Exactly which of these was the most significant event of the year will depend on which FD you ask. But here’s a look back at how Financial Director saw 1998 unfold – and what has happened since … A number of themes have run through the magazine during 1998. Probably Financial Director’s longest-running campaign was the unceasing effort to convince everyone that the introduction of the euro in 1999 is going to be the single most important economic event to hit UK since 1945 – whether Britain joins or not. In January, the issue of the month was how the euro is likely to be introduced within the UK by stealth: UK-based subsidiaries of continental, Asian or American multinationals seemed certain to start invoicing and pricing in euros – in Britain. In April, FD argued that the basic concepts of importing and exporting will be turned upside down: “Businesses that, hitherto, have merely supplied the UK subsidiaries of these industrial behemoths are now going to find that they are ‘exporting’ to British-based customers. The borders of Euroland may actually turn out to be just round the next corner.” And yet, that very month, a reader survey conducted with law firm Pinsent Curtis revealed that Emu was not a board-level issue for 48% of UK companies. Patrick Ponchon, FD of the $5.6bn-turnover European subsidiary of Xerox Corp, gave some of the most compelling arguments why such a head-in-the-sand attitude is crazy: his business is going to issue massive single-source, pan-European contracts with a few of its suppliers. The result will be that 90% of Xerox’s suppliers will eventually lose Xerox as a customer. Repeat: 90% of Xerox’s suppliers will eventually lose Xerox as a customer. In June, we indulged in a little future-gazing with a piece of pseudo-fiction entitled “Almost in Euroland”. In it, FD speculated about how the UK arm of a Dutch company might decide to pay its UK employees in euros. Only later did we hear how Vauxhall has a deal that links UK workers’ pay to the deutschemark. Talking of fiction, some of the financial software vendors expressed grave concern at how other vendors were describing their systems as euro-compliant – before anyone actually knew exactly what all the euro rules are going to be. In two vendor debates held at Softworld exhibitions – one sponsored by Solomon Software (June issue), the other by Computron (November issue) – representatives lamented the notorious lack of detail in current proposals for reporting in euros. On the corporate governance front, Sir Ronnie Hampel’s code was met by two types of response: those who commended his committee’s attempt to get away from box-ticking and those who regarded the code as offering too many easy options. In May, Financial Director looked at how the proposed ‘super-code’ – designed to embrace all three corporate governance reports – would have been something that box-tickers could have used to give Robert Maxwell a virtually clean bill of health. For example, back in the middle of 1991, Maxwell was planning on stepping down from the chairman/chief executive role at both Maxwell Communications Corporation (MCC) and Mirror Group Newspapers (MGN), which was then on its way to flotation. In terms of the number of non-executives on the board of each company, Maxwell’s businesses very nearly met super-code requirements. Yet, in 1991, Marks & Spencer – chief executive: Richard Greenbury – was busy boasting about how few of its directors came from outside the retail group. Over at ICI, four directors, including Ronnie Hampel, had service contracts which carried a three-year notice period. So tick, tick, tick for Robert Maxwell, not so many ticks for some of the subsequent giants of corporate governance. But Financial Director argued that box-ticking – the practice that Hampel was being criticised for eschewing – could have been used to give the seal of approval to a man who had been criticised by a DTI report in 1973 for confusing his private company assets and those of his public company; for false accounting; for being unlikely to be restrained by his fellow directors; and for failing to disclose the extent of related-party transactions. Sound familiar? A month later, Financial Director discussed the value of conflict as part of a corporate governance culture. As long as boardroom conflict is “task-related” rather than “values-related” then it can be a force for good – and might have encouraged directors to stand up to Maxwell. In June, Financial Director’s first survey of FTSE-100 FDs’ qualifications showed how 81 of the top finance people were qualified accountants. Here was the breakdown: ICAEW 51; ICAS 5; CIMA 15; ACCA 6; CIPFA 2; AICPA (American) 2. Seventeen FTSE-100 FDs didn’t have an accountancy qualification. But as Jeremy Wagener – our own columnist and then director general of the Association of Corporate Treasurers – reminded us the following month, 22 of the 100 were members of the ACT. “The skills gained help treasurers grasp the dynamics of finance that often elude accountants,” Wagener wrote. The rise of the non-accountant FD was brought home in FD’s September issue when we showed how the BP-Amoco merger would result in a non-beancounter, BP’s Dr John Buchanan, heading up the finance function of what will be Britain’s biggest company. In October, our second annual reports survey had two revealing findings: first, FDs’ average salaries in the FTSE-100 rose by 12.1% to £394,378 (of which £264,795 was basic salary). Second, although the average age of a top 100 FD has gone up by a year since, well, last year, six FDs were only in their 30s. A seventh, 36-year-old Mark Pain at Abbey National, took up a promotion after Abbey Nat’s year end, while an eighth, Andrew Bonfield, also 36, is set to join their ranks when he takes