We've moved house this week, so very little time to blog + internet connection is not properly sorted, so won't be posting much.
Have to say I'm surprised at the lack of voting against a) anything at all at RBS and b) Burrows' election as chair at BAT (given his immediately previous role). ho hum.
Vote Labour.
(Ahh... my readers are just a bunch of bigots anyway. Oh s*** am I still typing...?)
Thursday, 29 April 2010
Friday, 23 April 2010
IoD on takeovers
The Institute of Directors has put out a position statement type thing on takeovers that is worth a read. Nothing earth-shattering, and some will no doubt read it as the voice of management entrenchment, but there is quite a bit of sense in there.
They say, basically, that takeovers may act as a discipline to directors, but there isn't much evidence that they add value, and actually they may make decision making (by both acquirer and target) more short-termist. As such they agree with raising the required vote for a deal to go through to 2/3rds (ie Labour's policy), though they don't agree with the idea of limiting voting rights to those already on the register at the time of the deal.
The issue with the 2/3rds threshold is that actually it wouldn't make much difference (most deals get much higher votes in favour). So when you hear someone argue that it will entrench management, see if they have any stats to prove this (I'm sure they won't have). It's simply a knee-jerk reaction. Also someone pointed out to me that you need a 2/3rds majority to change a company's articles (but not to decide who owns the company!) so there is a slight precedent.
All that said, I'm personally more inclined to tweak the voting side of things. Still, an interesting intervention.
PS - even this stuff gets partisan press treatment. The Grauniad, which treats this as a business story, says "Institute of Directors backs reform of takeover rules", The Telegraph, which treats this as an election story, says "General Election 2010: IoD criticises plans for 'Cadbury's Law'".
They say, basically, that takeovers may act as a discipline to directors, but there isn't much evidence that they add value, and actually they may make decision making (by both acquirer and target) more short-termist. As such they agree with raising the required vote for a deal to go through to 2/3rds (ie Labour's policy), though they don't agree with the idea of limiting voting rights to those already on the register at the time of the deal.
The issue with the 2/3rds threshold is that actually it wouldn't make much difference (most deals get much higher votes in favour). So when you hear someone argue that it will entrench management, see if they have any stats to prove this (I'm sure they won't have). It's simply a knee-jerk reaction. Also someone pointed out to me that you need a 2/3rds majority to change a company's articles (but not to decide who owns the company!) so there is a slight precedent.
All that said, I'm personally more inclined to tweak the voting side of things. Still, an interesting intervention.
PS - even this stuff gets partisan press treatment. The Grauniad, which treats this as a business story, says "Institute of Directors backs reform of takeover rules", The Telegraph, which treats this as an election story, says "General Election 2010: IoD criticises plans for 'Cadbury's Law'".
Meejah studies, lesson 2
Funny, wasn't it, how, coincidentally, on the eve of the 2nd leaders' debate, several national newspapers of a right-of-centre inclination had Clegg-bashing front pages. I mean obviously, given the surge in support for the Lib Dems, there was going to be greater scrutiny of their leader. But odd how all of them decided to go big on him on the same day.
Nick Robinson thought there was nothing in it, then changed his mind:
Nick Robinson thought there was nothing in it, then changed his mind:
Update 1939: I now learn that political reporters from the Tory-backing papers were called in one by one to discuss how Team Cameron would deal with "Cleggmania" and to be offered Tory HQ's favourite titbits about the Lib Dems - much of which appears in today's papers.
Tuesday, 20 April 2010
Fear of power
I did wonder recently, as I read through responses to the FRC's consultation on the Corporate Governance Code, whether some investors are actually afraid of exercising their potential influence as owners. Why are there asset managers arguing against annual elections for directors, for instance? Are these investors lobbying to move to a three-year cycle in the US? And where is the actual evidence for this assertion that it would lead to a short-termist mindset on the part of directors? Is there any at all?
Don't get me wrong, I understand companies making these arguments. They don't want to face the challenge. And when they say that in an extreme case it could lead to an entire board being voted off there are two simple points to make. First, what does this say about your expectations of your own shareholders (and why then do institutional shareholders - the only ones who make such an outcome a reality - parrot the same line)? The evidence to date does not support the idea that shareholders use what powers they have to destabilise their own companies. And second, if it really is an extreme case, why shouldn't shareholders have that option? However you cut it not introducing annual elections maintains a restriction on shareholder power - of course many boards will like that, by why investors?
That isn't to say that there aren't some good arguments against. Like performance-related rewards, annual elections represent a clear attempt to impose external control. That might not always send the best signals about trust in the management (though surely this would dissipate once the reform had been in place for a few seasons). But no-one seems to be making this argument.
There's a real difference in willingness to exercise power between markets too. UK-based investors that never - and I mean never - vote in favour of shareholders resolutions at UK companies, back them at US ones, even on ESG issues! I know resolutions are a more-established part of the engagement process there, but they could be here too - if investors got over their traditional hostility. I can think of investors who voted against the LAPFF resolution at M&S last year, but back resolutions seeking exactly the same outcome (split chair and chief exec) at US companies. A little inconsistent I would argue.
I see a similar problem on remuneration. There was a big surge in the average vote against remuneration reports last year - still only 5 got voted down though and plenty of very generous policies get nodded through. I still don't think we know if shareholders could get executive remuneration under control because I don't think enough investors are trying. To be clear, some simply don't care. Others do take governance issues a bit seriously, yet most fight shy of taking a stand over the size of rewards (or 'quantum' as it is dubbed in the CG microcosm). Again there seems to be such a fear of the 'unintended consequences' of cracking down on excessive rewards, that they duck out. For example, the most common theme I could see in investors responses Myners about pay at the banks was that being too tough would lead the talent to leave the UK.
If we are going to make this model of ownership work better something will surely have to change. At the moment there still seems to be far too much conservatism.
