First person: Second-chance saloon
The Review columnist Anthony Hilton asks why UK business is so unforgiving of sacked executives, and considers why firms should instead value the experience they can bring to the table
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 and it is lucrative work.
Executives often feel deeply hurt by the experience of being fired at a time when they are psychologically least able to cope with it, and need someone to talk to. Their domestic as well as business life may be in turmoil. The sacking might mean a sudden readjustment of priorities for a dismissed executive’s spouse, possibly even a rethink over the cost and location of the children’s education.
And the dismissal can often seem unjust. People get fired for all manner of reasons that are not always because they have failed to deliver what they said they would do. This summer’s profit figures from Barclays showed that ousted Group Chief Executive Antony Jenkins had hit many of his financial targets a year early. Ejected chief of the Financial Conduct Authority Martin Wheatley had fulfilled virtually to the letter the brief he was given by the Government when he first took the job.
Institutional fund managers can take executives' failure personally and resist any attempt for them to be installed elsewhereElsewhere, 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, bosses fall foul of boardroom politics – when a colleague fancies their position for themselves, for example. 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 CEO was on his bike soon after.
But even in these cases rehabilitation is hard. The media tend to be unsympathetic. Regulators will often 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 blackballing 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 at Gala, a bingo and gambling company owned by private equity. Earlier this summer, Gala announced plans to merge with Ladbroke, in a deal generally welcomed by shareholders. But a condition of their support was that Hornby – even though he is one of the leading executives at the new group and it is now seven years since the HBOS collapse – would not get a board appointment.
This is commonplace. The CEO 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 particular respect: not one of his boardroom colleagues had ever had any direct or indirect managerial experience of a bankruptcy or severe corporate failure.
His question, sparked by the ejection of Jenkins from Barclays, 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 answering, he claimed that it almost never happened. By his reckoning, there had only been four such reappointments in the past 20 years.
The UK just does not do forgiveness when things go wrong and it is a major weakness. Indeed, the first rule of any corporate disaster in the UK is to find a scapegoat and hang him or her out to dry. Contrast this with other countries where failure is seen as a rite of passage. In the US, for example, and across much of mainland Europe, almost all boards have at least one person with some direct experience of a business that has failed.
These board members are, for the most part, very valuable because they have learned lessons that you just don’t get when you have only ever had a career basked in 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 decide what defensive actions to take. Refusing to re-employ them is a huge waste of experience and managerial talent – which, let’s face it, is already spread pretty thin.
As a 21-year-old, many years ago, my first journalistic assignment was to interview the CEO of a bank that was considering a fundraising. On his board was a 78-year-old director and this prompted a scornful question along the lines of: “What on earth use was he at that age?”
The reply was instructive. His job, I was told sternly, was “to temper youthful enthusiasm by remembering what went wrong last time”.