Media Spotlight: The Road to Recovery – Andrew Smithers


Not many outside the world of finance will have heard of Andrew Smithers, but those who have will know that he is one of the most controversial voices in the industry.

A former investment banker with S G Warburg and now financial commentator, Smithers sparks debate and very often ire with his views and especially his market analysis reports each month. Smithers often dares to say what few others will.

And that is very much the tone of his book – The Road to Recovery.

The author asserts that the financial crisis from which we are recovering from started more than twenty years ago with a changing approach to corporate finance.

Traditionally, corporate financiers were entrusted with making sure companies not only remained profitable, but that they did so in a way that ensured long-term future health. Proper investment in staff and assets, cost-control and financial prudence were the key to a healthy company, says Smithers.

However, a shifting emphasis on profit margins and share price performance has led, says Smithers, to massively inflated bonuses for those corporate managers who deliver results that please shareholders.

What this has resulted in, according to Smithers, is a reduction in long-term investment – a massive risk to the health of the national economy.

The book itself is a revelation as few within finance dare to speak out against bonuses – that is normally saved for those outside the industry.

While the author places most of the blame for the financial crisis on this changing culture of corporate management, he is clear throughout the book that policymakers have also had a role in the crash.

Smithers is also keen to point a finger at economists, who he feels have missed a key point in that the problem is a structural one and not cyclical.

He makes several policy recommendations that aim to highlight the issue, but none of these overrides his key assertion that executive pay is a fundamental root cause of the crisis.

Smithers is engaging and unflinchingly assertive in his view – characteristics that have made him a widely-read analyst around the market for many years.

Whether readers agree with the points he lays out in The Road to Recovery or not, it is a really interesting read and one that offers a view few others have. The bonus culture within the City has caused such fervent disdain among the masses that undoubtedly many will applaud what Smithers is saying.

However, even those among us who feel bonuses are a natural outcome of capitalist profit-chasing will enjoy a book written by a man who clearly knows his stuff and presents it all in an accessible way.

A highly recommended and insightful read, The Road to Recovery is well worth walking down.