Sunday 28 February 2010

Standard Life replies to Myners

Reuters reports that Standard Life has made its response to Paul Myners' call to action public, and you can download the letter on their website here. Reuters picks up on the fact that they disagree with UKFI about the use of share price targets in long-term incentives. Notably they also encourage Myners to get stuck into investment banking fees, particularly in respect of capital-raising.

The footballer's defence...

...of high pay is given a doing over here, by the bloke who wrote this, which I blogged about previously.

Notably, for readers who share my interest in the role of shareholders in all this, he says:
The first major obstacle comprises the institutional shareholders, who act on our behalf. The senior executives of these companies, and often those much lower down the scale in the case of pension fund managers, become wealthy precisely because of the talent argument. The ability to do their job is deemed to be highly uncommon, and must therefore be rewarded accordingly. It is unlikely that they would be keen to question the same logic too forcefully in relation to the employees of the companies they invest in, as this would inevitably undermine their own justifications.

Wednesday 24 February 2010

Another link

Great post from Will @ potlatch

Caledonia funds Tories' anti-Lib Dem drive

Updated figures on political donations are now available on the Electoral Commission website. I can't see any further donations by Fidelity, but investment trust Caledonia Investments is keeping up the transfer of shareholders' money to the Tories. Notably of the £133,000 they have given to the Tories in the past two year half - £65,000 - has gone to Meon Valley. I'd never heard of the constituency, and a quick look on Wikipedia reveals that it is a newly-created one. What's more it looks like it will be a close fight between the Tories and the Lib Dems, with us a distant third. So a large part of Caledonia's money is being spent on an anti-Lib Dem campaign, rather than an anti-Labour one. Interesting...


1. Canadian shareholder activists SHARE have published their annual manager voting survey (PDF)
2. There's a big push for support going on in respect of the resolutions at BP and Shell on tar sands.
3. Brendan Barber blogs on M&A. I think policy interest in this area is going to increase again.
4. FSA commentary on hedge funds is interesting, and doesn't actually surprise me.

Saturday 20 February 2010

Voting & long-termism

There's an interesting piece on the Economist website about possible ways to encourage long-termism. It tends a little too much towards the conventional wisdom that the best outcome it one share no vote with no exceptions. I'm not convinced by the idea of differential voting rights, but I'm inclined towards some sort of qualifying period for voting rights. And as I've said before I like the idea of trying to use dividend policy to encourage long-termism.

None of this would guarantee that outcomes would be any better. But I do think companies should be allowed to experiment, whereas they are often faced by a rather fundamentalist stance from shareholders. In addition, I do think that shareholders who had held their shares for a period to qualify for whatever kind of loyalty benefit and who then challenged the management would send a very strong message. Much stronger than talking the language of long-termism but then pushing for structures that suggest investors' focus is primarily on liquidity. The two things don't sit well together.

That said I agree with the final comment in the Economist piece:
Better yet, the investing public, whose retirement savings have atrophied in the financial crisis thanks in part to the short-term way in which they were invested, may sort things out themselves, by demanding a longer-term perspective from the pension and mutual funds that they have entrusted with their money.

If that ever does happen I think we can say for certain that investing intermediaries would need to seriously entertain some of these sorts of structural incentives for long-termism. I didn't see Cadbury workers lobbying for hedge funds to have unrestricted voting rights...

Thursday 18 February 2010

Left-wing rag backs increasing stamp duty on shares

By which I mean Financial News . This from their asset management comment this week (you'll need a sub to see it I think):
The Government has its hands on a lever that would make short-term speculation markedly less attractive than long-term investment.

An increase in the cost of stamp duty, the UK's levy on the purchase of shares, would directly discourage trading. Short-termism has grown as trading costs have fallen, cut by the increased efficiency of electronic trading systems and competition; pushing up stamp duty would be a direct way of countering the trend.

This would be blunt, of course, but the Government need not be so siplistic. A significantly better change would be to modify stamp duty, so that it was charged on sellers of shares rather than buyers, and tapered to zero if the shares had been held for a certain length of time - say, three years.

I should point out that I'm not personally convinced this is a good idea, for reasons I set out here. I'm inclined to the view that it would be better if pension funds and others made a concerted push to reduce unnecessary costs, including high turnover, rather than seeking to whack the problem with a tax. But it's interesting to note that such ideas are getting a decent hearing these days.

