John Clough is a rarity among plc chief executives; a man whose early personal experience suffuses the business organisation he leads.
Today he is a millionaire businessman at the helm of a growing FTSE 250 company, but he has not renounced John Clough the son and grandson of miners, who kicked a ball in the back lanes of Northumberland colliery terraces and fought the family mongrel to get closest to the fire. “I remember nights by the coal fire, you burned as much as you liked because it was for free,” he recalls.
This world of hot-as-toast living rooms and draughty, freezing bedrooms, of community camaraderie and the powerful sense of identity created by dangerous manual work seems so distant now, although Mr Clough is not yet 50.
For the 3.5m UK households that, according to new government figures last week, are living in fuel poverty – those spending more than 10 per cent of their income on fuel bills – the concept of abundant free energy must seem pretty unimaginable too.
Northumberland’s mines have vanished but that world still informs the ethos of Eaga, the organisation Mr Clough started with four colleagues in 1990. Today, Eaga employs 4,500 people. It remains headquartered in Newcastle, in his native north east England, but operates across the UK and also in the Republic of Ireland, India and Canada.
A green support services company, it is at the forefront of the drive to improve the energy efficiency of the UK’s housing stock, to reduce carbon emissions and address social issues by eradicating fuel poverty. Unusually for a big FTSE company, Eaga’s key market drivers are centred on climate change and social inclusion, it says.
Eaga, which turned over £639m and made pre-tax profits of £28m in its first full year as a public company after flotation in June 2007, is also a rare example of a plc that embraces employee ownership, the “partnership” philosophy most commonly associated in the UK with retailer John Lewis.
Established to manage a government grant programme to improve living conditions for vulnerable people in cold, damp and energy-inefficient homes, Eaga is now coming to wider attention, due to diversification and expansion.
Its biggest contract is the government’s £800m Warm Front Scheme, through which it improves energy efficiency in more than 1,000 homes daily and fits or repairs a central heating system every minute of each working day. It also has a three-year outsourcing contract worth more than £200m with Scottish Power to deliver its obligations under the government’s Carbon Emissions Reduction Target and has won £500m worth of work from the BBC to help with the digital switchover. Ultimately, it plans to expand beyond the government and regulated sectors into the commercial market for energy consumption and emissions reduction. “We will start to see fiscal incentives, tax breaks, for doing the right thing,” Mr Clough predicts.
Eaga’s dramatic expansion is all the more remarkable because its initial growth was inspired by one traumatic day. “It was the changing point of my life,” says Mr Clough.
After joining the National Coal Board, subsequently called British coal, as a graduate entrant, his career, fatefully, took him in the 1980s to Monkton cokeworks in Hebburn, South Tyneside. He restored this heavy industrial site to profitability; then environmental issues killed it. He cannot forget the day he had to close it. “It was the emotion shown by 330 very hard manual workers who were walking around in tears. It was 330 families who went on the dole. I felt remorse, responsibility, sadness, guilt.”
Coal, he concluded, had no political support; it was time to leave. But the environmental issues that had been raised, and the human need for warmth, endure. “If the Industrial Revolution caused the problem we have with climate change the green revolution can put it right and the opportunities will be greater. Self preservation will drive us.”
His personal target, when appointed in 1990 to run the Energy Action Grants Agency (subsequently Eaga) was to replace those 330 jobs before 2000. Marketplace competition forced him to cut 50 jobs at one point but, six months late, he reached his 330 target.
Eaga, which has improved living conditions and lowered fuel bills in 5m homes since 1990, became an employee-owned partnership in 2000. To fulfil growth ambitions, it subsequently needed access to more capital but Mr Clough decided against a management buy-out or a private equity injection. “It’s a firm belief that if we involve our people in the ownership of the organisation we get so much better engagement,” he says.
On flotation, the Eaga Partnership Trust, which holds shares for the benefit of all Eaga employees, became the biggest single shareholder, with 37 per cent. Employees, management and senior directors hold a further 11-12 per cent as individuals. As flotation diluted employee ownership, employees, then totalling 3,200, received money and shares. The average was £30,000 cash and shares worth £70,000 at the opening price. Mr Clough became a multi-millionaire.
The shares, floated at 181p, dived in April – they have since partly recovered – after a candid trading update. Partnership drives Eaga to be “absolutely transparent”, says Mr Clough. “We have a zest for it; I’m not sure the markets fully understand it. They are used to people using weaselly words.”
He would like Eaga to be a “partnership plc” model. “I think employees have been the poor relation in terms of stakeholders in the past.” In the City some people are interested, some not. “It’s not what they say, it’s what they don’t.”
Mr Clough remains connected to his roots; he lives in Northumberland, goes fishing and grows vegetables. His parents still live in a terraced house in Ashington, an archetypal ex-pit town. He has used £250,000 of his wealth to create a family charitable fund, backing applications that “promote community glue”. Eaga has invested £3.2m since 1993 in a charitable trust to research solutions to fuel poverty. And the company recently sponsored The Pitmen Painters, Lee Hall’s powerful play about the Ashington Group, a group of miners who produced artwork in the 1930s. “These working men had a real appetite to better themselves,” says Mr Clough.
Partnership encourages a sense of shared objectives at Eaga but, in wider society, he worries that a “series of dysfunctional generations” have allowed community closeness to fade. His interest in the current economic turbulence is not only financial.
“Just as we’ve had in the financial sector a re-set, there might be a societal re-set. We need a more values-driven culture than we have at the moment,” he says.
Get alerts on India when a new story is published