Investment bankers go to considerable lengths to interest CEOs in deals....

COLLUSION?

What are the relationships between the Financial Markets and Top Managers?

Back in the old days, when every town of any note had a ballroom, which in those more decorous times fulfilled the functions of a night club and singles' bar, Saturday nights would witness the scene of hundreds, maybe thousands, of couples on the dance floor, performing the elaborate steps of the waltz, foxtrot, quickstep, or more exotically, the tango.

A prominent investment banker, a product of those times, used to liken the relationships between managers and the financial markets to a large ballroom. 'Everybody has a pretty shrewd idea of why they are there and what they would like out of it', he would say, 'And everybody knows what to do to the music, despite the fact that there are no written rules. Thus you can have a whole ballroom floor with thousands of people doing the same thing because all of them know what to do. If you don't know, you will pretty soon have to get off the dance floor, without consummating your desires!'

This metaphor appealed to us, because it is a good way of illustrating how the relationships between the various players and the financial markets work. Everybody knows what they want, everybody has a shrewd idea of what the other dancers want, and although there are rules governing the conduct of the dance, much of the action and interaction is influenced by unwritten norms and conventions.

We fell so strongly for the metaphor, that we began to stretch it a little. Back in the 1950's, young men would feel themselves obliged to go to dancing classes, usually run by ladies of indeterminate age with dyed hair, always called 'Mrs' something, although their marital status could frequently be open to doubt. There blushing adolescent clods with two left feet were taught the basics of the quickstep and waltz, the minimum entry qualification for joining the mating game.

In somewhat the same way, there are guides and instructors for managers who wish to have discreet lessons in how to comport themselves on the great dance floor of the financial markets. Stockbrokers are always ready and willing to help in this regard. One of our respondents outlined a quite extensive range of advice that he would from time to time offer to clients, including how to handle awkward, rude or unreasonable questions from fund managers. Financial PR consultants offer similar services - it was reported that Nigel Whittaker, who was once responsible for public affairs with Kingfisher plc, has set up a consultancy with the explicit purpose of grooming CEO's and others to look good and present themselves professionally.

As the course of our investigations for this website progressed, we were regaled with much fact and opinion about the motives and actions of the various parties involved in the City and in management. What emerged was a very complex system, comprising many actors, with different but frequently intertwined interests. We were also treated to a rich diet of beliefs and perceptions about the habits and motives of the many actors and what each could do to or for the others.

Let us start with a description of the interests of each of the salient 'dancers' on the floor, and how they often intertwine with those of others.

We will begin with Top Managers. The two roles to focus on are those of CEO and finance director, as these are assumed by the City to be the most important.

Managers' interests

We have known a great many CEO's and finance directors and whilst it is not possible to stereotype them, we can generalise a little about their interests from our interviews and from personal observation. Despite all their differences, top managers generally seek the following:

• A good reputation.

  Public reputations for CEO's and finance directors are mainly moulded by the financial markets and press. Many managers go to considerable lengths and use considerable resources to build their images. Some CEO's will also aspire to an honour, and there are known (to insiders) patterns of behaviour that will help this cause. Finance directors will be aware that building a good reputation with the markets will increase their chances of attaining a CEO position.

• Accumulation of wealth.

  Despite the publicity, not all top managers are greedy individuals. A fascination with reward is more a systemic infection that affects top managers as a class. For many, reward has an important value, not only in its own right, but also as an index of comparative prestige and approbation. Thus the upward spiralling of top manager pay has been boosted by everybody striving to keep up with their peers.
  
  The greatest explosion in managerial rewards of recent years has come from tying rewards to performance and actions that will please the markets. Thus, the key to very high rewards is a high share price, and much thought and effort goes into managing expectations to achieve this.

• A successful career.

  This aspiration has tended to degenerate of late to 'being around for long enough to accumulate some wealth', as top management becomes increasingly like politics.

• Doing a good job.

