as Sir Brian, the company counts John McGrath, a former chairman of Boots, among its non-executives. Another, Etienne de Villiers, made his name at Walt Disney. Shareholders are furious at the refusal from the independent directors.

One investor said: "Who is the company being run for, management or shareholders? If non-executives are not there to convey to the board what shareholders want, what are they there for?"

The fight is a dramatic new phase of the City's campaign for better governance and accountability in Britain's boardrooms. After three years of falling profits and share prices, and stung by corporate scandals, shareholders are being more assertive of their rights.

Investors have been emboldened by recent successes, most obviously on "fat-cat" pay. There was a taste of this when shareholders stood up to GlaxoSmithKline over the pay package for the pharmaceutical company's chief executive, Jean-Pierre Garnier.

But the City has been taken aback by the ferocity of the fund managers' attack on Carlton. Corporate governance codes demand chairmen are non-executive, independent, and work part-time to oversee the work of a company's executive management. Mr Green had made clear he expected to be a full-time chairman at the merged ITV and, as someone who has run a top ITV company for years, he was clearly not independent.

Mark Burgess, a senior fund manager at Legal & General Investment Management, said: "For us, this is not about individuals or personalities. It is about making sure there is an independent chairman." He said shareholders had acted now because "there was a danger that the issue would have dragged on and on".

Last night, Mr Green and his fellow directors were desperately trying to convince the City that a compromise was possible. This could mean a deputy chairman appointed from outside the company or a commitment from Mr Green to step down at a set point. But things appeared to have gone too far. Mr Burgess said: "I can't see what other options there are."

City sources suggest that, as well as a corporate governance principle, shareholders took against the personality of Mr Green. They became convinced he could not work with Mr Allen, a softly spoken and measured individual. Given Mr Green's over-bearing character, shareholders did not believe he would allow Charles Allen to run the company day-to-day. As Mr Green's High Noon showdown approaches, the question to ask is will he end up playing the "good guy" role of Marshal Will Kane or follow in the footsteps of gunman Frank Miller.

THE TARGET

Michael Green Executive Chairman, Carlton Communications

By Sean O'Grady

Ordinary mortals often have difficulty fathoming what makes a man like Michael Green tick. The consensus seems to be that Mr Green has a net worth of between £50m and £100m. For most of us that would be sufficient to retire on. But not Mr Green, even at 55, for he is fighting for his corporate life against rebellious shareholders.

Part of the answer is that people like Green only become that wealthy because they will never have enough. And he has something to prove. The Green dynamism and drive are legendary, as is his dislike of personal publicity. He also has a reputation for being overbearing. He has certainly long since outstripped his father's business achievements. Cyril Green was a prosperous manufacturer of drip-dry shirts who sold his business before Michael and his elder brother David had a chance of inheriting it. Instead they set about making their own fortune, starting in the direct mail business in the 1960s, and no doubt helped by Michael's first marriage into the wealthy Wolfson family, of GUS (Great Universal Stores) fame, in 1973. Michael made his first million by the age of 21. Carlton was, 30 years ago, a small photographic studio that the Green brothers used as their principal corporate vehicle in the media industry.

Green's aim has been to transfer the fragmented ITV into a single entity capable of being a global player - with him at its head. The disaster of ITV Digital made that an increasingly unrealistic aim. Green may be frustrated today, but will that be the end of him? As he said recently: "I'm not about to retire to the country; I love business. It's in my blood."

THE ASSASIN

Anthony Bolton Fund manager, Fidelity Investments

By William Kay

Although an anonymous City analyst is said to have dubbed Anthony Bolton "the silent assassin", it would be hard to imagine a more unlikely killer than the tall, donnish and slightly diffident classical music lover.

Although, as the senior UK fund manager for the US-owned Fidelity investment group, 53-year-old Mr Bolton is listened to respectfully in boardrooms, the Carlton-Granada merger is the first in which he has emerged as either kingmaker or kingbreaker.

"Michael Green must have really rubbed him up the wrong way for him to get involved like this," said Mark Dampier, of the broker Hargreaves Lansdown, who has known Mr Bolton for years. "He is the most successful fund manager in the City, yet he has none of the arrogance of your typical star manager. If anything, he's quite unprepossessing."

Since Mr Bolton started the Fidelity Special Situations fund in 1979, it has outpaced the FT All-Share Index by nearly five times. After Yhe left Cambridge with an engineering degree, his barrister father had a stockbroking friend who knew someone at a merchant bank, Keyser Ullman, which was looking for graduate trainees.

Most mornings now, Mr Bolton leaves home in Midhurst, East Sussex, on the 6.45 train, using the time to pore over company reports. During the day he meets company directors, on one day 37 of them.

Those who know him believe he wants to retire at 55. So his attempt to oust Michael Green may be a swan song for the silent assassin.

THE KEY DIRECTORS

SIR BRIAN PITMAN
Once famously described as a "charming thug", the 70-year-old transformed Lloyds TSB into Britain's biggest bank.

JOHN McGRATH
The former chairman of Boots has emerged as Michael Green's staunchest supporter on the Carlton board.

ETIENNE DE VILLIERS
Aged 53, the former European chief of Disney joined Carlton as a non-executive director in September, 2001.