Its core operations are in the world’s emerging markets such as the Middle East and Africa. It has had a presence in Hong Kong for 150 years, culminating in the bank’s listing on the Hang Seng in the autumn.
So why, instead of appointing a high-profile FD with a solid track record in financial services to mould relationships with its new shareholders in Hong Kong, analysts and financial press, did Standard Chartered turn to an almost unknown 40-year old consultant, Peter Sands, to take the financial reins of the company in May 2002?
Sands has no accountancy qualification, has never held a senior finance position in business, and his previous career history begins in the Foreign & Commonwealth Office and ends as a partner at consultancy McKinsey, where he specialised in digital TV and financial services technology.
Compare this to his predecessor, Nigel Kenny, who left Standard Chartered to “pursue other interests” only six months after the company appointed its new CEO Mervyn Davies in November 2001 to shake up the business. Kenny, who qualified with Price Waterhouse, joined Standard Chartered in 1992 after 13 years with Chase Manhattan.
Interestingly, Sands joined Standard Chartered at the same time that Philip Hampton was made group FD at LloydsTSB and Stephen Hester joined as finance director at Abbey National. And while all three became FDs in their early forties, only Hester and Hampton have a background in senior financial management: Hampton was previously FD at BG and BT; Hester was CFO at Credit Suisse First Boston, the global investment bank.
This is not to say that Sands does not make a welcome addition to the Standard Chartered board. But a quick skim of his CV suggests that he would be ideal for a more hands-on role – operations director, perhaps.
Why then did Davies ask Sands to take the finance job? And why did he think he was qualified to manage the accounts of a global business with net revenues of over $4bn in 2001?
“I think I got the job for a couple of reasons,” says Sands. “One is that Mervyn wanted to build his own team and bring in some fresh perspectives and new energy. He wanted someone who would be prepared to challenge accepted ways of looking at the numbers. We needed a new view of things.”
And is not having an accountancy qualification helping to bring that fresh perspective? “I don’t know what it’s like to have one. But maybe not having an accountancy background means I am not coming at the business issues with a legacy. I don’t have to worry about overturning years of tried and tested accountancy experience,” he says.
The consultant in Sands is apparent in the way he talks. He describes the business before he joined as “an institution where the whole has been less than the sum of the parts”, and he is “determined to reverse that equation”. Technology is “a powerful agent for change”. He “touches base” with his CEO every day.
But he has surprised a few people with an unexpected numbers-based approach to his job: “Pretty rapidly after I arrived we had a senior management presentation meeting and I had to talk about strategy. I think perhaps because I came from a strategy consulting firm the managers expected it to be exciting stuff. But the message I gave was simple. Our strategy is to deliver performance … we have to focus on driving better returns.” he says.
And driving performance means meeting certain targets that Sands has laid down – 20% return on equity from all Standard Chartered businesses across the globe, for instance – “that’s not something you get a cultural dispensation for”. And for the first half of 2002 Standard Chartered achieved 12.8%: “not quite 20%,” Sands says, “But it was still a big improvement on ROE last year of 9%.”
Capital management is also high on Sands’ agenda. “When I came in it is fair to say that the capital we had was not the right mix or amount.
We have put in a whole set of changes to the quantum of capital, the composition, the minutiae of how we manage capital,” he says. “I am not only looking at this from an accounting point of view but also from the fundamental view of an economist.”
In essence Sands has not been brought on board as an accountant but as a driver of business change. In this respect a track record as an FD or an accountancy qualification are irrelevant. He sets simple financial targets and tightens up management discipline: “And although individuals have squawked when a bit of tightening has threatened some cherished project the business needed better. The style that Mervyn and I have brought in is a much greater emphasis on performance and accountability. And it’s not that people have resisted this, people have quite welcomed the clarity. That doesn’t mean that everybody has flourished and we have got rid of some people.”
Part of the Sands proposition is the strong relationship he has with CEO Davies. And much of what he says is geared to presenting a tag-team approach to managing the business: “We use each other as a sounding board, even when it is about an issue that I should potentially deal with on my own.”