  We have not met many top managers who were not strongly motivated to do their best. The trouble is, that the ultimate judge and jury these days are the investors, press, analysts and other external observers, so no matter how well regarded a manager may be by customers or staff, they know that this regard will count for little unless the press and markets are satisfied.

Next come the Investment Institutions or Fund Managers.

Tony Golding, in his excellent book, 'The City' says, "The institutional investor's Valhalla is a world where every stock in the portfolio outperforms by, say, 10 per cent every quarter ad infinitum". As this is an impossible goal, investors tend to seek a range of qualities from their portfolio that they assume will enable them to outperform whatever norm or index that they are measured against. Readers will remember that fund managers who cannot claim out-performance will pretty soon find themselves losing funds under management, or getting fired by pension fund trustees.

All this pressure is then transferred to the companies in an institutional investor's portfolio. Investors will seek to buy cheap and sell dear, thus they are always on the lookout for undervalued shares. Once they hold shares, they will look for very high performance from their holdings. Ideally this means that companies outperform the market, or act in ways that will increase their share price. Frequently, this means creating a degree of excitement through activism of one sort or another. And if a share is in the doldrums, fund managers will be very pleased if they can realise a premium through the sale or acquisition of the company concerned.

Fund managers, analysts and the press alike tend to identify companies with their leaders, thus further increasing the pressures on those executives.

Brokers.

Stockbrokers occupy an important position in the web of interactions between managers and markets. Whilst their basic role is to buy and sell shares, they can also act as guide, adviser and 'go-between' for managers and investors. The success of brokers is, in the end, measured by the volumes of shares that they buy and sell on behalf of clients, but this business will be attracted by the reputation of the broker's senior staff. As we have seen in chapter two, successful brokers in London will sometimes be appointed as 'house brokers' to companies and will tend to capture all transactions related to those clients.

If a chairman or CEO is contemplating a major move, for example, an acquisition, disposal or change of management, they will often wish to take soundings to gauge likely investor reaction. This they can do through their house brokers, or with the advice of the broker, directly to chosen investors.

On the other hand, investors may wish to send messages to companies about what they would like them to do. Such wishes may represent the investment manager's views about the composition of the company's business portfolio, or ideas about creating additional value by de-mergers or disposal programmes.

As well as sending signals directly and via their shareholdings, investors can, and do, send messages via brokers. Such messages can be amplified by quietly briefing the press via analysts or directly. If the message is one that may create good transactional business, the chorus of signals about the need to act can become quite deafening!

Broking companies employ Market Makers, who used to be called 'Jobbers' and specialist salesman who sell shares, predominantly to investment institutions.
Market Makers will buy, hold and sell shares on behalf of their broking house, thus taking the risk of being caught 'long' or 'short' holding shares that move in price. They can also cause movements in the share prices of particular companies if they buy or sell in sufficient volumes.
Salesmen are responsible for selling shares to institutions. They are constantly in touch with investors, trying to create interest in shares. They mainly do this by producing and pushing 'ideas' - some piece of information or angle that will move shares. These ideas may originate from the salesmen themselves, from analysts or significantly, from investment bankers who are trying to set up deal opportunities. Salesmen and Market Makers are thus one of the prime wellsprings of the vast amount of market rumour and speculation that swirls around managers and their companies and can create short-term share price instability. As can be seen, most of this is not rooted in anything more substantial than the need to sell shares.
One of our management respondents told us that if an investment institution agreed to buy a particular share if it was 10% cheaper, then the salesmen would work hard to create ideas or rumours that would shift perceptions of the company's performance down.

Sell-side Analysts.

Stock market or securities analysts, are generally employed by brokers, although there are still some independent companies. Analysts, as their name implies, study companies, assess their strengths and weaknesses and issue advice to potential investors on their likely prospects. Broking houses have always realised that a reputation for good analysis would attract broking clients, especially for new share issues. As the functions of investment banking, broking and investing became grouped under the same umbrella in vast integrated banks it became apparent that a good reputation for analysis would also attract clients for the vastly lucrative investment banking advice.

