The ultimate social networker
THE SATURDAY INTERVIEW:FOLLOWING HIS recent battle with throat cancer, Peter Sutherland has lost that barrister’s boom from his voice, but none of his passion for Irish and European affairs – nor indeed his candour, writes SIMON CARSWELL, Finance Correspondent
Ireland’s former attorney general and EU commissioner says the most recent scan on his throat showed he was clear of the cancer. His conversation is punctuated by occasional raspy coughs which fail to interrupt his frank views on the challenges still facing Ireland.
We are meeting at his home in Donnybrook, Dublin, a few days before he travels to the Davos economic summit in Switzerland for his annual round of private meetings with the great and the good of the business and political world. Sutherland is Ireland’s “Davos man” – a master networker with high-profile corporate and public positions and a bulging contacts book to boot.
On the wall of his downstairs study is an imposing oil portrait of Sutherland. On the opposite wall is a photograph of Garret FitzGerald’s first cabinet, which included Sutherland as attorney general at the tender age of 35 – then the youngest to be appointed by a government.
“Haughey left us with a terrible mess,” he says, pointing at the photograph. FitzGerald had “a fantastically fertile mind”, he reminisces later, “constantly generating new ideas”. He says he spent many cabinet meetings rolling his eyes and “showering” notes, “which had nothing to do with law”, around the table as suggestions were made by various ministers. “As attorney general I should have stayed out of it but I couldn’t – it’s not in my nature.”
Settling into the leather chair at his desk, Sutherland says he feels fine after his illness. “I had an operation last August and following the operation I had chemotherapy and radiotherapy, and everything so far has gone very well.” For Sutherland, a dyed-in-the-wool Europhile, the worst part about his illness was missing the “mortal combat” of fighting for the Yes vote in the second Lisbon referendum.
“It nearly killed me. I tried my voice out to see if I could do radio stuff. I went to record myself on a little dictaphone and I couldn’t hear my own voice. It used to kill me not being able to go on RTÉ to battle it out,” he says.
Last summer, during a holiday, one of his children noticed a swelling on his throat while they sat on a beach. Within a week he was back home in London undergoing a major operation.
He was horrified by Brian Lenihan’s illness, he says. He and Lenihan have remained in contact through the financial crisis. On one occasion, Sutherland visited Lenihan to tell him what a great job he thought he was doing and to say that Lenihan had the potential to be one of the great taoisigh of the 21st century. Lenihan was taken aback, he says.
Two days before Christmas, Lenihan phoned him to break the news of his illness. “Do the best you can to maintain your lifestyle,” is Sutherland’s advice, though he acknowledges their illnesses are very different. “If he is told to cut back, then that is what he should do – what he has to do is get better.”
He believes this is “a crucial moment in Irish history” as the country fights to bridge the substantial deficit between high public expenditure and low tax revenues. He points out that the country has had only the first of four austere budgets that this very difficult correction will require. “There is a long way to go but I think there is a sort of national understanding that was reflected in the attitude to the appalling news about Brian Lenihan,” he says. “We have limited talent in this country and we have to apply it.”
One of Sutherland’s main concerns about Ireland’s heavy indebtedness is that the Greek debt problem will “not go away”. Greece, like Ireland, is battling to reduce a large deficit, but the Greek government has not taken the same budgetary steps, which has raised its borrowing costs in the bond markets to record highs. This has a knock-on effect for other countries as governments borrow heavily to fill public finances depleted by bank bailouts and the recession.
“We are very different, but if the Greek problem were to spiral out of control – and I hope it doesn’t – the question is, have we done enough to dig a moat around the Irish problem in a way that distinguishes us quite clearly? There will be moments over the next 12 months when we will have to stand up domestically and be counted.”
Sutherland says the most recent budget “restored pride in the Irish situation”. It was “courageous and correct and absolutely necessary”, and created an international perception of “brave little Ireland”, he says. “But brave little Ireland has to continue to deliver.” Ireland’s competitiveness is “way down” on that of other countries, says Sutherland, and the public sector needs further radical changes.
At the root of the problem is the failure to “take on some of the sacred cows”, such as the unions. “There are a lot of things that Michael O’Leary says I disagree with – and I disagree with the tone and the vituperative approach he sometimes takes – but there is no denying that the essence of a lot of what he says is absolutely true and somebody needs to say it.”
