Gerald Ratner launches new book
I waited in my office to be called. I had been told I couldn’t phone anybody. I couldn’t talk to anyone within the company. I just stared into space as the board kept me waiting for eight hours. It was late evening when they finally asked me to join them. It took around 15 minutes for them to confirm what I already knew: I was fired.
I was allowed to keep my car, though not the driver, and so I drove myself home through pouring rain. Just beyond the M25, a dashboard light came on: I was nearly out of petrol. I found a garage just in time, and as I pulled up to the pump I realised I didn’t know what side the petrol cap was on: the chauffeur had always filled up. After a bit of fiddling around, I eventually got the petrol cap off, but it had been years since I’d used a petrol pump and I only succeeded in covering myself in petrol. I began to cry for the first time since Murphy, my beloved beagle, had died.
I arrived home, redeyed and drenched in a highly flammable liquid that had ruined my clothes, to a house that was worth less than I’d paid for it, fired from the only job I’d ever had, with my reputation in tatters. I felt sorry for myself, but I was also incredibly angry. I had worked bloody hard for 30 years, making millions of pounds for shareholders and creating thousands of jobs for a company I loved, and I had suddenly had it taken away from me. Not for doing anything criminal. I hadn’t embezzled. I hadn’t lied. All I had done was say a sherry decanter was crap.
In 2006 a book was published called History’s Worst Decisions. Alongside Nero burning Rome to the ground, Eve eating the apple, and the choice not to install a tsu-nami warning system in the Indian Ocean was a speech that I made in 1991.
Despite the fact that I didn’t kill anybody, I didn’t do anything illegal and I didn’t even say anything that I hadn’t said before, that speech caused me to lose my business, my reputation and my fortune.
It says something about our society that people like to list what I lost in monetary terms: a £650,000 salary, £500m wiped off the valuation of my company, and a billion-pound turnover slashed overnight.
I was so stunned by what had happened to me that it was impossible to see a way forward. Not only had I lost my job, but I had lost the only job I had ever wanted. When I’d been a little boy, I had wanted to run Ratners. I had never had any other ambition. It had consumed my thoughts and my energies for so many years that I had never stopped to think about what I might do afterwards. It was a job I had thought I would have for life.
It’s difficult to explain, but I felt that I had lost my future, that all the events and milestones I had mapped out for myself had faded. And without the structure and support network - chauffeurs, secretaries, accountants - and a full diary of meetings, my life seemed incredibly empty. Like many men of my generation, I had let myself be defined by my job, and without it I really didn't know who I was.
In the weeks and months immediately after the speech, my life changed almost seismically. I kept thinking that it would soon be over and that people would forget about the speech, that they’d stop calling me Mr Crapner, and that the phrase “doing a Ratner” would disappear.
I was wrong: if you Google me, which I confess to having done (who hasn’t?), the first result is a Wikipedia entry on “doing a Ratner”. Even though I had once had my name above hundreds of shops up and down the country, it had become more famous as a byword for crap.
It took several years to realise just what an impact the speech had had on every aspect of my life - emotionally and socially, as well as financially. I didn’t know it at the time, but it turned out to be the most significant moment of my life, and it now casts a strange light over everything that led up to it and everything that’s stemmed from it.
I THINK we can all look back on our lives and pinpoint moments when things changed. I have a clear recollection of sitting on the stairs at our house in Hendon with my sisters as my mother told us that our father was about to have an operation to remove a tumour in his brain.
“He’s unlikely to survive,” she told us. He lived, but it gradually became clear that his personality had altered. He would have rows with waiters and shop assistants and air stewardesses. At times he was so rude that it was almost funny.
Key members of staff at Ratners, the family jewellery business, found him impossible to deal with. His relationship with his brothers, who were also in the business, became increasingly fractious. For long periods they refused to speak to each other and only communicated through the company accountant, Mr Hussein, even in the same room as each other.
It affected all of us a great deal, and my performance at school started to nosedive. But my parents knew I wasn’t stupid (to this day I can multiply a three-digit number by another three-digit number almost instantly), and when I turned 15, my father gave me a job in the business.
I left school without a single qualification, quite happily, and went to work. I got £9 a week behind the counter in the Oxford Street shop, one of the flagships of the ever-growing Ratners chain.
My father’s behaviour was so erratic that people would often come to me with suggestions and concerns they didn’t feel able to raise with him. I could get away with saying things to him that no one else could and was very well informed about everything going on in the company.
Hanging out with my friends Charles Saatchi and Michael Green - both well on their way to making their first millions - occasionally made me feel like a bit of a failure. But when I was 21 my father asked me to join the board of what was by then a publicly limited company - equalling their achievements.
