Chairman Allen

I was „fighting“ for my existence, to get the best deal I could following the shock October announcement of my redundancy from Grand Met caused by the apparent difficulties in profits and the need to restructure (known in insider circles as cutting to the bone to make it attractive to prospective buyers).
 
Today the glossy 1990 Grand Met Annual Report (financial year 1st October - 31st September) was published with the opening headlines from the Chairman:
·         Profits increased by over 25%
·         Earnings/share up 55.6p to 64.1p (format to avoid showing only15.3%)

·         Dividends increase by 15.9% to 20.4p


So 25% was clearly not good enough and only 16% for the shareholders. Pretty miserable performance. Not a happy man, our Allen, and he forecast a difficult 1991 with a weak US$ but he reckoned on a “further earnings improvements”. He has to say this to keep his 1991 bonus target down as alow as possible.


The company had in the last 10 years gone from annual profits of £200m to over £1billion. If the shareholders weren’t satisfied he may have his bonus cut. Excluding pension contributions made on his behalf,  his salary in 1990 was only £639,125. And he held share options with a value of around £3.5m.




Writing this in 2018, I don’t find his pay or shares that much compared to what I often hear business leaders are paid nowadays. I seem to remember in earlier days one talked about the top man getting 10x the pay of an average worker - OK,  an average executive at least. That ratio was probably not very far off. But when I see that now a top UK executive earns the equivalent of the average annual wage by January 3rd then something is very wrong and nobody should wonder about the rise of popular unrest and the scissors dividing rich and poor get ever wider apart.


It does make the £150,000 UK Prime Ministers annual salary look very pathetic and here in Germany one says Mrs Merkel earns less than the average bank branch manager. And yet we expect clean, honest, competent politicians?
 
Allen Shepherd who started with the group just one year before me in 1975 was a self-made East End boy from a working-class family. He had fought his way up from Ford in Dagenham through the hell of Rootes/Chrysler, British Leyland throughout the 1960s and until he was recruited to sort out the Watney Mann & Truman brewing business of Grand Metropolitan a strange mix of businesses based initially on hotels in the UK. He was knighted and became a Lord in due course, as they all do if they contribute enough to the ruling government of the time’s party funds. He merged GrandMet with Guinness before he left to form Diageo plc. which was only overtaken in 2017 by a Chinese company as the worlds #1 distiller.



I am not that naive or socialist to realise he and his peers are worth paying good money, sometimes eye-watering sums, but only if it is done with fairness and honesty. Being a hard taskmaster is fine but sharing out the rewards justly is essential. No British Airways plane is cancelled when the company chairman phones to say he is feeling unwell for the day - but a British Airways flight will not take off until the cleaning lady has been found to clear the mess in the WCs.
 
Grand Met exploded in his time, big into breweries worldwide followed by out of breweries; big in hotels with Intercontinental bought from PanAm’s collapse, out of hotels: into pubs and restaurants, out of pubs and restaurants. Part of the Blip gives some idea of the 1990 brand portfolio – just a fraction of what had gone through the companies books in the last 15 years.
 
Brands and “adding value” was the maxim. A brand name and logo as such costs nothing and you don’t need any more than a good marketing company to come up with a name and design. The Coca-Cola brand which is only #3 in the world is worth US$80 million and that’s without the value of a single can or Christmas Truck. It#s purely a number on a piece of paper.



Buy or create the brand, make it a household name and sell it. Go to the next.  And the drinks sector where Grand Met was heading was easy money – a distillery, lots of automatic bottling, labelling and casing machines, a healthy marketing budget and you are laughing all the way to the bank.

 
I don’t take any notice of the annual report when it comes through the letterbox as I am sick of the mandatory sentence “Our success is primarily due to our most valuable, our employees”.  Being a shareholder in GrandMet I am only after my annual share income and want the highest share price possible. Sack a few more and the price will automatically rise.
 

All just numbers in a Profit & Loss and Balance Sheet. And that’s what makes our world go around.