Looking back, Sutherland believes Ireland failed in economic terms over most of the past four decades with the exception of a “sparkling period” from 1994 to 2002 when the State took advantage of EU changes freeing up the movement of goods, capital and services across Europe.
“This sent a signal to multinational investors that they didn’t have to locate in France to sell in France,” he says. A low corporation tax rate of 12.5 per cent gave the country a “dynamic boost”. “Then we reduced our competitive advantage by eating it up with waste and wage increases beyond what was possible for us to handle,” he says. Ireland received “incredible largesse” from the EU through the 1980s and 1990s, yet “delivered virtually nothing in terms of improvement of the State. We never looked back and examined where the wastage happened,” he says.
One look-back Sutherland opposes is the banking inquiry. This is hardly surprising from a former chairman of AIB who appeared at the 1999 public inquiry into the Dirt tax evasion scandal.
“It would have been better not to have an inquiry at this time because we have limited resources and a diversion of those limited human resources into an ex post facto analysis of the past is far less important than remedying the immediate problem that we have now,” he says.
“It is a very difficult subject and to have all of these civil servants sitting in listening to bloody evidence on the past when they all know broadly what happened. We know what happened – we know it all. A political football is not what we need. We need to look to the future to get it right.”
BANKING IS AN AWKWARDsubject for Sutherland; he is chairman of Goldman Sachs International, the UK subsidiary of the US investment bank, which is in the public spotlight over its decision to pay $16 billion in bonuses after Wall Street’s excesses brought the global economy to its knees. Bonuses at Goldman Sachs in the UK have been capped at £1 million for the past year.
The bank will be the biggest loser from US proposals to reform the world of investment banking and remove what President Obama sees as excessive risk-taking in the financial system. The UK has chosen to tackle financial reform differently, with a 50 per cent tax on bankers’ bonuses.
Sutherland seems uneasy with this tax - especially when it applies to financial institutions banks in which a government has no shareholding. He says “democratic control allows governments to fix levels of taxation not in a discriminatory way but on the basis of a society as a whole. It allows governments to govern companies when they bloody own them, not when they don’t own them.”
“If you can prove that the system has a bonus-paying culture which creates a risk-taking environment, then clearly you must have a regulatory right to intervene and control that. “If, on the other hand, the issue is simply a question of ‘Beckham shouldn’t be paid more than [another player]’, that has become political populism. It is for the boards of companies to discover and to decide how much of the profits of a company should be distributed,” he says.
Goldman may be in the crosshairs over its pay, but the bank has survived better than most. It repaid $10 billion in state cash received under the US bad asset scheme, Tarp. The bank made near-record profits last year, replenishing its capital reserves.
According to Sutherland, Goldman would argue that it was “the exemplar in risk management” and it avoided the investments that felled the giants of Wall Street, though he says he can understand the sense of public outrage at the sums being paid in financial services.
“Goldman would say that it is precisely because it set up systems which avoided the culture that [it came] through unscathed,” he says.
Sutherland was also a board member at Royal Bank of Scotland (RBS) during the financial meltdown when the UK bank collapsed into state arms after a frenetic, debt-fuelled growth. Of the bank’s 2007 role in the €71 billion acquisition of Dutch bank ABN Amro, the biggest ever banking takeover, Sutherland says it made “the mistake of buying at precisely the wrong time when the world was falling off the back of a bus”.
“RBS had what appeared to be a good corporate governance system but the complexity and the reality is that boards can do – and are involved in – only so much decision-making and no more. You cannot micro-manage,” he says.
Banks are “getting it in the teeth”, he says, but governments, in terms of macroeconomic policy and regulatory oversight, “carry at least as big and probably a far greater responsibility.
“The reaction now has to be one which doesn’t simply seek to flagellate but to have a system that actually works. The whole issue of pay and so on, which personalises everything, is much less important than the systems of regulatory management and oversight which are needed.”
So what effect will Obama’s reforms have on Goldman Sachs? “This may appear to duck the issue – and it is not – I don’t know the detail of it,” he says, adding that he has been told by Goldman not to comment publicly on the subject.
Was he surprised by the controversies that have emerged at Anglo Irish Bank? “Nobody can look at what has happened and say other than that it has been a very damaging period for Ireland in terms of perception of our institutions,” he says, though he believes there is great growth potential for the IFSC with a more streamlined regulation. “It shouldn’t now become a regulatory system that impedes our development,” he says.
