(From the Archives – 2016) Smurfit Revisited

Dr Michael Smurfit’s legacy is secure. As he prepares to celebrate his 80th birthday, Ireland’s most consistently successful business leader can reflect on a career that saw him transform a small family-owned box-maker into Ireland’s first global leader in its sector. His defining role as the first Chairman of Telecom Eireann arguably created the infrastructure for Ireland’s multinational-based economy. Twenty years after appearing on the cover of the first ever issue of this magazine, he sat down again recently at the K Club with Decision Editor FRANK DILLON. PHOTOGRAPHY BY MARK MCCALL

Twenty years is a long time in the life of any individual so it unsurprising that Dr Michael Smurfit is a different man to the figure we interviewed 20 years ago. At 60, Dr Smurfit was a man in a hurry, building a phenomenally successful global corporation that now has revenues of over $8 billion.

The prospect of speaking to an eager young journalist at first seemed an irritant to him that day when we met at the company’s HQ in Beech Hill.

The frostiness soon evaporated. I didn’t grill him on the latest short-term developments in the publically quoted multinational, somewhat to his surprise. Instead, we talked that day in some detail about family, about culture and the values and strategies he believed made his company successful. He relaxed and opened up. Afterwards, he thanked his guest graciously for what he said was a very reflective and interesting discussion and wished me every success with my new publication.

There is less urgency when I meet him again recently. Casually dressed in his golf gear in the splendour of his home Straffan House at The K Club, Michael Smurfit is still an active business man, with close on 100 investments, he tells me. Though he stepped down as Chairman in 2008, he is still a major shareholder in Smurfit Kappa, and proud of the elevation of his son Tony to the CEO role last year.

The demeanour, however, is that of a man who has nothing to prove.

Dr Smurfit is excited at the time by the hosting of the Irish Open at the K Club that week. It represents a return to top level golf at the Club he established and now owns outright. It is 25 years since the impressive estate opened, 10 since it hosted the Ryder Cup that put it on the map of world golf and almost 80 years to the birth of Michael W. J. Smurfit in St Helen’s, Lancashire. After our meeting, Prince Albert of Monaco is due to arrive for a private visit coinciding with the golf tournament. They are well acquainted from Dr Smurfit’s role as honorary consul to the principality.

Getting to 80 is an achievement in itself, he says, one that previous generations of Smurfits didn’t enjoy. Mortality is something he thinks about periodically. “When you see your friends passing on or you consider a terrorist attack like the one at Brussels airport, you realise, that could have been you. No Smurfit made it past the age of 70. I’m blessed to have had good health, especially in my latter years,” he notes.

When a company is doing very well, all the owners see is a better year. Only when they see a downturn or a tech change are they are open to suggestions. You can buy many businesses but you can only sell them once

His life story is well documented in a weighty autobiographical volume published two ago entitled, ‘A Life Worth Living’. It was a monumental effort that involved a small team working for five years. It charts the family’s modest beginnings and struggles for viability in the Lancashire of the 1930s, the move to Ireland and the setting up of a small box-making company in Rathmines through to mega mergers at the turn of the last century and beyond. “We had to take some of the best bits out on legal advice. There were some nice stories we couldn’t run with because they were probably slanderous,” he smiles.

There’s a lot to be proud of in terms of business achievements along with some regrets in a life lived at a frantic pace. “I made a few stupid investments and I backed the wrong people from time to time, but clearly I made the right decisions a lot more often than I made wrong ones,” he says.

One source of regret is pushing himself too hard down a ski slope almost 20 years ago. The resulting injury means that he can no longer play golf and only got to play the K Club course on a small number of occasions. It was characteristic of his approach to life. “I think most successful people are like that, very driven in everything that they do,” he says.

Exercise consists of two hours a day of walking, maintaining a constant 75 kilos, the same weight as he was in his 40s.

