GERRY Grimstone is among the last men standing. With five years under his belt as chairman of a FTSE-100 financial services company, it became clear that he was perhaps the only person left with a clear enough conscience and sufficient reputation to lead the industry’s lobbying organisation, TheCityUK, writes Erikka Askeland.
Since 2007, Grimstone has been the chairman of Standard Life, which, compared to its fellow financial services giants in Edinburgh, had a relatively good crisis. As a result, Grimstone last week took up his post at the City’s lobbying group.
“People were keen I should do it. Somebody has to do it because it is an important role,” says Grimstone of the unremunerated position.
“I’m the longest-standing financial services chairman in the United Kingdom now. That is more a function of people falling by the wayside, rather than anything particular about me,” he adds.
He is personable and assured, in the way you would expect of an Oxford graduate who rose high in the civil service only to pass seamlessly into industry as one of the major forces for privatisation in the late 1980s.
As head of international finance at the investment bank Henry Schroder Wragg – now simply known as Schroders – Grimstone advised the government on the sale of a number of its publicly-owned assets, including Cable & Wireless and the water utilities.
Despite his amiable persona, he has a reputation for taking a firm line when needs be. Sir Sandy Crombie, the former chief executive of Standard Life, once remarked on his ability to deliver a “hairdryer treatment”.
TheCityUK has only been around for a few years, launched to defend the industry as public ire increasingly angled itself at the perceived greed of bankers whose voracious appetite for lucrative risk nearly toppled the western economic system.
The group also works to reduce the impact of regulation. As UK and continental European regulators make more strenuous attempts to tame the industry, TheCityUK is trying to ensure that controls foisted on the beast that bolted do not completely break its spirit.
Grimstone figures the choice of a chairman from a decidedly Edinburgh-based company underlines the group’s emphasis on not only the City of London, but the wider UK. However, he warns that London’s pre-eminence as a global financial centre is at risk if it is hamstrung by regulation and allowed to suffer at the hands of international rivals.
“London’s position is under threat. You certainly can’t take for granted the things the City has done in the last 100 years will still be there 100 years from now,” he says.
“I travel a lot in the Far East – in the past it was commonplace for London to be the intermediary for work that was going on over there. You can’t get around the fact these places are all developing their own big financial centres. They will seek to challenge us – it is a competitive world.
“One of our messages to government is they have to consider all of that and speak up for it – it is not an optional extra that the United Kingdom has financial services, it is one of our biggest industries. It exports more than all our other export industries combined,” he observes.
As the Financial Services Authority (FSA) faces being abolished next year for its failure to properly regulate the big banks in particular, the worry is that political pressure could come to bear as new regulators, including the Bank of England, the Financial Conduct Authority and the Prudential Regulatory Authority take its place and bare their teeth.
However, while Grimstone dismisses concerns that an entirely new system of UK regulation will be that different – “it is still all the same people doing it,” he says – he believes that these should take a firm line.
“I am not going to defend the indefensible,” Grimstone stresses. “Financial services can do a lot of good, but they can also do a lot of damage.
“The vital thing about the regulatory system is they are there to stop financial services from doing damage.
“If ever there is a case where the regulator knows more about a company than the board and its chairman do, some very serious questions have to be asked about how the company is being managed.”
He is concerned about the possibilities of a lack of co-ordination between the UK and Europe. His message to Prime Minister David Cameron is that the UK should keep its place at the EU table to defend itself as the leading financial centre.
“The problem with regulation is waiting until you know what Britain’s position is in Europe. Almost the easy part of it is getting the domestic position right, it is how that then knits together.
“The big banks and those big organisations are in London and Edinburgh because they are very strong in global financial services.
“But we could not be strong in global financial services without being strong in European financial services.
“It would be a nonsense to say the UK can be a global centre but it won’t do Europe. Being at the heart of Europe is an important part of being a global financial services centre.”
But for Grimstone, the responsibility for managing companies should rest with the people who manage them.
“The buck does stop with the board, and they have to recognise their responsibilities,” says Grimstone.
He believes that it should continue to be the people on the board who make decisions on divisive issues such as remuneration.
“All these things we do about corporate governance – it is meant to be about outputs,” he says.
“Are remuneration policies getting the outputs we want? Are people being fairly paid and incentivised in the right way?
“Our stance here [at Standard Life] is we want good people working for us, we want to pay them the least we can compatible with having the best people working for us.
“The chairman should take a lead on the ethical position of firms. The boards should be responsible for the ethics throughout their companies. They should have processes in place so they know what is going on, and I see remuneration just being a natural part of ethical behaviour.”