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
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
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.
By the time I took over the editorship in 1987, the magazine still called
Financial Decisions was really starting to find its feet. The
interview piece became very much the cornerstone of the monthly title as,
indeed, it is today.
But while the strategy was to address an audience of finance directors, the
‘Financial Decisions Interview’ more typically included chief
executives and even company chairman. Having a career background as an FD might
have helped, but it certainly wasn’t compulsory.
One advantage of this approach was that the magazine interviewed many of the
big name business personalities of the day and personalities didn’t come much
bigger than Sir John Harvey-Jones who, shortly before his 63rd birthday, had
retired as executive chairman of ICI, the chemicals giant whose shares used to
be referred to as the bellwether of the London stock market.
Harvey-Jones was just a few months into his retirement when he told us why he
was happy to have left ICI. Well known for his long hair, loud ties, plain
speaking and for having taken his dog into the office, he steered the troubled
chemical group to profits of more than £1bn the first time such a figure had
been achieved by any British company. But he had a remarkable modesty: “When I
look back over my career, I think it’s ridiculous. I can never really believe
that my accomplishments are anything to do with me. I was just your average
slob with a bigger job than most.”
More significantly, we witnessed a ‘coming of age’ of the FD. One
particularly significant article in June 1988 interviewed FDs Archie Norman
(Woolworths), Gerald Corbett (Redland) and Alan Perelman (Dee Corporation): “All
are under 40, hold powerful positions on their company boards and have a
significant influence on the strategic direction of those companies, but none
are accountants.” The latter point is critical: it reflected not an attitude th
at the FD role was unimportant and could be done by any general manager as part
of his career progression, but rather, that it was an absolutely vital role, far
more important and essential to strategic development to leave it to a mere
Financial Director has always had certain characteristics which have
run through the quarter century: strong, purposeful design with a signature
front cover that made readers look and think twice, at least; an editorial which
played to the strengths of the monthly frequency, no frenetic daily or even
weekly schedule, but a thought-out approach to the stories that the editorial
team judged FDs would want to read about, including columns which added the sum
of knowledge rather than a knee-jerk reaction to events. The profile, in
particular, has to be seen as a carefully researched tour de force which so
often stands the test of time. It is journalism at its best.
Over the years, the magazine has found a confident voice supporting the work
of the FD, but always prepared to offer a fair critique rather than simply
slavishly admiring. In the early 1990s, the title changed from Financial
Decisions to Financial Director.
Looking back at editions of Financial Director from the early 1990s,
is it a question of plus ça change? Was business really so worried about the
prospect of a Labour government? The cover story for April 1990 the picture a
red rose lying on a metal shard-strewn factory floor was accompanied by the
slightly hyperbolic question, “Life under Labour: will your company survive?”
Well, we rather jumped the gun on that, as there was another seven years to go
before we would find out, although in our defence in spring 1990 prime minister
Margaret Thatcher and her government were stumbling badly in the polls thanks to
high inflation and rising unemployment.
FDs with acute memories and who have grown up with the magazine will know
that some themes have refused to go away: funding and structuring the balance
sheet (yes, we were concerned with deleveraging back then), tax, financial
reporting and pensions have always been part of the working life of FDs. In
February 1990 we were writing about the rise of the convertible bond. Twenty
years later, they are back in fashion.
But while we can find comforting similarities there are also stark differences.
The early 1990s was an astonishing period of regulatory change. Until that time,
corporate governance was a subject mostly discussed by academics and corporate
governance codes of best practice were unknown.
The Financial Reporting Council (FRC) was established in 1990 to promote good
financial reporting and, at one stroke, edged the auditor out of the limelight
over accounting failures. It was clear that regulation was belatedly catching up
with business. The Accounting Standards Board and the Financial Reporting Review
Panel were also born in 1990 with much needed money, more full-time staff and
more legal clout than their discredited and tired predecessor body, the
Accounting Standards Committee.
The FRC and its acolytes have proved to be a sensible, even elegant structure
designed with some panache by the then-Sir Ron Dearing, a good friend to FDs and
the wider accountancy profession. But regulation inevitably begets regulation.
