Published in the Sunday Business March 1999
When he published accounting for growth in 1992, Terry Smith was doubly damned: his employer UBS Phillips and Drew, sacked him and then sued him. Smith’s “crime” was to use real company accounts, indeed some of his own clients’ accounts, to illustrate his bullet-point exposé of creative accounting techniques
Some of the companies got wind off their inclusion and made loud noises , UBS P&D told him to withdraw the book; Smith their head of research, refused and had to walk.
The controversy did Smith a great favour, although he would not have said so at the time. He had lost a job, had a young family to support and faced a legal battle with a triple-A-rated bank. But in the end accounting for growth sold more than 100,000 copies, becoming a standard text on many business courses.
And now he is about to publish again. His new book, Corporate Pathology, looks at why companies die and dissects the remains of some of the biggest corporate collapses of recent years. It may not foment the furore Accounting for Growth inspired, but is likely to be read just as avidly. The mention of Smith’s name may provoke fear and loathing in some of the country’s grandest boardrooms, but it also commands respect.
UBS ought to have known better than to expect Smith to back down. He had come to them after a falling out with his previous employer, BZW. It was Smith who wrote the infamous sell-note on the company’s parent, Barclays. The bank tried to put a brave face on it, claiming it illustrated the independence of its research, but Smith’s card was marked. When he was passed over as head of research he left.
For the past seven years Smith has been a director of Collins Stewart, the boutique stock broking outfit, where he handles a growing number of institutional clients.
It is the kind of company that suits him. “Terry was never one to work for a big company,” says a friend. “He could never toe the party line they impose. Collins Stewart is small enough and Terry’s role big enough to keep him happy.” Collins Stewart also keeps him very busy, especially now the firm handles European stocks and is about to open a New York office.
Smith is known for his hard work, high standards of professional conduct and a self confidence that led one former colleague to remark, jokingly, “The words: I’m not infallible but I could be wrong were made for him.”
His methodology is based on rigorous attention to accounts, with special emphasis on cash flow. He has no time for those who merely talk to directors about the state of their company and then reproduce their comments as fact. “That’s not doing analysis,” he says, “that’s taking dictation. “The answers he insists are in the numbers.
Colleagues within Collins Stewart regard him as a personable and approachable man and his sense of humour, often self-depreciating , is much valued. He is as ready to talk of his East London roots as he is of his love of horse riding with his daughters, hunting in the Essex Countryside, and vintage cars.
His accent is educated estuarine, more Trevor Brooking than Trevor McDonald, and some have tried to characterise him as an East End David taking on establishment Goliath or as a barrow boy with attitude.
But Our Tel, as he mockingly refers to himself, I was never a Del boy. A first in history and an MBA underpin an intellectual acumen highly regarded by investors whose cause he champions against “companies that take liberties.” His system of analysis, he says is an adversarial one: corporate finance advisors and investors are not on the same side and if one has to fight to get at the facts, then fight he will.
Sir David Tweedle, chairman of the accounting standards board, has no doubt of the value of Smith’s work, especially Accounting for Growth. Terry’s twelve bullet-points, or blobs, married with our own agenda here and his book highlighted for all how close to the wind some companies were sailing back in the Eighties. It ripped apart what was allowed to happen then we have now tackled all those “blobs.”
A former colleague summed up “Terry can be very intimidating to work with because of who he is and what he knows and expects; but in the pub he is good fun. ‘Essex man meets ethics man’.”
© Sunday Business
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