WB Interview: John Parker

The chairman of National Grid, and former naval architect, is a leading advocate of strong corporate governance.

by Nick Loney, World Business
Last Updated: 23 Jul 2013

He doesn't admit it, but it must secretly delight Sir John Parker that his smart office overlooking London's Trafalgar Square affords a perfect view of Nelson's Column. Parker's career has been steeped in ships and the sea, and, like Nelson, he takes great pride in his reputation as a leader. But he is quick to dodge the comparison. "Yes, it's a nice view", is all he'll say.

As chairman of National Grid, the UK's largest utilities company, Parker has come a long way since his first job as a naval architect at Belfast shipbuilder Harland & Wolff in 1964. He still retains a soft Northern Irish burr and a mild interest in ship design, but his manner and style are much more that of a man of industry than a designer. Smooth and unhurried, he has the kind of presence that is built on decades of success and, like most successful leaders, he retains just enough humility to stave off accusations of arrogance. He reminds me several times about how "lucky" he has been in his career, answers all my questions with great deliberation and interrupts proceedings only once - to refill my coffee cup.

But beneath the velvet manners, it's hard to escape the impression that Parker is really made of shipbuilder's steel. He expresses his views calmly and patiently, but with an air of conviction. Nowhere is this better illustrated than in his views on corporate governance. Parker has become one of the UK's leading advocates of strong and transparent leadership, which he views as a moral duty for every company, as well as a source of competitive advantage. "If you run a business, you must ask yourself: what are the three ingredients we need," he says. "Number one: are we going to run this with leading governance practices. And the answer is not only that you should, but you must.

"Number two: you must have strong central financial control with total integrity in the reporting lines to the financial director. You need to establish a clear dotted-line relationship with not too much space between the dots. And number three: you need sound administration. You have to act within the law, you must demonstrate compliance on many fronts and you need to be able to track all your decisions, all of which requires a strong administrative machine."

The publication in 2003 of the Higgs report, which led to the creation of the UK's Combined Code on corporate governance, was a key moment in UK business history, he says. "These reviews cause a lot of irritation at the time, but they do help to put energy behind change. I know some companies that had to undergo quite a revolution to sort themselves out."

He believes that the introduction of the code has put the UK ahead of the rest of the world in the way it evaluates and regulates businesses at board level, but insists that regulations alone aren't enough. "If you comply with the code as it is written, then your standard of governance will be of a very high order. But you need to have people sitting at a non-executive level who will embrace these things as a natural way of life - not just the chairman sitting there with a copy of the code, saying, 'according to regulation 2b, we have to do this'."

Sarbanes-Oxley, which is currently causing a great deal more "irritation" in the US than the Combined Code ever did in the UK, will in practice do nothing to improve corporate governance among NYSE-listed firms, insists Parker, because it focuses on the wrong things. "It will improve the controlled environment, it will make sure your systems have integrity, but it will do nothing to make sure your board is refreshed," he says, referring to the Combined Code's recommendation that non-executive directors should not serve more than two three-year terms. "It comes at the financial control and integrity side, not at the totality of corporate governance. I always argue that what really matters is quality of leadership from the chairman and the non-executives."

He says that while it was clear, post-Enron, that US companies needed to be more tightly controlled, the regulations that followed amounted to overkill. An atmosphere of near-hysteria, he argues, is rarely conducive to balanced law-making. "Usually, it's some massive corporate failure that leads to reform, and that reform is either appropriate or it is knee-jerk and ill-defined," he says. "The US is trying now to pedal back from Sarbanes-Oxley because the sheer cost of compliance is so huge."

Ironically, many firms currently listed in both New York and London may soon not have to worry at all about governance codes at all. If the most lurid press reports are to be believed, the colony of vultures hovering above NYSE and the LSE in the form of private equity partnerships could soon carry off large numbers of companies to an uncertain future. Parker won't condemn venture capital in principle, although he admits that in practice it is something to worry about.

"Responsible VC companies will be prepared to take a lower return on capital and leave behind a healthier company. But there are those that will just go in for the short term, squeeze the living daylights out of a company and then get out." The answer, he says, is to take the scalpel to yourself before somebody else does it for you. "If somebody tells me they're worried about being attacked by a VC, I tell them to do what a sensible VC would do and cut the fat out themselves - quickly."

Such talk comes naturally to Parker, who has spent much of his career cutting the fat out of businesses and public bodies. He had his first management job at 28, overseeing the implementation of the new computer-controlled system of cutting steel plates for shipbuilding. He then moved to sales, which took him around the world, before returning to the UK in 1974 to become managing director of the Austin & Pickersgill shipyard in Sunderland at the tender age of 32. At that time, the shipyard was busy churning out SD14s (Shelter Deck 14,000 tons), which replaced the ageing fleet of US-built Liberty ships as the world's standard cargo ship. "Every 27 working days, we churned out one of these 14,000 ton ships," says Parker.

He describes the experience of being a 32-year-old MD as "quite a shock. You grow up quickly. We had a tough workforce - they were great people, but they spoke so quickly I couldn't understand them. But this worked to my advantage because it gave me an excuse to ask them to repeat their point more slowly, which gave me thinking time."

In 1978 Parker was seconded to the board of the British Shipbuilders Corporation (BSC), a public body that owned and managed British shipbuilding, and later became deputy chief executive. For a while he tried to juggle both jobs, but soon realised it was impossible and reluctantly decided to work for the BSC full time. "I was hijacked - I never wanted to do it," he insists. "It was a disastrous situation: the Corporation had 86,000 employees, it was recently nationalised with no corporate plan and had virtually no management team at the top. The industry was losing £100 million a year and I had to handle some massive redundancies (15,000). But after five years the corporation was turning in a decent operating profit."

