So what makes Sir George, who was forced to step down as chairman and chief executive of 3M last year on reaching the age of 65, think he has anything to teach the fund management industry?
His mind immediately races back to 2005 when he joined 3M, a sprawling conglomerate perhaps best known for Post-it notes and Scotch tape, as one of the few Britons to lead a large US company.
“Operating margins had risen from 17.5 per cent to 23.5 per cent from 2000 to 2005. I knew that was an unnatural act for a company of 3M’s size. I said there was a problem here.
“Organic growth was only about half of the market so we were losing market share. New product vitality [the percentage of sales derived from products introduced in the previous five years] had slipped from about 30 in 1979 to single figures. We had rapidly deteriorating customer and employee satisfaction. Yet the [financial] figures looked absolutely magnificent.
“This was a company on a glide path to disaster yet the external indicators at the surface level all looked fine. But it was a company that was sick. If we had not reversed course, this company would have become another Kodak, I’m absolutely convinced about that.”
Kodak, the 131-year-old US photography company, filed for bankruptcy last year.
According to Sir George, all of the data needed to spot 3M was struggling, such as its new product vitality index, were publicly available. Yet, he says, none of the analysts and shareholders who queued up to meet him ever asked about these soft indicators.
“The analysts, who were trying to predict the next quarter’s earnings, weren’t interested,” he says.
Insights such as this have persuaded Sir George that long-term investors, focused on the underlying health of a company rather than on short-term earnings expectations, can consistently beat the markets.
As a result he has been named inaugural chairman of Ownership Capital, an Amsterdam-based start-up that aims to run concentrated, long-term equity portfolios where soft measures, such as environmental, social and governance factors, will be rigorously analysed alongside the traditional metrics of revenues and earnings.
The boutique will then engage with its portfolio companies in an attempt to improve their performance further.
Sir George expresses a degree of frustration that the good ESG work he says 3M did, both prior to and under his stewardship, went unrecognised by the market, even though he is convinced it added value in the long run.
He says 3M adopted the mantra “preventing pollution pays” more than 30 years ago and worked hard to reduce its energy use, minimise packaging and integrate materials such as biodegradable plastic.
Yet he says 95 per cent of people did not care about these “soft indicators of the culture of a company”, despite the likelihood that they should reduce the chance of a company having a serious accident or poisoning a river – failings likely to weigh on the stock price.
During his tenure, Sir George abandoned the “treadmill” of quarterly earnings guidance in an attempt to get shareholders to focus on the bigger picture. But he laments the fact that fund managers “are responding to the objectives of the people that manage them”, which in most cases means chasing short-term performance, which in turn drives asset growth.
“Three years ago at 3M we took the decision to try and move our investors to a more long-term approach, but I’m afraid the preponderance of investors is still short term,” he says.
Despite these initiatives, Sir George was a bogeyman to some in the corporate governance community during his time at 3M, as he committed the “sin” of being both chief executive and chairman, a dangerous concentration of power in the eyes of purists.
Perhaps unsurprisingly, Alex van der Velden, chief executive of Ownership Capital and a strong advocate for most things ESG, does not see the combined chief executive/chairman issue as completely black and white.
“Generally that is frowned upon, but it depends on the nature of the person and the structure of the board,” Mr van der Velden argues.
“To separate [the roles] just for their own sake because that looks good is nonsense. Often you may have a founder that owns 20 per cent of the shares, or there are lots of engaged owners. You can be sure there is countervailing power there.”
Following his retirement from 3M, Sir George has vacuumed up an impressive array of roles, from chairman of Arle Capital Partners, a private equity house, to director of PepsiCo, Hitachi, Stanley Black & Decker and Archer Daniels Midland.
Yet despite the apparent pressure on his time, he says his involvement with Ownership Capital is not merely titular, and that he will be able and willing to engage from a position of equality with the chief executives of investee companies.
“It’s not just a figurehead position, it’s a real live engagement position,” he insists. “With a focused portfolio, a score [of companies] or not many more than that, we will have time to do this.
“I have done thousands of investor meetings personally. The degree of engagement we will get from companies will be very positive. There will be joy in getting this kind of engagement from investors.”
Sir George is convinced such a close partnership with the portfolio companies will also give valuable insights into the quality of the management and its willingness to innovate, factors he believes are crucial to the success or failure of a business.
His personal insights range from Apple, 3M’s biggest customer, where Steve Jobs, the technology company’s late chief executive, “had the guts and vision” to initiate real change, to Eastman Kodak, which invented the digital camera in the mid-1970s but was overtaken by Canon and Sony, “which ultimately became its destroyers”.
“They did not understand the business they were in. They thought they were in film. They were in images,” says Sir George.
“We are trying to get a sense of the management because, in the end, it’s down to the people.”
Number of employees
Sir George Buckley
University of Huddersfield, BSc Hons Electrical and Electronic Engineering
University of Southampton and University of Huddersfield (PhD in engineering)
Managing director, central services, British Railways
Chief technology officer, Emerson Electric Company
President, Mercury Marine
Chief executive, Brunswick Corporation
Chairman and CEO, 3M
2006 to present
Board director, Archer Daniels Midland and Stanley Black & Decker
2012 to present
Chairman, Arle Capital and director of Hitachi and PepsiCo
Chairman, Ownership Capital
Get alerts on Fund management when a new story is published