The MT Interview: Martin Broughton

A lifer at BAT, he rose from auditor to chairman via CEO, in which role he pushed up the tobacco giant's market share worldwide. Not bad for a non-smoker. Diplomatic, understated yet a good mixer, he brings an air of considered coolness to BA's strategic thinking. The firm will need it.

by Chris Blackhurst
Last Updated: 31 Aug 2010

Legal papers released during the dirty tricks row between British Airways and Virgin reveal a remarkable scene involving Lord King, BA's chairman at the time, and a van he sees circling St James's Square, outside his office window. Convinced the vehicle is up to no good and may be bugging him, King orders colleagues to find out who the driver is.

Nobody questions the gruff King's judgment. Instead, the van incident is marked down as another example of Richard Branson's no-holds-barred approach to competing with the world's favourite airline. In another episode, King notices a model aircraft on a bookcase and has the room swept for bugs. None is found.

I could go on. In fact, much of the bizarre feud between BA and Virgin was fuelled as much by the paranoia of King and his senior people as the desire to do down the usurper. For a period, BA lost all sense of perspective, trying to poach Branson's passengers and becoming obsessed with the novice pretender. It spiralled out of control and the airline was held up to ridicule.

The fiasco seems inconceivable now, as we sit in BA's gleaming, modern HQ, Waterside, near Heathrow. For not only does the firm occupy an all-glass building that seems to signify openness and transparency, and everyone, including the most senior personnel, is housed here and is clearly visible, but it also has a fresh chairman, who represents a clean break from the past.

After King came Colin (now Lord) Marshall. When King was chairman, Marshall was his CEO. This was a double act in which they didn't always see eye to eye: the tough, fierce King, who fired from the hip; the smooth, technocrat Marshall, who did everything by the book.

Finally, after what has seemed like an age, Marshall has gone, replaced as chairman by someone who has never worked full-time for the airline, and who wasn't there during its privatisation.

The difference is apparent as soon as you step into Martin Broughton's office. It's small, almost tiny. There's no sense of grandeur - no fancy paintings, no photographs of him with Mrs Thatcher or other blasts from the '80s. There are no industry gongs, little evidence of importance.

The view from his window is of a grassy bank, part of a landscaped nature park next to the offices. In the distance, traffic winds its way through cones on the M25.

Outside, BA's office may be sparkling, but the airline's reputation has been badly tarnished after a disastrous summer of delays, cancelled flights, shortage of ground staff, luggage left on the tarmac and threatened strikes.

Ever the wise old bird, Broughton stayed above the fray - it was noticeable that it was chief executive Rod Eddington who took the flak, turning up with his top managers to man the desks - and poised to take some very awkward decisions, if need be.

As a chairman well versed in handling poor publicity, Broughton never once let his guard slip, keeping his position and authority intact. His tactic was justifiable: after all, these were embarrassments to do with the day-to-day operations of the airline and therefore outside his visionary, strategic remit. But it also allowed him to retain the trust of the City, to ensure that while consumers may rail against the airline, investors remain sweet with Broughton and the corporation.

It enables him, if required - if shareholders demand it - to move against Eddington, to give them the chief's head. As someone who is not time-served in the airline, he isn't native; he can look askance, if he wishes, at the excuses and explanations offered by the management team. The fiasco may have brought forward Eddington's departure; at the very least, it will have sharpened Broughton's thinking as to the type of person needed to replace him when he eventually goes.

Broughton has been in situ only a short while, but there seems little prospect of his office decor changing. There is personal memorabilia - photos of his family, a coffee-table book on Turkey, some references to racing (he's also the new chairman of the British Horseracing Board) and that's about it: functional, quiet, understated. Just like Broughton himself.

He's wearing a suit with a blue shirt and loafers. His look is relaxed, smart, but not flash. The only unconventional thing about his appearance is his hair. It is grey, wavy, slightly too long, but so abundant that it must be impossible to manage - a rare sight on a 57-year-old corporate grandee. You suspect he's proud of it, allowing it to grow, making him feel young and still boyish.