Charles was getting some very big clients at his advertising agency, Saatchi & Saatchi, and Michael was diversifying into other areas of marketing and media on his way to leadership of Carlton Communications.
Although we were friends, we were also rivals. I’m sure our need to brag to one another forced each of us to read more about our industries, and to learn more about high finance and City institutions than we might otherwise have done.
None of us had been to university, but we spurred each other to get an education that was almost certainly more use to us than a degree. I remember Michael’s mother telling us there was more to life than money and profit. “You should be going to Richmond Park or a gallery or the opera. Just take the dog out for a walk at least.”
She was right, in a way. But at 21 it was all I was interested in – making money and everything that came with it. I lived and breathed the jewellery business. I was desperate to make Ratners the biggest jewellery retailer in the country, if not the world. Within two decades I had succeeded – after taking charge from my father when the company was going downhill.
I turned Ratners from a stuffy old jewellers into a trendy fashion store. Something had changed in the jewellery market: customers weren’t looking at heirlooms, they were thinking about what they would wear that night. We flaunted our cheaper products: women on the high street saw a £10 pair of earrings in the window rather than a £300 ring.
I also acquired rival companies, spurred on by the City, which demanded constant growth. By the mid-Eighties Ratners was doubling its profits annually and I was being invited to Downing Street for lunch with Margaret Thatcher. My salary was probably £500,000 a year, which would be more like £900,000 today, and I had assets of £7m or £8m. On top of this, the company paid for most of my expenses. I had an amazing lifestyle, with houses in London and the country, holidays in Barbados and skiing in Courchevel.
On the way up, Michael, Charles, and I had started playing snooker together in the basement of my parents’ house in Regent’s Park. No matter how rich we became, or where our careers took us, we rarely missed these sessions. Charles arranged for his favourite deli to deliver sandwiches through the little window at pavement level. We spent so much time there – sometimes it would be five afternoons a week – that occasionally a secretary would stand on the pavement and shove paperwork through the window for one of us to sign.
The three of us would discuss the economy (Charles had no idea that Nigel Lawson, who was chancellor of the exchequer, would one day become his father-in-law), deals we were considering, and strategies for staying on top of the competition.
We were incredibly competitive and always arguing about who was the best snooker player, or the best tennis player, or who had the best clothes. We also made ridiculous bets with each other. One night we started bragging about who knew the best routes through the back-streets of north London, and as Charles and I both lived in St John’s Wood, we decided to race each other. Of course that wasn’t enough of a bet for me.
“I could beat you driving backwards.”
“You’re on!” So I got in my Corniche and drove from Regent’s Park to St John’s Wood backwards. Charles laughed so much that I won.
A DEAL to buy a jewellery chain in America in 1989 meant I could claim to be the world’s biggest jeweller with 2,000 shops on two continents. As I stood on the threshold of a new decade, I thought I had it all to look forward to. I was wrong.
Interest rates were rising steeply to cope with the high inflation caused by the consumer boom of the Eighties. At one point, the mortgage repayments on my latest home – a house by the Thames at Bray in Berkshire – were £19,000 a month.
Even with my salary, that was the kind of expenditure that puts a dent in your lifestyle.
Yet Ratners seemed, by and large, to be immune from the wider economic downturn. This brought us a lot of attention, as it’s usually the luxury goods retailers that suffer most in a slump: people will always need milk but they can do without new earrings. I was personally credited with making the company a success.
I started getting a lot of invites to do after-dinner speaking so I could explain how we’d bucked so many trends. I was nervous but soon found that if the audience laughed at my first joke, I grew in confidence. I also enjoyed it, but each time I stood up to give a speech, I was undermined by a little bit of doubt. Why hadn’t we suffered as other companies had? It was almost as if I was standing on a roof waiting to jump. I had a sense people were waiting for me to fail.
In 1991 the Institute of Directors – an influential association of some of the leading lights of the economy – asked me to speak at its annual conference at the Albert Hall.
I called up Lynne Franks, who had one of the best reputations in PR at the time (she was said to be the inspiration for Jennifer Saunders’s character in Absolutely Fabulous). She listened to what I proposed to say and told me to tear it up and write a speech about doing business ethically.
“Like Anita Roddick?” “A bit like that, yes. It’s a new decade, there’s a new spirit out there – people are becoming greener, more ecological. I think you have an opportunity here to put yourself at the head of a new movement.”
I thought she was being very hippyish and ignored everything she had said. I decided I would carry on refining the speech I had given several times before; but, as the IoD was such an esteemed institution, I would leave out some of the jokes.