The report on The financial aspect of corporate governance (Cadbury to us all
after committee chairman Adrian) was published in December 1992. It was the
beginning of the proliferation of codes, standards and guidelines and the
expansion of the size and complexity of financial reports. In the early 1990s, I
believe most FDs could have had a detailed grasp of both the accounting
standards and the tax codes. A genius would struggle now to cope with the sheer
volume in situ.
Cadbury had been set up by the FRC, the London Stock Exchange and the
accountancy profession responding to a series of events, notably the collapse of
Polly Peck and Coloroll. As the committee was conducting its work, higher
profile failures blew up in the form of BCCI and Robert Maxwell. Maxwell had
gone overboard in November 1991 followed shortly (metaphorically speaking) by
his business empire, a victim of recession and fraud. In retrospect it seems
like a medieval morality tale involving pensions, cash, accounting. If you want
to know why FDs are grappling with international accounting standards then take
a look at Maxwell’s accounts. The reconciliation between the figures published
in the US and the UK should send a shiver down the spine of anyone looking to
glean useful information from the accounts. Such different figures, how can they
both be right?
Maxwell’s story recalls one personal memory and another stark ‘then/now’
difference. I remember making sure I didn’t let the one copy that the publishing
house (home to two dozen titles) had of Maxwell’s reports and accounts out of my
sight until I’d finished with them. Now, of course, they’d be on my laptop in
PDF form (and soon presumably XML) and I could share them with any number of
colleagues. But in the early 1990s no one had heard of the internet, email,
broadband, Google (which was to start life as a research project in 1996) and
blackberries were still only a type of fruit. Faxes were considered pretty
sophisticated office equipment and celluar phones were absolutely state of the
FDs have always been in the van of the information revolution and
technology. Finance departments, no doubt with varying degrees of success, can
now impose control over large and geographically diverse global businesses in
way that could not have been dreamt of in the early 1990s. It has also given FDs
at least two new acronyms, ERP and SSC. ‘Enterprise resource planning’ was
beginning to emerge in the 1990s out of ‘material resource planning’ and the
first shared service centres (SSCs) were also stumbling into being both have
now been made commonplace by telecom and technology innovations.
FDs’ technology may change but their role within the company hasn’t
fundamentally altered. It is a difficult job which requires a challenging
skillset which makes you respected and valued more than liked. And that’s why it
brings considerable reward. In March 1993 (after I had stepped down as editor),
the profile was the FD of National Westminster Bank, Richard Goeltz. One quote
in that interview stands out from the American Mr Goeltz. “When I began working,
I thought the function of accounting was to reflect economic reality,” he says.
“Fortunately I was disabused of that misconception early enough in my career
that it did not do serious damage to my earnings power.” May Financial
Director long continue to dig up gems like that from the world’s top FDs.
Leafing back through some of the first issues of Financial Director I
edited, what struck me most aside from how young everyone looks and how fond
finance directors were of beards 20 years ago was how little has changed over
the past two decades.
In the first-ever leader I wrote, I referred to the “worrying trend emerging
of directors being more concerned with watching their own backs and thinking
about what’s happening to them today rather than with what’s going to happen to
the company tomorrow.” That might not be quite as true for the general business
population today as it was then, but it was glaringly manifested in the recent
banking crisis that catapulted us into recession, and it remains all too evident
in many executives’ reluctance to be weaned off their exorbitant salaries
even in companies that by any reasonable measure must be deemed to have failed
their shareholders, employees and pensioners.
We were slipping into recession in the summer of 1990 presaged by a slew of
companies going bust but, unlike the current recession, the recession of the
early 1990s sneaked up on us. Nevertheless, the question we asked then was no
different from that being posed this time round: why did no one see it coming?
And the answer is the same in the words of a leading insolvency expert at the
time: “People got complacent or greedy.”
It makes you wonder if all the money, time and effort that have been poured
into corporate governance and corporate responsibility initiatives over the past
two decades has served any useful purpose.
Yet some things have changed. The economist John Kay, then director of London
Business School’s Centre for Business Strategy, ascribed many of the problems
besetting the UK economy in 1990 to the “businessman-as-hero culture” that was a
defining characteristic of the 1980s. The hype around colourful
founder/managing4 directors such as Roy Bishko of Tie Rack, Sophie Mirman of
Sock Shop, Asil Nadir of Polly Peck, Tony Berry of Blue Arrow, John Ashcroft of
Coloroll, et al, was fun while it lasted. I enjoyed interviewing many of them.