Certainly, for one who has spent the past 11 years at the very peak of UK Plc, as chief executive and then chairman of British American Tobacco, and as a director of Whitbread, and now at BA and the BHB, he exhibits no hint of a paunch, no suggestion of letting go. Fags, beer, racing - he has held senior positions in them all, but you wouldn't know it to look at him. His career has been built on ability, drive and charm. Red-faced temper tantrums, slanging matches, anything that might cause a loss of dignity and respect are not for him. Indeed, within BAT he was known for his 'eyebrow management', for raising an eyebrow when others might raise their voices.

Careful diplomacy is his way. His courteous manner comes naturally: he listens attentively, considers his answer and replies fully. You can see how he's managed to glide his way along the corridors of power in some of the most competitive, aggressive industries imaginable.

This is the oddity of Broughton. We're brought up to see our commercial leaders as macho, powerful men - more like King and indeed Eddington - yet here is Broughton, up there with the best of them. He's like no chairman of a tobacco giant, no director of a beer company, no head of a global air carrier or horse-racing body you've ever met.

Neither, though, is he like his predecessor at BA. Marshall was clipped and intensely focused, a former cruise liner steward who devoted his career to providing a service, of always putting the customer first (sometimes at the expense of his relations with senior colleagues and staff). Broughton seems much more easy-going. It's difficult, for example, to think of Marshall mixing easily with the colourful characters of the turf, sitting with ordinary supporters in the Matthew Harding Stand at Chelsea football matches, or with his fellow big-wigs in the choice seats. But Broughton does all these.

The new chairman has stayed in touch with his roots and that link has served him well. He was born in Fulham, west London. His father, who was disabled, was a coach-trimmer - 'hard to believe now, but in the days when people kept cars a long time they would get parts like the seats and trimmings replaced'. Family life he describes as 'uneventful, austere. I was 18 or 19 before we got a TV and we didn't have central heating. There wasn't much money. We never really went out.' He has a twin brother, Steve, who worked in insurance for Sun Alliance and is now retired. Were they Terrible Twins? 'Not really,' he replies with a shrug.

His childhood, he wants to emphasise, was not exceptional, not unpleasant, just ordinary. He passed the 11-plus for Westminster City Grammar School where, he wants to stress again, 'I was an average student. I was bottom of the A stream, just average really.' He wasn't a standout pupil at anything and he describes his schooldays, using that word again, as uneventful.

Broughton comes across as good-humoured, confident, with a ready smile.

So it's hard to believe his early years were as dull as he portrays. University was off-limits to him. 'It was a mix of two things: I couldn't afford to go and I wouldn't have got in.' He got 'six O-levels, or was it seven, I can't remember. They were all modest grades and they weren't good enough.'

It seems out of character that he can't recall, but anyway he couldn't go and that was that. Does he have regrets? 'No, there's not been a part of my life that wasn't worth doing. I'm sure I would have enjoyed it, but the bottom line is no. You could say I found my vocation by not going to university.' What was the vocation? 'Accountancy. I found it easy, whereas school had always been a bit of a struggle.'

Does it annoy him that society, and business in particular, puts so much store on having a degree? 'Yes, it bothers me that so many organisations go further than that even and say: "Unless you have a 2:1, we're not interested." It's not even a question of having gone to university - it's what sort of degree you got.'

To be fair, he says, he can understand that 'the top companies get so many applicants for jobs, so why look elsewhere? They've got to sift through a wealth of applications somehow.' Mind, he adds, his face breaking into a wry smile, 'I sometimes reflect that as a non-graduate I wouldn't be employable as a management executive under many companies' rules.' His children were encouraged to go to university. 'They both went to universities in the US. That was their decision.'