Outside banking, Sutherland has just finished a 13-year stint as chairman of BP, Europe’s largest oil company. At one point during his tenure, the company was valued on the stock market at £236 billion (it is currently worth about £120 billion) and was making £42 million a day in profits.
Sutherland relishes the connections that come with such jobs. His career soared to these levels after 1989 during his final days as EU Commissioner and having a last coffee with members of his cabinet, Catherine Day and David O’Sullivan (both later secretaries-general of the Commission). “They said, what’s next? I said there was only one game in town – Gatt [General Agreement on Tariffs and Trade].”
The Uruguay round of global trade talks, concluded in 1994 with Sutherland as chair of Gatt, produced the biggest trade agreement in history and established the World Trade Organisation. The failure of the subsequent Doha round of talks to progress global trade agreements has frustrated Sutherland.
“It undermines the credibility of the only institution we have which seeks to manage with an objective trade dispute mechanism – which is like a court – the protectionism and nationalism which otherwise has created world wars since the beginning of time,” he says.
His time at Gatt gave Sutherland access that he still uses. During our interview he declined to comment in detail on the state of one country as he was privately advising its government.
At the Davos summit this week, he was scheduled to meet the deputy prime minister of China and the president of Mexico. “[Davos] provides an opportunity for direct dialogue with people. Otherwise you would have to travel to capitals. It provides a networking opportunity venue which is unparalleled.”
The Swiss conference is a long way from the Dublin North West constituency, where Sutherland ran unsuccessfully for a Dáil seat for Fine Gael in 1973. “It changed my life – if I had got into the Dáil, I would have given up everything,” he said.
However, the Dubliner still prefers public affairs roles to corporate jobs, and says that every time he has been asked to take a public service job he has accepted, unless work commitments stopped him. He was twice offered the job of UN High Commissioner for Refugees by Kofi Annan, a fact, he says, that he has never disclosed publicly before, but he declined both times due to other commitments. He cites his work at Gatt and the introduction of the Erasmus student exchange programme when he briefly held the education portfolio at the Commission in 1986 as his two most rewarding achievements.
HIS IRISHNESSopened doors for him internationally, he says, particularly at trade talks when African and South American leaders recalled an Irish priest who had taught them. “As a people we are liked. Even before they know you and your failings, people respond positively,” he says.
Sutherland’s affability has clearly landed him plum postings over the years. “To me, knowing people, networking with people has been a key to whatever limited success I have had, so I am not going to give that up,” he says. He is active in the secretive Bilderberg Group, the influential, invitation-only group which meets privately discuss the state of the world. For the next stage of his career he has decided to join three boards – at German insurer Allianz; Koc Holdings, Turkey’s largest conglomerate; and a Chinese shipping company. All are “geopolitical choices”, he says, reflecting the shifting powers in the world. Despite demands for his services (and connections), Sutherland still sees himself as a jobbing barrister by trade.
“I don’t consider myself a businessman – I am a man who is passionately interested in public affairs, particularly [those] of Ireland. I am energised by debate and dispute, and I am quite happy to fight my corner. I have a very clear idea as to what I actually believe in.”
BORNApril 1946 in Dublin
FAMILYmarried with three children
EDUCATIONGonzaga College in Dublin, University College Dublin and Kings Inns.
CAREERPractised at the Bar from 1969 to 1981; he represented Captain James Kelly in the 1970 Arms Trial. He ran unsuccessfully for Fine Gael in the 1973 general election.
Served as Ireland’s attorney general (1981-1984) and EU Commissioner (1985-1989). He was chairman of Allied Irish Banks (1989-1993), and director general of Gatt and later the World Trade Organisation (WTO) (1993-1995).
He chaired the committee that reported to the EEC Commission on the functioning of the internal market after 1992, which became known as the Sutherland Report.
He recently stood down as chairman of UK oil company, BP, but is still chairman of Goldman Sachs International, the US investment banks UK subsidiary. He was non-executive director of Royal Bank of Scotland (RBS), during the global financial crisis.
He is a board member of the World Economic Forum, which organises the annual economic summit in Davos, Switzerland.
Sutherland was appointed by Pope Benedict XVI to the board responsible for the Administration of the Patrimony of the Holy See, a part of the organisation that has been recognised internationally as the Vaticans central bank.