Major shareholder backs embattled G4S CEO

LONDON (Reuters) - The second-largest shareholder in under-fire British security group G4S said it fully backed chief executive Nick Buckles, adding he had been let down by local staff and should not have to resign over the London Olympics contract failure.

Shares in G4S have dived 18 percent in the past week since it said it could not deliver a promised 10,400 Olympic security guards, costing it up to 50 million pounds ($78 million) and forcing government to call up 3,500 extra troops.

Invesco's investment manager Neil Woodford told Reuters he was annoyed by the debacle, which has sparked a major political backlash and raised questions over government outsourcing to private firms, but said one contract failure should not damage G4S's overall reputation or see Buckles axed.

"It is my view that the interest of shareholders are best served by keeping Nick Buckles in this business because his track record is excellent," he told Reuters in an interview.

"I do not want to throw all of that away on the back of this failure of local management to deliver one contract, one of literally thousands and thousands of contracts that this company has around the world."

Woodford, who supported Buckles in the wake of G4S's failed 5.2 billion pound bid for Danish cleaning firm ISS last year - despite having disagreed with the deal - added that he had not discussed his stance with other significant shareholders.

Last week a top 20 investor, who did not want to be named, told Reuters it was undecided: "I would say we are watching the situation closely and would be concerned if there was long-term reputational damage which affected the ability to win future contracts."

Buckles situation took a slight turn for the worse on Tuesday as G4S shares fell a further 3 percent to an overall six percent decline in the day as he tried to explain reasons for the Olympic crisis to Britain's Home Affairs Committee.

But Woodford said stock markets had over-reacted and that Buckles, who has been with G4S for 27 years, was working hard to ease the failure of others within the company.

Just 11 days ago, the managing director of G4S Global Events, Ian Horseman Sewell, told Reuters the company was so confident about the Olympics that it believed it could stage another similar-sized event at the same time if needed, a line that was repeated numerous times at the committee hearing.

"He's been let down by operational management, he's doing his best now, I think he is working literally night and day to do what they can to rescue the situation," Woodford said.

He added that little could be read into a recent British newspaper interview with G4S's new chairman John Connolly who failed to express outright support for Buckles.

"John has only been there for a couple of weeks so I think it is too early for him to jump up and down and say I absolutely defend Nick Buckles," Woodford said.

"My impression is that they have a very good working relationship which has been cemented in this crisis."

(Editing by Kate Holton and David Cowell)