Wednesday 17 February 2010

My son the anarchist, Adorno and sitars

Massively off topic but....

A few elements have come together at the same time this week in one of those pile-ups of thoughts that make you reflect on things. Firstly I've been on leave with my son on my own for three days (Mrs P being away with work - the first time she's been away from him overnight). Secondly I've been reading the collection of Theodor Adorno essays I've been posting dollops from. And thirdly I've been going through one of my phases when I listen to a lot of sitar music.

It's a trivial observation, but what has really come home to me this week is just how unsocialised my son is (he is only one, like!). He's currently experimenting with food, so a lot goes on the floor because (I think) he likes watching things fall. He's also quite happy to sit there having had his breakfast with big splodges of yoghurt on his face. Doesn't he feel it on his face? Or is my own awareness of having something on my face more a product of socialisation than a physical reaction? And watching him play with things is interesting too. He's into putting things from one container into another at the moment. But he doesn't mind what goes into what. So the little figures from his wooden toy bus end up in the box which is supposed to take specifically-shaped coloured blocks (ie circle, triangle, square). I realised that I get slightly annoyed that he isn't putting the right things in the right places. But then I suppose to him they are the right places, because he hasn't internalised the rules that go with each toy. I bet I'll miss it when he plays with them the right way.

Meanwhile this book of Adorno essays is really clicking with me. It's quite a bleak view of things, and I think sometimes he takes an interesting observation and pushes it a long way, but a lot of it rings true. The short piece on 'Free Time' is particularly good. He basically argues that while free time is defined in opposition to work, it is still influenced by the same societal structure. This is something that often nags away at me, or more particularly the impetus to divide up and maximise 'free time'. He makes a good point about the 'miracles' people expect from their holidays, which are constantly frustrated because distant places are no longer different. I even feel a need for productivity when I'm reading sometimes. I'm ashamed to admit that sometimes the thought flickers across my mind that it would be great to simply transfer the content of a book into your brain, like that scene in The Matrix where Neo learns how to fight by having knowledge of kung-fu etc uploaded. Informational efficiency, you see, rather than that messy time-consuming reading business. Bleurgh! Anyway, reading these Adorno essays has really made me think about the way that structures in society (capitalism if you like) don't get left at the front door when you get home.

When it comes to sitar music I'm a fully paid-up member of the 'uncomprehending white boy listening to something that sounds exotic' school. Adorno would probably hate me given what a music snob he seems to have been. I am aware, dimly, that sitar music involves a great deal of thought and structure. But to my untrained ears what is great about it is its complete difference to much of what I'm used to. Pieces start off slowly, have a mad fast bit, and then slow down again. And some of them go on for 25 minutes. And when there are tablas involved it's a similar story - they don't just mark time, or hold a steady beat, there are great surges and solos. I know there's plenty of non-sitar music that does the same kind of thing, and I like electronica in the same vein, but sitars have a bit of a hold on me. So what I really like about this kind of music is that it stubbornly refuses to fit into a structure that my mind expects/wants. (In sharp contrast I can remember ruining a track once by managing to identify the beat structure. After that I couldn't hear anything but the beats when I listened to it, and it destroyed the track for me).

Anyway today all the bits collided. I was walking round Brockwell Park with my son crashed out in his buggy (he had a bit of a rough night) with some sitar music playing away on my iPod, and thoughts about the Adorno piece I had just read floating about in my mind. I thought that everything seemed a bit more possible, if only you consciously resist the urge to structure and compartmentalise your own existence. I thought that I might be listening to sitar music the wrong way, but at least it is helping me undermine my own tendency to subdivide experience by the familiar. And I thought I hope I can resist the urge to encourage my son to do things the right away (whilst preventing him from putting his fingers in plug sockets, eating knives etc) and let him be the unsocialised, exploratory Tasmanian Devil he is for as long as possible. And most importantly, I felt really bloody happy.

Anyway, back to finance-related blogging soon...

PS. Incidentally the first time I heard of Adorno was when my mate bought the first Consolidated EP when I was at university. There is an 'Adorno Strength Remix' of the track 'Consolidated' on it.

Monday 15 February 2010

3 up

This here blog in now three years old to the day. Hooray for me. So to celebrate here are three totally unrelated things.

