The James phenomenon

John Prosser talks to the UK’s most high profile corporate doctor about his remarkable career

“Nothing is more dangerous in business than success,” says David James. “Every failure grows from success, because nobody is ever prepared to say ‘This is a successful business, the shareholders should be happy with what they’ve got’. I’ve never yet heard anybody at public company level say to their investors ‘Be happy, we’re going to carry on as we are’.”

And James should know. The UK’s most celebrated corporate troubleshooter has spent a large chunk of his career clearing up the mess left by errant managing directors, chairmen and, of course, governments. James is the man the UK Government called on to bail it out of the Millennium Dome debacle; just one more entry in a resumé which includes exposing the Iraqi Supergun scandal whilst holding the stewardship of Eagle Trust, and negotiating the release of hostages in Lybia at gunpoint after another Eagle Trust interest in Lybia was bombed by US forces. Cedar Holdings, Sears and Henlys Plc are also names which have crossed his path. James cheerfully admits to a day spent in jail in Malta (carrying the can for another’s corporate misdemeanour), and, at a personal level, carrying around a broken heart for 46 years, until his recent marriage.

I am facing him across the coffee table in his smart Thameside apartment. Outside there is an icy breeze, but a deceptively beautiful blue sky. He has, he says, set aside the morning to talk to me. Good news, and it can surely be only coincidence that on the wide screen TV, at which he takes regular glances, the England cricket team are undertaking a rescue of their own after an inauspicious start in their first test against India. Cricket, I learn, is one of James’ passions; but at least he has turned the volume down.

Now 68 years of age, David Noel James CBE is acknowledged as one of the UK’s sharpest minds in dealing with corporate finance and recovery, and our conversation is lightly peppered with phrases like “And then I got another call from the Bank of England”.

But it was not always so. James, born in 1937, was, as a child, assessed by a school inspector as retarded and mentally handicapped. But he was not. He was severely allergic to cats, creatures to which he had frequent exposure during his war years’ childhood. The allergy induced chronic asthma, rendering him, in his words, “unteachable”. Fortunately his allergy was finally discovered and he was taught privately, ultimately gaining three A levels and the offer of a place to read history at Oxford. But family circumstances meant that James needed to find work and, after a two-year stint in insurance (“living death”), he found himself working for Lloyds Bank and involved in uncovering his first fraud, in a London suburban bank.

Unrivalled disciplines

But some colleagues had been seduced away from the Bank by the Ford Motor Company and James was to follow in their footsteps, spending nine years at Ford, a time he clearly regards as the equivalent of the university education he never had. He is emphatic that the business disciplines in place at Ford in the 1960s were, and remain, unrivalled. But he was again to lose a huge opportunity when circumstances surrounding the death of his father prevented him taking up the offer of an appointment as Ford’s European financial controller, based in Cologne. Finding himself out of work, but with his blue chip Ford experience under his belt, he was, after a successful project extricating the Rank Organisation from a potentially disastrous television rental scheme, offered the role of managing director of English Numbering Machines Ltd, a wholly owned subsidiary of Rank. What he didn’t know was that the company was on the point of going bust.

Arriving there in the bitter January of 1977, he found a company which had just lost its biggest order from its major customer. In his first week as MD, the payroll was stolen, the plant’s heating system collapsed, the maintenance department fought a pitched battle with the toolroom in the street outside the factory, and the union called a strike. James was receiving his baptism of fire in British industry. But he survived. He had agreed to run a half marathon for charity but, having broken his foot on the weekend before the race, had to stagger around the course on crutches, a decision which earned him considerable local media publicity and the respect of his workforce. This, and his uncompromising style of expletive laden negotiation, enabled him to carry the workforce with him and, ultimately, turn the company back to profit.

By 1984 James found himself as CEO of Central & Sheerwood Plc, a troubled public company owning some of the best known names in British industry (Newton Chambers Plc, builders of the wartime Churchill tank; Ransomes & Rapier, a mining equipment company) and also, in James’ words, a business in a “quite catastrophic mess”, which also involved, in at least one subsidiary, massive fraud resulting in the imprisonment of the incumbent CEO. However, James was again able to reconstruct and sell the businesses as profitable concerns. Then the Bank of England called.

This time James found himself as managing director of North Sea Assets. Further success with North Sea Assets resulted in what was becoming a now familiar call from the Bank of England, asking if James would take control of a company called Eagle Trust - “a great big maggoty cake of a project,” says James. “Everything in it had some special problem and it was nothing like any other troubleshoot exercise ever.” The rest, as they say, is history. In the early 1990s, James was elected to the Council of Lloyds of London, after what he describes as “the biggest bust in British finance”, and for four years held the joint chair of the audit committee.

His passion for business runs in tandem with his fascination with opera. He is a big man, not at all like his own description of himself as the “complete little nerd”, once obsessed only with opera and chess. And the broken heart? He tells me the story of an early romance, leading to his engagement, and of the girl who, he says, was intelligent enough to do them both a favour by walking away from it.

James had saved £600 for a deposit on a house; instead he blew it all betting on a horse. But the horse won at long odds, sealing another of James’ passions, horse racing.

When he looks back, the common element of business failure he homes in on is the CEO who is an “egomaniac nutcase who thinks he can walk on water and nobody ever has the guts to tell him, ‘no you can’t’.”

Regrets

But he laments the mistakes made by both post war British politicians (“they’ve never grasped the fundamentals”) and business leaders, and regrets that British business has never really managed to find a broadly successful business model. “I would want to see a totally different reorientation of investor awareness of the quality of their investments,” he says. James believes that institutional investment funds wrongly walked away from their close involvement in supervision of their business investments at around the time of the UK’s 1986 Insolvency Act and that, in particular, they should have consistently scrutinised the quality of management much more closely, something James says they have failed to do. He regards Enron as a perfect example of a case in which management should have been “cleared out”.

He is also mighty bothered by the encroachment of stakeholders into the corporate agenda. “We are far too confused now about the value and significance of investment and stakeholder interest in the company,” James asserts. “You cannot keep on buying-off the workers with enhancements of the stakeholder package to the point where the company itself cannot survive, as is happening with General Motors and Ford at the present moment. At the end of the day the investor loses everything because of what has been conceded. You cannot have stakeholder value addressed other than in the context of a thriving, surviving company. That does not mean you have the right to divert the cash flow and profitability of that company into the hands of those stakeholders, to the detriment of the investor of that company, otherwise everybody is going to lose and that is where we have completely lost the political plot.” James also believes that the new Tiger economies of China and India are almost certainly doomed to repeat the business mistakes of the West.

Currently he is planning what may be his final move: the resuscitation of MG Rover, one of the UK’s best known automotive brands. If he survives long enough, he intends to spend the final years of his career on the project (he suffered a stroke after a particularly gruelling running session in the gym, causing him to slash his obsessive exercise regime). He is now happily married, but regret clearly casts a shadow over some aspects of his earlier life, and one gets the impression that if a choice could again be made between Oxford University and the university of life, Oxford would stand a good chance of winning.