Between Maxwell and Micawber: plotting the failure of the Equitable Life

Abstract

This paper offers reflections on the failure of The Equitable Life Assurance Society. Noting that the collapse of this financial institution precipitated a raft of official inquiries, we provide a detailed analysis and ‘re-view’ of the public inquiry report that was produced by Lord Penrose. The paper observes that Lord Penrose's text presents itself as a factual description of events. Yet we counter that this report remains, at root, a creative product which depends upon narrative strategies of characterisation and emplotment. Analysing the narrative resources and the broader narratological choices that underpin Lord Penrose's account of the Equitable affair, we suggest that this report turns upon a Maxwellian rendering of the drama's key protagonist. Questioning the assumptions, omissions and elisions which underpin this method of plotting the failure of the Equitable, we propose another means of characterising the drama's principal. Building upon a reading of David Copperfield, we proffer a Micawberish alternative to the Maxwellian autocrat favoured by Lord Penrose's text. Readers are invited to consider the relative merits of these contrasting narratives and are, furthermore, encouraged to reflect upon the manner in which the interplay between text, author and reader acts to shape public understanding of accounting, accountability and financial regulation more broadly.

Keywords:

• Equitable Life
• financial regulation
• public inquiry
• genre
• Penrose report
• narrative
• organisational storytelling
• Maxwell
• Micawber

Acknowledgements

The authors would like to communicate their thanks to the editors for their support and guidance. The authors are also grateful to the three anonymous reviewers who provided thoughtful and constructive commentaries on earlier drafts of the paper.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. In a footnote, Penrose (2004) observes that, although it is often suggested, The Equitable (founded in 1762) may not, in fact, be the world's oldest mutual life assurance society. That title, he suggests, may belong to the Scottish Churches and Universities Widows’ and Orphans Fund which was established 19 years prior to the Equitable Life Assurance Society in 1743. In a more recent contribution, however, Roberts (2012) identifies three societies established before either of these pretenders: The Amicable (est. 1706); the London Assurance Society (est. 1720) and the Royal Exchange Assurance Society (est. 1720).

2. Slater (2003) suggests that there were three bidders initially.

3. In February 2002, the High Court approved a compromise scheme between the Society and its two classes of policyholders.

4. The full documentation on this case may be found under the heading: ‘Panel Statements for 1969’ at www.thetakeoverpanel.org.uk.

5. During his lifetime and after his death Maxwell became a very well-known public figure and acquired many epithets. Bower (1988, 1991, p. 540), for example, notes that President Gorbachev employed the term ‘Maxwell syndrome’ to describe the conduct of those ‘Western businessmen’ who had promised to assist the glasnost process but failed to deliver on this undertaking. Both Bower and Maxwell's widow Elisabeth (Maxwell 1994, p. 520) also draw attention to the ‘Max Factor’. This term – more commonly associated with a major cosmetics corporation – was it seems coined by market-makers to express their tendency to discount the stock price of any floated corporation that allowed Robert Maxwell to exercise managerial discretion. Noting the operation of this ‘Max Factor’, Bower (1988, 1991) tells us that in the immediate aftermath of Robert Maxwell's death Mirror Group shares ‘rose from 77.5p to 106p in the expectation that the family would have to sell its controlling interest and without Maxwell the business would make better profits’ (p. 549). In a mocking reference to his wartime record and rank, Private Eye routinely referred to Maxwell as ‘Cap'n Bob’. However, his authorised biographer, Joe Haines (1988, p. 16) suggests that it was the author and (irregular) columnist, Keith Waterhouse, who first employed this term of address.

6. Elisabeth Maxwell suggests that Robert was unfaithful as a husband and a bully to his children.

7. When first published the novel had a rather longer title: The Personal History, Adventures, Experience and Observation of David Copperfield the Younger of Blunderstone Rookery (Which He Never Meant to Publish on Any Account).

8. Like Robert Maxwell, Wilkins Micawber is a character who lives vividly in the public imagination. Consequently, his name has acquired the characteristics of shorthand form of expression. Mention of ‘Micawber's maxim’ or the ‘Micawber Principle’, therefore, draws attention to a section of David Copperfield in which our hero states: ‘Annual income twenty pounds, annual expenditure nineteen pounds, nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery’ (Dickens 1992, p. 164).

9. The Inquiries Act 2005 establishes a framework for the operation of public inquiries in the UK, and so, provides a degree of codification that was hitherto absent. Under s1 (1) the act grants to Ministers the power to establish an inquiry where it appears that ‘particular events have caused, or are capable of causing public concern, or there is public concern that particular events may have occurred’. Public inquiries constituted under this act may not rule on civil or criminal liability. That right is referred to the civil and criminal courts. However, the legislation makes it clear that the inquiry team should not be inhibited in the discharge of its duties by the likelihood of liability being inferred from its work. Among other notable provisions the act gives the inquiry the power to compel the attendance of witnesses. Furthermore, the act allows inquiry teams to decide whether witness testimony should be given under oath.

10. The research undertaken by Toft and Reynolds (2005), however, suggests that few of those who are called before public inquiries accept this as a meaningful distinction. Most, it seems, find the processes – however, these are formally constituted – to be adversarial in nature.

11. You will note that we, too, have employed this device (see endnote 1).

12. The term ‘maxwellisation’ seems to have entered the vocabulary of financial regulation in the early 1990s when it was used in connection with the investigation of the collapse of Robert Maxwell's Mirror Group. In this context, maxwellisation refers to the processes whereby those who participate in and are named by inquiries are given the right to make representations to the commission prior to the publication of the final report. Before the 1990s those subject to maxwellisation would have been said to have been issued with ‘Salmon Letters’ in accordance with the recommendations of Lord Justice Salmon's 1966 Royal Commission on Tribunals of Inquiry. The translation of ‘Salmon Letters’ into ‘maxwellisation’ may be a reflection of the controversy that arose in connection with the publication of the DTI's preliminary report on the Leasco Data Processing Company's takeover of Robert Maxwell's Pergamon publishing house. Thompson and Delano (1991) among others (see Bower 1988, 1991, 2008, Maxwell 1994 for contrasting accounts) observe that Maxwell sought a judicial review of the DTI inquiry and complained that his right to ‘natural justice’ had been breached by those conducting the process. Thompson and Delano (1991) comment, however, that, despite very strenuous efforts, Maxwell failed to establish that his right to natural justice had, in fact, been breached. Yet they add ‘that the Department of Trade modified the procedures following the Pergamon case to ensure that anyone criticised was given an opportunity of rebuttal before the findings were published’ (p. 180).