Thus the profile and rewards of analysts began to rise and rise. Rather than simply being rewarded for the quality of their analysis, they began to be bonused on the deal flow for broking and banking. Whilst this incestuous and damaging practise is now under attack, analysts still depend on their reputations for their income. Reputation means perception - expertise in an industry sector, being at the centre of things, being in the know and getting it right in their analysis of companies' actions and performance.

Analysts are a vital link in the two-way flow of information and opinion that flows between companies and the markets. Reports that Jack Grubman, the telecommunications analyst with Salomon Smith Barney attended board meetings of WorldCom to provide 'market colour' to mergers and acquisitions discussions indicate how seriously analysts' opinions are taken.

They are also a key link between professionals in the financial markets and the press. They both have a similar interest in finding angles and stories about people and companies. Journalists will use analysts to give them advice, stories and views about companies, as well as quotes about the views of investors.

As analysts are also closely in touch with fund managers, they can be a very communicative line between institutional investors and the press. Woe betide the unfortunate executive who has incurred the displeasure of investors and analysts, for they will be briefed against in the press without mercy!

Investment Bankers.

Investment banks tend to have a relatively low public profile. But, seen from inside the financial markets, bankers occupy a central position.

The reason for this is simple; they generate huge revenues for the huge integrated banks that employ them, more, for example, than the brokerage arm. In this sense, bankers will tend to drive the priorities of the big international investment banks.

It should be no secret that investment bankers feed off deals and corporate transactions. These will include advising companies on acquisitions, bid defences, selling sizeable assets, de-mergers and large transactions involving financing. Bankers will also advise management on financial strategy and on the best ways of financing growth. But fundamentally, bankers are there for the centrepiece of the industrial drama, the large deal such as an acquisition. Investment bankers' fees are huge, usually calculated as a percentage of the value of the deal. (Not the value created by the deal). Readers do not have to use too much imagination to see that the fees earned on really big deals can be very substantial indeed. This being the case, it should not be surprising that investment bankers will go to considerable lengths to encourage deals. They have a ready audience in British top managers, who are amongst the world leaders when it comes to taking the transactional route to corporate development.

Bankers, driven as they are by their hunger for fees and are extremely active in ensuring that managers do not miss any opportunities. To do this, they will produce 'ideas' for creative and attractive deals. These ideas will be 'sold' to anybody who might influence the initiation of deals, but investment institutions, managers and the press are certainly three typical recipients.

There cannot be a single company that has not been the subject of a banker's 'idea' at some time or the other. These ideas may cover opportunities for synergistic mergers, great opportunities for creating value by de-mergers, 'split-offs', 'carve-outs', 'spin-offs', buy-outs and buy-ins. Any transaction that may create an interesting angle on how value may be created will be considered and sold with great enthusiasm, whether the subject is interested or not.

The Financial Press.

We cannot complete a section on the sinews of communication and interaction that bind managers and markets without touching on the financial press. Nearly all newspapers have a financial section, but it is the broadsheets that carry the most weight with managers. In fact, many managers will be avid scanners of a wide variety of the media from the "Financial Times" to the "Investors Chronicle". For a modest fee, the company's financial PR adviser will scan all the media and provide a complete, international if required, press cuttings service. Backing the press is a variety of other media, of which radio and TV are probably the most important.

These days, top managers will almost invariably be trained in how to project themselves to the media, and financial PR and other communications companies provide in-depth coaching with copious feedback and advice on how they 'come across'.

The quality of business journalism, as we have seen, varies vastly. Senior financial journalists can be extremely weighty and influential figures, often with perspectives and opinions that seem to indicate a greater degree of balance and maturity than is sometimes seen from the markets. Most managers feel that it is important to stay on side with broadsheet City editors and some journalists. Behind the senior quality figures lies a large 'tail' of financial hacks and headline writers, many of whom echo that which is fed to them by analysts and seem to have little judgment, memory or sense of process.

