The cautionary tale of the Co-operative Bank, its black hole and its naughty chairman has recently taught us that if a financial institution has the reputation of being dull, earnest and set in its ways, it probably isn’t. The collapse last year of Switzerland’s oldest private bank, Wegelin & Co — whose boss once claimed that being small and provincial made it ‘easy to avoid the deadly emotions of greed and fear’ — was another example. Attention now turns to Standard Chartered, an overseas commercial bank that has long had the reputation of sticking cautiously to the mode of business in which it has historic roots, notably in Asia, and has seen off repeated takeover approaches from others jealous of its franchise. Its chief executive, Peter Sands, in post since 2006, is widely regarded as a safe pair of hands; its chairman, Sir John Peace, bears no resemblance at all to the Revd Paul Flowers; its balance sheet looked relatively comfortable throughout the bad years — and a big fine for US sanctions-busting in 2012 was passed off as an unfortunate blip.
But suddenly the bank has announced the departure of two key executives below Sands and is under fire from a short-selling bond player, Carson Block, who claims it is sitting on piles of toxic loan assets. Other City voices mutter that Standard Chartered looks a lot less dull these days, and may need a steadying rights issue; the shares are down 30 per cent. It would be sad if all this turns out to be anything more than a passing flurry; but the lesson of the past five years is that the banking world is full of skeletons and surprises, against which the jumpiness of professional investors is an unreliable early warning system but one we should monitor all the same — and which also serves to keep regulators on their toes.
Sharing the recovery
A 50p increase in the £6.31 minimum hourly wage would save George Osborne about £750 million a year in welfare payments and pundits think it probably wouldn’t do much damage to the currently robust rate of private-sector job creation. The proportion of the workforce who earn the minimum wage or just above it is quite small, but the political impact of a rise, wrapped up in rhetoric about sharing the benefits of recovery, would be quite large — and just the sort of gambit Osborne loves to deploy against his Labour opponents.
So it seems quite likely to happen, perhaps accompanied by a gesture towards lower corporate taxes or NI contributions to balance the cost to employers. And it raises a wider issue, which is that it really will be a good thing — for consumer confidence and to avert another build-up of personal debt, as well as for social justice — if the benefits of recovery are widely shared. In most large organisations, public or private, the norm for several years has been sub-inflation pay rises, at zero or 1 per cent, for all except the most senior executives, who have continued collecting handsome rewards. Both fairness and economic pragmatism suggest it must soon be time for everyone’s pay to start keeping pace with the cost of living again.
Tony Hayward must wake up every morning wondering where fate would have taken him if it had not chosen, in April 2010, to fracture a vital piece of the Deepwater Horizon drilling rig in the Gulf of Mexico and cause history’s biggest oil spill. Still only 56, he might be coming to the end of an arduous tenure as chief executive of BP, collecting non-exec directorships, and looking forward to more time on his yacht. As it was, he left BP in October 2010 a humiliated and apparently broken figure, after a PR fiasco and a ruthless campaign by Barack Obama to make him the focus of blame for the disaster, in which 11 rig workers died.
Hayward’s most notorious blunder, at the height of the media storm, was to tell an interviewer ‘I’d like my life back’ — but no one could say that his wish has not been granted, at least in business terms (there was also a painful divorce). He has built a portfolio that looks set to yield a fortune several times larger than the nest-egg he would have accumulated if he had served out his time at BP. Since May last year he has been ‘interim’ chairman of Glencore Xstrata, the Swiss-based commodity and mining giant whose founders have made themselves very rich indeed; he is about to share, with Nat Rothschild and others, a £100 million payout on their stake in Genel Energy, an oil and gas venture in Kurdistan; and he’s busy turning round another company, Compact GTL, which owns technology for turning natural gas into synthetic oil. One door slams, three more open: quite a recovery story.
My pick for Brussels
The Prime Minister, we’re told, is thinking of picking a business leader to be Britain’s next EU commissioner, in the hope of bagging the powerful ‘single-market reform’ portfolio. One name in the frame, according to the Daily Telegraph, is CBI director general John Cridland — a master of his brief, but perhaps a bit too self-effacing to set the cat among the Brussels pigeons. More promising would be one of Cridland’s CBI predecessors: Lord (Digby) Jones, the tub-thumping free-marketeer who declared after his stint as a trade minister that ‘about half’ of all the Whitehall officials he met ‘deserved the sack’; the ubiquitous but currently underemployed Lord (Adair) Turner; or Sir Howard Davies, who must surely be on the lookout for an excuse to escape from the thankless task of chairing the Airports Commission.
The trouble is, they’re all talkers: why not send someone who will seriously cut the crap, axe the bureaucracy and focus on delivering value for member-state stakeholders: private-equity veteran Jon Moulton springs to mind. When I asked him in the depths of the financial crisis what he saw ahead, his answer — glinting behind his rimless specs — was ‘opportunities from the wreckage’. Not a bad slogan for Europe’s next phase.
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