But it led to a situation where, as Kay put it, companies thought “they could do
anything and left them misunderstanding the nature of their competitive
Twenty years on, we are all less ready to put business leaders on pedestals
but our healthy scepticism didn’t stop bankers setting themselves up for a
spectacular fall. Yet, while the banks may have spearheaded it, we were all
complicit in the illusory wealth creation process of the past few years we
fell over ourselves to grab cheap credit as personal and corporate debt soared
to dangerous levels. And no party was more complicit than the government, which
chose to interpret Gordon Brown’s claim to have ended the era of boom and bust
as evidence that the UK’s wealth would continue to rise inexorably and
indefinitely and, consequently, made no attempt to stem the banks’ incontinent
lending and its Byzantine borrowing.
It made me laugh, then, to read an analysis in the November 1994 edition of
Financial Director reflecting the nervousness of FDs about the
increasingly likely prospect of a Labour government. We sought to reassure them.
“A straw poll of business leaders… found cautious approval of the party’s
apparent shift in attitude towards industry and its recognition of the validity
of markets and wealth creation,” we wrote. Clearly, their fears were unfounded.
In December 1990 we extolled the virtues of teleworking to a management
population that viewed it with the same suspicion they accorded to a prospective
Labour government. Today there can’t be many people who don’t work remotely for
at least part of the week. But progress in other areas has been slower. There
are only slightly more female directors now than there were in 1994 when we
called for more women in the boardroom and still too many companies are keener
to be seen to be green than being genuinely environmentally responsible, 20
years after we described UK plc “scrambling onto the green bandwagon”.
What always interested me most were the personalities. I used to enjoy
listening to the good and the great tell me how good and great they were and
then going off and talking to their colleagues and finding out what they were
really like. Judging by some of the people who, despite a very questionable
track record, pitch up in job after job, each bigger and better paid than the
last, it’s a trick the headhunters have never learned.
But I used to like it even more when I met someone who I thought was
genuinely impressive. The late Hugh Collum, former FD of SmithKline Beecham and
chairman of The Hundred Group of Finance Directors was one. He was urbane,
intelligent, thoughtful, trustworthy and had great integrity. Business would be
a better place if there were more like him.
Richard Shackleton/Lucinda Horne
Shackleton: editor, 1995-1997
Horne: acting editor, 1995; editor, 1997
So central was the finance director to the editorial positioning of the magazine
that each issue featured an FD on the cover. There was a signature style black
background, piercing eyes and an ability to tell whether they had missed a bit
shaving that morning. It was a short-lived style as the ‘themed’ cover returned
within a year.
Lucinda Horne was acting editor for a while in 1995, until Richard Shackleton
took up the reins at the end of the year. His departure in 1997 saw Lucinda
briefly take up the editor’s job, proper, before a new career beckoned.
It was a period when industry and finance were in a state of flux.
Deregulation in utilities promised cheaper deals for corporate consumers, while
the ever-growing telcos slugged it out in the mobile market and in cable. The
London Stock Exchange, meanwhile, marked the tenth anniversary since the Big
Bang of deregulation, while Aim, the junior (and supposedly cheaper) market
celebrated its first birthday. And yet, as Horne wrote in 1996, businesses such
as The Body Shop and Virgin were taking themselves off the market, bemoaning the
lowly share price rating the City was giving them. At the same time,
institutional buyers were able to outbid incumbent managers who harboured
ambitions to take their own subsidiary out of a parent’s clutches.
In the realm of FDs themselves, Horne wrote an article at the end of 1995
that helped to raise the profile of a low-key but highly influential
organisation, The Hundred Group of Finance Directors: “Few outside its immediate
sphere of influence know it exists.” The same is still true today, but that’s
not to belittle the importance of the organisation whose membership comprises
around 130 FDs from the largest companies. Part talking shop, part lobby group,
it seeks to work behind the scenes: “We don’t issue press releases. We go and
see people,” one former chairman told us.
Of the FDs interviewed in this period, former merchant banker Oliver Stocken
of Barclays, was probably the highest profile. One City analyst told us:
“Barclays has been in the forefront of work to identify risks in its loan
portfolio and categorising lending.”