At 18, he joined a small firm of accountants in Piccadilly. He earned £7 10s a week, while his twin brother was picking up £20 in insurance.

He discovered that despite hating maths at school, he actually liked totting up figures. 'I'd always been very numerate. Whereas calculus was a pain, I'd always been good at straightforward, old-fashioned number-crunching.'

He worked at bookkeeping by day and took a correspondence course in accountancy by night. 'I'd no idea how well I was doing, I was on my own. Then I took the exam and I came 41st out of 3,000. It was the first time I realised I was doing well.' And, he adds: 'I'd never been used to doing well in any subject until then.'

Determined to earn the same as his brother, he left the small firm at 23 and joined the smart Peat Marwick, on £1,800 a year. It was the big time and he thought he'd arrived. His illusions were quickly shattered.

'My department boss was 62, his deputy was 64. Everybody else was in their early 20s - there was nobody in-between. The section wasn't managed properly, the whole thing was unsatisfactory.'

He spent a large slice of his weekends playing football ('I was centre-half for one team and goalkeeper for another'). While turning out for his school old boys' XI, he overheard two team-mates chatting. 'We were in the changing room. One said he'd got a job with Coca-Cola and how brilliant it was, travelling the world at someone else's expense. He was in internal audit and would visit their global operations, stay for several months and move on. I thought, that is exactly me.'

Within two weeks, he'd applied for two jobs. One was in the audit department of BAT, the other was with Intercontinental Hotels. BAT replied immediately and Intercontinental came back several months later - by which time he was at BAT. It was 1971. He'd been with Peat Marwick less than a year.

But he stayed at BAT for 33 years. And he's a non-smoker. He tried to put his father off the habit and also discouraged his children from taking it up. He even admitted, while chairman, that smoking is bad for you.

So why devote yourself to a company when you don't believe in its product, don't even think it's a good thing? It's an aspect of Broughton that's hard to square. There he is, natural accountant, good financial brain, with excellent people skills; clearly, he could go anywhere, yet he chooses to work for BAT. Not only that, he becomes chairman and top flag-waver, after the company had gone through a strange period of wanting to be a conglomerate (and less dependent on tobacco) and then ditched that idea in favour of concentrating on - wait for it - cigarettes. It's all very odd.

'I thought I'd join for three years. It's not the company I would have chosen, but I joined and I loved it.' The training, he says, was wonderful.

'I got six months here, six months there. I got to see how a major business operated. It was brilliant exposure: I got to see the business as a whole.'

What happened was that he stopped thinking about cigarettes and what they did, and saw them more as any product, as with any other business.

'It was a very consumer-oriented operation. I found myself more fascinated by marketing rather than finances. The marketing side interested me: why do people spend $2 on one pack of cigarettes when they could buy another pack for $1? I was intrigued by brand loyalty - how you develop it and how you keep it.'

He also discovered something else. During his time at BAT, the corporation dabbled in insurance and paper, among other things. But it was the people who worked on the tobacco side that he found the most fun to be with.

'It must have been something to do with the product. Maybe selling cigarettes attracts a more libertarian type of person.'

He loved the camaraderie, not unlike, he admits, the sort of kinship you find in an office smoking room. 'There was definitely that sort of mentality.' It helped, of course, that BAT had such a strong position in tobacco and was so successful: 25% of the adult population smoked and BAT had a 30% market share. It was major, lucrative business. 'Those of us in BAT who were non-smokers were more tolerant of smokers than non-smokers elsewhere,' he says, grinning.

He may be a non-smoker, but that doesn't stop him fighting the smoker's corner. 'I drink alcohol and that's responsible for over 50% of the violent crime in the UK. Alcohol leads to damage to the non-drinker, through traffic accidents and drunken men beating up their wives and so on. With smoking, the only damage done is to the smoker.'

