Sunday, 19 April 2015

Gerald Ratner and his Catastrophic 'Midas Touch' in 1991

If Thatcherism is epitomised by hard work, graft, determination and unbridled success then Gerald Ratner in the 1980’s is definitely its personification. A famous British businessman, he mixes with the British elite in business and politics and is known throughout the land for his jewellery company Ratners Group. He holds such a high profile even Margaret Thatcher occasionally invites him to lunch. Gerald glories in all his achievements and is happy to be rewarded and feted for them whilst still enjoying life to the full as an adventurer.

Unsurprisingly all this achievement goes to his head and gives him such an inflated sense of self-importance even Icarus would have seen him as arrogant. To be fair he isn’t the only one or the first to feel this way. Famously the home computer genius, Clive Sinclair tried to sell the C5, a small battery powered tricycle that was compared to the K9 robot dog in the BBC science fiction series called ‘Doctor Who’. It was so unpopular that he lost £8 million of his fortune.

On 23rd April 1991 his risky instinct tells him to liven up a high profile talk before the Institute of Directors with something edgy. His thinking is that if he gains applause early on then he will calm his nerves. His solution is to insert some risque jokes.

Initially he is hesitant so he asks his trusted accountant, Hussein for advice. Hussein recommends he goes ahead with them. At the rehearsal, the girl monitoring the autocue questions his use of the word “crap”. Moira, his wife also has doubts. “It's just not that sort of event,” she says. However by now Gerald can not be swayed. He recalls that just a week before he has managed to get away with using the word crap in front of Princess Anne so he will be fine. 

On the night itself he launches into a now notorious speech with the  following quips. ‘We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve your drinks on, all for £4.95. People say, "How can you sell this for such a low price?", I say, "because it's total crap".’ As if that is not insulting enough he digs his own grave by following by saying some of the earrings were "cheaper than an M&S prawn sandwich but probably wouldn't last as long".

There are no indicators at first of what is about to happen. His speech finishes and it looks like he has given another triumphant performance. His jokes are well received and he is given a standing ovation. However the first ominous signs that not all is not quite right soon begin. As he leaves, a journalist from the Daily Mirror runs after him. “Aren’t you making fun of your customers?” the journalist asks. “What are you talking about?” queries Ratner. “You knowingly sell your customers crap. Don’t you think that’s making fun of them?” goads the journalist. Gerald retorts “No I’m not. I was just making a joke and having a bit of fun.”

Ratner thinks this will be the end of the matter. Shortly after he arrives home his close friend, the advertising expert, Charles Saatchi calls. “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 a cascade of bad news pours all over him in a deluge. When Gerald leaves his home and enters his car the driver hands him ‘The Sun’ and remains quiet. A shocking headline mocks him and calls his company “Crapners”. The Mirror’s front page is not much more sedate,  telling its readers that the businessman is dismissing them as “you 22 carat gold mugs”. The enormity of his disastrous aside hits him and Ratner freezes, numb with shock. In his own words "I had the all-time PR disaster. There's no way to deal with it. What I did was so ridiculous, you cannot make excuses."

Sympathy is in short supply even though his comments have been taken out of context. Anger and condemnation to say nothing of the taunting he receives is unrelenting for the next couple of weeks. Finally in desperation Gerald calls his nemesis, Kelvin MacKenzie, editor of populist tabloid ‘The Sun’.

Kelvin MacKenzie scents blood. Hurting others feelings matters not one jot to him as long as he gets the sales figures he wants. Many are offended by his attitude. “He gives it all that jack-the-lad, I'm-one-of the-blokes shit, but he's not. He comes from a middle-class family and talks absolute bollocks. He strikes me as a bully" complains Frank Warren.

Gerald pleads “could you stop doing this now. “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.” Mackenzie is unrepentant. “What you failed to realise, Gerald, was the power of Ratners, what a huge brand it is and what a big story this is.” Begging, Ratner seeks sympathy with “Well, you’ve had your headlines, now I’d like to get my company back.” Kelvin sniffs opportunity and rubs it in by saying “Well, you should apologise then.” A crestfallen Ratner says “Okay, I’ll apologise” and Mackenzie finishes off with “I’ll send a journalist over.”

An hour later a journalist and photographer turn up. Further insult soon follows. Gerald is forced to grovel, hold a toy gun to his head and then make an apology. The next day The Sun runs an “exclusive” interview. Ratner is described as a “disgraced” fat cat and beside a photo of himself with the toy gun that takes up half a page.

The assault is unending. After the speech, the value of the Ratners' group plummets by around £500 million resulting in the near collapse of the firm. Gerald Ratner is left distraught. ‘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’ he despairs. 

Gerald takes business failure very personally. His whole identity revolves around his business success. He goes on to lose his job, his chauffeurs, secretaries and accountants and all that had made him a proud man. A job he had once thought was for life was gone.

Later, others eclipse him during the 1990s for self-implosion. Famously, Nick Leeson manages to bring down Barings Bank. As a friend of his quips "I've heard of people writing a cheque that bounced, but you were the first to write a cheque and the bank bounced." None though has had quite so spectacular a fall as Gerald Ratner or been made to suffer so hard for one lapse of judgement.

Today, Ratner's speech is still famous in the corporate world as an example of the value of branding and image over quality. The story is not yet over for him though. He seems to be on his way back up. He sold his health and fitness club venture in Henley-on-Thames, Oxfordshire, for £3.7m in 2000 and has even ventured into jewellery once again with his own website. He calls it Gerald Online after his first choice of name Ratners Online was blocked by his old company even though they are the ones who had changed the company name away from Ratners to Signet. Let’s hope its not crap!