Company News » Hundred weight – The Financial Director interview

“Since I became an accountant, people have been asking whether the accountant is going to have to be strategic and stop being a beancounter,” says John Coombe, finance director of pharmaceutical giant GlaxoSmithKline and chairman of the elusive Hundred Group of Finance Directors. “For 30 years people have been asking that question. And 30 years ago it was a stupid question,” he says.

Coombe says he has never concerned himself with too many details, even if he sometimes feels that he does “too much getting the numbers right and not enough picking them up and looking at them”. Most of the time he leaves the abacus to his chief financial accountant – you don’t survive two mega-mergers and become chairman of the Hundred Group by being able to add up.

Coombe’s central concerns are driving growth, business efficiency and the creation of shareholder value. Since he was promoted from chief financial controller to Glaxo’s FD in June 1992, he has helped create 11.2% year-on-year share-price growth for investors. Even in the present troubled climate, where red has become the new black, Coombe continues to make his shareholders happy, announcing in June 2001 that GSK was on track to deliver its promised 13% EPS growth for the year.

He says that being a successful FD is all about moderation; striking a balance between what he describes as “producing the numbers and using the numbers”. “There is a dilemma,” he says. “We accountants are brought up to be prudent, to only believe what we think to be correct and true.

We are unlikely to put on coloured shirts and strange ties and take extreme actions that will change the course of business life. So I think not that many accountants make it into the CEO job.”

There is comfort in the number-two role for finance directors – a semi-visibility afforded by the back office that isn’t available to the CEO.

But, in Coombe’s case, when your business starts to turn over #18bn a year and you become responsible for ‘rationalising’ a company with 100,000 employees in over 40 countries you start to lose that anonymity.

When we last interviewed Coombe, in our January 1995 issue, he was finance director of Glaxo (pre Wellcome merger). Then he revealed himself to be a methodical FD with a “preference for mulling things over”, claiming that “on balance I get better decisions as a result”. Six years later his work remit has broadened to such an extent that the distractions of the Hundred Group and Accounting Standards Board, where he is a member of the board, are starting to eat into his time. “It’s been a rather mucky two years for me (at the Hundred Group). The challenge is the chairmanship.

I took it on in November 1999. But in January 2000 GlaxoSmithKline began a tortuous merger process that should have been over in a few months and in fact lasted a year. But we got through it,” he says.

After the #100bn Glaxo Wellcome and SmithKline Beecham merger was announced in January 2000, both companies’ shares slumped. It was Coombe’s task, after completion of the deal in late December 2000, to convince the market that the numbers made the merger worthwhile. However, the general feeling that Coombe et al hadn’t communicated concrete evidence of cost savings and earnings predictions gave way to scaremongering about redundancies and a downturn in research and development spending when #1.6bn of savings were finally proposed in July 2000.

Coombe has learnt to handle these issues, especially after the mistakes made during the Glaxo Wellcome merger in 1995. “We are conscious of numbers, as the press loves to talk about ‘x people fired’. We are going for a central target to achieve a significant reduction over adding both companies together,” he says. “But we have some ground rules: salespeople are safe, a lesson from the Wellcome deal where we suffered as sales forces became demoralised. This is a rare example of a lesson learned and applied successfully.”

The merger of Glaxo Wellcome and SmithKline Beecham was approved by the European Commission in May 2000. Unfortunately the United States Federal Trade Commission (FTC) got a bee in its bonnet and didn’t approve the merger until December 2000.

Coombe can’t quite bring himself to forgive the FTC. “Because of the FTC we staggered on through the rest of 2000. They are stood up saying ‘Europe is doing this to our finest company’,” he says. Coombe draws a comparison with the proposed GE Honeywell merger that failed earlier this year: “All the hassle with GE complaining about the Europeans is nothing compared to the Americans. I have sympathy for GE because it is a lousy process to go through. What I don’t have sympathy for is drum-beating Americans complaining about our systems. My experience is that our systems with set timetables are rather better than the American open-ended approach.”

Coombe is open and frank in discussion, a factor that probably helped his election to the head of the Hundred Group. In recent years the public perception of the group has developed and the chairman has become the official mouthpiece of the finance function of the FTSE-100 – a voice that carries considerable resonance in business. No longer a secretive gentleman’s club, the group has recently tackled government on high-profile issues such as double taxation and the euro, attracting some column inches in the press as a consequence.

Participation in the group is voluntary and by invitation only, so it only meets when there is something to talk about. “The key driver for the group is lobbying on behalf of FDs of the FTSE-100. We keep an eye out for issues and we go on the issue where we have points to make. If there are no issues, frankly, we just get on with our day job. We are all pretty busy and have things to do,” says Coombe.

Currently three issues are getting group members excited: pensions reform, accounting standards and share option accounting. “We still have the tail-end of pensions to deal with,” says Coombe. “When the pensions standard comes in we will see more and more volatility in company accounts. Now, with my position as a member of the ASB and endorsing the standard, I broadly agree with the principles of the standard, but we have to continually remind investors of the impact this can have. Going forward, I think this is something that the Hundred Group has to work on.”