1. It only struck me the other day, but might the Tories' commitment to scrapping compulsory annuity purchase at 75 cause some problems for Personal Accounts/NEST? Frustratingly the recent policy document only says that they will "reward those who have saved for their retirement by ending compulsory annuitisation at age 75". But assuming that means what it says, could we see people hitting retirement with a pot of money in NEST able to simply take it as cash (ie not annuitise any of it)?

That would strike me as a bad system. The whole point of the scheme in the first place was to try and improve the replacement ratio (ratio of work to retirement income) for the lower to middle earners who currently don't have access to a workplace pension. However if they can draw down the whole pot as cash the scheme will not serve that purpose for at least some. I remember being told this was one of the flaws in the Australian system - retirees blowing their pot on a cruise and then having to exist on state benefits. Some will argue that it's their choice. True, but then why 'nudge' them into saving in the first place? You might as well have left them to spend the money during their working life.

2. One of the books on my wish-list (well, realistically I'm going to buy it given that it's only about £8 on Amazon) is Micromotives and macrobehaviour by Thomas Schelling. Anyway, before I took a punt I thought I'd flick through Tim Harford's Logic of Life, as I remembered that he refers to Schelling quite a bit. I didn't like Harford's book very much (though his first was one was alright), and as I was having a flick I stumbled across a section that reminded why. Here's a chunk about paying kids to read books, and the reaction to the idea:
The idea is horrifying to conventional wisdom. Psychologist Barry Schwartz [author of the Paradox of Choice] attacked Fryer in an op-ed piece in the New York Times: "The assumption that underlies the project is simple: people respond to incentives."

The trouble, Schwartz continued, was that psychologists had found circumstances in which that wasn't true. He suggested that what schools do instead is rekindle the intrinsic joy of learning; this is inspiring material for an op-ed article, but offers no practical help whatsoever.

This, to me anyway, is wrong in several ways. First, it's a bit of a misrepresentation of Schwartz's article (which is here). Although he does suggest we should ask why intrinsic motivation is flagging, he also says "It may be that the current state of achievement is low enough that desperate measures are called for, and it’s worth trying anything." It's not rekindle intrinsic motivation or nothing.

Secondly, I'm really not clear what the conventional wisdom is here. Certainly on the one hand there is widespread belief that learning is an end in its own right, and that we should try and help kinds enjoy it. But isn't 'people respond to incentives' part of the conventional wisdom too? Presumably that's why parents have ben bribing their kids to revise for exams etc no doubt since exams existed. I would say that the argument that Schwartz deploys about incentives sometimes resulting in worse performance is also a challenge to conventional wisdom, just a different bit of it.

Thirdly, is it a reasonable point that what Schwartz says is of no practical help? I don't think so. Surely it is quite helpful for someone to say 'your idea may backfire, and here is some evidence that suggests why'. Isn't that what a lot of economics is all about?

3. Two more chunks of Adorno for no real reason except that I like them. It's over the top, but enjoyable stuff.

Chunk A
Among those intellectuals anxious to reconcile themselves with [mass culture] and eager to find a common formula to express both their reservations against it and their respect for its power, a tone of ironic toleration prevails unless they have already created a new mythos of the twentieth century from the imposed regression. After all, those intellectuals maintain, everyone knows what pocket novels, films off the rack, family television shows rolled out into serials and hit parades, advice to the lovelorn and horoscope columns are all about. All of this, however, is harmless and, according to them, even democratic since it responds to demand, albeit a simulated one. It bestows all kinds of blessings, they point out, for example, through the dissemination of information, advice and stress reducing patterns of behaviour. Of course, as every sociological study measuring something as elementary as how politically informed the public has proven, the information is meagre or indifferent. Moreover, the advice to be gained from manifestations of the culture industry is vacuous, banal or worse, and the behaviour patterns are shamelessly conformist.

Chunk B
[W]hat its defenders imagine is preserved by the culture industry is in fact all the more thoroughly destroyed by it. The colour film destroys the genial old tavern to a greater extent than bombs ever could: the film exterminates its imago. No homeland can survive being processed by the films which celebrate it, and which thereby turn the unique character on which it thrives into an interchangeable sameness.

