Monthly Archives: November 2011

The US justice system is an unlovely affair of frantic litigation by too many lawyers in too many courts, with expensive and patchy results. But occasionally a judge wields his power for the public good.

Andrew Hill

Plenty of risk officers and strategy directors must be dreading the order from the boardroom: “We need a full report on the impact of eurozone break-up – and how we will deal with it – by tomorrow’s emergency meeting.”

Wednesday’s FT analysis of how, if at all, businesses are preparing for disintegration of the currency area is fascinating. But the comments seem to me to alternate between despair (“There is no blueprint for anything. You do discuss certain scenarios with customers, but it is like poking around in the fog”) and complacency (“Treasurers in multinationals remain generally positive about their ability to weather the systemic fallout from any European exit”). Read more

Andrew Hill

I have a soft spot for US judge Jed Rakoff, who has just thrown a large legal wrench into the decades-old mechanism of redress between Wall Street banks, investors and the Securities and Exchange Commission.

I first came across him nearly 10 years ago when he presided over the extraordinarily complex litigation between JP Morgan and a bunch of insurers about offshore financing the bank had arranged for Enron. Witty, sharp, quoteworthy and unmistakeable – with his white beard, he looks like one of those wise judges who administer 23rd century justice in sci-fi movies – he is a journalist’s dream. Read more

The pun proved irresistible. “Mystery Ends, Mistry Begins”, ran the headline in India’s Economic Times on the appointment last week of Cyrus Mistry to succeed Ratan Tata at the head of the eponymous tea-to-steel holding company. If the succession was a mystery, it looked to have a pretty feeble final twist.

John Gapper

For close observers of the size of the backing that governments and central banks gave to banks and investment banks during the 2007-08 financial crisis, Bloomberg Magazine has a fascinating breakdown of the figures.

As I noted in my column last week on Hank Greenberg, the former head of American International Group, the liquidity support offered to financial institutions by the Federal Reserve – including use of the discount window – is enormously valuable. Read more

Andrew Hill

Michael Woodford has undoubtedly done a service to Japanese capitalism by exposing the accounting scandal at Olympus. But is the former president and chief executive the right man to lead the camera and medical equipment maker out of the mire? I think not.

The British executive is now back in Japan and due to meet the directors who fired him on Friday. Three executives formally resigned as directors on Thursday ahead of the encounter, but I would still love to be a fly on the boardroom wall for it. Read more

John Gapper

The news that AT&T is taking a $4bn charge to cover the break-up fee it will owe to Deutsche Telekom if its takeover of T-Mobile fails is concrete evidence of how badly it has done in its campaign to convince regulators. To which I say, good.

I have been against the AT&T and T-Mobile deal from the start, arguing that it would enable AT&T and Verizon to replicate in mobile the duopoly that they and the cable companies enjoy in fixed line telephony and broadband. Read more

There are various words, many unprintable, that could be used to describe Hank Greenberg’s $25bn suit launched this week against the US government and the New York Federal Reserve over the rescue of American International Group in 2008. I’ll settle for ludicrous.

Andrew Hill

In its new report, the High Pay Commission makes much of the risk that Britain will slide back to “Victorian levels of pay inequality” if runaway executive pay awards are not somehow reined in.

The parallel with the Victorian era is a resonant one. Even some of the characters in the modern-day saga are Dickensian. The avuncular Vince Cable, Britain’s business secretary and supporter of the thrust of the independent commission’s proposals, is half-Micawber, half-Cheeryble. John Varley, former chief executive of Barclays, seems a stiff-collared braces-wearing throwback to an earlier era in most respects – except one: the commission points out that top pay at his old bank is now 75 times that of the average worker, compared with a ratio of only 14.5 times in 1979.  Read more

Nine hundred people talking animatedly online about brown clinker – a cement ingredient – doesn’t sound much of a vision. But it may be exactly what computer visionaries had in mind when they first envisaged computerised collaboration between workers midway through the last century.

John Gapper

The more details emerge of the shortfall in customer funds at MF Global, the financial broker formerly headed by Jon Corzine, when it collapsed three weeks ago, the more disturbing it appears.