The Michael Smurfit of his 40s was a difficult man, he readily accepts. “Up to my mid 40s, I didn’t like myself and I don’t think many people liked me either. I was so self-centred – I wasn’t a bully but I was self-centred. I couldn’t wait to wake up. I went to bed at night with a pen and paper as I had so many ideas. I must have been very difficult to live with. Family holidays always had to be cut short so I could attend to some urgent business,” he recalls.

The realisation soon dawned that to grow Jefferson Smurfit Corporation would require the development of a team. A cadre of hand-picked senior management figures like Howard Kilroy and David Austin were to help transform the fortunes of the Jefferson Smurfit corporation. “I realised that I needed to bring in management – I needed to motivate them. It took me time to realise that I needed to focus on key people. You don’t automatically get respect, you earn respect, so I changed my focus around that, which made a big difference to what we were able to achieve.”

For most of his time at the helm, Michael Smurfit remained very singly focussed on the task of building what he happily refers as a ‘dull, boring type of business’ – making cardboard boxes. In this, he differed from Dr Tony O’Reilly, a contemporary to whom he was often grouped with as one of the two great titans of Irish business from the 1970s onwards.

O’Reilly’s business career has not ended well, having filed for bankruptcy last year. Unlike Smurfit, O’Reilly’s interests ranged from newspapers to food to luxury goods and oil exploration amongst others, as well as deep involvement in philanthropic interests such as the Ireland Fund.

Dr Smurfit has huge sympathy for him.

“I went public about the decision of AIB to go after him. I was horrified by that decision. He didn’t deserve to have his career ended in bankruptcy. I wrote to him at the time and got a very nice reply. There but for the grace of God … I used to meet him at dinners and I remember worrying that he was trying to do too much. He must have had boundless energy. I stayed focussed. I put all my eggs in one basket and watched the basket.”

It is a sad decision made by the older generation of the population from which the ramifications for the younger generations will be felt for many years to come

One of the acknowledged attributes of Michael Smurfit is his capacity to make good deals. When buying a business, for example, finding a vulnerability on the part of a seller is the key to being able to extract value, he says. “When a company is doing very well, all the owners see is a better year. Only when they see a downturn or a tech change are they are open to suggestions. You can buy many businesses but you can only sell them once.”

Understanding the intimate workings of a business is crucial, a task that proved relatively easy for Michael Smurfit given his immersion on the shop floor of the business as a young man.

“I worked every machine, including working in a paper mill. I knew what made a good corrugated box – nobody could fool me. In the industry people knew that I knew this and I could tell a lot about a business from a visit to a plant.”

Successful acquisitions and mergers to produce scale and market dominance are commonly viewed as the key driver of the Smurfit business but the man who built it says this was only part of the story.

“That culture we installed back then of being the best was the real driver – to have the best product, best service, lowest working capital, best on-time delivery and lowest stocks etc. These were the parameters of running a world class business. We made 29% return on sales for 25 years. It just so happened we became the biggest by being the best.”

Diversity was also as important as scale. “One of the reasons I diversified out of Ireland was sheer fear, specifically because of the Anglo Irish Free Trade Agreement. I knew that all of our customers would go out of business and that’s exactly what happened. The shoe box and shirt box business all went to Asia. We had to get out of Ireland.”

The decision to sell to Madison Dearborn was the first stage in stepping back from the empire he had built over five decades and was ‘opportunistic’, he agrees. “When they came to see me I thought it would be about something else, they had studied the company and thought it would do well in a leveraged buyout. I went to the family, the board and finally the shareholders. That’s not an easy thing to do when you run a company the way I did but that’s the decision that we made. Fifty-four years was enough for me.”

Telecom Tribulations

The one major diversion that Dr Smurfit made from running the Smurfit corporation was taking up the invitation of the then Government to chair Telecom Eireann, the newly spun-off semi state company in 1983. Feargal Quinn, the driver of another successful family-owned business, Superquinn, took the chair at An Post, the other part of the old Department of Post & Telegraphs.

Leading Telecom Eireann is one of his proudest achievements.