Don't get me wrong, I understand companies making these arguments. They don't want to face the challenge. And when they say that in an extreme case it could lead to an entire board being voted off there are two simple points to make. First, what does this say about your expectations of your own shareholders (and why then do institutional shareholders - the only ones who make such an outcome a reality - parrot the same line)? The evidence to date does not support the idea that shareholders use what powers they have to destabilise their own companies. And second, if it really is an extreme case, why shouldn't shareholders have that option? However you cut it not introducing annual elections maintains a restriction on shareholder power - of course many boards will like that, by why investors?
That isn't to say that there aren't some good arguments against. Like performance-related rewards, annual elections represent a clear attempt to impose external control. That might not always send the best signals about trust in the management (though surely this would dissipate once the reform had been in place for a few seasons). But no-one seems to be making this argument.
There's a real difference in willingness to exercise power between markets too. UK-based investors that never - and I mean never - vote in favour of shareholders resolutions at UK companies, back them at US ones, even on ESG issues! I know resolutions are a more-established part of the engagement process there, but they could be here too - if investors got over their traditional hostility. I can think of investors who voted against the LAPFF resolution at M&S last year, but back resolutions seeking exactly the same outcome (split chair and chief exec) at US companies. A little inconsistent I would argue.
I see a similar problem on remuneration. There was a big surge in the average vote against remuneration reports last year - still only 5 got voted down though and plenty of very generous policies get nodded through. I still don't think we know if shareholders could get executive remuneration under control because I don't think enough investors are trying. To be clear, some simply don't care. Others do take governance issues a bit seriously, yet most fight shy of taking a stand over the size of rewards (or 'quantum' as it is dubbed in the CG microcosm). Again there seems to be such a fear of the 'unintended consequences' of cracking down on excessive rewards, that they duck out. For example, the most common theme I could see in investors responses Myners about pay at the banks was that being too tough would lead the talent to leave the UK.
If we are going to make this model of ownership work better something will surely have to change. At the moment there still seems to be far too much conservatism.
Financial incentives for schoolkids - new evidence
Massive hat-tip to this US blogger who has been following the Capital Gains programme (one of those where school kids are paid for attendance, reading books, grades etc).
His posts led to this report (PDF) by Roland Fryer, who is the economics professor in the US apparently most associated with the 'Green for Grades' type programmes. As I have said before, I think the results of these initiatives will tell us a lot, one way or another, about how financial incentives affect motivation in a very important area.
It's an interesting report, if not the most clearly written in terms of expressing the results, and I'm resisting the temptation to cherry pick the bits that support my hunch (that financial incentives aren't going to be very effective in terms of academic performance). So here are some of the conclusions:
I think if we cut through the 'inputs' and 'outputs' terminology the story seems to be - if you pay kids to turn up, more will turn up, and if you pay them to read books, more will read books (which is A Good Thing). But if you reward kids for doing well in tests it makes little or no difference. Obviously this story has much longer to run, and I take my hat off to Fryer for trying something different to address a real problem. But it looks to me like a pretty significant setback for those who think that financial incentives are the answer to a lack of educational attainment. This, I humbly submit, is a rather big deal.
UPDATE: Actually I think I've been a little unfair. The point about the impact on reading books is important, as the report indicates that leads to improved vocabulary etc. And improved attendence likewise (you might accidentally learn something even if you only turned up for the money). Anyway, read the thing yourself and let me know what you think...
His posts led to this report (PDF) by Roland Fryer, who is the economics professor in the US apparently most associated with the 'Green for Grades' type programmes. As I have said before, I think the results of these initiatives will tell us a lot, one way or another, about how financial incentives affect motivation in a very important area.
It's an interesting report, if not the most clearly written in terms of expressing the results, and I'm resisting the temptation to cherry pick the bits that support my hunch (that financial incentives aren't going to be very effective in terms of academic performance). So here are some of the conclusions:
The results from our incentive experiments are interesting and in some cases quite surprising. Remarkably, incentives for output did not increase achievement. Paying students for performance on standardized tests yielded treatment effects for seventh graders between -.018 (.035) and -.030 (.063) standard deviations in mathematics and .018 (.018) and .033 (.032) standard deviations in reading. The programs in which fourth graders were paid for their test scores exhibited similar results. Rewarding ninth graders for their grades yielded increases in their grade point average of .093 (.057) and .131 (.078), but had no effect on achievement test scores in math or reading.
Conversely, incentives can be a cost-effective strategy to raise achievement among even the poorest minority students in the lowest performing schools if the incentives are given for certain inputs to the educational production function. Paying students to read books yields a large and statistically significant increase in reading comprehension between .180 (.075) and .249 (.103) standard deviations, increases vocabulary between .051 (.068) and .071 (.093) standard deviations, and increases language between .136 (.080) and .186 (.107) standard deviations. The estimated impacts on vocabulary scores are not significant; increases in language are marginally significant. Similarly, paying students for attendance, good behavior, wearing their uniforms, and turning in their homework increases reading achievement between .152 (.092) and .179 (.106) standard deviations, and increases mathematics achievement between .114 (.106) and .134 (.122) standard deviations. The point estimates are moderate in size, but we do not have enough statistical power to make confident conclusions. The effects of incentives in Washington, DC, on reading achievement are marginally significant in reading and statistically insignificant in math.
I think if we cut through the 'inputs' and 'outputs' terminology the story seems to be - if you pay kids to turn up, more will turn up, and if you pay them to read books, more will read books (which is A Good Thing). But if you reward kids for doing well in tests it makes little or no difference. Obviously this story has much longer to run, and I take my hat off to Fryer for trying something different to address a real problem. But it looks to me like a pretty significant setback for those who think that financial incentives are the answer to a lack of educational attainment. This, I humbly submit, is a rather big deal.
UPDATE: Actually I think I've been a little unfair. The point about the impact on reading books is important, as the report indicates that leads to improved vocabulary etc. And improved attendence likewise (you might accidentally learn something even if you only turned up for the money). Anyway, read the thing yourself and let me know what you think...
