Business Irish

Sunday 19 November 2017

Foreign investors don't want any part of inherent Irish cronyism

We're in a time of economic 'war' and we need war-like solutions to survive the present crisis. By Brendan Keenan

Niall Fitzgerald
Niall Fitzgerald

Niall Fitzgerald recalls the moment he realised something was going wrong in Ireland. "I was told at a dinner how an acre of land in Ballsbridge was sold for €54m. I thought I had misheard him, and he meant €5.4m. When I left Ireland in 1971, you could have bought the whole of Dublin for that."

The former CEO of household goods giant Unilever -- now deputy chairman of media group Thomson Reuters -- has strong views about the Irish situation. And, being Niall FitzGerald, he is not afraid to express them.

It is unlikely we will ever see him on 'The Apprentice,' or 'Dragon's Den,' but it seems a pity. Even a friendly interview is a slightly intimidating experience.

If the Irish authorities and Irish bankers were contestants, they might be heading for the door. In a recent speech entitled, "The Good, the Bad and the Ugly ," delivered to the Institute of International and European Affairs, FitzGerald typically did not mince his words.

"I am not here to preach -- I have too many sins of my own to make that credible," he says, "but honest talk is the only way to confront our present realities."


He told the Irish Independent: "If you don't take action, and do things to hold people accountable for what happened, and go instead with a crony capitalism kind of society, you will find that foreign investors do not want to be part of that."

It is not just Ireland's economy that has been damaged, he says, but its reputation -- and that may be even more harmful in the long run. He strikes a surprisingly populist note in saying that one big reason for the loss of Ireland's reputation as a good place to do business, is the fact that nobody seems to have been held accountable for the financial disaster.

"I realise that these are complex processes. Cases of this kind are not easy to prove." But he is clearly puzzled, and impatient, about the fact that nothing has actually happened, more than two years on.

"I am assuming something will happen," he says. "If we are still having this conversation in a year or two, and nothing has happened, we would have to conclude that the talk of investigations was all garbage, and nothing was ever going to happen."

FitzGerald was one of the first Irish-born executives to rise to the very top of the tree and never made any attempt to play down his Irishness, or to cut his connections with Ireland; at a time when it was not necessarily an advantage in the corporate world.

He understands that it is difficult to take unpleasant actions in a country where all the people at the top know each other, and are often personal friends.

Who can forget Sean Quinn complaining that he had rung every government minister, and none of them would return the call? It is not an ideal situation when the right course of action may be to destroy someone you know -- and probably like.

But it has to be done sometimes. "We must quickly put an end to any perception that corporate governance can be compromised by personal relationships. The victims of the recession have noted what they perceive to be a cosy cartel at the top -- the bankers, developers, politicians, regulators and business people generally.

"We know what we're talking about here -- about a 'cute hoor,' nod-and-wink, mutual pockets-lining approach to business transactions -- about cronyism."

At the very least, there should be more transparency, he says. "Eighty billion of public money is being put in here. Taxpayers are entitled to know what is being done with it.

"NAMA, for example, should not be a secretive organisation. It does not wash to say information should be classified to preserve commercial confidence. At the very least, generic descriptions of loans and assets should be disclosed. These are exceptional circumstances, with vast amounts of money involved."

The circumstances are so exceptional that more radical action may be needed, both to fix the economy and the country's reputation. Perhaps even a national government. "Ireland has to show the outside world that it is serious about fixing its problems.

"One way to do that could be a national government. This is an emergency, with debt levels we thought we'd see only in wartime.

Economic wartime

"But this may be wartime -- economic wartime -- and it may require war-like solutions. If the three main parties came together for a specific period and agreed on three or four key things, it could be very helpful." Business itself also needs to rethink its priorities, both on what it does, and how its leaders are paid. FitzGerald is also at one with the popular mood when it comes to the earnings of top bankers and executives.

He freely acknowledges that he has been very well-paid himself, as the boss of one of the world's largest companies, but says more effort must be made to align earnings to long-term achievement.

"I'm not against people being paid a lot of money if they deliver a lot of real benefit. But the money should not be paid until value has been created.

" That is what people who own their businesses do, and we have to replicate that for managers, which means the big earnings are held back until the results are known."

One difficulty is measuring real wealth creation in areas like banking or -- even more so -- financial trading. FitzGerald is quite scathing about some of their activities. "This global trading doesn't add anything to wealth.

"You can only trade assets if the assets have been created. These traders may be very clever -- and they do provide a service -- but we have got into a frame of mind where that is seen as more important than actually creating the assets.

"John Rose of Rolls Royce likes to say that there are only three ways of creating wealth: you dig things up, grow them, or convert them to add value. Anything else is merely moving them about."

He stresses that he is not pessimistic. Like all the best managers, he sees opportunity.

"We have shown the world that we will take the strong medicine required to address long-term challenges. Now we have to show that we have the will to build a better business environment."

Niall FitzGerald became deputy chairman of Thomson Reuters, following the creation of the new company in April 2008. Prior to this, he was the chairman of Reuters.

He spent over 30 years with Unilever in a variety of commercial and financial jobs in several countries.

He is a senior adviser to Morgan Stanley International. As an Irish citizen, he holds an honorary KBE.

Irish Independent

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