Broughton warms to what is clearly a well-rehearsed theme. 'You must admit it's odd. In Portugal, in Euro 2004, Carlsberg and Carling logos were everywhere. Liverpool, Celtic and Newcastle have all been sponsored by beer companies. Tobacco sponsorship isn't permitted, yet how much hooliganism is caused by tobacco? It's irrational that alcohol sponsors these things.'

Broughton worked his way round the different businesses and was repeatedly promoted, until, in 1988, he joined the board as finance director. The timing of his arrival was perfect. The Berlin Wall was coming down and, suddenly, the tobacco industry was transformed. 'It changed our world.

Until then, vast swathes of the world had been off-limits. The former Soviet Union had one of the highest densities of smokers anywhere, even though it had never allowed advertising,' he says, rubbing it in that in his view advertising doesn't create smokers but persuades existing smokers to switch brands. 'It was a high-growth opportunity, a seriously high volume market.'

This new frontier challenged BAT's business philosophy. 'It made us think about our basis for being in more than one business. Being diversified meant that we were always diverting cashflow, and we were in danger of missing a growth opportunity in our key market, tobacco. There was no logic to it. The sensible, rational business position was to go for one industry, to go for tobacco.'

Regrouping wasn't easy, he recalls with understatement, but BAT pulled out of pretty much everything except cigarettes. In 1993, Broughton succeeded Sir Patrick Sheehy as chief executive of a more sharply focused group.

Under Broughton's reign, BAT's global market share went from just over 10% to 16.5%, and the company outperformed the stock market over that period. It's a business that people still want to invest in and to work for - so knocking, he says, all those who attack its presence in tobacco.

Remarkably, compared with the flak that hit Gerald Ratner when he made his 'crap' remark about one of his jewellery items, or Matt Barrett of Barclays when he said he told his children not to use credit cards, Broughton's remarks about advising his children not to take up smoking escaped criticism. Possibly, it was because he has always been up-front about his non-smoking. Also, it was a symptom of a more public relations-savvy attitude. 'How do I head a tobacco company when I don't smoke? Simple. I'm not asking people to smoke. I'm asking them if they smoke to smoke ours.'

Such arguments don't carry the same conviction now that passive smoking has become an issue. If Broughton timed his ascendancy impeccably to coincide with the opening up of new markets, his departure was well judged too, as the banning of smoking in public places becomes more common around the world. He maintains that no evidence exists of a risk to health from breathing in someone else's smoke and believes strongly that the industry was wrong not to put its case across more forcibly.

Such debates for Broughton, though, are in his past. Now he's got air travellers to think about, although, he says, chairing an airline in the 21st century is not much different from heading a tobacco company. They both involve mature products and both entail encouraging customers to try one brand rather than another.

While at BAT, Broughton also took on non-executive posts at Whitbread and BA. He's been on the airline board since 2000, becoming the senior independent director and Marshall's chosen successor. 'Four years ago, Colin Marshall invited me to join the board, with a view to becoming chairman in two years' time. In the end, it took a while longer because BAT merged with Rothmans and I couldn't bugger off as soon as we'd done it.'

Broughton is unlikely to be a pushover as non-executive chairman. If Eddington, a strong personality, thinks he will have things all his own way, he can think again. 'Rod's issues are to do with where BA is today.

Where the airline will be in five years is for Rod and me - it's something we need to work on together.' He has inherited a business, he says, that is 'in very good shape relative to the competition, but that's in the context of an industry that is in very bad shape'.

When we meet, Broughton is sitting on a profits announcement for the three months to June of £115 million, versus losses for the same period last year of £45 million and analysts' expectations of £100 million. He's far from complacent, however. 'At the current profit levels, this is a business that's going to decline. We need to get to 10% margins to generate a long-term leadership position.'

Other airlines, he predicts, will go to the wall. 'There are too many walking dead, too many propped up with government subsidies.' Other countries back their airlines, not Britain. He claims it doesn't hurt. 'Does our government do enough? Look at it the other way round. Our government has got it right. This is not an industry that should get support. There are enough players in it.'