Friday, 16 April 2010
Leaders TV debate
I'm supposed to be in Ireland but due to a cloud of volcanic ash I have some free time, so thought I would add to the torrent of guff about last night's TV debate.
Much as I hate to say it, the polling companies seem to have called this right. Nick Clegg was the stand out performer, Cameron second by some distance, Brown third. Our guy just isn't suited to this format, he doesn't have an emotional appeal to voters, and everyone knows it. In a sense this was Drew Westen's theory in practice. There were a couple of points when I felt Gordo did give solid, technical answers that felt good in comparison to the general soundbitey feel. But by the end he just seemed to be repeating that line about taking £6bn out of the economy at the wrong time. Also that dig about 'you can't airbrush your policies' sounded really rubbish. (there's a great Friday Night Armistice thing where they performed political 'jokes' as stand up that really showed this kind of thing up, but I can't find it)
One interesting thing about it was how restrained Cameron seemed - he didn't get many jabs in, even when Brown had a direct go at him. I found this quite puzzling, but Iain Dale discloses today that voters don't like it when Cameron does angry.
What could we pull out of the bag? Well, if Brown can't emote why doesn't he do a bit of angry? After all, 'Bullygate' did no damage it seems, and might have even toughened him up in voters' eyes. Just a thought.
Finally, despite agreeing with the pollsters take on who came out best, I found the whole thing a bit depressing. Nick Clegg did well by trying to talk to the voters directly, and seeming to share their concerns, but this is ultimately just presentational stuff too. It's sort of anti-soundbite soundbite. I suspect the stuff that made voters warm to him was the stuff with the least meaningful content.
Much as I hate to say it, the polling companies seem to have called this right. Nick Clegg was the stand out performer, Cameron second by some distance, Brown third. Our guy just isn't suited to this format, he doesn't have an emotional appeal to voters, and everyone knows it. In a sense this was Drew Westen's theory in practice. There were a couple of points when I felt Gordo did give solid, technical answers that felt good in comparison to the general soundbitey feel. But by the end he just seemed to be repeating that line about taking £6bn out of the economy at the wrong time. Also that dig about 'you can't airbrush your policies' sounded really rubbish. (there's a great Friday Night Armistice thing where they performed political 'jokes' as stand up that really showed this kind of thing up, but I can't find it)
One interesting thing about it was how restrained Cameron seemed - he didn't get many jabs in, even when Brown had a direct go at him. I found this quite puzzling, but Iain Dale discloses today that voters don't like it when Cameron does angry.
It must have been a predetermined strategy based on the fact that people tend not to like it when Cameron becomes aggressive. The dial tests show it.I've long suspected this - that if Cameron loses his temper the impression will be a bit 'how dare you challenge?'. It's that whole Bullingdon Club 'born to rule' vibe he is so desperate to shake off. But by failing to punch back he seemed a bit ineffective last night, as the polling seems to suggest. If I were a Labour strategist I would be hunting for clips of Cameron losing it, or thinking up ways to provoke him!
What could we pull out of the bag? Well, if Brown can't emote why doesn't he do a bit of angry? After all, 'Bullygate' did no damage it seems, and might have even toughened him up in voters' eyes. Just a thought.
Finally, despite agreeing with the pollsters take on who came out best, I found the whole thing a bit depressing. Nick Clegg did well by trying to talk to the voters directly, and seeming to share their concerns, but this is ultimately just presentational stuff too. It's sort of anti-soundbite soundbite. I suspect the stuff that made voters warm to him was the stuff with the least meaningful content.
Thursday, 15 April 2010
Meejah studies
I had to do some media interviews today ahead of the BP AGM. That and the Devil's Kitchen implosion made me think about this here media business.
First the interviews. Before I get stuck in hat-tip to Paul for leading me to read one of the three rather good books that posts from others bloggers have pointed me to over the past year or so (the others are this via Chris Dillow, and this via Tim Worstall). Anyway, Bourdieu suggests early on that if you choose (as an interviewee) to engage with TV on its own terms you effectively agree to say nothing, and I have to say this chimes with my own experience. Broadcast media interviews are inevitably short and simplistic and the pressure is always to simplify and shorten, and explain ideas in terms of existing concepts.
I don't mind all this on one level. I am vain enough to quite enjoy interviews. But I do think that Bourdieu was basically right about what is going on. Producers and interviewers inevitably often go back to 'good' interviewees who play by the rules and can provide the simple punchy soundbite, regardless of whether it explains the underlying issues or not. This is not by any means to be critical of individual journalists - there are genuine constraints on what they can do. But the format broadcast media in particular works to inevitably reduces the meaningful content of the interviews.
After the first interview, a 'proper' one, I was buttonholed by one of the environmental campaigners who was outside the AGM. It was just him, me and his camcorder. It was far less structured than the 'professional' media interview. There was no sense of the 'rules' of the types of interviews I usually do, so it was unsettling in a way that I no longer find 'normal' media interviews to be. Unlike a normal broadcast crew, he clear wasn't thinking in terms of his key 10-15 second sentence. Plus the record button was always on in terms of the likely output (unlike traditional broadcast interviews where they want your 'best' answer). He also pushed me on one of my answers.
Somehow, even though it wasn't done by a journalist, the second interview felt more journalistic. It was the first time in ages that I felt I had actually been challenged to defend what I had said, rather than my comments simply being a bit of 'content'. I'm glad there are people out there doing this stuff, and I suspect this will be where a lot of 'real' news comes from in future.
I got back home this afternoon to discover the latest blogosphere scandal - the Devil's Kitchen blog has been taken down following a less than impressive TV turn by its real-life author in his other role as leader of the Libertarian Party UK. As Chris AKA The Devil has acknowledged, he hardly covered himself in glory on the Politics Show, but there are a few things that particularly stand out from it all.