But, be they good or bad at their work, all journalists will be on the lookout for a story or an unusual angle on events affecting managers and companies. Having a copious supply of insider sources and contacts is crucial to a top financial journalist, who will go to considerable lengths to cultivate them. Returning favours from contacts will include acting as a conduit for 'leaks' and angled stories from the financial markets. Sometimes, when the markets are working full-time to press managers to do something, the noise in the media can become deafening. One manager described it as akin to being attacked by a "poisonous swarm" of noisy insects.

Smart managers will therefore use the press for their own purposes, but also be extremely wary about which journalists they talk to and not view all publicity as good publicity. The backing of a good internal Public Affairs manager and/or a financial PR adviser is therefore seen as extremely important in these image-conscious times.

So, these are some of the 'dancers' on the great financial/industrial ballroom floor. We hope that we have been able to show that, whilst each has separate interests, they are, to a very great extent, mutually interdependent. The financial markets need industry to provide investment opportunities and for their vast fee income. Managers of large quoted companies are, in turn, dependent on the markets for capital and to a large extent, for their careers, reputations and wealth. As a result of this mutual interdependence and the stakes that all play for, it should be evident that many of the 'dancers' watch each other like hawks, so that even their smallest and most nuanced acts are noted and analysed for significance.

The power of perceptions in shaping behaviour.

As we amassed information and opinions through our investigations for this book, we unearthed a fund of beliefs, perceptions and stories about managers and markets. Some of the strongest perceptions were held by managers about the markets and began to fall into clusters and form patterns. We believe that several of these patterns of perception are worth exploring, because they are strong enough to drive the actions and reactions of those who hold them. So, here are some of the most significant of these beliefs that can have the effect of shaping management behaviour.

1. The markets are powerful, very fickle and will be quick to punish.

One of our respondents told the following story, which he said was from his direct personal experience.

He was the CEO of a large company and also the deputy chairman of another company. One morning, he received an urgent telephone call from a prominent fund manager 'star', who we will call X.

X sounded very brisk. "I would like to see you urgently. Is five o'clock to-day OK?" Our friend made rather vague noises, signifying acquiescence. "Good", said X, "I'll see you at five".

At the appointed hour, in walked X, accompanied by two junior colleagues. Without any preliminaries, X expressed sorrow and concern about the state of health of the CEO of the company of which our respondent was deputy chairman. "His ill-health is obviously affecting his performance, I think he has completely lost the plot," X observed.

There followed what was described as a very long silence, and then, knowing that he could not avoid a response, our friend enquired what X wanted to be done. An even longer silence ensued. In the end, in desperation, he said, "I suppose that you want us to have him resign?"

After another significant silence, X rose, expressed satisfaction at a successful meeting and left. A month later, the CEO resigned.

A second story comes from a senior search consultant. He told us that he conducted a difficult assignment to find a finance director for a large FTSE 100 company. At the end of an exhaustive search process, the field of candidates was narrowed down to one person, who was interviewed by most of his potential executive colleagues, several non-executive directors and the chairman. All felt very positive and the search consultant began to feel that his quest had been successful.

The last hurdle was the board Appointments Committee and an urgent meeting was fixed, to which the search consultant was invited. The chairman opened the meeting by summarising the background and credentials of the candidate and reporting that all who had met him felt that he was an excellent fit, both for the job requirements and with his potential colleagues. A rustling of acquiescence amongst the directors was broken by one non-executive director who had not met the candidate, a senior investment banker.

The senior banking figure cleared his throat and said he felt duty bound to say that his soundings amongst contacts in the markets had unearthed some rather negative feelings, not universally, but one or two quite significant people seemed to have reservations.... The search consultant said that his prime candidate moved from a strong number one position to the bottom of the list in just a few seconds!

Both these stories were told to us as personal experience and 'gospel' by the respondents and it should be evident that it does not take too many such tales of this kind to convince managers that it is best to stay on the right side of the markets. That impression was strengthened when one of the authors asked a board colleague why they (and the non-executive directors) had agreed to what seemed to him like obscene advisers' fees for the Redland bid defence. His close colleague said that he had also wanted to negotiate harder, but had received no support from the non-executives. "Remember also", said the colleague, "That I will want to get another job after this is all over".