For a time, it seemed plausible that the funds had simply been mislaid in accounts that could not be immediately accessed when MF Global went into Chapter 11 bankruptcy. But the likelihood that the money was improperly used – and lost – has increased. Read more

Michael Bloomberg, New York City’s mayor, made himself unpopular with his decision to raid Zuccotti Park in the early hours of Tuesday and evict 200 campers from the Occupy Wall Street protest, but he was right. So is the City of London Corporation in attempting to shift the tents from outside St Paul’s Cathedral.

John Gapper

Warren Buffett’s foray into IBM, acquiring a 5.5 per cent stake in the company, seems to defy his longstanding antipathy to investing in technology companies. But it depends on what the meaning of “technology company” is.

Mr Buffett’s main objection to technology has always been its unpredictability, as he explained in this discussion with Bill Gates in 1998, which was published by Fortune magazine:

“I look for businesses in which I think I can predict what they’re going to look like in 10 or 15 or 20 years. That means businesses that will look more or less as they do today, except that they’ll be larger and doing more business internationally.”

“So I focus on an absence of change. When I look at the internet, for example, I try and figure out how an industry or a company can be hurt or changed by it, and then I avoid it. That doesn’t mean I don’t think there’s a lot of money to be made from that change, I just don’t think I’m the one to make a lot of money out of it.”

 Read more

John Gapper

The Cinderella story of the unexpectedly successful Citigroup auction of EMI – with the business being sold in two halves to Vivendi’s Universal and Sony – is the recorded music division.

The FT reports that Universal is paying about $1.9bn – more than the $1.7bn-$1.8bn that Citigroup, which took over the business from Guy Hands’ Terra Firma, initially hoped to get. That appears to signal some life in recorded music, after all.

The conventional wisdom of recent years has been that, while the music publishing companies that hold the back catalogue rights for well-known music, still had some value, recorded music values were slipping due to mass piracy and the digital revolution. Read more

The goings-on at Olympus were baffling three weeks ago. Michael Woodford, the Japanese company’s British president, was fired and then disclosed details of some very odd deals. Something was badly awry but it was hard to fathom why Olympus had wasted $1.4bn on three tiny acquisitions and a ludicrously inflated advisory fee.

Colourful opportunists are characters from the M&A world’s myth of combat. Here, acquisitions – and not only the hostile ones – follow weeks of hand-to-hand skirmishing, first between bullish chief executives and their more cautious boards, then between the company and its investors, and finally between the merging groups. This tale and its romantic corollary, the myth of true love – clashing armies, or blushing brides – are the stories on which the media thrive.

John Gapper

Mark Williams’ piece in the FT arguing that the New York Federal Reserve should not have permitted MF Global to be a primary dealer in US government bonds raises the question of how it happened.

Mr Williams explains why MF Global, headed until last week by Jon Corzine, former chairman and chief executive of Goldman Sachs, was a dubious candidate for this official seal of approval: Read more

Once upon a time, there was an emperor who had been thrown out of the kingdom of New Jersey and was seeking another place to rule. Corzine, for that was his name, opened his wardrobe at home one day and spotted some clothes glimmering at the back.

By Ben Fenton

In an extended Vanity Fair piece that people who know the Murdoch family say is “horrifying in its level of detail” and “strikingly accurate in most respects”, Sarah Ellison has laid out how the phone hacking scandal at one of News Corp’s UK newspapers derailed dynastic plans for the media group.

One element of a long history – the claim that the four eldest Murdoch siblings had discussed the “succession” to their father as chairman and CEO with a “family counsellor” or psychologist – stood out, both for being hard to picture and for what it says about how little other shareholders views appear to enter into the Murdoch family considerations on succession planning. (Rupert Murdoch and the elder four of his six children control 38 per cent of voting shares, but own only 12 per cent of the total equity). Read more

Andrew Hill

I have two immediate reactions to the shock announcement that António Horta-Osório is temporarily stepping aside as chief executive of Lloyds Banking Group because of stress. One is frivolous, one serious:

1) His predecessor – the eerily impassive Eric Daniels – must have the constitution of an ox, given that he led the big UK bank through the credit crunch, a controversial merger with HBOS and the 2008 government recapitalisation. (Mr Daniels is a smoker, which I suppose may have helped calm his nerves).

2) The rarity with which top executives admit to suffering stress must mean boards are underestimating the occurrence of stress-related illness at the top – with potentially dire consequences. Read more