International Success the Old-Fashioned Way
Brian Powers ’74 Uses Integrity, Judgment, and Analysis to Drive Private Equity Firm

Cullen Couch

Remember Y2K and the bleary-eyed corporate IT teams scrambling frantically to save their businesses from imploding at the tick of a clock? Happily, their efforts ensured that the new millennium would dawn with the infrastructure humming contentedly, and we all breathed a little easier. But that complacency was premature. Other more insidious forces were at work that would soon damage public trust in the free market system. They were the corporate scandals at Enron, Tyco, Vivendi, WorldCom — the list of companies is long and still growing — that revealed an appalling breakdown of institutional ethics in the corporate world.

And that disturbs Brian Powers ’74, Chief Executive Officer of private equity investment firm Hellman & Friedman and a man who has spent his entire professional life playing, and winning, by the rules. Powers’s management style relies heavily on teamwork — a system built on trust — and it has been a resounding success in an array of businesses around the world, including publishing giant Axel Springer, television broadcaster ProSiebenSat.1, racing company Formula One Holdings, Australian newspaper publisher John Fairfax Holdings Limited, and reinsurance company Mid Ocean Limited. Powers understands the performance pressures at the top of corporate life and sees a dire need for rebuilding an ethical standard that used to be the norm. “The barbarians aren’t just at the gate; they are next to you,” says Powers. “Sometimes the barbarian is your boss pushing you to do things. There are now greater temptations and fewer institutional safeguards built in to prevent ethics abuses.”

“Financial Alchemist” Attracts International Attention

By any measure, Powers’s business career has been remarkable in both speed of ascent and breadth of experience. Raised in Massapequa, New York, Powers went to Holy Cross to play football and then transferred to Yale where he received his undergraduate degree in economics. Powers excelled in his studies at UVA Law School. He graduated near the top of his class and accepted a teaching fellowship at Stanford University Law School. A year later, he joined Debevoise, Plimpton, Lyons & Gates in New York where he worked in their mergers and acquisitions group. After two years, he joined the Ford Foundation, originally as their financial counsel, but after a few months the Foundation put his demonstrated financial acumen to work running their venture-capital and real-estate portfolio. A few years later, he caught the attention of Australian financier James D. Wolfensohn, who hired Powers to help him start James D. Wolfensohn, Inc., New York’s first boutique merchant bank.

In 1987, the legendary Hong Kong holding company Jardine Matheson, the model for novelist James Clavell’s “Struan and Company,” hired Powers, just 37 years old and an American, to be its managing director, or taipan. A New York Times article written shortly thereafter described Powers as a “financial alchemist” who had developed a reputation for creating and successfully completing highly complex financial restructurings that were the wonder of Wall Street.

After serving at Jardines, Powers returned to Wolfensohn. He joined Hellman & Friedman briefly in 1991 and then served for five years in Australia as Managing Director and Chief Executive Officer of both Consolidated Press Holdings Limited and Publishing and Broadcasting Limited. Powers rejoined Hellman & Friedman in 1999 and since then has led the firm’s worldwide investments in media, professional services, telecom, software, and technology service industries.

As one who quickly developed a reputation for superb business instincts and a strong work ethic, Powers had many options to join businesses that intrigued him. “I never left a job because I didn’t like it,” he says. “Quite the contrary. I just got excited and enticed by things that at that point looked really fun and interesting. That’s why I went to Hong Kong, then Australia, and they each turned out to be great experiences.”

A Formula for International Success

Powers doesn’t follow the model of an all-powerful CEO running the company as a personal fiefdom. Rather, he relies on a strong management team. “I’ve been lucky enough to be chief executive or chairman in most places I’ve been, and playing that leadership role as part of the team is very enjoyable. I also think it’s better than the autocratic approach that you see in some organizations. I like developing the team and being very clear on what you are trying to accomplish: drive shareholder value while protecting the interests of all the stakeholders, including the employees.”

“I LIKE DEVELOPING THE TEAM and being very clear on what you are trying to accomplish: drive shareholder value while protecting the interests of all the stakeholders, including the employees.”

Powers describes Hellman & Friedman’s strategy as “pretty simple.” First, the firm looks for strong “defensible franchises” with earnings growth potential and with free cash flow that doesn’t have to be put back into capital expenditures. Second, they look for businesses either with strong management teams or the ability to attract them. As the firm finds businesses that fit these criteria, it develops the expertise needed for those industries, and then looks for any opportunities available in OECD (Organization for Economic Cooperation and Development) countries. According to Powers, Hellman & Friedman doesn’t invest in developing countries since few businesses there fit the firm’s criteria. Further, “we also typically write equity investment checks for $200–300 million and there are few opportunities of that scale in those countries.”

Business practices vary widely in the different countries, says Powers. His firm must adapt to the market and understand its economic cycle, its labor unions, its employment laws, and the cultural norms prevailing in business activities such as marketing campaigns — even when sharing a common language as in England or Australia. “Those issues are important in how you run the business,” says Powers, “but also very important in evaluating management cross-culturally. That’s one of the hardest things to do. There’s a great tendency to overvalue a manager in a non-English speaking country who can ease the communication problem because they have been trained in America and speak your language. I’ve evaluated talent for many years, and I still find it much harder to evaluate a manager from a different culture than one from America.”

Ethics and Teamwork

Powers would agree with Webster’s definition of teamwork as “work done by several associates with each doing a part but all subordinating personal prominence to the efficiency of the whole.” Since an ethical lapse within that structure could well destroy it, one can see why Powers values integrity so highly. It’s not only morally right, but fundamentally important to the success of his management style. He’s not so sure others agree.

“You would like to think ethics is a smart way to do business and I did think that was clearly the case some years ago,” he says. “In the world we’re now living in — and this is a fairly depressing observation — it’s not clear now that ethics is also good business. In theory, ethics should also be good business. In the long run I’m still sure that it is. Reputation always serves you well in tough times. But I’m a little cynical now that no one is holding people to a high standard. People are less demanding of an impeccable reputation as a prerequisite to doing business with someone.”

The Sarbanes-Oxley Act is a step in the right direction that has made directors more aware of their duties, but Powers is not sure how much that process translates into substance. “I’m not convinced that Sarbanes-Oxley has yet made a difference in protecting investors and consumers from corporate malfeasance.”

A strong supporter of the Law School (his son Jeremy is a second year), Powers thinks it is now more important than ever to teach ethics because “there are more pressures on people to cut corners than there ever have been. When I came out of law school, firms had an incredibly strong sense of ethics and so did their clients. A corporate scandal would kill a company’s stock price, kill it with its customers, and often cost the chief executive his or her job. Today, it’s not clear that happens. Where you used to have a senior person at the firm or business as the guardian of ethics, today it might be your boss who is pushing to make his budget or bonus. That is very hard for someone fresh out of law school to contend with. So it’s important to teach that while business success is great, you must always be aware of what’s going on. Most people who end up crossing the line don’t do it consciously, so if a colleague says, wait a minute, this is a problem, it may help that person avoid making a terrible mistake and re-focus on doing business the right way.”

The “right way” has served Powers well. It’s perhaps why he feels so strongly that it’s also the best way. His advice to young people starting out on a career path is to “look at jobs in a shorter time horizon, like five years, and ask which one will be the most fun, the most exciting, the most expanding. The economics are very much secondary to that. Don’t plan your career too much, or over-analyze it. Concentrate more on the opportunities that will excite you day-to-day rather than ones that might pay you more or be perceived as more prestigious. And above all, keep your bearings. When all is said and done, there is a real premium on being able to look at yourself in the mirror and saying, ‘I’m proud to work at this organization.’”