First, I'm amazed he wasn't prepared for this outcome. If you mouth off a lot, you have to expect people to bring your comments up again. If I was him I would have assumed I would have got asked questions about what I had said online and prepared accordingly. He didn't look like he saw it coming at all,
But secondly, I can't believe he crumbled so easily. I mean, wasn't the whole point of DK that he was unconstrained, a foul-mouthed advocate of liberty no matter what? As such I am amazed he didn't simply bat back Brillopad's raising of his blog by saying something like "The whole point of the LPUK is that people have the right to think and say what they want. The problem is that politicians and media intermediaries like you fail to allow the real voice of the people to be expressed. You might find what I blogged offensive, but it's no worse than what millions of people think, or say in clubs and pubs across the UK." That's exactly what I would expect the leader of the LPUK to say. Instead he ended up apologizing (and to a union official...).
So it does make you wonder if all that 'libertarianism' wasn't just a convenient label for someone who is just.... pardon my language... a gobshite. The fact that the leader of a party of libertarians couldn't give a libertarian response to a slightly pushy question must make the massed ranks of the LPUK wonder if his heart's really in it. The DK blog itself has also now been removed after a quiet word from his employer. Liberty's champion needs to pay the mortgage, natch. Does make you wonder if he'll stick at this politics business, and if so whether he'll move more trad Right (UKIP, but maybe ultimately the Tories). Wouldn't be surprised at all.
But, if it's any consolation for DK, this just isn't a big deal. Us bloggers like it cos it's a bit of good gossip in our online world. But it was ultimately 3 or 4 minutes on a TV programme most people don't watch. I'm with Paul in having little sympathy, given his deliberate offensiveness (that just isn't what I like), but it's already dust. Only bloggers care about this one.
First the interviews. Before I get stuck in hat-tip to Paul for leading me to read one of the three rather good books that posts from others bloggers have pointed me to over the past year or so (the others are this via Chris Dillow, and this via Tim Worstall). Anyway, Bourdieu suggests early on that if you choose (as an interviewee) to engage with TV on its own terms you effectively agree to say nothing, and I have to say this chimes with my own experience. Broadcast media interviews are inevitably short and simplistic and the pressure is always to simplify and shorten, and explain ideas in terms of existing concepts.
I don't mind all this on one level. I am vain enough to quite enjoy interviews. But I do think that Bourdieu was basically right about what is going on. Producers and interviewers inevitably often go back to 'good' interviewees who play by the rules and can provide the simple punchy soundbite, regardless of whether it explains the underlying issues or not. This is not by any means to be critical of individual journalists - there are genuine constraints on what they can do. But the format broadcast media in particular works to inevitably reduces the meaningful content of the interviews.
After the first interview, a 'proper' one, I was buttonholed by one of the environmental campaigners who was outside the AGM. It was just him, me and his camcorder. It was far less structured than the 'professional' media interview. There was no sense of the 'rules' of the types of interviews I usually do, so it was unsettling in a way that I no longer find 'normal' media interviews to be. Unlike a normal broadcast crew, he clear wasn't thinking in terms of his key 10-15 second sentence. Plus the record button was always on in terms of the likely output (unlike traditional broadcast interviews where they want your 'best' answer). He also pushed me on one of my answers.
Somehow, even though it wasn't done by a journalist, the second interview felt more journalistic. It was the first time in ages that I felt I had actually been challenged to defend what I had said, rather than my comments simply being a bit of 'content'. I'm glad there are people out there doing this stuff, and I suspect this will be where a lot of 'real' news comes from in future.
I got back home this afternoon to discover the latest blogosphere scandal - the Devil's Kitchen blog has been taken down following a less than impressive TV turn by its real-life author in his other role as leader of the Libertarian Party UK. As Chris AKA The Devil has acknowledged, he hardly covered himself in glory on the Politics Show, but there are a few things that particularly stand out from it all.
First, I'm amazed he wasn't prepared for this outcome. If you mouth off a lot, you have to expect people to bring your comments up again. If I was him I would have assumed I would have got asked questions about what I had said online and prepared accordingly. He didn't look like he saw it coming at all,
But secondly, I can't believe he crumbled so easily. I mean, wasn't the whole point of DK that he was unconstrained, a foul-mouthed advocate of liberty no matter what? As such I am amazed he didn't simply bat back Brillopad's raising of his blog by saying something like "The whole point of the LPUK is that people have the right to think and say what they want. The problem is that politicians and media intermediaries like you fail to allow the real voice of the people to be expressed. You might find what I blogged offensive, but it's no worse than what millions of people think, or say in clubs and pubs across the UK." That's exactly what I would expect the leader of the LPUK to say. Instead he ended up apologizing (and to a union official...).
So it does make you wonder if all that 'libertarianism' wasn't just a convenient label for someone who is just.... pardon my language... a gobshite. The fact that the leader of a party of libertarians couldn't give a libertarian response to a slightly pushy question must make the massed ranks of the LPUK wonder if his heart's really in it. The DK blog itself has also now been removed after a quiet word from his employer. Liberty's champion needs to pay the mortgage, natch. Does make you wonder if he'll stick at this politics business, and if so whether he'll move more trad Right (UKIP, but maybe ultimately the Tories). Wouldn't be surprised at all.
But, if it's any consolation for DK, this just isn't a big deal. Us bloggers like it cos it's a bit of good gossip in our online world. But it was ultimately 3 or 4 minutes on a TV programme most people don't watch. I'm with Paul in having little sympathy, given his deliberate offensiveness (that just isn't what I like), but it's already dust. Only bloggers care about this one.
Tuesday, 13 April 2010
Corporate governance isn't that important...
...if you take the Tory manifesto at face value. I can't find a single mention of it, or of 'shareholder' or 'remuneration' for that matter. Nothing about takeovers either. So all this debate about governance, pay and the role of shareholders in public companies must be seen as a sideshow I guess? And what happened to that Zac Goldsmith stuff about including a reference to climate change in pension fund SIPs? I can't see that either.
Not exactly a manifesto for change if you work in corp gov or SRI is it?
Not exactly a manifesto for change if you work in corp gov or SRI is it?
Monday, 12 April 2010
Labour's manifesto...