One gag that had always got a laugh was a comment about how we were able to sell a sherry decanter for less than a tenner (punch line: because it was total crap). I also ditched another joke about a pair of our earrings that were cheaper than a Marks & Spencer prawn sandwich.
I showed the draft to Mr Hussein. He was still the company accountant, and I valued his opinion. “I think you should put in a couple of jokes,” he said. “People like your jokes.” Back went the decanter and the prawn sandwich.
At the rehearsal, the girl monitoring the Autocue questioned the use of “crap”. Moira, my wife, also questioned if it was right. “It's just not that sort of event,” she said.
But Michael took a look at the manuscript and made no comments about the word. He is surprisingly conservative about these things, and if he wasn’t bothered then I was sure no one else would be.
Just the previous week, I had made the crap joke at a lunch attended by Princess Anne. If I could say “crap” in front of royalty, then it would be fine for a bunch of chief executives and economists.
When I stood up to speak I knew the audience wanted to know why Ratners was continuing to perform so well when our competitors had faltered. One factor I wanted to illustrate was that we covered the entire market from luxury watches to the kind of jewellery you wouldn’t mind if you lost in a nightclub.
So I pointed out that in our luxury division, Watches of Switzerland, we sold a pocket watch for £500,000 while at Ratners we sold a pair of gold earrings for 99p.
Then I made my joke about the prawn sandwich, which got a laugh. I started to relax and highlighted the sherry decanter, too. The “crap” punch line got another laugh. To this day, some people think I said our jewellery was crap. I didn’t.
At the end of the speech, there was a standing ovation. As I left, a journalist from the Daily Mirror ran after me.
“Aren’t you making fun of your customers?” he asked me.
“What are you talking about?” “You knowingly sell your customers crap. Don’t you think that’s making fun of them?”
“No I’m not. I was just making a joke and having a bit of fun.”
I’d not been home long when Charles Saatchi called.
“There’s a fantastic piece in the Evening Standard,” he said. “There’s a good line about you calling some of your products crap. It works really well. You come across as a really great guy with a good sense of humour. It’s terrific PR.”
The next morning, my driver was reading the Mirror and holding The Sun. He didn’t say anything and just handed me the papers. The headline in The Sun was “Crapners”. The Mirror’s front page screamed, “You 22 carat gold mugs”. I was so shocked and weirdly scared that I started shaking.
The story was basically the same: here was this guy, whose company is worth hundreds of millions of pounds, who’s making fun of his customers and enjoys selling crap. They were effectively telling their readers that they would be idiots to buy anything from me ever again.
The attacks continued, and it wasn’t just my company that was being lambasted, it was my family’s company, the company I had grown up in and loved. And, as the company’s name was the same as the family’s, it wasn’t just my company that was suffering, it was my children. Virtually overnight, our surname became synonymous with crap.
I really knew I was in trouble when Michael Green let me win at tennis. The week after the first headlines appeared, I beat him for the first time in months, if not years.
After a couple of weeks of negative media comments, I couldn’t take any more. I called up Kelvin MacKenzie, the editor of The Sun at the time. Keeping a calm voice was a struggle when I was so full of rage for this man who had put my daughters’ happiness in jeopardy.
“Could you stop doing this now,” I said. “It started off as a joke but it’s just not funny any more. My children are being called names and, quite frankly, I’m starting to lose my business, which means lots of people will lose their jobs.”
“What you failed to realise, Gerald, was the power of Ratners, what a huge brand it is and what a big story this is.”
“Well, you’ve had your headlines, now I’d like to get my company back.”
“Well, you should apologise then.”
“Okay, I’ll apologise.”
“I’ll send a journalist over.” A journalist and photographer turned up an hour or so later. When they took the photo to go with the interview in which I apologised for selling cheap jewellery at cheap prices, which had never previously been a crime, they handed me a toy gun and asked me to point it at my head. I obliged, and the next day they ran an “exclusive” interview with the “disgraced” fat cat and that photo took up half the page.
Over the next few weeks, I began to understand why comments I had made without incident for the past five years had suddenly become news. Britain was in the middle of its worst recession for a generation, and homeowners were struggling with massive mortgage payments and negative equity. People were being laid off, and salaries were depressed: some people were really beginning to suffer, and so the sight of me with my houses and helicopter was an insult to a lot of people.
In the Ratners shops, sales were starting to be hit. Price, the one thing I had always competed successfully on, was now my problem: cheap equalled crap in the eyes of our customers. Within a few weeks the figures were in terminal decline and we were losing money. Customers who had bought jewellery before the speech were bringing their purchases back and asking for refunds. The share price fell, and the press attacks continued.
