FD rewind – a retrospective look at 25 years of Financial Director

Peter Krijgsman
Editor, 1984-1987
The first person I called (apart from my mother) on being appointed editor of Financial Decisions magazine in the summer of 1984 was the press officer at the General Electric Company. His CEO, Arnold Weinstock, was legendary for his mastery of financial management, evidenced by a corporate cash pile of vast proportions. What better way to launch a new title for senior financial managers than sharing Arnie’s wisdom?
The press man promised he would try. In the meantime I took out a side bet by lining up the FD of soon-to-be-privatised British Telecom. In the event it was him ­ the relatively unknown Doug Perryman ­ who graced the cover of the launch issue in a huge red tie and a bad shave.

Weinstock was not press-friendly. The closest I would get to him was an interview with GEC chairman James Prior two-and-a-half years later. The only bit of Weinstock wisdom to emerge from that interview was the news that Prior, an old Conservative Party heavyweight who had fallen out with UK prime minister Margaret Thatcher a few years earlier, was billed by the company every month for his newspapers. It seemed a paltry prize at the time, but in retrospect Weinstock’s micro-management penny-pinching probably captures everything you need to know about how the world has changed in the past 25 years. After Weinstock’s departure a few years later, the purse strings loosened and GEC all but went down the drain as the renamed Marconi Corporation.

We were still in the Stone Age in 1984. It was before the City’s Big Bang, journalists used mechanical typewriters and a two-bedroom flat in Putney cost less than £50,000. The magazine’s recruitment ads showed that a group treasurer for “an expanding and ambitious financial services group” would be paid £20,000 per year (plus car). From memory, this was not far off the going rate for editing a nascent financial magazine. One of our surveys at the time showed th at 80% of FDs worked for less than 50 hours a week. Stone Age or not, the world was a cosier place.

It wouldn’t last, of course. The Thatcher government was steadily stripping out the anti-competitive cushions that made for a comfy if undynamic life and Financial Decisions interviewed many of the agents of change in this process. One of them, Lord Young of Graffham, had been appointed by Thatcher to cut business red tape. Young was messianic about getting people to take more risk. “The one thing which we [the Conservative government of the time] haven’t managed to change is our attitude towards failure. In the US, failure is an incident. Here it is a tragedy.”

Adding the counterpoint to our feature was an interview with Britain’s youngest Labour MP, a little known fellow named Tony Blair. The future prime minister’s mastery of the sound bite was already fully formed: “Cutting red tape is the sort of platform you put up in school mock elections,” he said. “The main burdens facing small businesses are not regulations but lack of sales and lack of demand.”

There is an almost biblical theme going through the magazine’s back issues, with the most outspoken prophets of change failing to enter the heavenly kingdom of deregulated finance. In June 1985, we interviewed Bob Lloyd, then leading the US investment bank Drexel Burnham Lambert’s effort to convert British finance directors to the cause of junk bonds. “Companies with 50% and 100% debt-equity mixes are seen here as highly geared,” he said. “In the US that would seem conservative.” Drexel itself never made much headway in the UK and would be closed down a few years later by the Securities and Exchange Commission. But finance directors heard the message on debt and the leveraged finance boom soon got underway.

The following year we interviewed one of Drexel’s favourite customers, Ivan Boesky. The yet-to-be-disgraced American arbitrageur was most vocal in his condemnation of monopoly regulators. He vilified the UK’s then powerful Monopolies and Mergers Commission. “You can’t follow the logic of the Office of Fair Trading. There is one decision today, another tomorrow. And a lack of confidence develops. The loser is the country itself.” This anti-regulation theme was encouraged wholeheartedly by the government, though Boesky wouldn’t benefit. He later found himself in prison for insider dealing.

Another doomed prophet was Eddy Shah, founder of Today, Britain’s first colour daily newspaper. An irrepressible man with a huge cigar, Shah looked a bit like Danny de Vito. He imported US technology to create a cheaper production platform in an industry that was only beginning to shake off the dictatorship of the print unions. The paper was eventually closed after being sold to Rupert Murdoch. Perhaps tellingly, at the time we interviewed him, Shah had failed to find a finance director who could keep up with him.

Banks then, as now, were a subject of great concern. The collapse of one ­ Johnson Matthey ­ in 1984 prompted the Bank of England to urge UK banks to start appointing finance directors to their boards. Financial Decisions interviewed the first man to occupy such a role, Michael Julien at Midland Bank, now part of HSBC. Julien was one of the brightest, most clear-headed FDs of his generation, who would later go on to senior board roles, including chief executive and chairman at a number of major UK companies.

“You could very simply divide the finance director’s role into two, namely defining the policies and then establishing an internal audit function which checks whether those policies are being out into effect,” he said at the time. Earlier this year (see Financial Director July/August 2009) he was a little more candid about Midland’s condition in the mid-1980s: in financial management terms it was muddle verging on farce, much of which he succeeded in fixing. At Midland he discovered that, if internal audit existed at all, no one was sure who was responsible for it and he duly got to work on fixing the problem. I can’t help but wonder whether his input then was one of the factors that protected HSBC from today’s banking crisis.

Meanwhile, the shadow of what would engulf the banking system in 2008 was beginning to form. Charles Green, then general manager for finance at NatWest, told us that his greatest challenge was working out how to manage the new range of exposures thrown up by changes in capital markets and by the bank’s stronger presence within those markets: unfinished business, it would seem.
Peter Krijgsman