Stocken himself said that some of Barclays’ problems related to people
sitting on problems for too long: “The cardinal sin is for people to hide a
problem. People are going to make mistakes.” Perhaps we can see here the roots
of Barclays’ survival of the credit crunch.
Horne also wrote about the changing role of the FD. “We saw the change in the
’80s when the concept of creating value really took hold,” said one FD.
“Suddenly the FD had a major say in what the company should be doing.”
We started in the mid-1990s to see more of a new breed of finance director:
young, female, ambitious and from abroad. Australian Helen Chalmers, FD of the
London Ambulance Service, had a seven-year career in the NHS but was still just
30 when she became director of finance at what had been described by a House of
Commons committee as a “deplorable” ambulance service in the nation’s capital.
Described by colleagues as “intelligent, person-orientated and first-class,
technically”, Chalmers herself told us: “One of the things I love most is
encouraging my teams to achieve certain goals and then watching them do it. I am
fairly convinced if I were to consider another career it would be personal
coaching and motivation.”
People, people, people. The FD role was on the move again.
It was the December 2001 issue. A huge American company that we had barely heard
of became the largest US bankruptcy in history. It was worth a short paragraph
it was American, after all, and seemingly had little significant presence over
here. But one thing led to another on press day and the paragraph got forgotten
about. Never mind, I thought. Earthquake, far away, not many dead. Had our
chance, missed it. Move on.
Well, this particular earthquake was Enron and the ramifications of that
single corporate failure are still being felt today, thanks to the legislation
rushed through Capitol Hill by Senator Sarbanes and Representative Oxley.
So we got a second chance at the story after all. In fact, not only did our
March 2002 issue do a story on what went wrong, we also got an exclusive
interview with the FD of the UK arm of Andersen, Enron’s auditors. (Not even
their press officer thought we’d get that one.) The firm was in danger of
imploding because no plc wanted to reappoint the firm responsible for shredding
documents. So we were a little surprised when he told us, “We don’t know what
the outcome is other than the firm is very clear that financially this isn’t
something that they’re overly concerned about.” Brave talk.
My first issue as editor, September 1997, focused on a discrepancy between
the way that UK companies that had listings on London and Wall Street reported
to their British shareholders versus the information given by those same
companies to their American shareholders. Hanson was a case in point: thanks to
its SEC Form 20F, it told Americans about timber prices, chemical prices,
tonnages, number of employees who were paid annual salaries or hourly wages… the
list went on. Just about the only thing UK shareholders were told in their
annual report that the Americans weren’t was that prime minister John Major had
officially opened a new quarry. Times have changed not least, thanks to
downloadable PDFs, but probably more because of a change in attitude. Shame
about the extra reporting burden on FDs, but that’s what’s meant by
We were also quite pleased with ourselves when we showed in May 1998 how the
late, unlamented Robert Maxwell (and I’m distressed at how many people I meet
now who don’t even know who he was) could have ticked many of the ‘boxes’ in the
latest corporate governance ‘supercode’, whereas companies such as Cadbury,
Marks & Spencer and ICI might have struggled on a few points. Those three
supposedly virtuous companies were deliberately chosen because they were the
corporate homes to the leading authors of corporate governance reports: Adrian
Cadbury, Richard Greenbury (M&S) and Ronnie Hempel (ICI). Governance isn’t a
tally; it’s harder work than that, we argued.
Because we’ve written so much earlier this year about the FDs we’ve met (see
our January, February and March issues), I won’t use this scarce space to go
over that ground again. In September 2003, though, we showed how FDs who become
CEOs are significantly more likely to create market-beating shareholder value.
And in April 2007 we calculated similar findings for FDs who become chairman of
the board. Along the way we provided management lessons from the Mafia (court
esy of then-deputy editor Tom Berry’s award-winning piece on Mario Puzo’s The
Godfather) one of many great ideas born in a pub and my next deputy, David
Rae, warned about the threat to your supply chain from piracy on the high seas.
Something to think about when tracking your freight as it sails past Somalia.
In May 2008, as the credit crunch was starting to bite hard, I asked our
markets columnist David Kern to write an article about how bad things could get:
“What’s the worst-case scenario?” I asked him. He found no fewer than three
worst-case scenarios and at least two of them have come to pass.
Under your next editor, Melanie Stern, things will surely get better…