Back in April, the GlaxoSmithKline FD was subjected to a hate campaign at his Buckinghamshire home by the anti-vivisectionist group Stop Huntingdon Animal Cruelty. Coombe was sent hate messages written in fake blood after SHAC declared it would target customers of Huntingdon following a financial rescue earlier this year. It was a vicious reminder of just how bright the spotlight shines these days on the most senior executives of UK plc.
For better or worse, Coombe can certainly count himself among that number.
GSK, the new, all-but compulsory acronym that GlaxoSmithKline now sports, is one of the world’s largest companies and the deal that brought together Glaxo Wellcome and Smithkline Beecham was the largest merger at the time it was announced.
With a compensation package that topped Pounds 500,000 last year, Coombe is certainly handsomely rewarded. But it comes at a price.
The last two years have been testing ones – Coombe’s word is ‘mucky’.
He says: ‘In January 2000 SmithKline began a tortuous process that should have been over in a few months but lasted a year. So that was a slightly challenging year. But we got through it.’
The merger of GlaxoWellcome (created as recently as 1995) and Smithkline Beecham had been in the making for three years. It survived one apparently terminal collapse but the Pounds 100bn deal was back on the table in January 2000. EU approval did not arrive until May. And it took the US Federal Trade Commission (FTC) until the end of last year to approve it.
Our systems are better
His resentment about the delays is scarcely concealed. ‘Because of the FTC we staggered on through the rest of that year,’ he says. And he suggests the problems General Electric is experiencing with the EC over its deal with Honeywell International pale in comparison. ‘All this hassle with GE complaining about the Europeans is nothing compared to the Americans,’ he says. ‘They are saying “Europe is doing this to our finest company”. But they did it to us for a year. I have sympathy for GE because it is a lousy process to go through. What I don’t have sympathy for is drum-beating Americans complaining about our systems. My experience is that our systems, with their set timetables, are rather better than the American open-ended approach.’
As the former GlaxoWellcome FD, Coombe’s appointment as CFO of the merged company was no foregone conclusion. He had to beat off stiff competition from Andrew Bonfield – the widely respected, and significantly younger, chief financial officer of SmithKline Beecham – to secure the post.
Once appointed, Coombe spent much of last year flying across the Atlantic to complete the deal. He was part of the Glaxo delegation that had to convince the FTC that there was no reason to block the merger. His next two years are likely to be no less ‘mucky’. His main challenge is to make the combined company – which turned over Pounds 18bn last year – work.
Shareholders want evidence of economies of scale. The company expects to generate total cost savings from the merger of #1.8bn by 2003. Earnings per share growth was 13% at the half-year (19% in sterling) – in line with the 2001 business performance earnings per share growth target. Coombe must keep cost savings on target to deliver that objective. In doing so he is taking advice from Boston Consulting, as well as drawing on his experience of the Glaxo Wellcome deal six years ago.
‘We are being a little conscious of numbers as the press loves to talk about “x people fired”,’ he says. ‘We are going for a central target to achieve a significant reduction over adding both companies together. The head office area has to make the biggest savings. We had some ground rules: sales people are safe.
‘We have plenty of products and the one thing we want is to keep the momentum of the business going. Salespeople are a protected species. This worked brilliantly, a lesson from the Wellcome deal where we suffered as sales forces became demoralised. This time we reported an 11% sales growth in the US arm of the business and 14% in Q1 this year. That was a good strategy and a rare example of a lesson learned and applied successfully.’
Then there is the challenge of merging two distinctively different cultures – inside and out of the finance function. ‘We are pretty balanced at the top,’ he says. ‘We are stable in terms of accounting and reporting. There are some improvements that we would like to do. But it is logical in a merger that you get the numbers together in a practical way. Then you set about trying to improve the systems. If you start with the systems you never get anywhere. We are gelling. We had our first finance conference in the beginning of May where 30 of the top finance people around the world focused on value creation. There was a real team spirit.’
Though decisive and driven – you need to be at his level – those that work with him say Coombe is an easy man to get along with. A former ASB colleague describes him simply as a ‘good guy’. Kenneth Thompson, Coombe’s former boss at banking group Charterhouse, once said: ‘John was the kind of person I enjoy working with and when I got to Glaxo he was the one man I wanted to join me. I knew that if he had patience he was bound to become FD.’
Watch Coombe address a City audience and the qualities that make a good FD are in evidence: his manner is confident, he avoids unnecessary detail but knows his subject and engages his audience. When Coombe speaks publicly he has the power to move GSK’s share price. And given the size of the company, that gives him the power to move markets.
Nevertheless as chair of the 100 Group of finance directors, Coombe is not a subscriber to the ‘FD as God’ school of thinking. ‘Some people in the group are capable of strange decisions, just as those outside are.’
And he recognises the accountant in every FD may actually inhibit progression to the CEO hot seat. ‘We accountants are brought up to be prudent, to only believe what we think to be correct and true,’ he says.
‘We are unlikely to go away and put on coloured shirts and strange ties and take extreme actions that will change the course of business life. I think the number of accountants that make it into the CEO job is not that many. A lot try but not many are successful.’
John Coombe is one of the candidates for this year’s Accountancy Age Personality of the Year Award. To view the entire shortlist go to www.accountancyage.com/awards
A HARD DAY’S LIFE
Apart from GSK chief executive JP Garnier, as FD John Coombe is the key member of the GSK board finance committee. The committee reviews and approves the major financial and securities transactions of the company, as well as dividends, results announcements and business of the agm.
Naturally Coombe is also closely involved with the company’s comprehensive budgeting system and with the other directors approves the annual plan.
The results of GSK operating units are reported monthly and compared to the plan. Forecasts are prepared regularly throughout the year with the company announcing results on a quarterly basis.
As the director responsible for investor relations, as well as taking the stage at the agm, Coombe reports formally to shareholders twice a year and gives presentations on the results to institutional investors, analysts and the media in London and New York.
He also talks to institutional shareholders on company plans and objectives through a programme of regular meetings and speaks regularly at external conferences and presentations. His other key role is to meet with the non-executive directors of the audit committee four times a year.
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