Here are some mechanisms by which the markets can communicate views, pleasure or displeasure to or about managers:

• Rising or falling share price.
• Briefings and rumours through the press, PR departments and consultants.
• Direct communications from investment institutions to directors.
• Sending the message through the house broker.
• Analysts Reports, which can often contain very personal comments about individuals.
• 'Ideas' and proposals for deals, M&A opportunities or restructuring from investment bankers. There is also great conviction that bankers will use many media, including the press and brokers' salesmen to put pressure on managements to be active.
• Recommendations, references and positive or negative responses to 'soundings' about candidates for top jobs.

2. Big Brother is watching you - constantly and minutely.

This set of beliefs is held most strongly by the top managers of the largest 100 companies. It is apparent that the intensity of the scrutiny from the markets decreases the further a company is below the FTSE 100, as institutions do not have the resources to thoroughly analyse companies below the FTSE 250.

Managers know that they are being scrutinised - how could they miss the fact:

• The CEO and finance director will present to institutional investors once or twice a year, more if there are problems or moves afoot. They know that their presentations will be carefully watched for issues of both form and substance.
• Companies will report to shareholders, usually twice a year, through the Annual General Meeting and reporting of half-year results.
  
  The annual general meeting provides a once a year opportunity for smaller investors to gain exposure to the directors and to question them. Unless there is special drama in the air, these meetings are rather sparsely attended by institutional investors. They will have had their chance to scrutinise managers through the special presentations mentioned above. If there are particular resolutions to be voted upon at the meeting, institutional investors will vote by proxy.
  
  Annual General Meetings can be noisy and sometimes turbulent affairs. They are an opportunity for pressure groups, such as equal opportunities and environmental campaigners, to have their say, sometimes to the embarrassment of directors.
  
  Occasionally, they can throw up funny or poignant moments, such as the time that a very small and very old lady stood up at the back of a meeting and asked the chairman to repeat what he had just said about the profit recovery programme. The chairman, shouting and enunciating his words very clearly, said, "Madam, I said that it could take us several years to get performance back on track". "Could you do it a little more quickly?" asked the little old lady, "You see, I am ninety years old and haven't got all that much time!"
  
  In theory, Annual General Meetings represent the democratic right of shareholders to call management to account. In reality however the will of the generally absent institutional shareholders is all that matters.
• Analysts tend to specialise in particular industrial sectors and watch companies and managers in their sector like hawks. They strive to ensure that no fact, rumour or snippet of information about the companies that they follow goes unnoticed.
  
  They are also very active in their questioning of the finance director and possibly the CEO - and the fruits of this scrutiny will be published for all to see. As the analysts' stock-in-trade is data, information and gossip, they are also very important in the reputation forming or destroying game. Many managers feel that analysts function on more than one level. Much of their work is based on financial and numerate data, but many feel that there is also a strong emotional basis to their opinions.
  
  So, managers believe that it helps to be liked by analysts. Conversely, those who have incurred the displeasure of analysts can find that their actions receive a negative spin. As these same analysts are a prime source of information for financial journalists, this spin can become magnified into campaigns. Sometimes analysts will develop a line about a company. This can be negative or positive, but once analysts have declared a view and recommendation, they can stick to them stubbornly, despite contrary evidence.
• With the reduction in faith in the independence of 'sell-side' analysts has come the growth of another class of analyst, the so-called 'buy-side analyst, whose work is for the investment institutions and is not usually published. But, it was reported to us by a broker that many sell and buy side analysts communicate closely and frequently, thus increasing the intensity of scrutiny and analysis of companies.
• Finally, managers know that the financial press is always vigilant. Most top managers with whom we have worked tend to scan the 'Financial Times' daily, looking for news that may impact on them or people that they know. As we have said, the press tend to be very tightly 'plugged in' to the financial markets through journalists close contacts with analysts and investors.

