Why the City has no need to fret about RBS chief's other job

Published on Sunday 15 November 2009 21:14

THE hoo-ha surrounding the appointment of Sir Philip Hampton, the chairman of Royal Bank of Scotland, as a non-executive director of mining giant Anglo American last week just goes to show how tetchy the City continues to be about the banks – and particularly those whose biggest shareholder is the UK government.

Last week, Hampton's role at Anglo was announced – a routine City appointment. But there was nothing routine about the response.

At a meeting at the Association of British Insurers (ABI) last week, RBS investors cavilled. Surely a 750,000 salary and 1.5 million share options is enough to keep Hampton's attentions strictly focused on the bank, they argued? Surely, with RBS far from coming out of the dark woods yet, Hampton is taking on another job just too soon?

But what also put the noses of shareholders out of joint was the seeming lack of consultation. Although it was clear that Hampton and RBS had discussed his new job with UK Financial Investments – the body that manages the UK government's 84 per cent stake in the bank – that courtesy was not extended to others.

"It was more an issue that if you spoke to UKFI about something, why don't you speak to other shareholders?" said a source close to the snubbed ABI members.

The ABI has no plans to take the concerns further – there will be no protests made or letters sent. But what did emerge from the squabble was the question of whether Hampton was a part-time non-executive chairman of RBS or a full-time executive chairman.

The fact is, the bank does not know. But Hampton insisted the job would still get the benefit of most of his time.

"I will spend four to seven days a week at RBS. That's what it's been like and what it will be like," he said.

Admittedly, the line between executive and non-executive chairman is a fuzzy one. The combined code of the Financial Services Authority (FSA) suggests that non-executives tend not to have interests in shares though Hampton, of course, does.

It was only in October too, that Hampton finally left his (part-time) chairmanship of Sainsbury's. Another non-executive role, at Belgian telecoms group Belgacom, ends in March.

His five-year tenure at Sainsbury's, where he played the wise owl to chief executive Justin King's Tigger-like style of management, was largely deemed a success after the pair turned the supermarket's fortunes around.

There is certainly a clear rationale for Anglo to take Hampton on board, too. In July, Sir John Parker took the chairman's role at the mining giant with a mission to "refresh" the group's board after seeing off a takeover bid by Xstrata. Anglo American now must finally get serious about a wide-ranging restructuring, which will prove to the market that the company has a future as an independent miner.

It should come as no surprise that the first person in Parker's little black Rolodex was Hampton, whose abilities as a restructuring specialist of international scope were just what Anglo was in the market for.

The City is a small place and Parker would already have got the measure of Hampton when they were both on the board of British Gas. Both were involved in the massive de-merger of the energy group to spin out Centrica in 1997 and its pipeline business in 2000.

If anything, Hampton's role at Anglo should serve to keep his outlook international, just as RBS fights to maintain and perhaps eventually start to grow its overseas business again.

Hampton has long been a trusted friend of government. A former City banker at Lazard, he first jumped the corporate fence to work for his newly privatised client, British Steel.

He later led a major restructuring at BT, where he raised 5.9 billion from shareholders to get the telecoms giant out of debt. Although it may look like peanuts now, in 2002 it was a record for the City.

He was initially dragged in to be chairman of UKFI last November. Although he was "really enjoying" that, the bigger challenge of the RBS chairmanship loomed, particularly after Gordon Brown decided the front-runner for the role, Mervyn Davies, was going to become a trade minister instead. Hampton found himself on a "shortlist of one" for the job.

But Hampton has proved he is a steady man in a crisis and an excellent team player. Last month he and Hester successfully fought a last-minute battle in Brussels to reduce the number of RBS sell-offs being demanded by European Competition Commissioner Neelie Kroes. In addition to its insurance division and profitable global payment business, Kroes also wanted wealth management business Coutts and its US arm, Citzens, to go.

Hampton got his knighthood after completing a review of City regulation in 2005. Led from the Treasury (aka Gordon Brown), the review was also embraced by Tony Blair, then Prime Minister, who used the occasion to fire broadsides at the city watchdog the FSA. In 2005, Blair and Brown were spearheading a move towards deregulation and the "light touch": concepts that fell into disrepute after the banking crisis.

Yet Hampton's approach even in 2005 has a ring of prescience. His report suggested the system of regulation in the UK was bloated and ineffectual, pointing out that 61,000 people in the UK were involved in regulating business – at a annual cost to the taxpayer of 4bn.

He advocated slashing the number of regulatory agencies from 35 to nine. But he also suggested imposing regulation on a "risk-based approach" – targeting organisations that seemed to be heading for trouble.

It is possible to speculate that if the FSA had cast off the onerous, pettifogging, box-ticking approach that caused it to miss the massive risks posed by banks gorging on wholesale debt in favour of Hampton's way, then the UK's banks might be in a different position today.

CURRICULUM VITAE

Educated at Bishop Vesey's Grammar School, in Sutton Coldfield, Hampton then studied at Oxford University and gained an MBA at business school INSEAD.

He was a trainee at accountancy firm Coopers & Lybrand before joining merchant bank Lazard.

In 1989 he became finance director of British Steel.

After stints at British Gas and British Telecom, he then became finance director at Lloyds TSB, where he fell foul of the bank's new chief executive, Eric Daniels, over dividend policy. Hampton says it was his "least favourite job".