Examination of Witnesses (Questions 840
- 850)
WEDNESDAY 10 FEBRUARY 2010
MR MALCOLM
SMITH
Q840 Chairman:
Was it solely the personal agendas of certain members of the board—the
chairman and others perhaps—that meant they did not pursue
the merger strategy? In other words, was it examined rationally
as opposed to emotionally?
Mr Smith: In fairness, I had made
a point of making the board discuss it on many occasions. It was
not new. They all knew this. As to why it did not happen, there
may be all sorts of reasons. It is no good just blaming one or
two individuals because, let us face it, there was a board there,
was there not? Unfortunately, they were being misled for whatever
reason, we do not know. I do not know what goes on inside another
person's head. I wish I did sometimes. I just do not. The fact
is that I think there were some bad decisions taken. If you said
to me, "What really went wrong?" the board governance
did not work. We did not have a truly independent oversight of
what was going on and there was not a truly representative view
being given to the council, who I think were trying to work in
a bit of a vacuum.
Q841 Chairman:
Bearing in mind you had externally appointed non-executive directors,
and, in other words, on a normal plc board you have a simpler
arrangement, you have the executive directors and the non-executive
directors.
Mr Smith: It got a bit cosy. Philip
knew one of the other directors, who was meant to be our financial
guru, very well from his days at HSBC. George Risley was about
to retire and was an older man obviously. He had done a very good
job but obviously he was going. The time had come to move on.
Subsequent to my departure, you only have to look at the people
who came on the board as non-executives. Some of them were good
people, but they were all acolytes of Rob Knight. They were people
he had known from his previous experience. They were not independent
at all. They were good people in themselves but there was a relationship
with the chairman which necessarily was a little unhealthy. I
am not being critical of individuals because that is not what
this is all about. I just do not think that there was that independence
of spirit among the independent, so-called, directors.
Q842 Mr Williams:
As I understand it, it was the chairman of the council who appointed
the non-executive directors.
Mr Smith: No.
Q843 Mr Williams:
That is the impression he gave us.
Mr Smith: Was that Stephen Yates?
Q844 Mr Williams:
Yes.
Mr Smith: That is not true. Stephen
would not have been so daft. The reality is the people who came
on were acolytes of the chairman. Some of them were very good
individuals but the trouble is it got a bit incestuous, frankly.
You just need to look at the relationship he had had with them
over the years. It did not take a long time to work it out. It
lacked independent oversight. I am really sorry for the farmers
and for my part in this whole sad affair I am totally apologetic
to the farmers. I feel I could have done better.
Q845 Mr Williams:
You are saying that the chairman was solely and absolutely responsible
for the appointment of the non-executive directors?
Mr Smith: After my departure,
looking at the people he brought in, and he tried to bring some
of them in when I was there but I blocked it, or I had done my
best to block it, because I knew what he was at.
Q846 Lynne Jones:
In what way could you have done better?
Mr Smith: I am really good at
looking back. I suppose if I said to you what could I have done
better, maybe I should have blown the whistle to the council during
the process of the bidding. Maybe I got tied up in the bid myself.
I am not totally blameless in all of this. I cannot hold myself
blameless. I felt I could have turned it round. I did not get
the chance to do it, but maybe I should have been more strident
at the time in telling the members.
Q847 Lynne Jones:
Do you think it would have been different if your dinners with
Mr Yates had continued?
Mr Smith: It was not Mr Yates.
It was the previous chairman, John Loftus. It might have been.
Rob is a very charming man and quite a smart guy. I think John
fell under his spell a bit. I actually think that Rob fell under
Mr Moody's spell. That is part of what went wrong here. I am not
being critical. I am not going to start blaming everything on
Philip Moody because it is not all his fault, but I really rather
suspect there was a pretty unhealthy relationship developed between
them. I think that really kind of formed what the board did and
I could have tried harder to do something about that. You have
asked a very good question: would my dinners with John Loftus
have made any difference? I think they might.
Q848 Lynne Jones:
Was it in order for the chairman to tell the chief executive not
to meet the chair of the members' board? Did you have any choice
but to stop?
Mr Smith: It would have been difficult.
I was not on the board. I was being told by the chairman of the
board that this was no longer appropriate.
Q849 Lynne Jones:
The chairman of the members' committee could have protested about
it.
Mr Smith: He could have done,
but he did not.
Q850 Chairman:
Thank you very much indeed. You have provided a unique insight
into the workings of the board during the period of the purchase
of ACC. You have given us some helpful commentary about the governance
issues for which we are very grateful. I think we see perhaps
just a modicum clearer as to some of the reasons why sadly the
business went down. As we come to the end, one of the great sadnesses—and
it reflects on your own observations as to why you decided to
come and talk to us, namely the farmers—is the sense of
optimism that so many of them started off with when the co-operative
was first formed. Their evidence to us gives almost a naive optimism
that by pursuing the strategy that we have been discussing they
would at last be able to take control of their destiny to their
own long-term advantage. Sadly, the way that thought process was
translated into reality delivered the opposite result with all
the pain and suffering that some of them have had to endure. Thank
you very much for your contribution to our inquiry. We are very
grateful.
Mr Smith: Sadly, I think it could
have worked. That is the bit that sickens me to my stomach.
Chairman: As one of our witnesses said
with a BA in hindsight, "We could all see how it could have
been done better". Clearly at the time you had your thoughts
but, for the reasons you have stated, you were not able to pursue
them. Thank you.
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