Charles Thomson has achieved what I thought was impossible. He has provoked me to sympathise with the directors of Equitable Life: the gold braid, that is, on the bridge when the ship hit the iceberg. Our oldest life assurance office — set up in 1762, which made it Barings’ twin — had been holed below the waterline. I have not, until now, had a kind word to say for them. I accused them of trying to save the society’s skin at the expense of its reputation, and failing. After that failure, they were pushed overboard, and now their successors are trying to sink them. Next week, in the High Court, the Equitable will open its case against its former directors and auditors. Already the lawyers are ticking like gas-meters. They can see at least six months’ highly paid work spread in front of them, but this does not faze Mr Thomson, who is now the Equitable’s chief executive. ‘We can afford this trial,’ he says. So, in a sense, can Ernst and Young, who were the auditors. Theirs was the nearest deep pocket, so they could expect to be sued. The directors do not have pockets like this. They are a mixed batch, and one or two of them are well off, or used to be, but how can they contemplate a lawsuit where the defence costs alone have been quoted at £100 million? If they win, they will still have to feed the meter. If they lose, of course, they will be ruined.
Acting on advice
It is not apparent to me what the Equitable stands to gain by ruining them. If they were picked up and shaken until the last penny fell out, the policyholders would never notice the difference. Perhaps the insurers would pay — and, after this case, every other director will want more insurance — or perhaps the Equitable has been warned that if it does not go after them, someone else will try to go after it. No doubt, in court, the former directors will say that they acted on legal advice and were held to be right until the House of Lords thought differently. In a neighbouring court, the Bank of England is being sued for misfeasance in failing to supervise BCCI, the Bank of Cocaine and Colombia, This case, today’s version of Jarndyce v. Jarndyce, is well into its second year, after a decade of preliminary hearings, and at this stage is still being opened. If it ever ends, it will presumably go to appeal — but, as in Jarndyce’s case, we can all spot the winners. They tick.
Read the meter
Lawyers say that the Lord Chief Justice has speeded things up and that cases nowadays have to be managed. He still has a long way to go before trials, civil or criminal, come back to the dimensions that used to be commonplace. There is nothing new about fraud or corruption. They have always attracted ingenious minds. What is new is the meal that the courts make of them — the cases that drag on for month after month, until the jury and the prisoners, cooped up together, empathise. Those who do not welcome the result then blame the jury for it. Juries, they tell us, are history — as indeed, in the best sense, they are — and should be replaced by professionals, who could be expected to treat every hour as another extension of billable time. So far from curing the system’s defects, they would live by them, as their colleagues now do. Perhaps the Lord Chief Justice should come round and read the meter.
The pilgrim’s regress
I wondered at the time why a well-bred bank like Morgan Stanley should be walking out with a credit card called Discover. Who were the Discovers, I asked? Did they come over on the Mayflover? Eight years later, those highly paid minds have worked out that it was all a mistake, and poor Discover will be dumped. She is the latest casualty in a civil war now being fought out with full-page advertisements in the Wall Street Journal. On one side are the grandee dealmakers who represent Morgan Stanley’s tradition. They confront the salesmen who came from Dean Witter, are based in Chicago, and complain that their efforts have kept the grandees in the style to which they are accustomed. It is an old story, and serves to confirm my belief that performers and dealmakers do not fit into conventional business structures. Memos and meetings annoy and frustrate them, and their rewards arouse envy. None of this, when the war is over, will stop Morgan Stanley charging huge sums for offering its advice to other businesses.
Eric Roll came to banking 38 years ago as a third career (economics first, Whitehall second) and took to it, but his good fortune was to be taught by Siegmund Warburg. They would walk at weekends round the silent squares of Belgravia, talking less about theory than practice: the quirks of particular companies, banks and, above all, people. Lord Roll became chairman of S.G. Warburg, an inveterate traveller on its behalf — ‘never known to pass an airport,’ said Sir David Scholey, his co-chairman, ‘without going into it’ — and finally an Uncle in its best tradition, coming into the office until his death, last week, in his ninety-eighth year. Accuracy, so he said, had always been its founder’s watchword. Big mistakes might be forgiven — errors of judgment, candidly admitted — but not small ones. I am not convinced that I would have made the grade at S.G. Warburg.
Standing and waiting