Outlook: Castorama team could still score against Mulcahy's men

It's not been a good week for the French. In the World Cup, the national side is hanging on by a thread after two dodgy results. And on the corporate playing field things have not gone to plan either, with Castorama's DIY defence against Kingfisher's ?3.2bn bid crumbling like a poorly assembled flat-pack cupboard.

The Castorama directors suffered a further setback yesterday when Kingfisher shareholders voted overwhelmingly in favour of the bid. But is it really all over? Don't you believe it.

After a month-long row between these two companies, this deal was never going to be settled without major battles on every minor point. On the face of it, the only remaining issue is for NM Rothschild to rule on whether it considers that Kingfisher's 67 euros per share offer is fair. If it is does, then the deal goes though and Kingfisher mops up the remaining 45 per cent of the shares and takes control.

But there are two stumbling blocks. The first is price. If NM Rothschild indicates a higher price, the UK company may find its finances stretched. However, the Castorama share price indicates that the market thinks the offer is just. And half the minority shareholders have already sold in the market, indicating they think the same. Also, sliding stock markets – the French CAC is down 8 per cent since the bid was made – make the Kingfisher bid look a little less mean than when it was made almost a month ago.

The other issue will be management relations. And this could be more of a stumbling block than Kingfisher is prepared to admit.

It has been clear for some time that the relationship between Castorama's senior team and Kingfisher's chief executive Sir Geoff Mulcahy has broken down completely. If he stays on as Kingfisher chief executive, even for the proposed interim period, the French. will create merry hell. Jean Hugues-Loyez, Castorama's chief executive, has already made life difficult for Kingfisher with his visit to London last week. He is far from a spent force now and could potentially wreck the integration process. Basically, the French want Sir Geoff out, and soon.

It is no surprise, then, that Francis Mackay, Kingfisher's French-speaking chairman, is stepping up the search for a new boss to succeed Sir Geoff, who doesn't speak French. Indeed, he speaks a strange, strangulated form of English. Mr Mackay already has a list of potential candidates, though it is not so much a shortlist as a long one at the moment. Internal possibilities include Bill Whiting (head of B&Q) and Ian Cheshire (acting finance director), but Mr Mackay may feel he needs an external candidate with international experience. And someone who speaks French.

He must move quickly, as he only has a month's grace while NM Rothschild considers the fairness of the Kingfisher offer. After 7 July, the bank will have ruled and Kingfisher will need a project team to lead the integration. But even if Mr Mackay has not managed to secure his man by then, which must be the likely scenario, it seems certain that Sir Geoff will not be allowed anyway near the team lest he puts everybody's backs up.

There has been a suggestion that Kingfisher would like Sir Geoff to be heavily involved in the appointment of his successor. But with feelings running so high on the other side of the Channel, that might not be a good idea either.

The Castorama directors will not want "Geoff's man" watching over them. They are likely to insist on someone who they deem suitable. All of which indicates that Mr Loyez and his merry band of men hven't played their hand so badly after all. It also makes poor old Sir Geoff seem a bit of spare part. Perhaps he should just go sailing.

New York cleans up

The New York Stock Exchange's report on corporate accountability and listing structures is a welcome development, even if there is the distinct sound of stable doors being closed after the horses have well and truly bolted. The exchange certainly needed to do something to restore some of the shine to its reputation, which had been tarnished by its role in the post-boom fall-out. After Enron, the entire US financial structure was put under the microscope. And with scandal upon scandal still oozing from the cracks in corporate America – most recently Tyco's Dennis Kozlowski – it became increasingly vital that the exchange acted to reassure disillusioned investors. The New York Stock Exchange, it is saying, is still a suitable place to do business.

In fact the Exchange's role must be seen in context. It is just one part of a creaking structure that has fallen so low in investment esteem that doing nothing was not an option. The bulge bracket investment banks have been embarrassed by their fuelling of the dot.com boom. The reputation of analysts has never been so low as their independence has been questioned. Pension fund managers have emerged looking not so clever after all. No one has come out of this with any credit.

The NYSE's proposals look sensible enough. They include an increased role and increased authority for independent directors as well as a tightening of the definition of "independent". There is a requirement for shareholder votes on all equity based compensation plans and for audit, nomination and compensation committees to consist solely of independent directors.

Boards should also be made up of a majority of non-executives who meet without their executive colleagues present. In addition there is a "cooling off" period of five years during which former employees will be barred from joining the boards of their former companies as independent directors.

As for penalties, the Exchange will have the power to impose additional penalties, including public reprimand letters, for corporate offenders.

The NYSE has made recommendations to Congress and the Securities and Exchange Commission, prohibiting relationships between auditors and their clients that would affect the objectivity of the audit.

It's hard to fault the logic of all this though whether any of it works or not is open to question. For example, the NYSE offers no guidance on its "tightened" definition of independent directors. And what will "increasing the role and authority of independent directors" actually mean in practice?

It is worth pointing out that if we were still in a raging bull market no one would be asking these questions. During the good times investors were going along with it all because they were making money. Now the chill wind of a bear market is blowing, people are looking for someone to blame. As one senior city fund manager said yesterday: "It is a bit like the tide going out, as the water recedes it reveals all kinds of curiosities."

There is probably a great deal more muck to emerge and as markets continue to tumble investors will be looking for more and more scapegoats.

But it is good to see listing authorities raising the bar.

n.cope@independent.co.uk