OBSESSED BY PROFIT
Sir Peter Walters who this week swooped on Britoil
This is one of a series of profiles of men whom the Prime Minister admires.
IN THE same week — the last of Novem- ber 1981 — new men were installed at the top of Britain's two proudest companies, John Harvey-Jones at ICI and Peter Wal- ters — then only 50 — at British Pet- roleum. Both succeeded in the task they were intended to perform — to turn a complacent corporate colossus into a rational streamlined profit-oriented orga- nisation. Both have received knighthoods in recognition. But there the comparison ends.
While Sir John Harvey-Jones seemed to agonise over the thousands of men he laid off, joined the SDP, and frequently lent his weight to the Confederation of British Industry's moans to the Government about the `overvalued' pound, or lack of infras- tructural investment, Sir Peter Walters remained true to the Thatcherite ideal of the new British businessman. Rather than bleat to the CBI he allied himself to organisations more sympathetic to the Conservative cause, becoming President of the Institute of Directors, a managing trustee of the Institute of Economic Affairs and chairman of the London Business School. As one senior Civil Servant puts it: On matters economic and managerial there seems to be an identity of view between the Prime Minister and Sir Peter Walters. They are animated by the same ideals.'
To the extent that they do see the world through the same coloured spectacles, background must play a part. Sir Peter too comes from what might be termed hard- working lower-middle-class Midlands stock. His father rose through the ranks of the Birmingham City Police Force, and became its youngest chief inspector, while Sir Peter progressed through the Birming- ham grammar school system, a style of education after which he still hankers nostalgically. Peter Walters subsequently passed through a National Service officer training course as best cadet, and this rigorous mixture of police by inheritance and army by intention seems to have given him the authoritarian style which characterises Mrs Thatcher in her 'nanny' moods, but is less common among the entrepreneurial type of businessmen, who tend to be more liberal in outlook. Not so Sir Peter, who at the time last year of his acceptance of an honorary degree at Birmingham University remarked that 'a lot still needs to be done to overcome 40 years of national self- indulgence, in which we have elected governments who have tended to give people what they want instead of what they need'.
This militaristic attitude comes out clear- ly in Sir Peter's management style at BP, which he joined in 1954 straight out of the army. It has been described by one stock market analyst as 'management by shock'. The chairman is partial to coming out with some slogan or principle, which is then hammered into the employees by frequent repetition. Last year the message was that the oil price would not rise above $15 a barrel in real terms for the foreseeable future. Now that message seems more than a little alarmist, but at the time it had the effect of galvanising the troops into the sort of cost-cutting exercises that Sir Peter wanted.
Unlike many of Mrs Thatcher's favourite businessmen, Sir Peter Walters is in no sense a courtier. This is in part a reflection of his detached and very unsycophantic character, but also of the sheer power of BP, Britain's largest company and, thanks to Peter Walters's management, now big- ger than all the US oil majors with the exception of the mighty Exxon.
Put simply, the Government needs BP just as much as BP needs the Government. Traditionally BP would indeed help out the Government when called upon to do so, but Peter Walters is more in tune with the ethos which has seen the Government steadily reduce its stake in the company. Indeed Sir Peter always lobbied the Gov- ernment to remove its last remaining shares as speedily as possible, and will view with much gloom the prospect of the Bank of England ending up with up to a third of the equity, following the flop of the recent BP share sale. Sir Peter will now doubtless by arguing to the Government that it is equally inappropriate for it to hold a `golden' or takeover-blocking share in Bri- toil.
The old way of thinking in BP, which held that what was good for BP was good for the British citizen, has never ensnared Peter Walters. He is the most unsen- timental and clinical businessman imagin- able. He may glory in the title of Assistant to the Court of the Worshipful Company of Shipwrights, but that did not stay his hand from reducing BP's fleet from 120 to 30, and deciding last year not to continue flying the British flag on what remained, because seamen from the Third World were so much cheaper than the home- grown variety.
That reluctance, as Mrs Thatcher might say, `to snivel and say that you care' came out strongly in the aftermath of the oil price recovery of late 1986, when the oil companies in the UK put up prices at the pump much more quickly than they had reduced them when crude prices had col- lapsed in the summer. Other oil company executives made up far-fetched excuses about currency movements and fluctua- tions in the continental oil products mar- ket, when attacked for their abuse of the retail market. But Sir Peter, chairman of that formerly cosy great British institution, merely snapped to journalists that if people believed that BP was taking unfair of advantage of the consumer then they should buy BP shares instead of the petrol. So there. But being sharp with journalists is child's play for someone who has cleared out swathes of top management, and — in what turned out to be a brilliant strategic move — closed down all but five of the company's 17 European refineries: when people search for one word to describe Sir Peter that word usually is 'ruthless.'
One man who can testify to that is Alton W. Whitehouse Jr, the former chairman of Standard Oil, which BP took over at the beginning of the year at a cost of $8 billion. But in March 1986 BP had just 55 per cent, and at that stage Sir Peter wanted to remove Mr Whitehouse. After the BP board meeting that month and before the usual directors' lunch Sir Peter asked Mr Whitehouse up to his office on the 31st floor of Britannic House. Sir Peter silently pushed a piece of paper to the American across his octagonal desk. It was a letter from Sir Peter urging the non-executive directors of Standard to sack the top executives, including one Alton W. White- house Jr. Whitehouse did not stay for lunch, or indeed with Standard Oil.
Most businessmen are driven by the profit motive, but few are as obsessed by it as Peter Walters. He has insisted that every part of the vast organisation behaves as if it were a separately quoted company, which must maximise the profit it earns for its imaginary shareholders. This is sometimes taken to extraordinary extremes, so that the BP legal department is obliged to compete on a cost basis with outside legal firms, and the same goes for BP's accoun- tancy department. The message is simple and stark. If you are not the lowest cost producer, whether it be oil, chemicals or legal contracts, then you — like Alton W. Whitehouse Jr — have no place in Sir Peter Walters's British Petroleum.
Perhaps not surprisingly Sir Peter's col- leagues tend to describe him as almost impossible to get close to, a distant and very private man, who makes big decisions without hesitation beforehand or express- ions of regret afterwards. 'I really believe that no shades of grey exist for Peter Waters,' says one former colleague. 'He sees everything in black or white, with unerring clarity.'
It sounds like the sort of remark that a Wet ex-Cabinet member might make ab- out the Prime Minister, but there are differences between the two personalities which suggest, on that reliable unit of social measurement, that Sir Peter Walters is more the sort of person that one would wish to have round to dinner. He is not an overbearing personality — his is a light rather than a disruptive presence. He is more a listener than a talker and — which is most important of all — is devoid of pretension and has a ready sense of humour. One of his jokes is that when he goes on holiday he gives his telephone number to only two people: the Queen and Mrs Thatcher. Of course, it may not be a joke.
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