Profile – The fixer

Profile - The fixer

Neil Baker speaks to Ian Hay Davison, the chartered accountant who was Andersens' managing partner during the DeLorean scandal, and who has won the English ICA's Founding Societies' Centenary Award in recognition of his many achievements.

When Ian Hay Davison left school he wanted to be a barrister. Hiso was Andersens’ managing partner during the DeLorean scandal, and who has won the English ICA’s Founding Societies’ Centenary Award in recognition of his many achievements. father had other ideas: the route to the bar was too expensive, so the young Davison would train – like his father before him – as a chartered accountant. It was one of the few occasions when this forthright individual allowed himself to be told what to do.

Davison has never regretted his father’s instruction. But many in the profession would rather he had shown a precocious dash of his iron will and stuck with his legal ambition. If he had, those with a tendency towards slack thinking and inaction would have had a quieter life. But that would have been to the detriment of the profession as a whole.

That fact was recognised when the four societies that founded the English ICA announced Davison was to receive the 1998 Founding Societies’ Centenary Award. One of highest professional accolades that a chartered accountant can receive, the award recognises members who have made an ‘outstanding contribution in any field of endeavour’.

The award is one of the high points in the career of a man who has had his fair share of praise, abuse, success and failure. A controversial figure who has managed to be one of the Bank of England’s favourite troubleshooters, while at the same time having his name on a Treasury blacklist for his link to the DeLorean fiasco.

He sowed the seeds of success early. After a brief US detour, the young accountant, who spent rainy afternoons adding up telephone directories at the now defunct Tansley Witt, became the third member of staff in the consulting division of a firm called Arthur Andersen.

He soon found his employer’s distinctive corporate culture suited him well. Andersens was ‘always the maverick firm, the outsiders – always determined to succeed by going its way’, says Davison. And that is how he seems to regard himself. ‘I wouldn’t say I came from the wrong side of the tracks, but I didn’t go to a classy public school, I went to the London School of Economics and did my articles with a medium-sized firm of no particular distinction,’ he says.

He made astonishing progress. In 1966, aged 35, he was promoted from manager to managing partner in one day. After getting over the shock, he set about his ‘seriously laughable’ ambition to take Andersens from 44th largest firm to one of the top five.

Andersen’s scapegoat after 16 years

He did not achieve that ambition, but had made it to number eight when he decided to leave the firm in 1983. ‘I had done it for 16 years and I was getting a bit bored with it,’ he says, when asked why he decided to leave. But Davison’s superiors at Andersens’ head office in Chicago had also made it clear he was not going to progress any higher up the firm.

Senior US partner Harvey Kapnick had been forced out shortly after negotiating a merger with Tansley Witt. The new management looked at the acquisition, decided Andersens had paid too much and blamed Davison, he says.

The Bank of England soon provided a new challenge when it told Davison he was going to be the first chief executive of the Lloyd’s insurance market.

‘It wasn’t an offer; it was an instruction,’ says Davison.

Following a run of market scandals, the Bank imposed Davison on Lloyd’s as the price of continuing self-regulation. Few people in the market wanted him there. When he arrived he found the place ‘far worse than anyone could have imagined’.

It was a difficult time. He cleaned up the market and changed the accounting rules but failed to break the fundamental conflicts of interest that were strangling the market. ‘People served on the committee of Lloyd’s because they gained a commercial advantage from getting information before the rest of the market – and didn’t make any bones about it. I regard that as deeply improper,’ he says.

But that was not the view of the majority. ‘Most of my colleagues on the committee of Lloyd’s devoted their efforts to getting rid of me for the three years I was there. It was a hard grind because I was personally very unpopular,’ he recalls.

Davison eventually resigned when Lloyd’s tried to reduce his powers.

It was a battle lost but a war won. His decision to leave resulted in an inquiry that introduced many of the reforms he had sought.

On leaving Lloyd’s, Davison found the job offers were rolling in. He had gone to Lloyd’s out of a sense of public duty and expected a future filled with badly-paid but worthy appointments. He had the opportunity to run the Securities and Investments Board, the Audit Commission and the Monopolies and Mergers Commission. But, on each occasion, his journey to higher office ‘ran into the sand’. Finally, Davison went to see cabinet secretary Robert Armstrong to ask what was going on – which is when he first heard about the DeLorean ban.

It was four years since the fraud-ridden DeLorean Motor Cars had collapsed owing UK taxpayers around $80m. The government’s Northern Ireland department of economic development had issued writs against Andersens, the company’s auditor, accusing the firm of acting ‘fraudulently and with gross incompetence’.

The government wanted $300m in compensation.

The case, in simple terms, was that Andersens had concerns about possible fraud but did not draw sufficient attention to it in the company’s accounts.

The government argued that if it had known what Andersens knew, it would not have lent any more money to the company. Davison clearly feels the firm made its concerns clear enough. ‘I was the chap who was in charge of Andersens when we found out that there was fraud in the DeLorean operation,’ he says. ‘We took the unusual step of reporting it to the government and the Bank of England. Unfortunately, they didn’t listen to us or take any action.

‘My evidence was fatally damaging to their case. The US lawyers’ advice was you must do everything you can to Mr Davison because his evidence will defeat our case. So the government decided it couldn’t offer me any public appointments after Lloyds.’

And that, essentially, is what Robert Armstrong told him: he would not receive any appointment that a government minister had a say in. He was blacklisted. The ban was finally lifted last November. Fortunately for Davison, the Bank of England stood by him and ignored the ban. ‘They never had anything to do with it. They just refused to abide by the advice, which the government could have done too. It was a damn stupid rule, frankly,’ he says.

The Bank sent him off for six months to come up with a new system of regulation for the Hong Kong stock market. He returned home to a series of jobs sorting out troubled companies, such as retail group Storehouse.

That was a homecoming in more ways than one. At Tansley Witt he was a lowly receiver’s clerk running a Catholic boys’ prep school, a company that made outboard motors for bicycles and a hardware wholesalers locked in the Marshalsea Prison. He was using those same skills again – but now they were applied to public companies. ‘I am a jobbing company chairman.

I take on companies that are leaking and try to fix them,’ he says. ‘I am not interested in jobs that are purely decorative.’

It suits his direct style. ‘I believe you have to make up your own mind and decide where you stand. You should not be deflected by the blandishments of others. I don’t think I am.’ He would not necessarily recommend that approach. ‘It depends what you are ambitious for. If you want a reasonably bumpy ride then the answer is yes. If you want to smooth your path to the top, it is not the best way of doing it.’

Best president the institute never had?

But hasn’t he arrived at the top? ‘I have never been president of the institute and, frankly, none of the companies I have chaired are of the first rate,’ he replies, with typical directness.

After 23 years as a member of the institute’s council he has certainly thought about taking on the job in the past. Enough people have urged him to run for election. ‘I might once have done it, but I think the way in which the president has to use his time is profoundly unattractive to someone who actually wants to achieve change rather than attend dinners.’

And it is unlikely the institute could stand the full Davison treatment.

‘The profession is an extremely conservative body because it is composed entirely of chartered accountants – and you can’t get more conservative than that. It is astonishingly resistant to change,’ he says.

It is tempting to think what might have been – what difference he could have made. Perhaps he is the best president the institute never had. Or maybe the council would have lynched him.

Neil Baker is a freelance journalist.

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