Sunday 14 February 2010

2 snippets

1. Interesting para at the end of this piece (presume it's from tomorrow's FTFM):
There is an underlying question in all this about whether the public ownership model for companies still makes sense. Lord Myners was asked at the NAPF event whether voting rights should be transferred to employees. He replied mutual ownership was an interesting idea, as there were some real disadvantages of the public company model.

2. Quite liked this bit from 'On the fetish character in music and the regression of listing' by Theodor Adorno:
"If one seeks to find out who 'likes' a commercial piece [of music], one cannot avoid the suspicion that liking and disliking are inappropriate to the situation, even if the person in question clothes his reactions in those words. The familiarity of a piece is a surrogate for the quality ascribed to it. To like it is almost the same thing as to recognise it. An approach in terms of value judgements has become a fiction for the person who finds himself hemmed in by standardised musical goods."
I don't think I buy the general approach, but he certainly hits a few targets. I also think familiarity has an important influence of the popularity & legitimacy of ideas.

Friday 12 February 2010

EMI, agency theory and stuff

A few inter-linking points that are swishing around my tiny little mind this Friday evening. First up, a quick thought about EMI. It's a simplistic point, but it does demonstrate that whatever advantages private equity might have as an ownership structure, these surely can't outweigh poor decision-making. Private equity has concentrated ownership, plus, if you buy the Jensen argument, all that debt focuses management minds. But ultimately it's just a different structure. Companies who dislike pressure for corporate governance reform often make the point that good policies and structures don't make good managers, exactly the same is true even when the agency problem is in theory reduced under private equity ownership.

Secondly, what does the continuing growth of executive remuneration - apparently unlinked to performance - tell us about agency theory? One could argue that the problem agency theory would lead us to expect in respect of remuneration - managers making out like bandits because they can - has actually got worse since we have actively tried to deal with it. For all the apparent pressure for performance-related rewards, the amounts involved have surged.

Does this mean that we've misapplied agency theory? Possibly (and I would certainly question - for different reasons - whether performance-related rewards actually deliver for the notional 'principals') but perhaps it has ben poorly applied mainly in the sense that we've been looking in the wrong place. After all, fund managers are agents too. And they are both a) judged on short-term timescales themselves and b) paid highly. So wouldn't executive remuneration arrangements that reinforce the idea that high rewards are necessary and encourage a focus on short-term results be what we expect them to promote? Just asking, like.

Finally, in a similar vein, recent events lead me to query the theoretical framework I was previously quite impressed by which is laid out in Political Power and Corporate Control. The argument is broadly that there are three core constituencies in governance - investors, managers and employees - and depending on their relative strengths they will tend to ally in certain combinations. So in a country like Germany where employees have to some extent shared interests with management because of the governance structures, they will tend to ally against investors. Whereas in a country like the US where both employees an investors are shut out of power in governance they ally against management (think of the extent of union involvement in shareholder activism there).

So far so good, but then in these terms the UK ought to develop along the same lines as the US. Yet in reality examples like Cadbury demonstrate that actually management and employees often seem to find common cause against investors (though it didn't come to much in that case). Perhaps it's partly because labour still has some residual strength within companies. Perhaps I'm simplifying too much, and labour is beginning to see the possibility of allying with investors. Or maybe the framework needs to be applied a bit differently. But it doesn't seem to quite fit the UK in my opinion.

Thursday 11 February 2010


A couple of related bits on short/long-termsim. First, Pesto has blogged about recently ex-Cadbury chair Roger Carr's remarks about hedge fund involvement in the Kraft bid. Here's what he had to say:
"It was the shift in the [share] register that lost the battle for Cadbury. The owners were progressively not long-term stewards of the business but financially motivated investors, judged solely on their own quarterly financial performance...

"There were simply not enough shareholders prepared to take a long term view of Cadbury and prepared to forego short term gain for longer term prosperity...

"At the end of the day, individuals controlling shares which they had owned for only a few days or weeks determined the destiny of a company that had been built over almost 200 years."

He reportedly went on to argue that the right to vote should be restricted to those have held shares for a given amount of time. This is an idea that Myners has floated previously. I also think there is a good argument that companies could use dividend policy to encourage long-term ownership. I know some investors don't like these sorts of ideas and that equal treatment of shareholders being something of a point of principle, but I suspect that this isn't such a strong argument anymore. So I reckon we might see more policy interest in some sorts of incentives for long-term holders.