Through his involvement with the ASB, Coombe is also driving the issue of accounting standards. He believes fervently that big businesses like those represented in the Hundred Group have a responsibility to influence standards: “Unless major companies play on developing accounting practice, technicians will rule the day. You’ll get some wonderfully correct answers but not necessarily the most practical.”

One of the biggest problems is making sure the UK stays in line with international standards. But Coombe’s old friends in the US are making life difficult again, although he admits that they have started to come over on the issue of goodwill. “The row continually simmers,” he says.

“The more that we can achieve unanimity through the IAS the more we will be able persuade the US to go along with this. It means we need greater sophistication, but it doesn’t mean that we have to adopt (US) FASB.”

However, Coombe is worried about the European filter mechanism, which he feels is creating European international accounting standards. “That will be a complete disaster,” he says, arguing that it will enable the US to turn round and ask which set of standards we are talking about.

But he doesn’t see much alternative. “What choice do we have other than to forge ahead and try and get it right?” he asks.

One of the biggest challenges Coombe faces is not from the IAS, government or even the US. Getting the individual factions within the Hundred Group to agree is sometimes very difficult – especially when old and new economy companies bump heads. “There is normally a majority view. But the thing that has probably exposed the divisions most, and these aren’t divisions that will split the group up, is the share option issue. The high-tech members feel very strongly about this. I feel fairly strongly in the other direction,” he says. “My own view, and I speak for a number of members, is that share options are worth a lot of money. If you give them to staff you then ought to reflect that in a p&l account charge somehow.”

Nevertheless, there are those who believe share options are nothing to do with p&l – that they are simply a way of carving up share capital.

Coombe appreciates the arguments, but he also believes in common sense and taking a majority view. “This is a case where practice has to overwhelm theory and you have to say ‘Come on. This is becoming a large part of incentive and salary for many people,'” he says. “The only way to make sure shareholders are aware of what is going on, and to get better comparability between companies, is to put a charge through the p&l.”

He also sympathises with new technology companies who offer share options as a substitute for high salaries. “We may be stifling enterprise and initiative by forcing through a change like this. But at the end of the day I weigh everything up and I think if there is economic benefit to be gained by starting up dotcom companies then people will find a way of doing it. If we make share option accounting more difficult I can’t believe that would get in the way of economic development.”

Coombe admits the group can make mistakes. “Some of the people in the Hundred Group make strange decisions, just as those outside the group do. We are a microcosm of the world,” he says. But he knows that usually the considered view is the best and that the majority must prevail. This is why the Hundred Group exists – to pool experience, to learn from one another and to continue to shape the changing role of the finance director.


The group began life in 1975 as a spin-off from the London Society of Chartered Accountants, predating the launch of the FTSE-100 in February 1984. Originally called the Hundred Group of Chartered Accountants, its most immediate concern was the Labour government’s price control policy at a time when inflation was 2% per month. The Hundred Group soon found its feet as a forum for discussion and lobbying.

Eventually, membership was widened to include FDs who were not chartered accountants and the affiliation with the London Society of Chartered Accountants was ended. The group became the Hundred Group of Finance Directors, and non-FDs were asked to leave, including FDs who had moved into general management. This rebirth was the brainchild of Ian Tegner, FD of Midland Bank and chairman of the Group between 1988 and 1990.

The group gained notoriety in 1993 where it effectively lobbied against the torrent of new listings rules, accounting standards, legislation and the Cadbury Report. Michael Lawrence, the group’s chairman at the time, convinced the authorities that more time was needed to implement all the corporate and legislative changes.

The group’s paper on the euro, a united defiance against double taxation and a keen interest in pensions reform have helped raise its profile in recent years.

Membership is by invitation and fluctuates between 130 and 150 members, including representatives from multinationals and other major companies in important industries that are not part of the FTSE-100.

If a company is taken over the FD is invited to leave. If a company slips out of the FTSE-100 the FD is usually allowed to stay until the next regrading.

The group has no secretariat, but discussion is facilitated by the chairman and his deputy. Deputies are elected to the chair every other AGM and the outgoing chairman resumes his position as deputy chairman for a further year.

Chairman John Coombe, GlaxoSmithKline Steps down November 2001

Deputy chairman and chairman designate Mark Armour, Reed Elsevier

Head of legal committee Nick MacAndrew, Schroders

Head of investor relations and markets committee David Kappler, Cadbury Schweppes

Head of tax committee John Symonds, AstraZeneca

Environment committee head

John Buchanan, BP

Head of technical committee

Rosemary Thorne, Bradford & Bingley

Head of ad hoc committee Eddie Weiss, ex-Chubb


Name: John David Coombe

Age: 55

Qualification: FCA


2001-Finance director, GlaxoSmithKline

1999-Appointed chairman of the Hundred Group

1995-2000-Finance director, Glaxo Wellcome

1992-1995-Managing director, finance, Glaxo

1986-1992-Group financial controller, Glaxo

1984-1986-Finance manager, Charter Consolidated

1976-1984-Group treasurer, Charterhouse Group

1973-1976-Assistant chief accountant, Charterhouse Group

1971-1973-Management accountant, BOC

1969-1971-Dixon, Wilson.

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