“What we inherited was such a shambles, an unbelievable mess. Words couldn’t describe how difficult it was to get a phone. It was worth £500 extra on the value your house if you had one,” he recalls.

One of the first people that he spoke to was Tony Mullins, then chief technical officer. At the time the organisation had geared up for purchasing the latest analogue system to upgrade the network. Mullins briefed him on a more advanced option, they travelled to Sweden to check out the latest systems there and needing no further convincing, the new Chairman cancelled the order and specified that the future needed to be digital.

“To have someone like that and not take their advice would be stupid,” he observes. “We were one of the first countries to install a digital network. Had we not gone down that road I don’t think we would have been able to attract a lot of the foreign direct investment that came into this country later.”

Dr Smurfit’s motivation for accepting the offer of the Chairmanship was around ‘giving something back’ to the country, he says. He asked for a salary of IR£7,000, considerably more than comparable positions offered at the time. The Government were somewhat taken aback by this demand but agreed.

The rationale for this wasn’t around personal reward. This would have been small money to him. Rather it was around establishing the status of the office of the Chairman. “I never took a penny in salary or expenses from Telecom Eireann. I didn’t have a car or a secretary. I donated all of the salary to Camphill (a charitable trust working with people with special needs) but didn’t reveal that at the time.”

Dr Smurfit relished the role and played hardball with his political masters. “I just ignored the politicians. I told them that If you don’t like what I am doing you can fire me but I will do the best job I can, as I see fit.”

Smurfit believed that Telecom Eireann, then highly regarded for its state of the art telecom service, had the potential to grow an international business and to create high quality sustainable jobs. Building a new HQ on the site of the old Johnson Mooney & O’ Brien bakery in Ballsbridge was part of this vision but a controversy involving the circumstances of the buying of the site led to him being effectively forced out of the role in 1991.

In a radio interview, then Taoiseach Charles Haughey suggested that Dr Smurfit should step aside from his role until a full investigation was completed. “It was one of the most stupid things a politician could have said because it is not possible to step aside for a long investigation when you are leading an organisation. He should have said nothing.” In evidence before The Moriarty Tribunal in 2001, Dr Smurfit revealed how Haughey had solicited a donation from him in 1989 of Stg60,000, despite denials from the former Taoiseach that he had done so.

“Any money I was asked for was for the party – one donation didn’t go there but I didn’t know about that at the time… there was no way I could have known about it,” he says now. Despite this and deep annoyance and hurt about how he was forced from office at Telecom Eireann, Dr Smurfit says time has healed any wounds in relation to the former Taoiseach. “I have moved on and I think history will be kind to Mr Haughey. He achieved a lot. He was a fascinating man with many flaws but the side to him that came out in the Moriarty Tribunal was not the one I saw.”

He believes that Enda Kenny and Michael Noonan have also performed a great service to the country in restoring the economy to good health and was surprised that they were not re-elected decisively earlier this year.

“I thought that they would be a shoe-in. I don’t live here so I don’t understand all of the nuances, my understanding is that the Irish didn’t get the feel good factor. Balance of payments is not something the average person would give a damn about or the IMF outlook. We were getting all the kudos at the international level but the person filling up their car with petrol or getting their groceries wouldn’t have got a sense of that.” He is concerned that the minority administration will not be a secure one. “That’s not stability. A minority government is a licence for troubles ahead,” he says.

That’s all the more important as Brexit will be a huge challenge to this country. “It is a sad decision made by the older generation of the population from which the ramifications for the younger generations will be felt for many years to come. As a result of this the markets will remain very volatile and sterling very weak for some time to come.”

Begrudgery

Having built much of the success of the Smurfit corporation in North America, Dr Smurfit is well positioned to compare and contrast business and personal cultures. “Willingness to change was one thing that struck me. If an US executive had to relocate to the East Coast from the West or vice versa, for example, that is not a problem. In Ireland, moving between Maynooth and Dublin is a problem.”

