Pearson: new principal
The company has stumbled in the past through an inability to read consumer trends
Andy Bird is neither fish nor fowl. Pearson’s new boss-elect, already serving as a non-executive on the education publisher’s board, brings neither the familiarity of a true insider nor the fresh start promised by an outsider.
Still, Pearson is pinning a lot on him: a best-case $18m, if you tot up salary, pension substitute, incentive plans and a one-off co-investment scheme under which he receives 1.2m shares. Use of a New York apartment is thrown in for business purposes too. Lest that sounds unduly generous, Pearson is at pains to point out it is only half what he was earning on an annual basis at Disney — a role, incidentally, he left more than two years ago.
That is multiples of current boss John Fallon, who will take away a £1.85m package this year. But context is everything. Mr Fallon presided over seven profit warnings in a seven-year tenure. Shares over the period have more than halved. Even with dividends reinvested investors would be down by a third during a period in which the All Shares Index has returned 43 per cent.
Mr Bird, who takes up the reins in October, inherits a company still struggling to pivot to digital learning. Once a collection of diverse but blue-blooded assets — stakes in Lazards Bank, Madame Tussauds Waxworks and Royal Doulton potteries — by 2013 Pearson had slimmed down to a media conglomerate. Mr Fallon went further, shedding a stake in Penguin Random House and the Financial Times.
There is a long way to go before Pearson becomes the premier global and digital learning company it aspires to be. It is heavily tilted to North America, which makes up nearly two-thirds of business. By far the bulk of sales are B2B. Just 5 per cent are direct to consumers, an area that Pearson is targeting. But Pearson has stumbled in the past through an inability to read consumer trends. It failed to spot that students shunning its textbooks would turn to second-hand versions rather than go online.
Mr Bird has three factors in his favour: a strong balance sheet, a patient but activist shareholder in Cevian Capital and an incentive package that gives him a lot of skin in the game. But Lex has noted before that Mr Fallon’s successor must possess vision. Mr Bird needs to prove he can migrate his digital and international chops from Mickey Mouse to education.