Martin Broughton, British Airways Chairman: Lover of the jumps who is taking to the skies
Saturday 24 July 2004
Martin Broughton belongs to that new breed of super-chairman exemplified by the likes of Niall FitzGerald of Reuters, Dick Olver at BAE Systems and David Varney, who has just moved on from mmO
2 - highly paid but also highly pressured. Mr Broughton's new job at British Airways, which began this week, will entail a lot more than simply chairing the monthly board meeting, holding the ring once a year at the annual meeting and then picking up his director's fee (£250,000 in this case).
Martin Broughton belongs to that new breed of super-chairman exemplified by the likes of Niall FitzGerald of Reuters, Dick Olver at BAE Systems and David Varney, who has just moved on from mmO 2 - highly paid but also highly pressured. Mr Broughton's new job at British Airways, which began this week, will entail a lot more than simply chairing the monthly board meeting, holding the ring once a year at the annual meeting and then picking up his director's fee (£250,000 in this case).
In these post-Higgsian days of corporate correctness, the modern chairman is expected to be everything from father confessor and shareholder champion to company cheerleader and strategic guru. In other words, they are in the firing line as never before and are expected to earn their corn. "It is a big job," he admits. "It will involve a lot of external relations at home and overseas as well as managing the board, having an overview of the strategy and ensuring that what the management team is doing is coherent with that strategy."
He is determined, however, that the BA chairmanship will remain a part-time job which must not take up more than half his working week. "If I end up spending more time than that at BA I will start to get in the way of the chief executive. Part of my job is to make sure I don't tread on his toes."
The other half of his week will be spent at the British Horseracing Board where he is also chairman - which allows him to indulge his passion for the jumps, being, among other things, the owner of half a dozen racehorses and a keen follower of National Hunt.
The appointment of Mr Broughton to the helm of BA marks the first time for more than two decades that its chairman has come from outside the ranks of the airline's management. His predecessor, Lord Marshall, was chief executive for 10 years before becoming chairman.
But Mr Broughton is not exactly an unknown quantity. He has been on the BA board since 2000 and, before becoming chairman, was senior independent director and head of its audit committee. "Colin will be a hard act but it is going to be more of the same," is his message. "I have been on the board for four years and I fully buy into the strategy so that stays the same, delivering 10 per cent operating margins and providing the best possible service."
Indeed, he talks about the airline business and arcane subjects such as slot allocation and bilateral air service agreements with almost the same fluency and familiarity as his chief executive, Rod Eddington.
Mr Broughton was first asked if he was interested in the BA chairmanship two years ago but decided he could not commit himself until he had completed his stint as chief executive of the tobacco giant BAT, where he had spent most of his career.
There is no obvious crossover between selling cigarettes and selling airline seats but he sees one similarity. "At BAT I was involved in a business which is all about getting people to trade up to a better product when there is plain vanilla version around, a cut-price alternative if you like, and that is also what BA stands for," he says. "We are looking for people to get off the plane feeling they are pleased they paid a bit extra to fly BA and that it was worth it."
He says he was misquoted when it was suggested that one of the chairman's first tasks would be to find a successor to Mr Eddington. But what he will certainly have to do is plug some holes in the board.
As well as his own position, there are those of Baroness O'Cathian, Lord Renwick of Clifton and Ashok Ganguly, all of whom will depart as non-executives in the next 12 months.
Not, says Mr Broughton with a hint of irritation, because they are no longer making an important contribution, but because they are past their sell-by date according to Higgs, which states that a director cannot be deemed to be independent if they have served for more than nine years.
It will, nevertheless, give him a chance to refresh the board. "It seems that with this new governance set up you must have people who are independent as defined.
"But I also think it is very important to have a sensible balance, whether it be by experience or input."
So will he answer the plea of at least one lady who attended this week's annual meeting and recruit some more women board members? "I have always found that women think differently - more intuitively, I suppose you could say," he replies.
He is also keen to maintain the consensual, inclusive approach to running the airline that his chief executive has done so much to inculcate with one or two exceptions, such as last summer's wildcat strikes by check-in staff and the current baggage handlers dispute.
Future Shape and Size, the programme of 13,000 job cuts and £650m in efficiency savings announced after the 11 September 2001 attacks on the United States, was a crisis response to the biggest threat to the airline industry in a decade.
"It was top down decision-making. We said this is what we need to do and this is how we are going to achieve it; these are what the headcount reductions will be. This year, when we decided on a further £300m of savings, we took an entirely different approach. This time we are focusing on working with the workforce in a way which is sensible for both of us. The process takes time and, as always, there will be challenges as we go through that. Finding ways of being more productive is an essential part of the game. It has been the characteristic of successful airlines in North America where they have had deregulation for 25 years. We have only had it here in Europe for 10."
Provided there is not another 9/11-style shock to the system, he expects the management to reach the holy grail of 10 per cent returns by the end of next year. That also means shareholders should be able to look forward to a resumption of dividend payments after three barren years.
"Dividends are back on the agenda, but it is a question of when and how much," he says. "That depends on whether we are flying through still air or into headwinds," he adds, sounding more like the chief executive than the chief executive.
It is the kind of measured answer that BA insiders believe will characterise Mr Broughton's chairmanship. Unlike the gaffe he once made at BAT by confiding that he would not like to see his children take up smoking. Does the same health warning come with his new job?
"Not at all, and I would certainly recommend that if they had an interest then they chose British Airways," he says, ever the brand-man.
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