Balancing profit and loss, ups and downs, right and wrong

 

THE SATURDAY INTERVIEW/NIALL FITZGERALD:Arguably the most successful Irish manager of his generation, the former Unilever boss left ‘claustrophobic’ Ireland for global influence, writes FINTAN O'TOOLE

LAST SUMMER, Niall Fitzgerald had dinner in Dublin with a group of old friends from the world of Irish business. He is arguably the most successful Irish manager of his generation, and a man most of them would look up to. He ran the giant Anglo-Dutch food and detergent multinational Unilever for eight years. He has an honorary knighthood and is the first non-Brit to chair the British Museum. His old friends in Ireland might have expected a convivial evening of mutual backslapping.

Niall Fitzgerald is not that kind of man, however. He is friendly, good company, easy-going. As we sit in his unpretentious office in Mayfair – no photographs of himself with world leaders, no visible testaments to his wealth and status – sharing lunchtime sandwiches, he speaks fluently, openly, unfussily. But you soon realise that the ease is rooted in a steely self-confidence. It is the calm of a man who has little to prove.

And so, at that dinner in Dublin, instead of indulging in nostalgia and self-congratulation, he asked his friends a very awkward question. All of them, including himself – at Bank of Ireland during the 1990s – had served on the boards of Irish banks.

“I said, ‘I want to confront you as a friend with a very difficult question’,” he recalls. “Because unless we all – together and individually – learn from this, I’m not sure it has been of any great value. The question you have to ask yourselves is: did you know what the institution was doing and the full consequences of what it was doing? Because, if you did, you were complicit with the recklessness. Or if the answer is you didn’t know, then you cannot have been discharging your responsibility as a director of the company properly.”

What followed, says Fitzgerald, was “a very ferocious conversation”. Some “reacted with real anger”. Fitzgerald pointed out that he was not trying to exempt himself from blame. “I said, ‘I’m not disassociating myself from this. I’m trying to get us all to understand that things went wrong here for which are all accountable. Unless we accept the accountability, nothing will get better’.”

He also pointed out that he has himself left the boards of major international corporations when he felt he did not know enough to be able to make an informed judgment about the risks the company was taking.

“I accept that financial institutions generally are complex, but frankly, if you are not confident that you have sufficient information and tools available to you to judge at a macro level the risk you are taking, then you shouldn’t be sitting there.”

His argument, he reckons, “didn’t wash much with this group, but in time most of them privately would say that it was important to have that discussion”.

When you ask Fitzgerald about the strong sense of values that animates him, he comes back again and again to his mother, Doreen. He grew up in a middle-class Limerick family, with a much older brother, Colin, and sister Nuala. His father William, a customs official, had “what I think we used to call in those days ‘a small problem with the drink’. So that cast a shadow in the house. But my memory of it is not that I was a sad or deprived child in any way. I was very close to my mother. And much of my values and the way I think and the things I believe in strongly was formed by her.”

His mother, who had worked as a journalist before her marriage, “had a very straightforward view of life”. Its basic principles were that “the more you put in, the more you’re likely to get out”, and that “you should never depart from treating people as you would wish to be treated yourself”. Her litmus test was “that whenever you’ve done something and you’re unsure if it’s the right thing to do, look in the mirror and if you find you’re averting your eyes from yourself, you’ve got an issue. I make her sound a bit more saintly than she actually was, but she had a very well defined sense of what was right and wrong. I’ve used that many times in business. When you’re faced with a tricky issue, you’ve looked at the legalities and the ethics, you still have to answer that question for yourself – is it right?”

Fitzgerald’s personality – his combination of a hunger to succeed and strong principles – was also shaped by darker forces. When he was 10, that beloved older brother Colin, who was 21, suddenly came home from Britain.

“He was at home all the time. It was fantastic; it was wonderful. He taught me how to play chess and all the things big brothers do.”

What he did not know was that Colin was terminally ill with cancer and had come home to die. “One morning, my mother woke me up to tell me he’d died. And my immediate visceral sense at that moment was not one of sadness, it was one of having been let down. How could he do this? How could he come back and then, after six months, leave me?” The trauma gave him a profound sense that “you mustn’t let people down”.

It was reinforced by his relationship with his father. “I also saw my father, whom I loved dearly and had a great deal of respect for, because he was extremely bright, very able. But for reasons that were never clear to me, because I was too young, he acquired a taste for too much Guinness. I was very influenced by the fact that he, a man I loved and respected, was letting us as a family down. And I was determined not to let that happen from my point of view. Now, let’s be clear. I have on many occasions let people down, but the thing that keeps me sane is that I know what’s happening and certainly after the event I’ve recognised it and tried to learn from it.”

