Former chief executives at travel firm Thomas Cook, giving evidence to a UK Parliamentary probe into its collapse, have betrayed its family business roots by refusing to take responsibility for its collapse.
Manny Fontenla-Novoa presided over the much-criticised 2007 merger with MyTravel and a series of debt-fuelled acquisitions. He said: “I just believe on the major decisions I got them right and I’m sorry the way it turned out.”
The episode contrasts with the travel firm’s family business roots and early reputation for probity
Harriet Green, sacked in 2014, said she had been forced to leave three years into her six-year turnaround plan: “I believe that all of those actions, if allowed to continue would have positioned Thomas Cook very viably for the future.”
Peter Fankhauser served as chief executive when the firm collapsed, after the failure of his disposal strategy and collected a £500,000 bonus: “I worked tirelessly for the success of the company and I am deeply sorry that I was not able to secure the deal. It was not one-sided that I failed. There was multiple parties who had to contribute to the deal which finally then did not succeed.”
It is possible that each of the individuals declined to take responsibility for their actions, as a result of legal advice. But their failure to do so is depressing, not least because we have been here before with bankruptcies, such as Lehman Brothers.
In frustration, inquiry chairman Rachel Reeves said: “Everybody we’ve seen at Thomas Cook has blamed everybody but themselves. It’s the volcanic ash, it’s the hot weather in the UK, it’s the depreciation of sterling, it’s the debt acquired from someone else. It would be really good to see someone from Thomas Cook say to their customers, suppliers and their employees: ‘We got it wrong.’”
The episode contrasts with the travel firm’s family business roots and early reputation for probity. Raised a baptist, Thomas Cook got the idea of starting holiday excursions after agreeing to take a group of temperance campaigners on a trip from Leicester to a rally in Loughborough.
Following more excursions, he opened his first travel agency on Fleet Street in 1848, with a temperance hotel above.
Cook formed a partnership with his son John Mason Cook who laid the foundations of a global mass travel business after his father’s retirement. Grandsons Frank and Ernest Cook sold the business French company Wagons Lit in 1928. Following the war, it went through various hands as a non-family business, and got involved in a variety of new businesses, including an airline, prior to its final collapse.
Thomas Cook’s 555 travel agencies have passed back into family ownership, in the UK, bought for a reported £6 million by Hays Travel, a family business, the largest independent travel agency in the UK, owned by husband and wife John and Irene Hays.
The deal is a big bite, given that Hays Travel previously ran 190 shops. But John Hays is getting strong support from a relieved Thomas Cook team, along with efficiencies and an efficient online service. Irene Hays is convinced she can make its High Street locations prosper, with the help of events and its efficient online service.
The business was started by John Hays at the back of his mother’s childrenswear shop in County Durham forty years ago. His folksy approach is a marked contrast to former Thomas Cook chief executives. He is a popular figure in Sunderland, who knows the value of a good media profile and starts his day with a Greggs bacon sandwich. He received the freedom of Sunderland in 2016.
Hays already has strong support from its own staff after hitting sales worth £1.04 billion ($1.34 billion) in the year to the end of April which each member of staff receive a £100 bonus for each year of their service, at a total cost of £570,000.
The company has started a foundation dedicated to inspiring less fortunate youngsters to get involved in new activities like health, education and sport. The company agreed to lift its donations to £327,000 (£200,000) last year.
These costs, plus a new office, meant that its sales only led to pre-tax profits of £8.1 million, against £7.9 million. But Hays is not a listed company on a profits treadmill. It is a family business in a position to look after its stakeholders and it has chosen to do exactly that.
Its accounting is conservative. Outstanding commissions of £35.2 million in October 2018 were not included income.
There is no guarantee that family businesses stand the test of time any better than commercial companies.
But there is evidence that they do behave better to their stakeholders, given that families better understand the importance of preserving their reputation, over the long term.