Separately, in the IRRC/Mercer study there is a short section looking at potential remedies for short-termism. The interesting thing is that fund managers themselves float ideas (unprompted) that you might not expect, like a transaction tax. Worth a read.

Wednesday 10 February 2010

Grainger danger!

The first remuneration report of the year bites the dust. I bet there will be a few more this year.

Long-only short-termism

Hmmm... this (PDF) looks very interesting. The stats:
The key findings of the quantitative analysis include:

• Nearly two-thirds of strategies have turnover higher than expected, with some strategies recording more than 150-200 percent higher turnover than anticipated. Of the 822 strategies for which Mercer had expected and actual turnover information, 55 exceeded the turnover during the sample period. The average turnover was 26 percent higher than anticipated.

• Within the entire sample of 991 strategies, the average annual turnover of the sample is 72 percent, with some 20 percent of strategies having turnover of more than 100 percent.

• Value managers tend to have a lower annual turnover figure than the other style types. Large capitalization portfolios have lower turnover rates than small capitalization strategies, and socially responsible investing (SRI) strategies have lower turnover than non-SRI strategies.

• Across regions, UK, Canadian and Australian equity strategies have the lowest average turnover value, while European (including UK), international and US strategies have the highest average turnover levels.

The key insights from the qualitative case study analysis from the fund managers include:

• Causes of short-termism include volatile markets and changing macroeconomic conditions; mixed signals from clients; short-term incentive systems; and behavioural biases;

• Fund managers recognize the potential destructive nature of short-termism even while claiming it was unavoidable. The managers indicated that short-termism potentially places short-term pressure on companies; increases market volatility;
demonstrates a lack of discipline in fund managers’ investment processes; and creates a misalignment of interests between fund managers and their clients.

• The managers also identified potential solutions to short-termism, further details of which can be found in the report.

Robin Hood, Robin Hood, riding through the capital markets

The Robin Hood Tax – turning a crisis for the banks into an opportunity for the world

A Robin Hood Tax on banks’ financial transactions could raise hundreds of billions of pounds to fight poverty, protect public services and tackle climate change, according to a campaign launched today by an unprecedented coalition of domestic charities, aid agencies, unions, faith organisations and green groups.

The campaign is calling on the leaders of the UK’s political parties to support a global tax on the banks to help repair the human damage caused by the global economic crisis, protect public services at home, fight poverty abroad and help foot the bill for climate change.

The campaign, supported by almost 50 organisations including Oxfam, the TUC, Barnardo’s, The Salvation Army, ActionAid and Save the Children, is launched with a promotional film starring Bill Nighy, and written and directed by Richard Curtis (Four Weddings and a Funeral, Comic Relief). It is backed by regional events, advertising and online promotions challenging politicians, banks and the public to Be Part of the World’s Greatest Bank Job.

The Robin Hood Tax is backed by financiers and hundreds of economists who have signed a letter supporting the campaign.

Alastair Constance, City trader and founder of Ethical Currency, which already levies a voluntary rate of 0.05 per cent on all currency transactions, said: "Billions of pounds whizz round the global financial system every day. A tiny tax on each transaction is absolutely practical and will hardly be noticed by those paying it. But it could still raise billions to help make the world a better place."

The Robin Hood Tax would not be levied on banks’ transactions with their high street customers, but only apply to transactions between financial institutions. While different rates of tax would apply to different types of transaction, they would start at just five pence for every thousand pounds traded – an average of 0.05 per cent.

But even such tiny taxes would raise hundreds of billions of dollars a year given the scale of transactions – equivalent to $10,000 a day for every one of the 1.2 billion inhabitants of the world’s 30 richest countries in the OECD. Experts have estimated an international transaction tax system could eventually raise as much as £250bn ($400bn) every year.

While an internationally agreed tax system is the best way to proceed, the UK Government and European Union should start extending transaction taxes already in existence, such as the UK’s 0.5 per cent stamp duty on shares, the campaign says.

This would both raise much needed money and encourage other countries to adopt the proposal, with modern foreign exchange markets an attractive and easy target for a unilateral tax on sterling and Euro transactions.