There are a few bits of note in it (PDF) -
Finally there's some stuff on other types of ownership -
Good stuff generally though - will be interesting to see if the Tories and Lib Dems have anything to say on these issues.
Corporate governance reformThe Companies Act bit looks new to me? As is the suggestion that the Stewardship Code should be strengthened - this is a bit difficult to do at present as the thing doesn't even technically exist! But presumably reflects the concern I've heard from a few people that the ISC Code - which is effectively what the FRC is consulting on - doesn't do the job. Not surprisingly the reference to voting disclosure is music to my ears. Just wish we had pushed the button earlier.
To build strong businesses we need skilled managers, accountable boards, and committed shareholders – all with a culture of long-term commitment. We will strengthen the 2006 Companies Act where necessary better to reflect these principles. The UK’s Stewardship Code for institutional shareholders should be strengthened and we will require institutionalshareholders to declare how they vote and for banks to put their remuneration policies to shareholders for explicit approval.
Too many takeovers turn out to be neither good for the acquiring company or the firm being bought. The system needs reform. Companies should be more transparent about their long-term plans for the business they want to acquire. There needs to be more disclosure of who owns shares, a requirement for bidders to set out how they will finance their bids and greater transparency on advisers’ fees.This seems to be pretty much a restatement of recent comments by Mandy on takeovers, though the question of limiting voting rights on bids to those on the register pre-bid is new I think. Could be difficult to administer but I had another idea - what about limiting voting rights to those on the register at the last meeting (either AGM or EGM), or, even better, to those who voted at the last meeting. That would make the relevant shareholders easy to identify and reward those who exercise their ownership rights.
There should be a higher threshold of support – two-thirds of shareholders – for securing a change of ownership and the case for limiting votes to those on the register before the bid should be examined.
Finally there's some stuff on other types of ownership -
Creating a shareholding societyFine as far as it goes, but wouldn't we rather see positive incentives for employee ownership?
We want Britain’s workers to have a stake in their company by widening share ownership and creating more employee-owned and trust-owned businesses. We want to see a step change in the role of employee-owned companies in the economy, recognising that many entrepreneurs would like to see their companies in the hands of their employees when they retire. We will review any outstanding barriers to the formation of more employee companies like the John Lewis Partnership.
Good stuff generally though - will be interesting to see if the Tories and Lib Dems have anything to say on these issues.
Thursday, 8 April 2010
Superficial ownership
A few things lately have made me ponder this question of ownership (of publicly listed companies) a bit more. First the continued rumblings about the Kraft takeover of Cadbury. The select committee report on this is worth a read. There's nothing particularly novel in there, but it does capture something of the different perspectives on the deal. For a lot of people in the City (and some of the less interesting commentariat on the business pages) it was just a question of Cadbury shareholders getting a good deal. And on one level they were clearly right - Cadbury shareholders made quite a bit of money, and that includes all of us who are members of funded pension schemes.
But the select committee report does point up the way that this transaction in the financial markets doesn't quite mesh with the experience on the ground. Agreeing to sell the shares was a very quick process, but the effects on the company itself, and its employees, are only starting to be felt. Somehow the role of shareholders, though fundamental to the company's future, felt rather superficial. You could see this reflected in the comments about investors with a short-term interest deciding the future of a 185-year-old company. Similarly, in one very real sense the new owners of Cadbury are Kraft shareholders. But do we really think it feels like that to Cadbury workers? For them it will be the Kraft management they perceive as the new owners.
This is interesting in the light of the development of the Stewardship Code for investors. The idea is that investors will be apply 'comply or explain' to the Code. They state compliance or explain why not. And, as currently envisaged, it will be ok for an investor to say they don't think stewardship is important, and are thus non-compliant. So what's strange is that we could have investors in companies who publicly state that they don't think 'ownership' activity is valuable but who nonetheless are granted legal rights to exercise ownership.
It's this kind of contradiction that makes me open to ideas like qualifying periods for voting rights, or some other ways to empower long-term investors who do take such issues seriously. Notably Bob Monks' latest thoughts on these issues are in this territory too. Under such an approach, investors could still trade in stocks as much as they wanted, and as such those who think this would result in prices that tell us something useful about the underlying companies shouldn't have a problem. But only those who identify themselves as being interested in ownership would have formal rights. Controversial stuff, but I'm warming to it.
But are those investors who might be up for playing the ownership role ready to do it? Hmmmm. I was at a meeting where David Pitt Watson spoke on this theme last year, and I what I took from his comments is that actually very little 'ownership' activity actually takes place. Most fund manager meetings with companies are primarily designed to obtain information that could inform trading decisions (from memory I think this is confirmed by some of the research Paul Cox has done). Obviously meetings occur between corp gov and SRI people and companies too, but we all know that these are frequently given lower status by companies than meetings with those that manage money. So both sides of the relationship put more emphasis on the trading-focused meetings.
One might argue that this, then, is where we ought to focus activity. And it's interesting that when Paul Myners highlighted a few of the investors who he thought got the stewardship concept he mentioned the heads of L&G, M&G and Standard Life, rather than those with specialist governance or SRI focus like Hermes and F&C. The three he mentioned are more in the traditional long-only mold, and L&G primarily a passive house, and their voting records aren't great (M&G particularly). That suggests to me he must be thinking more about the style and attitudes of the CIOs combined with the assets to have an influence, but I could be well off the mark. But the general point is that I think we can conclude that the sort of ownership activity many of us would like to see is currently a minority pursuit. In addition some of the activity that is currently taking place under the ownership label is, again, a bit superficial.
Finally I'm attracted to the idea of trying to enfranchise individual shareholders and those who are the ultimate beneficial owners (like pension scheme members). This is the sort of stuff David Pitt Watson et al talked about in The New Capitalists. But once more attempts to do this to date, including by yours truly in respect of member trustees when at the TUC, haven't achieved what was expected. Again, the activity that has taken place doesn't quite feel like real ownership.
