On the right tracks

Railtrack chairman Geoffrey Howe has the task of retrieving shareholders’ money. It could be worse – he could be running the trains

On my way to interview Geoffrey Howe, the chairman of Railtrack Group, I was not quite sure whether to take a box of tissues with me. But as it turned out, Howe was not sitting in the corner of his office rocking back and forth whimpering to himself. In fact, he was in a rather jovial mood and the interview was often punctuated with his ear-splitting laugh.

His high spirits are perhaps because, in the dog’s dinner that is Railtrack, Howe has one of the easier jobs. He is not the man responsible for running the trains. When I am standing on the platform slowly watching my life tick away, I like to imagine that man standing over a huge train set, malevolently rubbing his hands and trying to decide on which excuse the station announcer will give today. For example: “Leaves on the line? No it’s only spring, they won’t buy that one – let’s go for that old favourite that we can’t find the driver,” followed by an evil snigger.

Instead, Howe is charged with making sure that the poor suckers who invested in Railtrack get some of their money back. Unfortunately for him, not everyone understands the difference, and he receives regular postbag rants from Joe Public on how it has taken them six days to get from Hitchin to Crewe. This is in addition to missives from the 250,000 shareholders for whom he is responsible.

So why on earth did the man who is best known in legal circles for his nine-year tenure as managing partner of Clifford Chance (that finished in 1997), take the job?

After leaving investment bank Robert Fleming after its takeover by JP Morgan, Howe decided on a ‘portfolio’ career – the posh term for ‘bit of this, bit of that’. He had been on the board at Robert Fleming and the thought of being further down the food chain and answerable to US masters did not appeal, so he took on a variety of board positions with both listed and unlisted companies.

“When this thing [the Railtrack job] came up I thought two things. First of all, that as a matter of fitting my own portfolio skill set of business, legal and communication, it was well suited. Secondly, that there was a case that genuinely needed to be fought for here, as what had happened to the shareholders of Railtrack was not fair. And then there was this instinctive thing in my own head that, when I asked myself whether this was something I wanted to do or not, kept saying yes.”

So rather than going to see a psychiatrist to get the voices inside his head to keep their mouths shut and allow him to opt for an easy life, Howe said yes to the headhunter, who must have spent the rest of the day pinching himself and drinking champagne.

However, Howe does add the proviso that if the job had anything to do with running the railways he would have turned it down, but he believes that when it comes to the job of achieving a fair settlement for the shareholders, the positives outweigh the negatives.

In making his decision, Howe took into account his personal portfolio as well. He has a young family and his commitment to them was partly behind his decision to go freelance. He did not want to take on managing director-type jobs where he would be responsible for the day-to-day running of a business, so instead he took on advisory-type roles, which means he now works an average four-and-a-half day week and is home in time for dinner.

But what of this question of ‘fairness’ for the shareholders? Surely if you are going to put the rail system into private hands, then those who invest in it should be subject to the vagaries of the free market, just like, for example, the shareholders of Marconi?

“Railtrack was put into administration because the Government changed the rules, it reneged on an agreement,” argues Howe. “Stephen Byers said, ‘We’re not going to comply with the agreement [to advance more funds] and we’ll stop you going to the regulator for more money and if necessary change the law to stop you.’ How was Railtrack going to go to the banks after that? The board had no alternative but to accept [administration].”

So Howe was brought in to spearhead a legal action against the Government to sue for compensation. The current state of play is that the main contender to take over Railtrack is a not-for-profit Government-backed body named Network Rail, which has put forward an offer of around £2.50 a share, which is 30p lower than the last price the shares traded at. The board is considering whether to recommend that the shareholders accept that offer and lose the right to litigate, or take the Government to court. Involved in that decision is whether creditors will be paid and what the future of Railtrack itself is, all of which are bogged down in a web of contracts so complex it would “make a lawyer’s eyes water”, says Howe.

Howe hopes that by the end of May the decision will be made, but the process is made all the more difficult by the variety of Railtrack shareholders. The institutional investors have made noises that they would be happy with that level of recompense. “But private investors seem to think that it isn’t a good deal,” says Howe.

“I think there are a number of reasons for that. Inevitably, they don’t know the full facts and we have to articulate very clearly why we [the board] think it’s a good idea. The institutions are more pragmatic and to them it is just business. But there are people who have put their life savings into Railtrack; some of them have remortgaged their houses to buy Railtrack shares and so have been put into a very difficult situation. The price of Railtrack shares has gone very high in the past and some of the shareholders have bought at a very high price,” he says.

Howe is unable to give an exact figure as to what percentage of shares are owned by the institutions, but says that it is more than 50 per cent. He is not among the private shareholders and does not even use the train service on a regular basis, but then the journey from his home in Islington to Railtrack’s offices on Euston Road is walkable if you are feeling energetic.

When he took on the job, Howe was not sure of the length of its tenure – it could have been six months or five years.
At the moment it looks like being the former, and Howe’s office does not look like he’s bedding in for a long haul.

Before we meet he warns me that the office is not marked on the outside and, it turns out, it is not even marked on the inside. The foyer board lists only the office rental company and the receptionist answers one of the phones with a cheery greeting from the Professional Cricketers Association. It is only the courier asking whether there is anything for Railtrack’s main legal advisers Simmons & Simmons that gives the game away. In Howe’s office itself, there is only what Howe has carried in with him on the desk and there are no flunkies to be seen – and no train set.

With a name like Geoffrey Howe, the mix-up of his current role is not the first confusion of his career. “I used to get a lot of teasing when I was first made partner at Clifford Chance, as the other Geoffrey Howe was Chancellor of the Exchequer at the time. Sometimes I would get tables at restaurants that I would not have expected to get and I used to wonder whether the name had helped. Hotels and restaurants used to look at me when I arrived as if to say, ‘You’re not Geoffrey Howe.’ And I used to open packages very carefully.”

While comparisons between the end of Mrs Thatcher’s reign and the current plight of Railtrack would be easy to make, there is one distinct difference. Talking to this Geoffrey Howe is nothing like being savaged by a dead sheep.
Geoffrey Howe