back

Some related articles :

The Reluctant Opponent

By: Phillip Inman
Guardian, August 17, 2002

It should never have happened to Lord Paul. The 71-year-old Labour supporter is head of a steel firm, Caparo, which is subject to one of the first strikes in defense of a company pension scheme in the UK.

While many top firms have closed their pension schemes to new workers in an effort to cut costs, most have pledged to honor their commitments to existing employees. Caparo, which employs 2,400 workers in some of the most depressed areas of Britain, said in April that its final salary scheme would be frozen. Like most manufacturers, it has been hit by the high pound and collapsing exports.

Workers would be shifted into a personal pension-style stakeholder scheme that would rise and fall with the stock market. The plan had the benefit, for Caparo, of shifting the risk of providing adequate pensions to its employees.

Staff in three of its plants reacted angrily to the proposals, believing an offer of talks was made in bad faith. Independent trustees had already been found for the new scheme, which union officials took to mean the deal was set in stone.

A work to rule and overtime ban followed. The company reacted with an offer to reinstate a watered-down version of the final salary scheme. The compromise deal would cap the company's pensions liability. But union officials rejected the offer and pressed ahead with industrial action this week - with more to follow next week.

Swraj Paul has been a Labour supporter from the moment he arrived in Britain in 1966. He has sat at the party's top table for 20 years, first with his long time friend and mentor Michael Foot, then with Neil Kinnock, John Smith and Tony Blair. They have all listened to the quiet-living vegetarian teetotaler and his consistent message that manufacturing is the route to economic success. He has told them that success can be built on a commitment to look after staff as if they were an extension of his family, even when profit margins are wafer-thin and competition intense. Tony Blair's appreciation extended to telling John Major that Mr Paul should be made a life peer, as he was in 1996.

Today he seems less a Labour supporter and philanthropic entrepreneur than an old-style steel baron.

Engineering union boss Sir Ken Jackson, a moderate who is close to the prime minister, accused him of "appalling treatment". His union, Amicus, has so far refused to strike, but the steel union ISTC, which ranks as another moderate union, is backing the industrial action. Officials have accused Lord Paul of bullying workers into accepting cuts in their pensions.

Spotting a political opportunity, Tory pensions spokesman David Willetts has pointed out the irony of a prominent Labour businessman fighting unions over the introduction of a Labour policy - stakeholder pensions.

But Lord Paul is unapologetic about his determination to cut costs and his handling of the dispute. He points to the decline in the revenues and profits across most of Caparo's businesses. What was once a listed company boasting revenues of ё500m and operating profits in excess of ё50m is now struggling to keep out of the red, with revenues of ё350m.

"For any business a final salary scheme is an unlimited liability. We are not trying to cut costs; the intention was always to maintain the current level of pension contributions, but we cannot afford to give a pension that is two-thirds of pay.

"We wanted to bring in a pension that gives the workers something and allows the company to keep going. We proposed a stakeholder pension, but that was to be the beginning of discussions.

"The union was told to respond within two months. It asked for a one-month extension and we gave it. During discussions, we presented a compromise that meant keeping the final salary scheme and also contracting in to the government's state second pension. It means some of the liability for guaranteeing pensions is shared with government.

"Now we have something that is almost the same as the scheme put forward by the union. I don't think the ISTC is looking after the interests of its members because it is bringing about a situation where the factories could close and nobody will gain."

From the mouths of many industrialists these comments would be considered threats, designed to inflame a dispute where factory closures are the endgame.

Lord Paul says this could not be further from the truth. He founded the company in 1968 after two years in the country looking after his daughter, Ambika. He and his wife had brought their youngest child to Britain in search of doctors who could cure her leukaemia. Their attempt to save her failed. Lord Paul says that, to occupy him while he grieved, he set up his own firm.

Passage from India

Business life in India during the 1960s had become stifling, he says, with increasing corruption and cronyism. More than 10 years in the family steel firm in India had given him many contacts in Europe. He began trading in steel. Within a few months, he had borrowed ё5,000 and bought a factory in Huntingdon, making steel tubes for the gas industry.

His sense of social justice brought him into Labour party circles, and it was Michael Foot who persuaded him in the mid-1970s to build a steel factory in Tredegar, south Wales. By this time his empire was growing quickly, mainly through the judicious use of his own money and government grants designed to boost areas of high unemployment.

The 1980s saw his empire extend to the US, where he is still the largest producer of steel tubes. He listed the company and sold 20% of the stock, using the proceeds to extend his reach to the European mainland and back to India, at the invitation of then prime minister Indira Gandhi.

He shocked workers and unions during this period with demands for flexible working and continual cost cutting. If anything, he says he met more resistance in the US than in Britain, and often his most conservative opponents were executives keen on building empires supported by unnecessary layers of management.

In fact, most of his criticism of British business relates to the failure of management. In the present dispute, he says he cannot be seen as a "here today, gone tomorrow" executive who wants to pillage company funds for bonuses and share options. As non-executive chairman he lives on his pension. He says that when sales began to slide three years ago he persuaded his three sons, who have held the top three executive positions since 1996, to cut their salaries by almost 40%.

"Tell me who else has taken these kinds of cuts in salary? Everything I have and they have is in the company. The unions have said the company saved money by taking pension holidays for several years. But all the money we have saved has gone into the business. No money has gone out of the business. When there have been pension deficits, we have topped them up."

In his autobiography, Beyond Boundaries, published in 1996, he lambasts management consultants and praises firms that train their own and stick to their purpose. He recalls how he once listened to their advice and bought the Fidelity electronics company. He was going to be the saviour of the British electronics industry, but it all came to grief after he found the company riddled with fraud and improper accounting. He famously accused the auditors, Touche Ross, of misleading him and sued them. He lost, but it set the tone for the current debate on auditor liability.

In defence of his credentials as a promoter of social justice, he also denies claims that he is a member of the tax dodging community following the decision to keep his 100% holding in Caparo International registered in the British Virgin Islands. He delisted the company and in 1991 bought back the 20% he did not own.

"I paid tax on my salary and I pay tax on my pension. All the subsidiaries are owned by Caparo Limited in the UK and they pay tax. We don't export profits abroad, like other companies."

So why register the shares abroad? "I only did it so that if I should sell the company for someone else to run I don't pay tax. But if they want to sell any of the assets, the new owner must pay tax because they are registered in the UK."

The likely new owners are his twin sons Akash and Angad, 42, and Ambar, 32. Ambar has a liking for the film business and was a producer of Lock, Stock and Two Smoking Barrels. He may opt out if his film business succeeds.

Friends say the twins are more committed but could be at the root of the dispute, using it to establish their own credentials as tough managers. Lord Paul denies that they have mishandled talks with the unions. But they may be trying too hard to follow a tough act.

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Action on Aging distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.