Not for the first time, my conclusion is that we are still at a very early stage in this field. I think what we have so far is a variety of superficial versions of ownership that we know aren't quite right.
But the select committee report does point up the way that this transaction in the financial markets doesn't quite mesh with the experience on the ground. Agreeing to sell the shares was a very quick process, but the effects on the company itself, and its employees, are only starting to be felt. Somehow the role of shareholders, though fundamental to the company's future, felt rather superficial. You could see this reflected in the comments about investors with a short-term interest deciding the future of a 185-year-old company. Similarly, in one very real sense the new owners of Cadbury are Kraft shareholders. But do we really think it feels like that to Cadbury workers? For them it will be the Kraft management they perceive as the new owners.
This is interesting in the light of the development of the Stewardship Code for investors. The idea is that investors will be apply 'comply or explain' to the Code. They state compliance or explain why not. And, as currently envisaged, it will be ok for an investor to say they don't think stewardship is important, and are thus non-compliant. So what's strange is that we could have investors in companies who publicly state that they don't think 'ownership' activity is valuable but who nonetheless are granted legal rights to exercise ownership.
It's this kind of contradiction that makes me open to ideas like qualifying periods for voting rights, or some other ways to empower long-term investors who do take such issues seriously. Notably Bob Monks' latest thoughts on these issues are in this territory too. Under such an approach, investors could still trade in stocks as much as they wanted, and as such those who think this would result in prices that tell us something useful about the underlying companies shouldn't have a problem. But only those who identify themselves as being interested in ownership would have formal rights. Controversial stuff, but I'm warming to it.
But are those investors who might be up for playing the ownership role ready to do it? Hmmmm. I was at a meeting where David Pitt Watson spoke on this theme last year, and I what I took from his comments is that actually very little 'ownership' activity actually takes place. Most fund manager meetings with companies are primarily designed to obtain information that could inform trading decisions (from memory I think this is confirmed by some of the research Paul Cox has done). Obviously meetings occur between corp gov and SRI people and companies too, but we all know that these are frequently given lower status by companies than meetings with those that manage money. So both sides of the relationship put more emphasis on the trading-focused meetings.
One might argue that this, then, is where we ought to focus activity. And it's interesting that when Paul Myners highlighted a few of the investors who he thought got the stewardship concept he mentioned the heads of L&G, M&G and Standard Life, rather than those with specialist governance or SRI focus like Hermes and F&C. The three he mentioned are more in the traditional long-only mold, and L&G primarily a passive house, and their voting records aren't great (M&G particularly). That suggests to me he must be thinking more about the style and attitudes of the CIOs combined with the assets to have an influence, but I could be well off the mark. But the general point is that I think we can conclude that the sort of ownership activity many of us would like to see is currently a minority pursuit. In addition some of the activity that is currently taking place under the ownership label is, again, a bit superficial.
Finally I'm attracted to the idea of trying to enfranchise individual shareholders and those who are the ultimate beneficial owners (like pension scheme members). This is the sort of stuff David Pitt Watson et al talked about in The New Capitalists. But once more attempts to do this to date, including by yours truly in respect of member trustees when at the TUC, haven't achieved what was expected. Again, the activity that has taken place doesn't quite feel like real ownership.
Not for the first time, my conclusion is that we are still at a very early stage in this field. I think what we have so far is a variety of superficial versions of ownership that we know aren't quite right.
Wednesday, 7 April 2010
What Conservative Central Office is Googling...
According to a search by someone located in the Eagle's Nest (joke) that sent them to my blog just now:
So I think Labour can expect more on the 'stealth tax' in this campaign.
PS. Just spotted that Iain Dale mentions that this issue was brought up in the final PMQs.
terry arthur 100 billionFor info Terry Arthur is the actuary who has come up with the highest figure for the impact of the reduction in dividend tax credits on pension funds. More here.
So I think Labour can expect more on the 'stealth tax' in this campaign.
PS. Just spotted that Iain Dale mentions that this issue was brought up in the final PMQs.
One for Lib Dem supporters in the City...
I'm not going to blog much about the election because a) I'm not very good at high politics and b) anything I post could basically be boiled down to 'vote Labour'. But since hostilities have formally started, I thought I would lob in a grenade.
So just to say that I'd be pretty annoyed about Caledonia Investments if I were a Lib Dem. After all, the case that Caledonia put to shareholders for using their money to fund the Tories was about the need to elect a Conservative government. I’ve been back and checked the AGM circulars issued to shareholders (available here) and there doesn’t appear to be any mention at all of the Lib Dems in any of them, though Labour is mentioned directly.
Yet, as I’ve blogged before, half of the money Caledonia has deployed so far has gone to the Meon Valley (a new seat this election) which is a Conservative-Lib Dem marginal with Labour a distant third. And when I went back and looked at where else they were chucking their cash about, it turns out that Caledonia has also given money to the Tories in other seats where the Lib Dems are clearly the target, not Labour:
Eastleigh – Chris Huhne’s constituency
Winchester – Mark Oaten’s constituency
Sutton & Cheam – a Lib Dem marginal
Romsey – an ultra-tight Lib Dem marginal
In total almost two-thirds of the money Caledonia has spent so far has gone on funding fights against the Lib Dems, not Labour. We’re not talking not big bucks – Caledonia has only given the Tories £133k in total so far – but the fact that the majority of it is being used against the Lib Dems doesn’t feel consistent with their arguments for making the donations.
I also wonder if those asset managers that voted for these donations knew that they would be funding anti-Lib Dem drives? You certainly wouldn’t guess that was the plan from the AGM circulars, or the comments from Tim Ingram made last year about the decision to fund the Tories:
Funny one, innit?
So just to say that I'd be pretty annoyed about Caledonia Investments if I were a Lib Dem. After all, the case that Caledonia put to shareholders for using their money to fund the Tories was about the need to elect a Conservative government. I’ve been back and checked the AGM circulars issued to shareholders (available here) and there doesn’t appear to be any mention at all of the Lib Dems in any of them, though Labour is mentioned directly.