The market for financial transactions has exploded in the last decade, and is now worth 60 times global GDP. Before the financial crisis banking was the most profitable industry in the world, with profits five times that of the pharmaceutical industry, and three times bigger than the privatised utilities, according to consultants McKinsey & Company. At the same time the financial sector is not taxed as much as other sectors.

The campaign is calling for countries which levy the tax to keep half the proceeds domestically and for the rest to be split 50-50 between poverty reduction and tackling climate change. The UK’s share of the tax would amount to tens of billions of pounds.

Money raised by a Robin Hood Tax could be used avoid cuts to vital public services and for a range of good causes including:
• Meeting the Government’s target to halve child poverty (£4bn)
• Ending the benefit trap that makes it too expensive for people to leave welfare and return to work (£2.7bn)
• Protecting schools and hospitals at home and abroad under threat of cuts
• Meeting the Millennium Development Goals to cut child deaths by two-thirds, maternal mortality by two-thirds and tackle malaria and HIV/AIDS, and
• Providing resources to enable a deal to be done on tackling climate change.

The UK campaign is part of an international movement with similar calls being made in the USA, Europe and across the developing world. Gordon Brown, Angela Merkel, Nicolas Sarkozy, Nancy Pelosi, Jose Manuel Barroso, Meles Zenawi (Ethiopia) have all spoken out in recent months in support of some form of transaction tax.

Financial figures who have backed transaction taxes include Lord Turner (FSA), George Soros, Warren Buffet, Avinash Persaud (chairman of Intelligence Capital), Sir Philip Hampton, (RBS chairman) and Terry Smith (chief executive of money brokers Tullett Prebon).

Polling carried out by YouGov for Oxfam shows there is already significant public support for a Robin Hood Tax, with almost twice as many people in favour of the policy as oppose it. It is also the public’s favoured option for reducing the UK’s deficit – well ahead of reducing public spending or raising income tax, VAT or corporation tax. Faced with a 12 per cent deficit, the next government will be facing a stark choice – raising other taxes such as income tax or VAT, cutting services, or taxing the banks. The campaign believes that the Robin Hood Tax is the right idea at the right time.

In a letter to the leaders of the UK’s political parties, the campaign says: “You could ignore the big problems facing the world, and accept that climate change will stay unchecked, and that the poorest people at home and abroad will have a very hard time of it over the next decade. Or you can find all the money needed by directly taxing the British public themselves.

“Or you can work to find an innovative, modern, regular way of accumulating a fund of money to deal with big issues boldly. We would ask you seriously to consider the Robin Hood Tax as that radical new option – a small tax on bankers that would make a huge difference to the UK, to the poorest countries and to our planet. Let’s turn the crisis for the banks into an opportunity for Britain and the world.”

Barbara Stocking Oxfam Chief Executive, said: “We have a once in a generation opportunity to make global finance work in the interests of ordinary people at home and abroad. A tiny tax on banks would make a massive difference to the millions of ordinary people around the globe forced into extreme poverty by the economic crisis.”

Brendan Barber TUC General Secretary said: “The crash was made in the finance sector – finance should now make a proper contribution to putting right the damage the crash caused and preventing huge cuts in vital public services.”

Claire Melamed Head of Policy at ActionAid said: “We now have a chance to raise enough money to create real and lasting change. If politicians are brave enough we could turn a financial crisis into an opportunity for the world’s poor by raising billions from the banks to spend at home and abroad.”

Tuesday 9 February 2010

Monday 8 February 2010

Boy meets cake

1st birthday... that came round very quickly...

Sunday 7 February 2010

Highly-skilled Hands

This is a bit interesting...
Guy Hands, who moved from Kent to Guernsey last April in protest at higher income and capital gains tax rates, says he has "never visited" his school age children since he left the country. They have remained with his wife at their former family home in Kent and they now have to travel to Guernsey to see him.

Neither has he visited his mother and father – and wouldn't unless there was a family crisis: "I do not visit my parents in the United Kingdom and would not do so except in an emergency."

This means, presumably, we could put a rough cash figure on the value Guy Hands attaches to his family. Given that he is (was?) pretty wealthy, the amount of extra tax he would have paid in the UK must be pretty large. So the Hands family can feel proud that they are valued to seven figures at the least, and surely much more. But he must have done some basic calculations and clearly the extra money has a higher value to him that his family's close proximity.

