AS Scotland’s most prolific female non-executive director, Lesley Knox knows the tensions that can arise in a boardroom once a company loses faith in the chief executive.
Sitting in the Melville Street, Edinburgh offices of British Linen Advisers, the boutique corporate finance house she co-founded in 1999, Knox describes how she was a member of the board at furniture retailer MFI at a time it ousted chief executive, John Hancock.
She says: “Some of the shareholders in MFI would say we kept our previous chief executive [Hancock] too long.
“[Sacking the chief executive] is the nuclear deterrent, if you like. For a board, it’s quite a difficult thing, because you’re effectively a committee, so to take a decision like that you need to be very sure.
“Unless there’s a successor waiting in the wings, you’re clearly going to put the company in a position where it is leaderless. For any board it’s a big decision. Fortunately, we were hugely lucky to be in the position of having Matthew Ingle in the business to take on.”
Ingle, who formerly ran MFI’s Howden joinery business, took over the reins on Hancock’s departure and is already making the sort of changes investors had been crying out for. He recently admitted that last year only 40 per cent of MFI customers received their kitchens on time and in full, due to IT problems.
In happier times, Knox says that non-executive directors perform a valuable role as “a genuine sounding board” for chief executives, who can find themselves rather isolated on reaching that role, as they suddenly find it much harder to confide in colleagues, competitors or even analysts.
“It ought to be the best sort of free help and consultancy and, even better, [non-executives] don’t go home at the end of the day. Their reputation is on the line just as much as the chief executive’s.”
Knox — an energetic 53-year-old — says the input of non-executives is not always apparent as “you don’t see the mistakes that non- executive directors have helped a company to avoid.”
She adds: “People wouldn’t do it if they didn’t feel they were able to make a positive contribution.”
Other firms on whose boards Knox sits have, mostly, been much steadier ships than MFI. She has been a non-executive chairman on Dundee-based Alliance Trust and Second Alliance Trust since April 2004. Knox is also on the boards of HMV Group and recruitment business Hays. She previously sat on the boards of Bank of Scotland, Glenmorangie, Dawson International, Scottish Provident and Babtie.
It was Bruce Pattullo, former governor of the Bank of Scotland, who set the ball in motion for Knox, when he asked her to join the Edinburgh-based bank in 1993.
At the time Knox was 39 years old, and there were relatively few businesswomen of calibre able to “go plural” with a string of non-executive roles.
Arguably, the period Knox was on the Bank of Scotland board was not a particularly happy one for the bank. Observers suggest she and her fellow non-executives might have done more to dissuade the bank from entering its alliance with right-wing televangelist Pat Robertson. She left the bank’s board at the time of its merger with Halifax in 2001.
At Alliance, Knox was behind the hiring of a successor to Gavin Suggett, who retired as its chief executive in 2003.
Head-hunters Whitehead Mann tracked down the American-born Alan Harden, formerly of Standard Chartered, who at the time was ensconced with Citigroup Asset Management in Tokyo. Harden ticked all the right boxes for Knox, notably in terms of his knowledge of both private clients and Asian investing.
Knox says Alliance — a Dundee-based institution with 250 staff, 40,000 shareholders and assets of £2.5 billion — will never go for “shoot the lights out” performance.
“We are a risk-weighted organisation and not out to achieve performance at any cost. We invest people’s money for generations, frequently.”
“If we can grow [the “wrapper” division] Alliance Trust Services, that will pay the cost of running the investment side out of profits, and as you grow it, you also grow a business that will add to your asset value. At it’s simplest, that’s what you’re trying to do. But it’s a lot more difficult than it sounds.”
Born in Johannesburg, the daughter of a radiologist, Knox moved to Edinburgh at the age of two and still considers the city her home — despite second homes in Hampstead and Suffolk and plans for another on the Isle of Harris.
She was first educated at St Denis School in Edinburgh but packed off to Cheltenham Ladies College at 12, an experience she says she hated. “Nothing in life has ever been as scary. You grow up quickly when you’re on your own.”
Soon after starting a medical degree at Cambridge University, Knox realised that her choice of subject had been a “horrible mistake”. She switched to law and after graduating she got a job with the “magic circle” law firm Slaughter & May.
But a short spell with a New York law firm taught Knox that investment banking was much more interesting than corporate law, partly because merchant bankers tend to be CEOs’ first port when they’re thinking of deals.
Knox took a job with the City of London merchant bank Kleinwort Benson, then prospering on the back of Margaret Thatcher’s privatisation programme. She lived through Big Bang — when the UK’s financial markets were deregulated — and Black Monday in quick succession.
Knox says that while sexism was rampant in the City at the time, she did not let it get her down. “I was clear what sort of culture I was joining. It was very male and very sexist. In the dealing room every second word starts with an ‘f ‘.”
Today, she describes the City as “an uneasy mix of people who are coming out of different cultures”, perhaps referring to an influx of more politically-correct and litigious junior employees.
At a time when large numbers of UK plcs are being swallowed by overseas rivals, Knox believes Britain ought to do more to retain its corporate base.
“When times are good, it feels as though it doesn’t matter [that UK plcs become the branch operations of foreign multinationals]. But things change when times get tough. That’s when all companies start to cut peripheral costs. The heart and mind of the company is no longer in the UK and that’s an issue.”
Ironically, such a takeover put paid to Knox’s career with Kleinwort Benson, where she finished up running institutional asset management. She quit soon after it was taken over by Germany’s Dresdner Bank in 1997.
Although the bank had changed with the acquisition of brokers Grieveson Grant in 1986 — a deal through which Knox met her husband Brian Knox, a top-rated European analyst — being part of a German group was of little appeal.
She landed on her feet when Pattullo, on whose board she had sat for about four years, asked her to become deputy governor of British Linen Bank. Bank of Scotland had bought the historic bank, which was mentioned in Robert Louis Stevenson’s Kidnapped, from Barclays in 1971.
However, Knox soon realised there was no merit in the Bank of Scotland replicating the same functions in a number of different “silos”, and talked herself out of a job by persuading her Bank of Scotland masters that such an approach was illogical and a waste of resources.
Knox was instrumental in a programme that saw British Linen’s operations merged into larger units of the wider bank. Knox says: “The natural end was of course to do myself out of a job, which was a bad mistake!”
All that was left was rump corporate finance business British Linen Advisers.
Knox formed part of the management buyout team, but has since left.
Knox gave birth to her daughter Fenella in 1994, and concedes that juggling motherhood with a high-level career is not always easy, but that for her it has been much easier as her partner has been retired for 15 years. “I’m privileged to have a husband who is around.”
Her advice to other working mothers? “Ask for as much help as you can, as nothing works to schedule. You need a supportive husband for starters; someone who enjoys you being successful.”
NEED TO KNOW
CAREER: Lesley Knox started her career with Slaughter & May and spent 15 years with investment bank Kleinwort Benson. She became deputy governor of British Linen Bank in 1997 and played a role in the MBO of British Linen Advisers. She is chairman of Alliance Trust, and non-executive director of five UK plcs.
MENTOR: Sir Harry Solomon (former chairman of Hillsdown Holdings)
FAVOURITE BOOK: The Hitchhiker’s Guide To The Galaxy by Douglas Adams.
FAMILY: Married with one daughter
DRIVES: Ten-year-old BMW
FAVOURITE PLACE TO DO A DEAL: Scotland
This article was published in the Sunday Herald on 19 March 2006