In late July, about three months after the speech, I was walking through Hyde Park not far from my London house. I was no longer coping with the strain. I remember thinking, how the hell has this ever happened? I had spent all those years working with my father for little reward, then I’d cracked it and made it a success to an extent I would never have believed. How could I now have thrown it all away? This question rolled over and over inside my mind to the point where I wasn’t thinking all that clearly. It felt like I wasn’t just losing my grip on the company, or on my personal wealth, but on my sanity.
I was beginning to feel like I was being kicked all the time. My dentist noticed a strange mark on the roof of my mouth. An operation was speedily arranged. They hadn’t done a biopsy, so just in case the growth was cancerous the surgeon removed quite a large section. It was benign, but when the anaesthetic wore off there wasn’t a pill in the world that would deal with the pain.
I was back at work almost immediately – the company was in such a state that I couldn’t possibly stay away from it – but I felt I was going mad. I remember standing in a shopping mall on a visit to our shops in Northern Ireland with my mouth killing me and the overbearing sensation that I had let everyone down. I thought of my father and grandfather building up the business only for me to destroy it. I thought of my kids growing up being called Crapner for the rest of their lives, and I just thought: “It can’t get any worse than this.” It was probably the lowest point in my life.
The drop in our share price meant that the value of the company in relation to the vast amount of debt we had taken on to expand in America was becoming a concern. I realised that giving up the chairmanship – I was both chief executive and chairman – would reassure shareholders. James McAdam, a respected businessman, was suggested as the new chairman.
I laughed when someone told me his nickname was Mr Mackay after the prison guard in Porridge. He was a dour Scotsman who wouldn’t take any nonsense. The only problem was, when I was around him I couldn’t stop myself acting the cheeky chappy. A few people started calling me Fletch.
Jim made it clear that if he was to take the job he would have to be allowed to make some painful decisions. The first thing he did was tell me to take a pay cut from £650,000 to £350,000. I was prepared to do anything to save the company, so I agreed. He also said I should not have a five-year handcuff clause in my contract. My notice period was cut to three years. The next thing he recommended was that we sold the company house in Balfour Mews, Mayfair, which I occupied during the week. I reluctantly agreed: after all, I had a chauffeur who could drive me in from Bray every day.
“And that’s another thing. You have too many company cars. Everyone here has too many cars. You can share a chauffeur and I only want the company to pay for two of your cars. You can either get rid of them, or pay for them yourself.”
The end of the tax year was looming, and I had more tax to pay than my reduced salary would cover. With the share price on the floor, I couldn’t expect a dividend payment to get me out of trouble. Selling the house in Bray was the obvious thing to do. We put it on the market and after several weeks took an offer of £1.5m for it. This left me £200,000 short on what I’d paid for it. I bought a smaller house nearby with a mortgage that exceeded its value.
It seemed, no matter what I did, someone was around to kick me where it hurt and for the 18 months after I made that speech in April 1991, each day spilt into the next with the levels of panic and fear rarely dipping below fever pitch. Every time I picked up a newspaper or turned on the TV I would shout at it – someone somewhere would be making a joke at my expense or misreporting what I’d said. Then came the day in October 1992 when Jim popped his head through the door between our offices.
“Can I have a word, Gerald?” When I went into his office, he looked up at me from his desk with a frown.
“What’s up?” “Take a seat, Gerald.” He had never sounded more like Mr Mackay.
“Gerald, I’m going to get rid of you. It just isn’t working.”
“But I’ve done everything you’ve asked me to do. I’ve stayed out of the papers, we’ve brought in McKinseys, we’ve refinanced, I’ve sold my house, we’ve shut shops. What else could I have done?”
“I’m going to pay you a year of your three-year contract and I would like you to leave immediately.”
“But we’ve started to turn the corner. We’re through the worst.”
“I realise this must come as a shock to you.”
He wasn’t wrong: I hadn’t seen this coming and was so taken off-guard that I didn’t really know what to say.
“What about the rest of the board?”
“There will be a board meeting tomorrow where this will be discussed. Feel free to raise the issues you’ve just mentioned with everyone else tomorrow.”
The board was now so weighted in Jim’s favour that I didn’t much like my chances of persuading them I should keep my job. When we met, there was almost no discussion. I was out. The £350,000 payoff would barely cover my negative equity and the coming year’s school fees. I wasn’t just unemployed, I was penniless.
Extracted from - The Rise and Fall . . . and Rise Again by Gerald Ratner to be published by John Wiley on November 1st