Who’s Hugh

Review of BATTLE OF THE TITANS: Sir Ronald Trotter, Hugh Fletcher and the Rise and Fall of Fletcher Challenge Bruce Wallace (Penguin $34.95)

Listener 17 November 2001.

Keywords Business & Finance; Political Economy & History

In 1908, James Fletcher, a 22 year old Scot arrived in New Zealand with ‘a few pounds in his pocket’ and carpenter skills which he used to found a building company which expanded into Fletcher Holdings. By 1955, his son, also James, persuaded father and the New Zealand government that not only should Fletchers build the huge pulp and paper factory at Kawerau, but it should own part of it. In 1981, Hugh Fletcher, the son of the son, amalgamated Fletcher Holdings, Tasman Pulp and Paper, and the sprawling Challenge Corporation to form Fletcher Challenge, the biggest New Zealand business amounting at the time to almost a tenth of the capitalisation of the New Zealand share market.

By 2001 the company had been downsized, split into separate businesses and sold off. It is the roller coaster of this last twenty years that journalist Bruce Wallis, who once worked for Fletcher Challenge, describes. But the history of Fletchers before 1981 looms large. (Readers may catch up on it in the biographies of the first two Fletchers, Bruce Jesson’s writings including The Fletcher Challenge, and a chapter in my just published The Nationbuilders.) The grandson tried to repeat the earlier Fletcher successes but the economy which they had built had changed dramatically.

There was another dynasty involved in the merger. Hugh Fletcher was the first managing director, but the Chairman of the Board was the previous chief executive of Challenge, Ron Trotter. His father Clem had been managing director of the Farmers Cooperative Organisation, and his son, Bill, heads the New Zealand branch of C.S. First Boston (which advised Fletcher Challenge). .

Wallace tells a gripping story of the rise and fall of the business and of the interaction of the two business leaders, based on documents and interviews of senior staff. It is the sort of story which balances the anodyne accounts served up in most business pages. The business giants portrayed there appear in this book, humans prone to losing their tempers, getting things wrong, and doing some damned stupid things. It may not have been Wallace’s intention but the book reads as a ‘get Hugh Fletcher’ exercise. He is portrayed as intellectually superior to any of the others in the firm, energetic, visionary and extremely persuasive, but almost all the mistaken decisions the company made are attributed to him. Perhaps the senior executives in their recalling tended to pass the blame up. One is left wondering what exactly they did, and how they justified their high remuneration. We await the Fletcher reply. It may argue that the decisions were much more collective.

Because the book is written from a company perspective, it fails to relate the business to the economy-wide context. Much of Fletcher Challenge’s difficulties arose from the stagnation and poor savings record of the New Zealand economy, which meant its home base was weak, and its ability to raise local funds limited. The founder companies had grown up in the regulated pre-1984 environment, and each had, for instance, a finance company to assist them with funding in the tightly controlled monetary environment. The world in which Fletcher Challenge was conceived was very different from that in which it died. Perhaps like the moa it failed to adapt?

Certainly Fletcher Challenge benefited from the privatisation program picking up good quality cheap government assets in the 1980s (although there is a great story of how Jim Bolger and Bill Birch squeezed the last cents out of them in a forestry sale in the 1990s). But ultimately New Zealand’s poor economic performance after 1984 undermined the company. The point is not Hugh Fletcher (or whomever) made mistakes (although some were extremely costly). Some of its investment decisions of any enterprising company will fail. What dragged Fletcher Challenge down was its lack of successes. There were too few in stagnant New Zealand. .

The book’s title comes from the chapter which describes the boardroom battle in the mid-1990s, when relations between Trotter and Fletcher had thoroughly broken down. In the early years they had, in the marriage guidance terminology, worked hard to make the relationship work, all the more astonishing given Trotter’s preference for rogernomics, while Fletcher was thoroughly seeped in the tradition of nationbuilding. But eventually the company’s poor performance drove them into a rivalry, as rivetting as a good political novel. However in Greek mythology, the Battle of the Titans was about the old gods against the new ones, the Olympians. Certainly the falling out between the ancient Titans contributed to their demise, but the times were achanging and the old ways were overwhelmed. This does not mean we should think of Trotter’s and Fletcher’s successors the olympian figures currently portrayed in the business pages. Time (Chronos, the father of the Titans) will prove them as charming, heroic, energetic and as flawed as did those who preceded them. The new deities are the forces of the globalised market, which on the evidence of this book, brook no challenge and ultimately grind all exceeding small.