Lest readers may come away with the view that all this scrutiny is one way, let it be said that managers deploy considerable resources to unearth intelligence that will help them to anticipate what is going on in the markets. So, in-house and external advisers will prepare daily press comment analyses, brokers will provide updates on investor sentiment, investor relations and financial PR houses will track share movements and immediately report if there is any unusual buying or selling activity. All of this has meant a burgeoning in the size and cost of the information and advisory services available to managers to help them be sensitive to, and to manipulate information for, the financial markets.

We thus have a scenario in which there are vast amounts of data, information, stories, rumours, gossip and tittle-tattle flowing through the financial markets, with all players, including managers, straining themselves to pick up anything that might help or hinder their causes. In addition, there is a considerable volume of 'spin' and deliberate leaking of 'information' that is angled to do down an adversary or make something happen that is beneficial to the leaker.

3. The financial markets are hungry - and demanding.

Tony Golding portrays a new CEO as being greeted by the proposition that he/she has a limited time to convince the watching financial markets and press that they are making an impact. One of our search consultant respondents observed that the perceived 'time to impact' had reduced to six months in the minds of many candidates. So, says Golding, "Our new CEO is surrounded by cheerleaders - investment bankers and securities analysts - waving banners with 'MORE CORPORATE ACTIVITY PLEASE' written on them".

We have seen that investment bankers present companies with a continual stream of unsolicited M&A propositions, sometimes reinforced by 'ideas' to investors and leaks to the press. Certainly, Redland, both in its acquisitive phase and when it was struggling to recover from the effects of all its acquisitions and 'moves', received a plethora of ideas - only they were different ideas; for the next acquisition in the bullish growth phase, and on how to break the company up and create more value when it was suffering. Of course, most of these ideas were from the same bankers!

Readers will see elsewhere in the book the assertion by a senior lawyer that more than 50% of all M&A activity is not originated by management, but by bankers, analysts or investors looking to generate fees, sell shares or realise quick 'value' by having the company sold or broken up. Occasionally, managers acknowledge the active role of investment bankers in bringing about deals.

Here is an excerpt from the Redland annual report of 1982, by the then chairman, Sir Colin Corness. "By good fortune of timing and following entirely independent evaluation by each company of the other as a desirable merger partner, we found ourselves brought together with Cawoods Holdings Limited upon the initiative of Baring Brothers and Co. Limited, who for many years have advised both companies". He finishes his statement by saying that he would like to ..."add a special word of thanks to our professional advisers for their most competent handling of the complex Cawoods merger transaction. I am confident that it will prove to be a most important milestone in the progress of our company". Most of the assets acquired were sold not many years later.

The lifeblood of the financial markets is action. Bankers live off deals and corporate transactions. These will include advising companies on acquisitions, bid defences, selling sizeable assets, de-mergers and large transactions involving financing. Bankers will also advise management on financial strategy and the best ways of financing growth. But, fundamentally, bankers are there for the centrepiece of the industrial drama, the large deal.

Investment institutions, paradoxically, tend to be convinced that activism is best for them, despite Warren Buffet's proposition that he makes "more money when snoring than when active". Many investors like the idea that their holdings are tradeable and may throw up gains from the sale of the company. They are also likely to be influenced by the prevalent belief that good management is active management and the fact that securities houses (brokers) make their money from the movement of shares and bankers from deals -and this influence will be strongest if they are owned by a large integrated bank.

It is not hard to see that many a manager will be strongly influenced by the chorus of approval that is generated (for a while, anyhow) by action, and needs to be very strong minded to risk being labelled 'boring', especially if a major slice of his/her wealth is tied to investor approval.

4. The markets like managers to be big, bold, reliable, decisive, charismatic, communicative and dedicated to their interests.

By now, readers may have reached the point where there is no need to labour this point.