These personal experiences shaped him more profoundly than his Catholic education at the diocesan college, St Munchin’s. The morality taught there was essentially external. “It was in your catechism as you chanted off what was a sin and what wasn’t a sin. It was a rule imposed by somebody else. And that has two consequences: it gets in the way of you thinking for yourself; and it suggests that there is a higher order that decides these things, and so long as you stay within the framework of their rules, what you’re doing must be right. But it ain’t sometimes. Take Enron, for example: everything they did, up to a point, so far as the board was concerned, was legal. The problem was, it wasn’t right.”

HAVING BEGUN AND then abandoned training in accountancy, Fitzgerald got a clerical job with Irish Shipping in Dublin and took a degree in UCD at night. He ended up at Unilever entirely by accident. A friend with whom he had arranged to play golf had an interview with the company. Fitzgerald planned to wait outside for him. But as the interview process involved working in groups, and one candidate had failed to turn up, Fitzgerald was asked to sit in. He was offered a job. At this stage he was 23, and had been thinking about what it would be like to work in business in Ireland.

“I was already beginning to feel uneasy about pursuing a business career in a society in which, it appeared to me, looking around, many people succeeded because they were intertwined with politics. And while I was interested in politics as a spectator sport, I wasn’t interested in being involved in politics.”

He came to the conclusion that “unless I was prepared to engage more directly with politicians and in the political process, and at some point be ready to compromise on my own principles, that that would restrict my abilities to develop a business career in Ireland. I was deeply uncomfortable with the thought that I wouldn’t have as much freedom as I wanted to be able to come to my own conclusions about the value and the ethical nature of things.”

He also found the world of Irish business “claustrophobic”. It was “the same people, the same smallish group”. Even now, he believes part of the problem that led to Ireland’s current crisis was “that very intimacy, the knowledge that you can take one small envelope and write all the names that matter on the back of it. Because we’re all human – you can think something very strongly, but to express to you, as a very good friend of mine, that I think you’re screwing things up here and actually doing wrong things is quite tough.”

As a global corporation, Unilever offered him a way out of that nexus. In 1970 he moved to the UK, beginning an ascent up the corporate ladder that took him on to the board at the age of 40, in 1986, and made him chief executive and chairman a decade later. Before reaching that pinnacle, though, he faced two particularly daunting challenges.

In 1980 he was asked to take over Unilever’s operations in apartheid South Africa. His initial reaction was: “This is a very bad joke. You know my views on apartheid.” The response of the then chairman was, “That’s exactly why we’re asking you to go”.

Fitzgerald knew he was walking into a moral minefield. The options facing international companies in South Africa were either to go along with the racist regime or to disengage from the country.

Fitzgerald believed there was a third way: “What we managed to do was to position the company as one which actually operated outside the law.” His first test came when he was shown the plans for a new factory and he asked why it had lots of little rooms. “‘Those are the ablution blocks, sir’ – the toilets. Why are there so many? ‘There’s male, female, then under each there’s black, coloured, Indian and white.’ I said ‘we’re not having that. You have my complete support to construct the finest toilets that have ever been constructed in the world. You can have marble floors, gold taps, so that there is no room for anybody to complain. But they will be for females and males only’.”

Fitzgerald tried to run the company as if apartheid did not exist. “We had completely integrated facilities; we paid equal wages to people of any colour; we moved people around the country in ways that were illegal.”

He also went for a drink in a township shebeen with his opposite number in union negotiations, Cyril Ramaphosa, and through him developed links to the African National Congress leadership. Tricky as it was, Fitzgerald’s strategy was at least retrospectively endorsed when Nelson Mandela subsequently asked him to head the UK branch of his charitable foundation.

After his return to London, however, his rapid rise seemed to be the prelude to a dramatic fall. “In 1994,” he says with a rueful grin, “I was personally responsible for Unilever’s biggest ever marketing disaster. We launched a product called Persil Power. Persil Power was the most effective detergent that’s ever been made – to this day. Because we’d had this technological breakthrough I decided we’d launch it across Europe simultaneously – never been done before. A huge investment. It failed dramatically, not because it didn’t wash the clothes, but because if used slightly outside the specified conditions, it also washed the clothes away. I still have the pictures from the Financial Times of the clothes line with the rotting underpants – that was me.” Unilever lost hundreds of millions of pounds, market share, and some of its hard-won reputation.