A begrudging attitude to success has traditionally been a problem in Ireland too although that is now changing. “You know the Irish character as well as I do. It’s a trait we have and not an admirable one. The Irish were downtrodden for centuries, we’ve had an anti-authority attitude and have traditionally been a little suspicious of success. Only a very small number of Catholics made it to the top so that’s understandable.”

“In the US they look up to success, but then it is made of a people like the Irish or those from other parts of Europe who were dispossessed and Went there with the idea that they could make a success of things.”

Modern Ireland is a different place, however, and we have much to be proud of. “We punch well above our weight. We are an extraordinary nation. Just look at sport, despite the fact that we have our own Gaelic games to support, we also excel in areas like rugby and golf. We’ve hosted the Ryder Cup here. Then look at entertainment area, U2, the Corrs, Riverdance.

Graduate School

Another key legacy of Dr Smurfit is the UCD Graduate Business School that bears his name. One of the areas we discussed in our interview in 1996 was the absence of women in the higher echelons of the Smurfit organisation, something he was keen to put right. He believes that the School has played a role in this in general.

“One of the reasons I helped start the Business School was to see if we could get more trained women in the system. There wasn’t a pool then. I believe that the pool is much greater now. I don’t agree with gender quotas. That’s the wrong approach. It must be based on ability and your achievements. The Business School is now qualifying more female students than male in the master’s category according to my last conversation with the Dean there.

“I get great pleasure from the School and I read all the papers they send me,” he continues. “I’m very proud of it. When I had considerable resources I wish I had put some of those resources in the Foundation however I am planning to do so in the future.”

The Crash

So did the crash affect him badly? “Yes, I lost a fair bit in the crash although there has been a recovery – property, bank shares, Smurfit shares went under one pound. A lot of my investments tanked.” The bursting of the property bubble was one he anticipated although the toxic effect was one he had not reckoned on, he says.

“What I didn’t know – and I consider myself fairly astute – was how property had infected every aspect of our economy, the car industry, the advertising industry, the professions, the taxes the government was taking in from homes etc. I anticipated the property crash but didn’t understand how deep it had got into every fabric of the country, how it destroyed earnings. I regret not studying the thing in greater detail and understanding where this was going to end. It wasn’t just 50% off property prices, it was 50% off a lot of things.”

Could the Government at the time have done more to prevent it? “I don’t think so. Not when you had foreign banks coming in and offering people 120% loans. Banks were throwing money at people. One bank rang me up at the time and said we don’t have you on our books and we’d like to lend you €50 million. I said ‘no’. OK, what about €100 million then? they replied.

Dr Smurfit says he doesn’t borrow personally and doesn’t allow The K Club to operate an overdraft facility. “Early in my career I did borrow when interest rates were 15 and 20%. It’s easy to borrow, but harder to pay back.” Money is not a personal driver for him, he says.

“I have never been money conscious. Money was never a goal or to be famous. My goal was the make the company I was born into with my dad’s name respected. That’s what I set out to achieve and what I hope I have achieved. I have got a lot of honours from countries through the years, Italy, Spain, Poland, France, the UK and one of the reasons I accepted those honours was on behalf of my dad. This is what he should have had.”

One incident from the 1950s is highly significant in this regard and still rankles with him. Having produced a breviary for the Catholic church, a massive project at the time, Jefferson Smurfit Senior, a convert to Catholicism, was set to be awarded a Papal honour by the Vatican.

The Archbishop of Dublin, John Charles McQuaid, intervened to block it, however, on the grounds that he was born a Protestant. “My understanding is a Catholic is a Catholic is a Catholic. You have the same opportunities to enter heaven. My dad was very hurt by it.” Does that affect his religious outlook?

“I have a reasonable degree of faith. I had good instruction in Catholic teaching when I went to school in Clongowes Wood and for a year was giving thoughts to going to Maynooth. I know there is something there. What exactly I don’t know as nobody has come back and told me,” he concludes.

As he contemplates his life at 80, that’s one mystery he seems happy to park for now at least. D

This article was first published to mark the 20th anniversary of Decision magazine in 2016