Sands views his relationship with Davies as of paramount importance. “We are keen to ensure that we are being consistent in what we are saying and the signals we give out. It’s very easy in a geographically diverse organisation to send conflicting signals so people in far off places wonder which way is up. It’s hard to find daylight between us on any issue of importance,” Sands says.
Recently the broadsheet newspapers have been full of horror stories of blood on the boardroom table. Standard Chartered lost its CEO Rana Talwar over reported differences in management style. And after Davies came in from Standard Chartered’s Hong Kong operation to plug the hole finance director Kenny was soon to depart.
Davies looked for an ally on the board and he had worked with Sands in his consultancy role since 1996. Davies put in a call and Sands accepted the post of FD. But he did not enter the world of senior financial management without a few reservations. “I thought that the accounting would be more boring than it turned out to be. I came worried that I would get too bogged down in accounting details,” he says. “Accountancy doesn’t have the most glamourous image. But the more I thought about it the more enthusiastic I got. You have to get into the detail of the business, the way it runs and what really drives performance. In some ways I liked the fact the job would force me to make a dramatic change to the role I had before.”
For Sands, accountancy is something you can learn – it is not the be-all of a finance director. But he had to learn quickly – it wasn’t long before the analysts were testing his mettle. “They have been kind enough not to say to my face that they are worried. But at the half-year results meeting I got a few questions that were quite clearly designed to probe whether I understood my numbers.
The first was a question about the accounting treatment of the minority stake we had just taken in the Bank of China Hong Kong flotation. I actually did know the answer to that one,” he says. “But once I had shown I could bat those questions away they quickly stopped.”
One of the most important things that Sands had to learn was to appreciate the cultural differences within the global bank. Some of this he knew from his days travelling the world with McKinsey, but many of his experiences at Standard Chartered have been an education.
For example, in Thailand Sands found that the executive culture is not conducive to question and answer sessions. “You just don’t get junior people speaking out in front of the board. So we asked them to write down their questions.” he says. “The substance of business is the same everywhere but you have to be acutely aware of different cultures.”
While Sands has been learning his trade he has deliberately shied away from exposure in the press. Moreover, he has been too busy floating Standard Chartered on the Hang Seng, standardising processes by moving all the office finance functions across the globe to central hubs in India and preparing the interim results – all since he joined in May.
“I made a deliberate decision when I first arrived that I should focus on the immediate priorities. Talking to the media could wait,” he says.
But now is the time to make his presence felt in financial community. “A lot of people fail to understand what sort of business we are. I find myself constantly having to explain the scale of the business, which markets we are in and where we have strong positions,” he says. “We are constantly up against the fact that people do not understand very much about whom we are.”
Sands’ next priority will be to get the Standard Chartered message across to a wider audience. Until now press mentions of Sands have been limited to comparisons between his appointment and the historical novels that his wife Betsy Tobin writes. He draws attention to a Guardian diary piece that likened one of her thrillers, “shimmering with psychological depth” as one review put it, with the Standard board. “What they will make of her most recent book about a lion tamer I don’t know,” he jokes.
Name: Peter Sands
2002-: Group finance director, Standard Chartered
1988-2002: McKinsey & Co.
1984-1986: Foreign & Commonwealth Office, assistant desk officer, Afghanistan and Pakistan; desk officer, Libya.
What is the biggest challenge in your job?
Making sure that I and the company keep focused on the key drivers of performance. There are always so many other things I could be doing.
My biggest bugbear is videoconferencing. It’s incredibly tantalising and tempts you into thinking that you can behave as if you were in a real meeting. It’s never quite as good as you want it to be. Given the nature of our business we spend an enormous amount of time videoconferencing.
What other company would you like to be FD of?
Of course I am convinced that I have the best finance director job in the most fascinating institution at the moment. But it would have to be Arsenal Football Club.
STANDARD CHARTERED AT A GLANCE
Net revenue: 2001 – $4,464m; 2000 – $4,090m
Pre-tax profit: 2001 – $1,148m; 2000 – $1,438m
Market cap: £8,878m (19 November 2002)
Stockbrokers: Cazenove, UBS Warburg
Listed: London, Hong Kong
Sector: indices; Banks; FTSE-100, FTSE4Good.