At the time, he was widely assumed to be the designated successor to the chairman and chief executive of Unilever. He offered his resignation, asking only for a few months to rebuild the morale of the team he had led and which he felt he had let down. The then chairman told him, however, that “you are now much better equipped to be the CEO of this business. You have gained two things – a degree of humility, which you didn’t have before, and a greater tolerance for the errors or inadequacies of others.”

Having achieved the top job, however, Fitzgerald found himself in the midst of a personal and professional crisis. “My marriage was breaking up, but I didn’t recognise that because I was someone to whom these things didn’t happen. I could control these things. And, very largely, I was the person who was responsible for this. But I was trying to control how it happened in an orderly fashion, which of course is a disaster.”

AT THE SAME time, he was losing some of the very qualities that had made him such an effective manager in the first place. “It’s very easy, running a huge international company, to begin to believe in your own grandeur. You begin to become the role rather than the individual. I wasn’t really conscious of it, but the more it happened, the more I became distant from people, the less I was approachable, and the less I was effective at the job. I wasn’t enjoying it any more, because I wasn’t being me.”

Two “searing” moments forced him to take stock. His eldest daughter Tara, then aged 22, shattered his illusions that he could protect his children from the crisis in his marriage and told him, “Dad, we all know what’s happening. We don’t approve of it, we don’t like it, but you’re trying to get our approval for it and you ain’t going to get that. So you have to decide what you want to do and live with the consequences.” And he spent a lot of time with an old friend from Limerick who was dying. On the night before his death, he told Fitzgerald that “you are currently living a lie, and that it is diminishing you, and the people around you are suffering as a consequence”.

His friend’s warning that “this life is not a rehearsal, it is the only performance” galvanised Fitzgerald into facing up to the breakdown of his marriage. (He has since remarried and has a young daughter by his second wife.) He also gathered together his management team and told them that “I think I’ve been kind of absent for a while, so I’m going to try and come back”. What he took from this episode was the need for authenticity. “If you’re not authentic, people can’t relate to you – you with all the warts, you with all the failings, all the weaknesses. If you try to hold yourself up as some kind of icon of perfection who has all the answers, you will fail.”

Authenticity, as he sees it, also involves responsibility and accountability. He is highly critical of those in the banking industry who insist that the bonus culture can go on as before.

“I have been genuinely amazed at what I would regard – because I know most of them – as very bright, able leaders of international banks, that they just haven’t got it. They don’t realise the degree of rage and anger that’s around, and that they have to make significant personal sacrifices to rebuild society’s trust in them and their institutions. There’s too much of ‘we can’t do this because our competitors will grab our best people away’. Fine, let them grab them away. You mean, these terribly valuable people who either didn’t understand the risks they were running, or understood them and continued anyway without thought for the consequences? You know what? I could do without those valuable people.”

Nor has he much sympathy for those of the super-rich who flee to tax havens rather than pay their taxes. “I had a conversation the other day with a well-known international banker who’s bothered by what’s happening in London with tax and so forth, and he’s decided he’s going to live in Zug in Switzerland. I asked him, ‘have you ever been in Zug?’ He said, ‘no but it’s got a very good tax regime’. I said ‘well, you’ll have a real ball with all that extra money, spending it in Zug. I find it really, deeply sad that you’ve got yourself into a position where you think the only thing that matters is how you avoid at almost any cost to yourself and your family being a supportive member of the wider society in which you live.’”

He does not believe, however, that the current crisis can be solved simply with more regulation. “We shouldn’t think that by introducing more regulation, we solve a problem which is about lack of accountability in the boardroom. Where it went wrong is that there was an undervaluing of true independence, of somebody who has no vested interest in anything that’s going on in this board, has an interest only in his or her own reputation. And who is prepared to say, ‘this is not right’.”

He is unconvinced that Ireland has yet learned this lesson. “The thing that really worries me, if I was losing sleep about it on behalf of Ireland, is that there are too many people who have a vested interest in there being no accountability. If the leaders of a society are not prepared to hold themselves accountable, or there are not the institutions which are sufficiently independent to hold them accountable, then I think you have a very serious problem on your hands.”

BORN

Sligo, September 13th, 1945. Raised in Limerick city.

EDUCATION

St Munchin’s College, Limerick; UCD.

FAMILY

Married to Ingrid, with a daughter, Gabriella. Has three children – Tara, Colin and Aaron – from a previous marriage.

CAREER

Joined Unilever in Ireland in 1968. Chief executive of its South African food business, 1980-1987. Youngest and first non-British chairman and chief executive of Unilever from 1996 to 2004, acquiring such brands as Knorr and Ben Jerry’s, and employing 250,000 people worldwide. Chairman of Reuters, 2004; now deputy chairman of Reuters Thompson.