Mr corporate transformer takes on BA challenge

Martin Broughton has overseen dramatic changes at British American Tobacco. Now he's quitting for pastures new
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Martin Broughton has worked in four continents but essentially he has been a one-company man. Joining British Airways as chairman next July will take him into a new company in a new sector. What will not be new is the scale of the corporate challenge he faces.

For the past 10 years, Mr Broughton has been at the helm of British American Tobacco, five years as chief executive and five as chairman. It has been one of the longest stints at the top for an executive of any FTSE 100 company. Those have been challenging years.

In that time the group has broken in two, faced lawsuits in the United States, with varying degrees of success, endured ever-tighter restrictions on advertising and expanded aggressively into developing countries.

Mr Broughton, born in London in 1947 and educated at Westminster City Grammar School, qualified as a chartered accountant and joined one of the top accountancy firms in the country, Peat Marwick Mitchell.

There was nothing dull or stuffy about him, though, whatever the archetypal image of accountants.

He joined BAT at 24 and was soon seeing the world at someone else's expense with spells in South Africa, Argentina, Hong Kong and Bangladesh.

Advancement followed swiftly. He held a variety of financial positions back in London before becoming BAT's finance adviser in Asia and then finance director of the Brazilian subsidiary.

It was Eagle Star, the financial services group that Mr Broughton ultimately helped to sell in a dramatic change of policy, that gave him his first taste of life at the top as finance director, a post created for him.

Less than five years later Mr Broughton got the chief executive's post and the deputy chairmanship for the whole group, then known as BAT Industries, to represent its broader interests and, perhaps, to take the emphasis away from tobacco.

The move into financial services pre-dated his arrival at the top. Indeed, as an accountant he might have felt at home with it, especially since it gave him a chance to shine in a key post. Eagle Star was bought in 1984; that acquisition was followed by the purchase of investment and insurance group Allied Dunbar a year later and Farmers, an American insurance group, a year after that.

Mr Broughton's objective was to broaden BAT's appeal to investors as tobacco companies came increasingly under pressure on various fronts: from health campaigners, from lawyers of lung cancer victims, from "ethical" investors and from governments that, while enjoying the revenue from tobacco taxes, sought to put up barriers such as restrictions on advertising and health warnings on cigarette packets.

Eagle Star and Allied Dunbar proved successful but Farmers demonstrated that there was no escape from regulation by diversifying out of tobacco. BAT discovered, as Scottish Power did in the electricity generating industry last year, that American regulators would rather hold down prices for American consumers than allow profits to pass to foreign enterprises. BAT was forced to fight a long battle to impose profitable premiums on car drivers presenting ever-larger repair and injury bills.

At the same time, the demise of the tobacco industry failed to materialise. Health scares did little to deter smokers in developed countries. While schoolboys were a little less inclined to take up the weed, the age of the girl smoker arrived. In any case, tobacco companies discovered new, even larger markets in developing countries to replace any sales lost in the Western world. China, with its billion-plus population, became the ultimate goal.

By the end of his stint as chief executive, Mr Broughton had merged the financial services side with Zurich Group and split the business in half, returning BAT to its tobacco roots. This was not the only breath of fresh air he brought to the group. Under previous chairman Patrick Sheehy, directors were expected to present a united front as confirmed smokers. Finance journalists were treated to the spectacle of a line of cigarettes lit up as one at the start of press conferences.

Mr Broughton took the views that the cause of smokers was better served if they did not impose their habits on others. He even warned his son and daughter of the dangers of smoking.

The view that BAT should concentrate on one sector has been justified by the way it has tackled the many challenges. BAT has pushed eastwards, in Europe and Asia, in a series of deals that have gathered momentum this year. It has tidied up its operations in Canada and America, most recently by agreeing to merge its Brown & Williamson offshoot into RJ Reynolds in a £4bn deal, and sought to minimise its exposure to US litigation.

The Independent's personal finance editor, William Kay, remembers Mr Broughton at school as a good team player. That will prove useful at BA, where industrial relations have deteriorated along with the financial performance. The latest spat, when check-in staff stopped the conveyors at Heathrow at the height of the summer season, was high profile and high embarrassment.

By the time he arrives in July, the worst of the "downsizing" of staff should be over - more than 12,000 of the 13,000 planned departures have already taken place. That may allow him to come in as the man who picks up BA at the bottom and takes it forward. On the other hand, bad industrial relations have not been a problem at BAT so he is again into new territory.

Mr Broughton knows the company, he sits on the board as a non-executive director, so he is aware that he is swapping from a group that has grown in the face of adversity to one that is shrinking under attack from cost cutting rivals. Various notions, such as increasing the number of first class seats and switching London flights from Gatwick to Heathrow, have failed to stem the tide.