over from Hugh Collum at SmithKline Beecham at the turn of the year. Only four FDs were in their 60s. Is this turning into a young person’s game? Is there no premium for experience over enthusiasm? Mega-mergers didn’t escape the Financial Director treatment – and there were plenty to choose from. One of the most ironic was the proposal to put Glaxo-Wellcome together with SmithKline Beecham. FD dug into the archives and found interviews with the two FDs leading that £100bn merger, John Coombe and Hugh Collum. We reported in March how, back in January 1995, Coombe said of his job as FD of one of the world’s “best companies”: “(It) has always been my key ambition.” Collum, on the other hand, told FD in 1993: “Mergers have never been easy, and people have always regarded them with suspicion.” He was talking about the 1989 coming together of SmithKline Beckman and Beecham Group – or he could have been prescient with regard to the mooted Glaxo deal: within days the merger fell apart – thanks, it is said, to the ambitions of the top managers at Glaxo-Wellcome, opposed by the top echelons of SKB. In February, we looked at why BT got outbid – by $16bn – in its attempt to take over MCI. Judging by BT’s soaring share price, it’s the best deal they didn’t do since flotation. The urge to demerge was the focus of our March cover story, which argued that Hanson’s lacklustre break-up was still likely to pay off. The acquisition of The Energy Group by Texas Utilities for £4.4bn has since helped prove the logic of the original plan. Financial Director never really worked up a lather over the Big Six mergers between Price Waterhouse and Coopers & Lybrand or KPMG and Ernst & Young. Unlike the High Court in the Prince Jefri of Brunei case against KPMG, FD has always had a little more faith in chinese walls – or perhaps a preference for cock-up theory over conspiracy theory: accounting columnist Peter Williams wrote in the July/August issue how sometimes different parts of the same firm don’t always know what’s going on. In February, he scrutinised the published accounts of E&Y and KPMG: E&Y was shown to have debtor days of 105, compared with ‘just’ 81 over at Peats. That merger proposal has long since been aborted. Not long after we looked at what the main stock exchanges have to offer a company seeking a share listing, some unusual things started to happen. The London Stock Exchange unveiled a tie-up deal with the Frankfurt Borse while, over in the US, high-tech market Nasdaq got together with the smaller and older Amex, the American Stock Exchange. Regular contributor Sarah Perrin picks up that story on page 33 of this issue. Issues surrounding financial reporting occupied the pages of FD throughout the year. The one message that emerged above all is the need to communicate more and better information – and that the annual report may not be the best way to do that. On the economics front, columnist Gerard Lyons was probably the first to spot that the dollar had reached its peak. Financial Director also did some weird and wonderful things through the year. A cover story on barcode technology (which featured virtually nothing except our barcode on the cover) attracted not inconsiderable reader interest. We also got an exclusive interview with Gene Kranz, the Houston mission controller who helped Apollo XIII solve the mother of risk management problems. Everybody complains about the weather but nobody does anything about it – but now you can, as revealed by FD’s article on a new Lloyd’s insurance policy that can even pay out on a sunny day. Above all, Financial Director met a lot of fascinating financial directors in 1998 – not all of whom we managed to squeeze into our pages. We look forward to meeting even more of you in the final countdown to the new millennium. On the Move, 1998 High-flying FDs this year included Paul Spencer, the Royal & SunAlliance FD whom we interviewed back in September 1997, and who became chief exec. At British Aerospace, FD Richard Lapthorne became vice chairman, while Filofax FD Chris Brace moved up to managing director. At Wembley plc, FD and deputy chief exec Nigel Potter took up the group chief exec role – twin towers or no twin towers. Not only did former Sainsbury FD Lord (David) Sainsbury move further up the Sunday Times Rich List to become the wealthiest individual in the UK, he also followed former British Petroleum FD Lord (David) Simon into the government. The former supermarket chairman is now minister for science. One surprise departure was that of Oliver Stocken at Barclays. Tough times faced Jim Walsh who left the troubled retailer Laura Ashley, and his successor, Richard Pennycook, who left the company within seven months of joining. Derek Petty left Kwik Save after its acquisition by Somerfield. David Pout left Allied Carpets after the company’s shares were suspended because of accounting irregularities. Outside interests were taken up by Bass FD Richard North who became a non-exec director at Leeds Sporting plc, parent company to Leeds United FC. Phil Cox, who became non-exec chairman of Virgin Rail, later resigned as FD of Asda. Hugh Collum became non-exec chairman at Chiroscience; he retires from SKB at the end of 1998. They plan their succession far ahead at Rentokil Initial, where it was announced that Roger Payne will take over from Christopher Pearce on his retirement – at the end of 2000. Tragically, Nick Carrington died at far too young an age, just weeks after being promoted to the board at BSkyB. Rejoice, rejoice: Williams plc finally saw the wisdom of having a proper FD on board: chairman Sir Nigel Rudd, a chartered accountant, appointed CIMA-qualified David Fielding to be the group’s first full-time finance man.
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