By the by, here's what he said at the time of deciding to move:
“Recent developments in UK policy may well drive global firms and highly skilled individuals away from London at significant cost to the UK economy in terms of lost revenues and lost taxes,” Mr Hands says.
I assume he would count himself as one of those very same highly-skilled individuals. But actually doesn't the mess at EMI raise a slight doubt about this? To many people who are less highly-skilled it might look a bit like he bought something he didn't really understand at the top of the market with a lot of borrowed money. After all, the current CEO says the targets set for the business were all wrong. And Hands himself, via his suit against Citi, seems to be suggesting he was sold a pup. Or more precisely he claims he was pushed into a deal at an inflated price by being led to believe another buyer was circling. Isn't that one of the oldest sales tricks going? A lesser-skilled person might have thought that a highly-skilled individual would spot that kind of thing. So it must be much more complicated than that. And require higher skills.

Thursday 4 February 2010

Chris Grayling exposes police violence

Fresh from his highly successful and completely accurate use of crime figures, which has earned him praise from the UK Statistics Authority (I think that's right?), Chris Graying has just delivered a pitch perfect quote on the stats to BBC News. I just watched it again to make sure I didn't mishear it and he clearly said:
"These are all about real crimes committed against real people in real police stations."
Super slick. Did I spot he had ACAB tattooed on his knuckles too?


Just to say that this book is worth a read if you're at all interested in the ownership of companies. I'm about halfway through and finding it really informative. Lots of stuff about alternatives to investor-owned businesses and when and why they do and do not work. At lots of useful background info in there. I had no idea, for example, that companies like Ocean Spray and Sun Maid were agricultural co-ops. That said, it is NOT a book that advocates employee ownership, but it is a pretty dispassionate analytical take on why different types of company ownership emerge (including why they appear in particular industries).

Wednesday 3 February 2010

A load of Bolland

I've not posted much this week due to work, being in the middle of buying a house and the rapidly approaching 1st birthday of Powdrill 2.0 (tomorrow). But I have been following/participating in the row over incoming M&S chief exec Marc Bolland's pay deal.

I have nothing too original to add - it's a LOT of money, by buying out incentives at the previous employer the supposed retention aspect of such schemes is destroyed, M&S isn't in a big hole that requires paying through the nose for a 'transformative' chief executive etc - but I have found some of the commentary quite interesting. For example, check out the comments from Wellcome Trust in this report:
"We are getting a bit concerned at the way that management’s attention is being diverted by these complaints. As investors, we have a very clear point of principle that managers' pay should be tied into the long-term investors’ interests, but as far as we can see M&S’ remuneration schemes are very well aligned. We are absolutely not stamping up and down in anger.
"If the company is going to hire the best people, if they are going to take them out of the company they have been working for, then they have to buy them out. That is the way the world works."

I suspect that, despite some of the rhetoric around, actually this is a fairly common view in the City (some analysts I have seen quoted have said basically the same thing).

I obviously disagree - I don't see how you can sensibly argue that pay should be tied to investors' long-term interests AND think that buying out execs' ...err... long-term incentives is the way the world works (which I accept it does, at least in part). These two things pull in opposite directions. Nonetheless at least the bloke quoted is being honest - we don't think it really matters.

Whether it does matter in the bigger scale of things I'm unsure. Some investors appear to sense a return to normal on remuneration, and are willing to go along with it. Some seem to be falling back into the old arguments to excuse any pay deal (they're like footballers, what they deliver in shareholder value far outstrips the cost etc). And yet I can't believe we have gone through the past 2 or 3 years without lots of people asking some pretty serious questions along the lines of 'WTF are we actually paying for?'.

This bit in the FT seems closest IMO:
Asked whether the reason was that management had improved hugely; executives were underpaid in the past; their jobs were more onerous today, or whether executives had collectively exploited market power to raise their salaries, all of the members of the panel agreed that the last possibility was closest to the truth.

So things could still get interesting.

Monday 1 February 2010

Long overdue plug

For the Unison Active blog, which goes straight into my blogroll. Some good stuff on there about pensions like this bit about Unison's successful action to stop local authorities borrowing from their pension funds. And this bit on infrastructure.

GMB report on public sector pensions

This report (PDF) is bloody ace! Lots of very useful info in there, and a good antidote to some of the rubbish propagated by the Right.