Yet, as I’ve blogged before, half of the money Caledonia has deployed so far has gone to the Meon Valley (a new seat this election) which is a Conservative-Lib Dem marginal with Labour a distant third. And when I went back and looked at where else they were chucking their cash about, it turns out that Caledonia has also given money to the Tories in other seats where the Lib Dems are clearly the target, not Labour:
Eastleigh – Chris Huhne’s constituency
Winchester – Mark Oaten’s constituency
Sutton & Cheam – a Lib Dem marginal
Romsey – an ultra-tight Lib Dem marginal
In total almost two-thirds of the money Caledonia has spent so far has gone on funding fights against the Lib Dems, not Labour. We’re not talking not big bucks – Caledonia has only given the Tories £133k in total so far – but the fact that the majority of it is being used against the Lib Dems doesn’t feel consistent with their arguments for making the donations.
I also wonder if those asset managers that voted for these donations knew that they would be funding anti-Lib Dem drives? You certainly wouldn’t guess that was the plan from the AGM circulars, or the comments from Tim Ingram made last year about the decision to fund the Tories:
"It is worth understanding why we are doing it. It is not for purely political reasons, it's economic reasons. We are an investment trust so we take equity positions in other companies, which are mainly British. We firmly believe that our shareholders will get greater wealth creation in the economic conditions created by a Tory government than by a Labour government."If that were really the case, why not solely target Labour marginals, to ensure that less Labour MPs are elected?
Funny one, innit?
Tuesday, 6 April 2010
Links
1. Did you see that the ISC is planning an inquiry into investment banking fees? I think P Myners can probably take the credit for that.
2. Interesting post about envy on Falkenblog.
3. An old article about educational incentives.
2. Interesting post about envy on Falkenblog.
3. An old article about educational incentives.
Thursday, 1 April 2010
Mindsets, metaphors and money (and Mercs)
Whilst I've not been blogging, I've been trying to get through a few more books on motivation in order to firm up a few ideas around incentivisation. As I've said before I think performance-related pay may well become a target in the coming period amongst investors who really are willing to think about what we've been just been through (agency theory next btw...!). It's important to be clear that what I mean here is that it doesn't really work, not that it 'drove excessive risk-taking' or whatever. The net result IMO has not been greater alignment of interests or any of that blah, but simply a further transfer of wealth to managers.
Anyhow this has resulted in me ending up reading a lot of stuff by Carol Dweck. I don't recommend Mindset, as it's one of those books where an interesting idea is spread too thin and reads too much like self-help literature, but Self-Theories, which is a collection of essays which highlights much underlying research, is well worth a read. Just to be clear her primary focus is on educational motivation, but her work has obvious applications elsewhere. The focus is on two distinct types of beliefs about intelligence or talent that students or various ages have. These are characterised as 'entity' or 'incremental' theories. Those with the former belief see intelligence, for example, as basically innate, whereas the latter believe that it can be developed. So the former see test results etc as measure of smartness, whereas the latter see them as a measure of effort.
The interesting thing is that those with the entity theory therefore often get very discouraged when they do poorly, as they see it as a judgement on them as a person. In addition they have a tendency to pick easy easy tasks that they know they will do well on, rather than challenging ones where they may fail and as such may be seen (or see themselves) as less talented. They also see the need to put in effort as evidence of a lack of innate talent. In contrast incremental theorists stick at tasks, see achievement as the result of effort, and are more likely to go for challenging tasks. Importantly this also raises a big question mark over how we praise kids. If we tell them they've done well because they are smart this is likely to push them towards an entity theory approach.
This makes a lot of sense to me, and if you've read any of Martin Seligman's stuff you will see some similarities, for example the tendency of people with a pessimistic explanatory style to interpret a setback as being indicative of their general lack of ability. This seems to be rooted in attribution theory. Being a complete amateur I can see some overlaps but Dweck does explain where the differences are.
But it also struck me if there is also a bit of an overlap with people coming from the perspective of cognitive linguistics. I immediately thought of George Lakoff and his idea that lefties and righties have different metaphors of the family that inform their beliefs. I'm massively oversimplifying, but again there is a bit of a fundamental difference between a view that moral character is innate and that it can be molded. Please note I'm not suggesting lefties=good, righties=bad (although that is true...) but rather that it seems that people from different disciplines seem to be heading towards some interesting common ground.
I got interested in this stuff through reading more about incentives and performance, and this opens a lot of interesting avenues. For example, it does cast another light on the issue of paying kids to do well at school. I was previously critical of Tim Harford's comments on fostering intrinsic motivation vs providing extrinsic motivation (financial rewards). I now think I wasn't nearly critical enough, as it appears that he is entirely unaware of the psychological research that backs Barry Schwartz's position. It's not just some wistful desire for schoolkids to want to learn, there is a lot of research here.
As such I am really interested to see how the programmes to pay kids for attendance and/or grades work in the US. It appears that the results are mixed, with some pilots having already been abandoned and others seeming to work (though it would be interesting to see if other factors are being controlled for). I reckon the outcome of such programmes could tell us a great deal about incentives and motivation. I'm happy to go with the evidence - if it works it works. And let's not forget that the US programmes are not some neo-liberal plot, it's a genuine attempt to deal with poor educational attainment. But equally let's not pretend the research on motivation is dippy-hippy wishful thinking.
A final thought - I hate the current Mercedes Benz advert. The one where it says something like presence should be effortless. In light of all the above it's clearly pointing people towards an entity theory about 'style'. And there's one more thing I would lob in here. Whilst I'm not convinced by Pierre Bourdieu's idea of cultural capital, he did hit the target in one respect. When we view people as being effortlessly stylish we miss the point that they have spent a lot of time and application acquiring the attributes to appear to be effortlessly stylish.
