Sunday, 8 February 2009


Nice piece from Simon Caulkin today. Here's a key bit:
At the heart of the pay spiral is governance, in the shape of the disastrous "agency" doctrine that demands the "alignment" of managers with shareholder interests through monetary incentives. Agency theory is management's very own Ponzi scheme. It is a self-reinforcing enrichment device for top managers and privileged shareholders who, in unholy alliance, have combined to loot the company at the expense of employees, customers and, as we now know, society as a whole.

I think this is 50% right. I think agency theory as applied to executive pay has been a disaster, and it has resulted in directors getting ever greater rewards regardless of performance. But how have shareholders looted the the company? Surely the ever increasing waste of resources that is exec remuneration comes at the expense of both employees and shareholders, who are often the same people in any case.

There's a nice puff piece for Hermes in the Observer too today it says:
Hermes claims to be one of the few pension funds to have questioned Britain's bankers over their exposure to credit derivatives and other risky investments in the run-up to the credit crunch. Melvin said he had campaigned for several years to persuade investors that their interests were not served by their agents and advisers in the City. But the boom in share prices and property values, which was fuelled by a frenzy of transactions, had drowned out his protests.

I think Hermes are a good outfit, but I had to go and check their voting record. During the 2007 UK AGM season they appear to have voted against only one resolution at one bank - remuneration at RBS. So that includes the likes of B&B and Northern Crock. They also OKed the RBS ABN Amro deal. I accept that voting is only part of the story of course, but just thought I'd point this out ;-)

Final Observer bit. Does Ruth Sutherland think Peter Drucker is still alive?
As Peter Drucker, the management writer, has argued, that ratio ought to be brought right back down - he suggests to the region of 20:1 or 25:1.

I don't think he 'suggests' it any more, unless it's the way he's lying or something.

Nice S&M bit on the VAT cut. Pretty much my view of it. I don't see how you can argue that it has 'failed' without being able to know what would have happened otherwise. No two ways about it the cut means that the punters can buy a little bit more. Maybe they have.

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