Considering the City’s overarching power and influence, it manages to keep a remarkably low profile. We scribblers in business sections occasionally get our stories on to the front page but, for the most part, they stay in their own rarely visited territory, with nothing but share prices and obits for company.
Occasionally, however, the goings-on in the Square Mile are considered worthy of wider attention. David Montgomery’s humiliating ejection from Mirror Group last month was one such story.
It was an irresistible tale. In one corner was the dour Ulsterman and Fleet Street bete noire, a man responsible for hundreds of job losses in his time. In the other was Sir Victor Blank, the smoothie and infinitely well-connected merchant banker, a veteran of scores of boardroom tussles. It took a week’s manoeuvring, but Sir Victor lived up to his name.
Sometimes the City produces great theatre. The pivotal moment in the recent plight of Marks & Spencer was when Sir Richard Greenbury, the famously cantankerous chairman, discovered his deputy, Keith Oates, was plotting against him and cut short his holiday in India to fly back and confront him.
The fashion trade might be complaining about St Michael’s dowdy lines and financial analysts may have muttered about feeble sales and shrinking margins. But what captured the imagination was the disloyalty, infighting and intrigue in one of the country’s great boardrooms. This was better than Julius Caesar. A great empire was at stake: M&S had conquered more of the world than the Romans ever managed. Greenbury was badly wounded but remains in power. And Oates, his Brutus, far from destroying himself, has walked away with a rumoured £2.4 million pay-off.
Most corporate disasters have the inevitability of Greek tragedy. Rummage around in the records of corporate failures and there is usually an over-ambitious or greedy protagonist sowing the seeds of his or her destruction. Aeschylus could have made plenty, for example, of the rise and fall of Gerald Ratner: the break-neck expansion of the tiny family jewellery business; the colossal borrowings; the overweening expansion overseas; and finally those fatal words “total crap”.
The story of hubris punished by Nemesis applies to dozens of once high-flying entrepreneurs and traders brought low. However, in the real world, unlike on the Ancient Greek stage, there is no helpful chorus to point out the clues to their impending doom.
There are doubters and sceptics along the way but, like Cassandra, they are doomed not to be believed. Two of the most influential men in America – Microsoft’s Bill Gates and the Federal Reserve’s Alan Greenspan – have warned in recent weeks that the sky-high valuations of Internet-related companies cannot be sustained. There are going to be billion-dollar casualties here, but investors cannot quite bring themselves to believe it.
Sometimes City drama is more comic. In the greatest hostile takeover battle in Britain of recent times, Granada’s £3.3 billion tilt at Forte, it was not the scale of the deal that remains in the imagination, nor even the blistering salvoes thrown by each side. Three years later, what people remember about the battle is that when Granada unleashed its surprise attack, Sir Rocco Forte was caught with his pants down shooting pheasant on a Yorkshire moor. For Granada, that one compelling image of an absentee boss indulging himself on a working day was worth a dozen technical arguments about declining earnings per share.
Usually City dramas take place behind closed doors. But occasionally the leading actor co-operates with the media. A frenzy then follows. The sacking of a hitherto anonymous fund manager and mother of five, Nicola Horlick, produced a maelstrom of coverage, amplified because she hired a PR and encouraged journalists to follow her to Frankfurt where she demanded her job back.
Naturally the City frowns on these moments of drama and dismisses them as trivialities overplayed by a sensation-hungry media. It loathes any attempt by journalists to personalise events. The easiest way to alarm a City PR is to say you’re looking for a little “colour” in a story. Some financial leaders come close to paranoia about revealing anything human about themselves. One chief executive once agreed to a personal interview but refused to tell me the name of his wife.
The business world – and particularly the City – prefers the curtains drawn. Important people in the big investment banks – those making tens of millions of pounds for their employers in a good year – remain unknown outside their immediate sphere. The cult of the personality is frowned upon. Every decision is a joint one. The bank has a single “house view” about everything from the future direction of the Japanese yen to the price of ICI shares. Woe betide the employee who publicly utters a different view.
It is very British. On Wall Street, stars are nurtured. Pundits like Abby Joseph Cohen of Goldman Sachs attain the status of guru, their views capable of adding or subtracting billions to or from share values. Here stars are regarded as potential liabilities: grooming them is pointless in case they jump ship to a rival bank.
The City likes to paint itself as prudent, honest and above all run by people who know what they are doing. The reality is not always like that, and these glorious moments of City theatre fleetingly remind us that the “rainmakers”, the “big swinging dicks” and the “masters of the universe”, as Tom Wolfe famously labelled 1980s bond dealers, are heir to the same frailties as the rest of us.
Sometimes dramas take on the guise of soap opera. Take the Peter Young affair. The City investment bank Deutsche Morgan Grenfell lost an estimated £400 million after alleged irregularities by Young, then one of its star fund managers. Young is now facing fraud charges. In November he turned up at the City of London magistrates sporting shoulder-length hair, a pink sweater, floral skirt, make-up and nail varnish, smiled brightly and asked to be known henceforth as Elizabeth.
There is another reason why the City needs to be seen in more human terms: accountability. When things go wrong the public has a right to know who was responsible. After all, nine times out of ten it is their money that is lost. Most City activity may sound high-falutin, but at bottom it still involves the pooling and investing of millions of ordinary people’s nest eggs.
Financiers are as bad as politicians at owning up to incompetence or negligence. Very costly mistakes can easily be concealed by a company with a £100 billion balance sheet. A single net profit figure from so-called Treasury operations can hide a multitude of individual investment disasters and even rogue trades. It’s in no one’s interest in the company or bank that an ill-advised punt in the high-risk futures market, say, should be made public.
Most City errors stay carefully hidden, unless they are too big to conceal. If Nick Leeson had only dropped, say, £100 million, rather than the £900 million that sank Barings, his illegal trading might never have been known outside the bank’s boardroom.
Heads do not always roll. Which brings us back to David Montgomery and Mirror Group. Perhaps the greatest drama behind his departure was not the boardroom bloodshed, but the extraordinary machinations of the largest Mirror shareholders. Of these the most remarkable was Hermes, the organisation that invests money for the future pensions of hundreds of thousands of Post Office and British Telecom employees. Over the previous four months it aggressively built up a large shareholding in Mirror and then deliberately set about ousting Montgomery. A Hermes official publicly berated him for his failings on the Today programme. This was heresy for the normally shadowy pension fund managers. They will occasionally condemn executives, but only under the strict conditions of anonymity. But there are signs that fund managers are prepared to be more openly critical in this new era of shareholder activism. Hermes, for example, has built stakes in seven other badly managed companies, and says it is prepared to go public if there is no reform.
For those seven, it could be an uncomfortable year. For the rest of us, it’s time to sit back and enjoy the show. Why, it was even reported last weekend that Montgomery, like Banquo’s ghost, is making a comeback, with his own takeover bid for the Mirror.
Patrick Hosking writes for the London “Evening Standard”
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