Monthly Archives: February 2010

Tony Tassell

Now John Mack, Morgan Stanley chairman, has undercut much of the banking industry’s attempts to justify big bonuses at a time of economic pain largely caused by the financial sector.

All through the current bank earnings season, banks have sought to defend bonuses by saying the ratio of compensation to overall revenues has been cut back. That might be true, but in absolute terms bonuses rose sharply on Wall Street while people were losing jobs on Main Street.

“I still don’t think the industry gets it,” Bloomberg reported the veteran banker as saying yesterday during an appearance in Charlotte, North Carolina (hat tip Huffington Post). “The issue is not structure, it is amount.”

By Maija Palmer, writing on the FT’s tech blog

It was only a matter of time before Brussels began looking at an antitrust complaint against Google. Murmurings of discontent about the dominant search engine have been going on for several years now, and recently there have been a rash of smaller cases against the company.

Three particular cases are being considered by the European Commission. A complaint by Foundem, a UK vertical search company, one from ejustice.fr, a French legal search site, and a complaint made initially in Germany by Ciao!, a vertical search site recently bought by Microsoft.

Tony Tassell

Four down, more to come? The decision by Eric Daniels, Lloyds chief executive, to waive his bonus must have been inevitable after his peers Stephen Hester at RBS and John Varley and Bob Diamond at Barclays gave way and surrendered their payouts. The top bankers have taken a hit for the team.

These sacrifices should not be considered too cynically even if the alternative was public infamy. A multi-million pound hit to the bank account must hurt even the richest banker. But the trouble is that the pay restraint should have reached further down the ranks.

Richard Milne

Toyota’s woes are seen as a chance for other Asian carmakers such as Honda and Hyundai and maybe even the US Big Three.

But the biggest beneficiary in the long run might be European: Volkswagen.

Tony Tassell

Whoever is advising Akio Toyoda, Toyota chief executive, on PR has not exactly covered themselves in glory. Toyota has widely been seen to be slow in responding to the unfolding safety disaster. That view is only going to be compounded by news that Mr Toyoda does not plan to appear before US congressional committees investigating the defects that have led the troubled Japanese automakers to recall of millions of vehicles. Mr Toyoda said Yoshimi Inaba, head of Toyota’s US business, would represent the company at the hearings.

This can only end badly for Toyota. It gives a bad impression that Toyota’s top management are ducking the issue or not taking it seriously enough or trying to hide something. Worse, it is an untenable position. If Mr Toyoda seeks to dodge the hearings, such will be the public backlash that he will inevitably be forced to backtrack and go to the hearings. If Toyota is serious about rebuilding its franchise in the US, Mr Toyoda has no alternative. He must go to Washington.

Louise Lucas

Barclays, expected to lead the ranks as Europe’s most profitable bank with an estimated £10bn of net income when it reports results next week, is a shining example of how to stay upright when all about you are flailing. Here are the golden rules:

1. Participate in auctions for banks if you must, but avoid succeeding – especially when said transaction takes place on the cusp of the mother of all financial crises
2. Ditto for distressed US banks
3. Just say no to state aid
4. When disposing of toxic assets remember the old tricks are the best: sivs fell into disrepute, but with a new name and sounder financing they are a useful tool for magicking assets off the balance sheet
5. Keep on banking

Of course, even a profitable bank becomes ensnared in the populist and regulatory backlash. Barclays is expected to trim bonus payouts, cutting its compensation ratio from 44 per cent to 38 per cent according to Sky News. And under the Basel III proposals, it will take more than the latest crop of profits to bolster its capital cushion.

Tony Tassell

Everything happens in private equity in slow motion compared with public markets. The cycles of accountability are so extended. It takes a long time to raise funds, invest and then realise profits or losses that the deal disasters can take years to emerge.

Louise Lucas

China has officially ousted Germany as factory of the world. Cue angst in Berlin, cheering in the streets of Tiananmen Square?

Not a bit of it. All the data really tells us is that the world isn’t flat and manufacturing is fluid: so long as ships ply the seas, goods can be made wherever labour and factory space is cheapest. And there is no getting round it: China is cheap and, wage inflation notwithstanding, managing to make its exports cheaper still.

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This blog is mainly about business and strategy and how and why people who run companies take the decisions that they do.

Most of the time, John Gapper is in New York and Andrew Hill is in London. We occasionally debate business issues between us, but your comments and criticism are welcome.




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About John and Andrew

John Gapper is an associate editor and the chief business commentator of the FT. He has worked for the FT since 1987, covering labour relations, banking and the media. He is co-author, with Nicholas Denton, of All That Glitters, an account of the collapse of Barings in 1995.

Andrew Hill is an associate editor and the management editor of the FT. He is a former City editor, financial editor, comment and analysis editor, New York bureau chief, foreign news editor and correspondent in Brussels and Milan.

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