18 April 2018 by Anthony Hilton
UK businesses’ refusal to forgive veterans of corporate failure is a mistake
One of the most successful public relations gurus in London – and one most people have never heard of – specialises in rehabilitating the reputations of sacked executives. He has a lot of customers. It is lucrative. But he does not often find a similar role for the downed CEO.
Executives often feel deeply hurt by the experience. Domestic as well as business life may be in turmoil, with the sacking leading to a sudden re-adjustment in priorities for the executive’s family.
The dismissal can also seem unjust. People get fired for all manner of reasons, which are not always because they have failed to deliver.
The profit figures from Barclays showed that its current chief executive Jes Staley has kept the wolf from the door, but he still has the regulator’s verdict on a whistleblowing incident to go through.
Previously, Barclays’ ousted chief executive Anthony Jenkins hit many of his financial targets a year early. This could suggest he was sacked, if not on a whim, then certainly due to bad luck.
Former FCA chief Martin Wheatley also fulfilled virtually to the letter the brief he was given by the government when he first took the job.
Elsewhere, bosses fall out with the chairman or the senior non-executive director because they have proved too successful and bruised the egos of those set to watch over them. Sometimes they fall foul of boardroom politics.
Shockingly, the otherwise successful CEO of a major insurance company was told by a senior shareholder that an unexpected rights issue and subsequent share price drop had robbed that particular fund manager of his annual performance bonus and he would have his revenge.
Sure enough, the chief executive was on his bike soon after.
“The first rule in any corporate disaster is to find a scapegoat and hang him or her out to dry”
The trouble is that even in these cases rehabilitation is hard. The media generally tend to be unsympathetic. Regulators often will not countenance re-employment in financial services. Headhunters are unwilling to risk including the toxic name on the shortlist for any new jobs.
Most of all, the institutional fund managers take the executive’s failure personally and resist any attempt for him or her to be installed elsewhere.
The black-balling can last for years. Andy Hornby was chief executive of HBOS when the bank ran into trouble in 2008 and he was fired. Since then he has sought to rebuild his career away from the limelight as an executive in Gala Coral, a bingo and gambling company owned by private equity.
Gala Coral announced plans to merge with Ladbrokes some years ago, in a deal generally welcomed by shareholders. But a condition of their support was that Hornby – though he was one of the leading executives in the group and seven or more years had passed since the HBOS collapse – would not get a board appointment.
This is commonplace. The chief executive of one of the UK’s leading companies says that in the course of a career spanning 40 years he had served on boards around the world, but those in the UK were unique in one respect.
Not one of his boardroom colleagues in this country had any direct or indirect managerial experience of a bankruptcy or severe corporate failure.
His question was how many chief executives who had been fired from the top spot of a FTSE 100 company ever got re-employed as chief executive of another major business. In answer, he claimed that it almost never happened. By his reckoning there had only been four such re-appointments in the past 20 years.
This country just does not forgive when things go wrong, and arguably it is a major weakness. The first rule in any corporate disaster is to find a scapegoat and hang him or her out to dry.
Contrast this with abroad, where failure is seen as a rite of passage. In the US, for example, and also across much of mainland Europe, it is common for boards to have at least one person with some direct experience of a business which has failed.
They are for the most part very valuable because they have learned lessons that you just do not get when you have only ever had a career in the sunshine. Their great strength is that in uncertain and volatile times like these they know what to look for, how to spot the warning signs and what defensive actions to take.
Refusing to re-employ them is a huge waste of experience and scarce managerial talent – something that is already spread thin.
As a 21-year-old, many years ago, an early journalistic assignment of mine was to interview the chief executive of a bank that was considering fund raising. On his board was a director who was listed as being 74, and this prompted a question on the lines of: ‘What on earth was he doing at that age?’
The reply was instructive. His job was ‘to temper youthful enthusiasm by remembering what went wrong last time.’