As a young board member of a public body, Parker was thrust into the world of government for the first time. "I was so naive," he says. "I was right in the centre of Whitehall in the middle of my 30s. I remember being asked to go to a meeting to discuss a shipbuilding deal. I went round to the DTI and took one guy with me to take notes. When I got there, I was faced with 24 people from every department within government. You learn very quickly in that environment."

It is at this point that the comparison with Nelson seems off beam. The way in which Parker talks about his career is reminiscent of another naval administrator, Samuel Pepys. Pepys was appointed to the Navy Board in last days of the protectorate, effectively creating the Admiralty as a department of state, and then served under Charles II, dominating naval administration for almost 30 years. Parker hasn't lived through anything quite so dramatic, but his years at the BSC spanned the dying days of James Callaghan's administration and the first few years of Margaret Thatcher's. In neat accordance with the changing times, he helped lead British shipping first through nationalisation and later back into the private sector as chairman and CEO of Harland & Wolff in Belfast.

Parker's language reinforces the impression of a man frequently having to cope with forces beyond his control. Having already been 'hijacked' to London, he says his move back to Northern Ireland was equally against his will. "It was a horrific job," he says. "I was very reluctant to do it. But they pleaded with me and in the end I agreed."

This was in 1983, at the height of Northern Ireland's Troubles and during a worldwide crisis in the merchant shipbuilding industry. But I suspect that deep down, Parker saw the 'horrific' situation as an excellent career opportunity. "Northern Ireland was in a terrible state - bombs going off all over the place, people being killed, hunger strikes," he says. "I was 41, the yard employed 8,500 people but couldn't get an order and was losing £45 million a year. That was an interesting mix."

His solution to Harland & Wolff's problems was what he and his management team called the 'three-legged stool'. "We decided to cut around the merchant market, go back into naval building and do more offshore work. And I got the yard turned around from a £45 million loss to profit-making within three years." But there were also job losses and soon after Margaret Thatcher told him to privatise the yard. "We couldn't buy it ourselves because we didn't have the balance sheet, so I cut a deal with government and brought in (Norwegian shipping magnate) Fred Olsen."

Harland & Wolff has experienced mixed fortunes since Parker left and is not the company it once was. Competitive pressures have forced it to cut more jobs and diversify its operations. But Parker is not a man to look backwards. "I never return to look at the companies I leave - though I hope I've left them in a better state than when I joined."

Parker does not come across as a man with either the time or the patience for unnecessary emotions. He takes enormous pride in the work he's done for his various employers and enthusiastically rattles off figures, but you get the impression that he is attracted more by the challenge than the company itself. His story is that of a hard-headed businessman thrown into difficult circumstances, emerging three or four years later having enacted great changes, and who then walks away with his head held high.

But while his zeal and clear-headedness will certainly have helped his career, it probably means he is not always easy to work with. His account of dealing with civil servants while at the BSC is particularly revealing. "They always try to intellectualise management and second-guess you," he says. "They'll always be saying, 'why don't you do this?', 'why don't you do that?', 'why don't you give me 10 scenarios?' And I'd say: 'Well, come on, I've got a company to run. I have better things to do with my time than satisfy your intellectual curiosity'." He freely admits to some "fairly tough" rows with ministers and secretaries of state during his 12 years in the public sector. "But I never got sacked," he says.

Parker's approach to chairmanship is an extension of his approach to management. He passionately believes in the role of the chair and the non-executive directors as custodians of the company, and sees the relationship between the chair and CEO as the axis on which everything else turns. He says that at National Grid, the division of responsibility between the two roles is defined on "less than an A4 sheet of paper. The chair manages the board and the CEO manages the company - that's simplistic, but it's a wonderful guideline. The worst kind of chairman is one who tries to give executive orders down the line. So I have a golden rule: never give executive orders."

Parker left Harland & Wolff to join support services company Babcock International as CEO in 1993 and became chairman in 1994. In 1997 he became a non-executive director of British Gas, which led to the chairmanship of the Lattice Group in 2000. When Lattice merged with National Grid in 2002, Parker became chairman of the combined company, National Grid Transco (the Transco was dropped in 2005). He cites his relationship with Roger Urwin, who was CEO from 2002 until last year, as a major factor in his success at National Grid.

When the two men started working together, Parker heard rumours that Urwin was concerned he wouldn't be given enough autonomy. So he took him to dinner. "I said to him: 'I've been a CEO for more than 30 years and I never want to sit through another round of budget meetings. You won't find me giving a single executive command behind your back. But if it does happen, you have the right to storm into my office and demand I come to yours to explain myself'."

Parker is 65 this year. How long will it be before he retires to pursue his passion for reading and - inevitably - sailing? "Well, I've done nearly five years here," he says. "It's been a very interesting run and a highly successful merger - and you don't get that many of those. I'll stay while I can add value, but I don't think I've ever outstayed my welcome."

Who is John Parker?
1942 Born Co. Down, NI
1964 Naval architect, Harland & Wolff
1974 MD, Austin & Pickersgill
1978 Deputy CEO, British Shipbuilders Corporation
1983 Chairman and CEO, Harland & Wolff
1993 Chairman and CEO, Babcock International
1997 Non-executive director, British Gas
2000 Chairman, Lattice Group
2002 Chairman, NGT, on merger of Lattice with National Grid

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