But there may be serious contradictions in the requirements of the markets from managers. Ideally, managers should 'deliver' exactly what they 'promise'. Any form of commitment to a definitive level of performance tends to be taken by investors and analysts as a personal 'promise' to them. Managers are required to 'deliver' to these promises, or be punished by a downgrading of the share price of their company, and of their reputations. Witness some of the reactions of the investors to the downgrading of BP's growth forecasts, or the near hysteria that greeted Redland's reduction in dividend. In both cases, and many more, the attentions of the financial markets and press turned rapidly on the top figure in the company. So, Lord Browne moved rapidly, in the eyes of some journalists, from a God-like status, to a man whose appetite for the fight was suspect, a possible candidate for retirement, and Robert Napier of Redland became a target for the 'chop'.

Sir Clive Thompson, CEO of Rentokil, has colourfully recounted to business school students the chastening experience of going from the heroic status of 'Mr 20 Percent' to a less than positive position when the performance of the company he led slipped from that magic and 'promised' rate of growth.

So, managers are supposed to be totally reliable. But, not 'boring'. They are also expected to be bold and exciting, and will be much appreciated if they deliver the rock-solidly reliable performance through a series of bold deals or strategic 'moves'. The fact that there may be a contradiction in the longer run between bold deals and reliable performance simply means that the heroes will at some stage develop feet of clay, and had better cash in on their popularity while it lasts!

Next, a top manager should ideally exude charisma, and possess superb communication and presentation skills. It is expected that a good deal of the charisma and polished communication will be devoted to assuring the financial community that the manager in question is totally dedicated to the investors' cause - as one of our respondents said, "convinced that I will do anything to serve their interests". A solid grasp of numbers and an ability to keep the message simple and easily digestible by very busy people (fund managers) is also much appreciated.

It will be evident that not all managers will easily match up to the ideal profile - we will also examine later in the book whether there is any connection between the markets' views and what really makes for good management - but, for now, we can report that many managers do try quite hard to match these perceived requirements. Thus, much emphasis is placed on 'grooming' them to be able to present an acceptable public face. The burgeoning industry of advisers and consultants will, for a consideration, provide close support for managers to help them develop their images. Also, much attention is now placed on the quality of presentation, maybe even at the risk of downgrading the substance.

Managers who do not match up to public requirements are publicly advised to improve, as in the case of Sir Philip Watts, the chairman of Shell, who was advised to view some of Lord Browne's presentations!

More seriously, it is the case that many more managers are also acting in ways that will please the markets, and are actually being decisive, deal-making and totally responsive to investor's needs.

We started this section with a dance floor metaphor to describe how the relationships between managers and the financial markets work. We will finish with another notion - that these relationships are truly symbiotic...

SYMBIOSIS

"An interaction between two different organisms living in close physical association, usually to the advantage of both, or, a mutually advantageous association or relationship between persons" - Concise Oxford Dictionary.

Large companies need very substantial amounts of capital and borrowings to fund their businesses, the financial markets provide this at competitive rates, but would like the highest returns for the risks that they are taking. Out of this simple relationship has a huge, hungry industry grown, as the investment markets have found more and more profitable ways of serving the recipients of capital, and managers have found that they have become high-profile public figures, capable, with a few strings attached, of amassing considerable fortunes. Thus has a rather simple symbiotic relationship become over time a very involved, intricate and extensive one.

A final story.

With such a strong dependency on City popularity to keep the opportunities coming, it is perhaps not surprising that sometimes corporate bosses are tempted to 'repay favours with favours'.

We were told that at a board meeting of a company that was subject to a takeover bid, the chairman proposed that a particular investment bank should join the defence team. As the company had not worked with these particular advisers before, several directors questioned what value they might add. The chairman insisted and an argument developed. The argument was abruptly terminated when the chairman announced that if the advisers were not appointed he would have to 'consider his position'. As the resignation of the chairman at the beginning of a bid defence was felt to be very bad news, the directors agreed to the addition to the team.

Later, another non-executive director revealed that the investment bank in question was a lavish supporter of shooting, a sport both he and the chairman were avidly interested in. "It is well known by some", said the director, "that the bank has provided our chairman with sport for many years".