The Creation of a Legacy
November 18, 09While moderating the 2009 Diamond Symposium, I watched AWDC Chief Executive Officer Freddy Hanard, who was sitting in the first row, intently listening to every word. From my perspective, Hanard had moved away from the glamorous Antwerp Diamond Conference format that featured the likes of Bill Clinton, Al Gore, Joseph Stiglitz and Sir Bob Geldof.
The symposium concept provides an opportunity for every single player to have input in the debate. The workshops preceding the symposium are built around the most essential subjects, and everyone is free to contribute opinions to be crystallized in messages to the plenary. The symposium concept has turned Antwerp into the major center for debate. It has made the event far more meaningful.
Some of the speakers mentioned the impact of last year’s symposium, which had made it clear that a significant decrease in rough supply plus painful redundancies throughout the diamond pipeline were inevitable. The producers, banks and rank and file all acted in a most responsible way. That’s not because of the symposium, but clearly, the messages may have had some impact.
At this year’s symposium, we counted our blessings. There have been no catastrophes or major bankruptcies. Rough prices, after hitting bottom, have come back up and now we are worried about a new rough price bubble. Polished prices are almost back to the January 2008 level – with some exceptions. As for the banks, to quote ADB bank chairman Pierre De Bosscher, they “have not followed a path of abruptly pulling the plug or enforcing aggressive remedial action with their clients. Instead, they have favored an approach allowing the gradual reduction of shortage of cover. They even approved the financing of new purchase transactions.”
While every businessman was coping with the crisis in the best way for his own company, it was Hanard, whose organization is tasked with advancing Antwerp’s diamond trade and industry as a whole, who provided stewardship in difficult days. Actually, Hanard, a former ABN AMRO banker, had been managing crises from the first day he assumed office in May 2006 in what then was the Diamond High Council (HRD), later renamed the Antwerp World Diamond Centre (AWDC).
It is already forgotten that just a few months earlier, Belgium’s premier, Guy Verhofstadt, together with Flemish Vice Premier Fientje Moerman, literally summoned the president of the HRD to Brussels to demand fundamentally changing the governing structure of the umbrella organization of Antwerp’s trade and industry.
Inheriting a Mess
HRD governance was a mess when Hanard assumed office, and it had been chaotic for many years when various interest groups jockeyed to influence HRD’s management. The premier found that the composition of the board of directors had ceased to accurately represent the constituencies. He demanded changes so that government would have one reliable industry partner to deal with.
Shortly after Hanard took office, a protocol was signed between the federal government and the HRD, containing the HRD’s obligation “to create a new, representative, transparent, legally unassailable and efficient umbrella organization within the sector.”
The reconstituted AWDC board of directors has six representatives of trade. Three from the bourses, one from industry and one is independent. The board of directors reflects what Antwerp is: the world’s largest diamond trading center. Manufacturing is history. This reality also dictated the strategies of Hanard to promote the expansion of Antwerp’s international brand and image, to expand polished markets and to attract rough producers to his city. Firm agreements with the Russians and the Chinese are just two examples of the latter.
AWDC and the Current Crisis
The streamlining of the new organization, which also required the non-profit AWDC to separate from the commercial activities (certification, education and equipment sales) and house those in a separate subsidiary, was hardly completed when the worldwide financial crisis struck. As the revenues of the AWDC come from the charges levied by the Diamond Office on the trading volume, the AWDC was faced with a steep fall in income at the very same time that it needed the money most to step up promotional and marketing activities.
In normal years, Antwerp’s trade turnover is well over $40 billion. In 2009, it fell to merely $30 billion. Hanard’s budget was slashed by 40 percent to some €10 million. As a banker, he prefers to look at EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), which will come to €900,000 this year. Having a budget surplus is not a mean feat.
In a service organization like the AWDC, the lion’s share of expenses is personnel salaries. The crisis necessitated layoffs. In 2009, the staff of the AWDC was down from 113 to 85; at the Diamond Office, from 40 to 34. The remaining personnel had to agree to a significant across-the-board salary cut. The AWDC paid a heavy price. Hanard recognized that, this time, the crisis was structural rather than conjunctural. The redundancies were also necessary for the long term to create a sustainable, effective organization.
So how can Hanard measure AWDC’s accomplishments? An analysis of worldwide trade movements shows that in relative terms, Antwerp’s share in the polished markets has increased significantly in comparison with the other centers during the past year. That may be of little consolation to a trader who may have seen his business fall by some 50 percent. But it is certainly a tribute to the sector’s management.
Low Profile and behind the Scenes
With the integrity and discretion only appropriate (and expected) from someone whose whole previous professional life was in banking, Hanard is closely working with government on various initiatives, including pending legislation solving some of the judicial hardships that have plagued the sector. Not every initiative has actually materialized. The government crisis assistance package, mostly aimed at allowing diamantaires to use their stocks as collateral, failed – not because of the AWDC but mostly due to the lack of cooperation among the banks themselves. Wider uses of stock for collateral purposes remain necessary – even today.
When looking at Hanard from the symposium podium, it crossed my mind that when I consider his most singular achievement, it is something the rank and file may never realize. Previous managing directors invariably left because either they were, more or less, kicked out, or they used the position as a stepping stone for their next careers. One thing the last few managing directors had in common: they never lasted long. That’s not necessarily their fault; the chaotic governing structure always made the job almost a mission impossible.
Hanard is not looking for his next career. Rather, he wants his present position to crown his professional life before seeking retirement. From the podium, I was glancing at a man who is in the process of creating his legacy. That means, foremost, doing something that has never been done before - grooming his successor, who will be fully ready and prepared for a smooth takeover when the day comes.
Although Hanard’s contract runs through the end of 2013 there is every indication that he may not need that long to do what he has set out to do. In order to assure stability and continuity, Hanard has decided to present the board of directors with a successor from within the ranks of the AWDC. Not an outsider or a political appointee, but someone who will – just as Hanard does himself – recognize and respect that he only works for one body, which is the board of directors. The CEO’s sole task is to carry out the policies and decisions of the board. In Hanard’s vision, that is what a good CEO is all about.
The board has accepted Hanard’s choice. The contract with the next CEO, Ari Epstein, has already been signed. Everything is specified in the contract, including the duration period, but it has no starting date. That date will start the very same day that Freddy Hanard leaves – not because his mission is accomplished but in order for the mission to continue.
Have a nice weekend.