Anyhow this has resulted in me ending up reading a lot of stuff by Carol Dweck. I don't recommend Mindset, as it's one of those books where an interesting idea is spread too thin and reads too much like self-help literature, but Self-Theories, which is a collection of essays which highlights much underlying research, is well worth a read. Just to be clear her primary focus is on educational motivation, but her work has obvious applications elsewhere. The focus is on two distinct types of beliefs about intelligence or talent that students or various ages have. These are characterised as 'entity' or 'incremental' theories. Those with the former belief see intelligence, for example, as basically innate, whereas the latter believe that it can be developed. So the former see test results etc as measure of smartness, whereas the latter see them as a measure of effort.
The interesting thing is that those with the entity theory therefore often get very discouraged when they do poorly, as they see it as a judgement on them as a person. In addition they have a tendency to pick easy easy tasks that they know they will do well on, rather than challenging ones where they may fail and as such may be seen (or see themselves) as less talented. They also see the need to put in effort as evidence of a lack of innate talent. In contrast incremental theorists stick at tasks, see achievement as the result of effort, and are more likely to go for challenging tasks. Importantly this also raises a big question mark over how we praise kids. If we tell them they've done well because they are smart this is likely to push them towards an entity theory approach.
This makes a lot of sense to me, and if you've read any of Martin Seligman's stuff you will see some similarities, for example the tendency of people with a pessimistic explanatory style to interpret a setback as being indicative of their general lack of ability. This seems to be rooted in attribution theory. Being a complete amateur I can see some overlaps but Dweck does explain where the differences are.
But it also struck me if there is also a bit of an overlap with people coming from the perspective of cognitive linguistics. I immediately thought of George Lakoff and his idea that lefties and righties have different metaphors of the family that inform their beliefs. I'm massively oversimplifying, but again there is a bit of a fundamental difference between a view that moral character is innate and that it can be molded. Please note I'm not suggesting lefties=good, righties=bad (although that is true...) but rather that it seems that people from different disciplines seem to be heading towards some interesting common ground.
I got interested in this stuff through reading more about incentives and performance, and this opens a lot of interesting avenues. For example, it does cast another light on the issue of paying kids to do well at school. I was previously critical of Tim Harford's comments on fostering intrinsic motivation vs providing extrinsic motivation (financial rewards). I now think I wasn't nearly critical enough, as it appears that he is entirely unaware of the psychological research that backs Barry Schwartz's position. It's not just some wistful desire for schoolkids to want to learn, there is a lot of research here.
As such I am really interested to see how the programmes to pay kids for attendance and/or grades work in the US. It appears that the results are mixed, with some pilots having already been abandoned and others seeming to work (though it would be interesting to see if other factors are being controlled for). I reckon the outcome of such programmes could tell us a great deal about incentives and motivation. I'm happy to go with the evidence - if it works it works. And let's not forget that the US programmes are not some neo-liberal plot, it's a genuine attempt to deal with poor educational attainment. But equally let's not pretend the research on motivation is dippy-hippy wishful thinking.
A final thought - I hate the current Mercedes Benz advert. The one where it says something like presence should be effortless. In light of all the above it's clearly pointing people towards an entity theory about 'style'. And there's one more thing I would lob in here. Whilst I'm not convinced by Pierre Bourdieu's idea of cultural capital, he did hit the target in one respect. When we view people as being effortlessly stylish we miss the point that they have spent a lot of time and application acquiring the attributes to appear to be effortlessly stylish.
Myners update
Since I last posted Paul Myners has been continuing to stir things up. He gave a very interesting speech to the ICGN which I recommend giving a proper read. Notably he told (well, reminded...) investors that that it's entirely within their own power to tackle investment banking fees. It's interesting that the investment industry is very good at warning about the unintended consequences of state intervention, or regulation over self-regulation, when it affects them, but are quite keen on using the state when a different part of the system is in question.
The Treasury has also published all the responses Myners received to his letter out to institutional investors to ask them what they were doing about remuneration at the banks. These are less interesting than I expected, though some people do seem to be thinking a bit differently. I think F&C's response is worth a read (well, they do have quite a big corp gov/SRI team), but I also thought Royal London provided an interesting reply. Wooden spoon must go to Lazards (PDF) - check out the hand-scrawled whinge at the bottom. Financial Muse blog (part of Financial News, the best financial trade mag by far IMO) has already given it a bit of a piss-taking.
Finally, Myners is also quoted in this piece in the Grauniad calling on the FSA to have a look at shareholder engagement. Amen to that. I get the impression that this idea has dawned on a few people of late - where is the corp gov function in the FSA? It really does need some kind of internal resource for these kinds of issues.
In fact the Grauniad article is worth a read as a few interesting comments. Even the one right at the end, which I disagree with, but does at least restate the conventional wisdom:
The Treasury has also published all the responses Myners received to his letter out to institutional investors to ask them what they were doing about remuneration at the banks. These are less interesting than I expected, though some people do seem to be thinking a bit differently. I think F&C's response is worth a read (well, they do have quite a big corp gov/SRI team), but I also thought Royal London provided an interesting reply. Wooden spoon must go to Lazards (PDF) - check out the hand-scrawled whinge at the bottom. Financial Muse blog (part of Financial News, the best financial trade mag by far IMO) has already given it a bit of a piss-taking.
Finally, Myners is also quoted in this piece in the Grauniad calling on the FSA to have a look at shareholder engagement. Amen to that. I get the impression that this idea has dawned on a few people of late - where is the corp gov function in the FSA? It really does need some kind of internal resource for these kinds of issues.
In fact the Grauniad article is worth a read as a few interesting comments. Even the one right at the end, which I disagree with, but does at least restate the conventional wisdom:
"The value of a company is directly linked to the performance of managers, whether high or low. If the share price is languishing, that surely tells you that management aren't doing a good job."
Reduced service in operation
Thanks those of you both on here and out there who have encouraged me to stick with it. I'm going to but with a much reduced frequency for a month or so. (After May, if the Forces of Darkness triumph, left-of-centre bloggers may start disappearing in the middle of the night in any case - JOKE).
Anyway, exciting new material coming soon...
Anyway, exciting new material coming soon...
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