There's been a feeling in the past decade that BA has lost its lustre, that the 'world's favourite airline' tag of the 1980s has become an albatross around the company's neck. Only now, steered by Eddington, is the carrier giving the impression of being on the right track: costs have been ratcheted down, and - perhaps late in the day - BA is taking on the budget competitors.

But the world's favourite? 'I don't regret we called ourselves that - it's an aspiration we should always have. It's a claim that many an airline in the world would wish to have been able to make.'

Nevertheless, BA did make itself a hostage to fortune. After such a bold statement, the only way was down. 'Our task is to get back,' he acknowledges.

'How? By delivering a service that people are prepared to pay for. It's like the $2 versus $1 pack of cigarettes. We're the $2 brand and we have to make sure we're worth the extra.'

It's important, he says, that passengers see the experience in the whole, 'through check-in, through the lounge, in-flight and through baggage control. If they're pleased, they will be happy to pay more and think we're worth it.' If people just want to go from A to B at the cheapest price, he says, that's not his BA. 'There's no added value for BA on that basis. It's a brand that demands a different position.'

BA, he also seems to be saying, needs to be more confident, needs to stop looking across at others. There may be a benefit to the airline from the low-cost carriers - but not in slavishly following them on price.

'They could be symbiotic, they could be good for us. People who otherwise wouldn't think of flying are now flying; that can only generate interest, and next time they may want to try something different.'

He will be right behind Eddington in his battles to remove stifling work practices. 'We've got the essence of people who want to do well, for the airline, for the customer, but we've got to change things.' For one hour a week, Broughton and Eddington will meet, to plan, to chat. It will be a meeting of different characters with different levels of experience, but similarly ambitious, fiercely determined minds. 'Rod has been running the airline for four years, he's been a great chief executive; I've been chairman for hardly any time at all.'

His approach to the board will be to listen, to seek agreement, but he says they should be under no misapprehension that agreement is necessary.

'I want consensus, but I'm happy to move ahead without it. I don't require unanimity.' He gives the impression of not being afraid to plough his own furrow. After all, for three decades, he climbed high in an industry that plenty of others abhor and shirk.

Now he's gone to the other extreme, to chair what he admits is an 'iconic company' that is almost national property, pored over and analysed by the public, City, politicians and the media alike. Sometimes, the attention can be too much, but he's sanguine. 'We have to accept that any bad news we have gets into the news more. It comes with the territory.'

Having come from BAT, he's no stranger either to the murky world of lobbying, of pressing politicians' flesh, of dealing with sensitive issues. He also arrives as a chairman without baggage - critical if BA is to move on.

Of Branson, for example, he says BA should be grateful, not resentful - and certainly should not be vengeful. 'We're more competitive because of having Virgin in our home market. Most other airlines are national flag-carriers, yet they have no competition. Virgin has made BA think more and helped us to stay ahead.'

You look for a flicker, a hint of irony, but there is none. A BA chairman thanking Branson? Now there's a thing.

FOUR TOUGH CHALLENGES FACING BROUGHTON

1. How does BA fight off budget airlines on short haul?

2. Following the sale of its stake in Qantas, on what does BA spend the £425 million proceeds?

3. How does BA improve its poor labour relations while squeezing out more cost from its staff base?

4. After the permanent grounding of Concorde, can BA launch an initiative that will put the glamour back into passenger flying?

BROUGHTON IN A MINUTE

1947: Born 15 April. Educated at Westminster City Grammar School.

Qualified as chartered accountant.

1970: Joins Peat Marwick Mitchell.

1971: Moves to British American Tobacco as auditor.

1993: Becomes chief executive and deputy chairman, BAT.

1998: Appointed chairman, BAT.

2000: Joins British Airways board as non-executive director.

2004: Stands down from BAT and becomes chairman, BA.

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