Monthly Archives: February 2012

Andrew Hill

David Willetts, Britain’s universities minister, has a bee in his two-brained bonnet about flawed incentives for British business academics.

Prestige in business schools comes from doing research and being published in peer-reviewed journals, he told an audience of managers, academics and members of parliament in London on Tuesday, launching a discussion of whether poor management is holding back growth. It’s a theme he’s touched on before in relation to wider scientific and academic research. Mr Willetts says that as the lead journals are US-based, they tend to be interested in sophisticated analysis of historical, mainly American, industry data:

We’re rewarding British academics and British business schools for analysing American industries… It’s not at all clear to me that this the right set of incentives.

This has an unwelcome tinge of nationalism but it is hard to argue with the underlying point. Read more

Andrew Hill

When Texas congressman and US Republican presidential candidate Ron Paul accused his rival Rick Santorum of being “fake” during last week’s televised debate, Mr Santorum pinched himself and said: “I’m real, Ron, I’m real,
I’m real.”

Andrew Hill

What does the march of women into senior executive positions look like? Something like this, according to a new Thomson Reuters report:

Progress to the C-suite: the steeper, the better

Each triangle represents one of the 1,965 companies in the Asset4 global database of environmental, social and governance information. If the proportion of female managers out of total management were the same as the proportion in the workforce, the lines would cut the graph in two, bottom-left to top-right. But the lines remain shallow, despite a slight improvement between 2005 and 2010.

As I’ve written recently, an obsession with boardroom quotas is a distraction. Groups that want to fish in a deeper talent pool – and improve innovation and corporate performance – should be more worried about the shallow gradient of these executive lines. Read more

John Gapper

It sounds technical but I find the most intriguing aspect of the newly redesigned Bloomberg financial information service is the search engine.

I went to a presentation in New York today on Bloomberg Next, a simplified and restructured version of its $20,000 a year service, to hear how it intends the $100m initiative to keep adding subscriptions in a tough market. Read more

Andrew Hill

I wish David Cameron and his government would make their minds up about what they think of business. One week they endorse the stripping of titles from disgraced banking barons and allow the flames of the campaign against bonuses to spread; the next, the UK prime minister is out warning about “dangerous rhetoric” that implies “wealth creation is somehow anti-social”.

It is a bit like the club chairman showing football fans a pre-match video of heinous fouls committed by the visiting team’s players and then complaining when the same fans become abusive during the match.

Mr Cameron — and his opposite number Ed Miliband, who made a cack-handed attempt to start separating business into “good” and “bad” sectors in a speech last year — must start to realise that there is nothing to be gained by such confused debate, and much to lose. Read more

There isn’t much moral high ground in Las Vegas and Steve Wynn failed to take it this week.

Mr Wynn, who pioneered Vegas’s rise from tawdriness to a luxury family resort – and then extended his empire to Macau – spent the weekend not only accusing his former business partner of bribing foreign officials but seizing his $2.5bn stake in Wynn Resorts at a substantial discount. By the time Kazuo Okada woke up on Sunday, his equity had vanished.

John Gapper

Lloyds Banking Group’s decision retrospectively to reduce the 2010 bonuses of senior executives involved in mis-selling loan insurance is a sign of the increased risks that bankers are starting to face personally.

The move strikes me as appropriate: it is an effective sanction against bankers over-selling high-margin products that will earn them big bonuses but turn out to be bad for customers. But the implications for the individuals involved, and for the industry as a whole, are serious.

It has the effect of turning “bonuses” –  a form of profit-sharing that most investment bankers have come to rely on for most of their income – into actual bonuses. In other words, provisional payments on which no individual can depend.

The fact that bonuses may be clawed back will make it much more risky to spend them on property or other things. Logically, they now ought to be kept in savings or shares for at least three years while there is a possibility they could be taken back. Read more

Andrew Hill

Fujitsu’s plan to enter the European smartphone and tablet market has a 1980s ring to it. By the early part of that decade, Japanese companies had already grabbed large shares of the markets for televisions, hi-fi units, calculators, electronic toys and digital watches. These days, Europeans are more used to hearing about new Chinese, Taiwanese and South Korean entrants.

But in phones, Japanese manufacturers have largely concentrated on domestic consumers, using country-specific technology and features. It will be interesting to see how many of these features travel, and how many have to be tailored to local tastes, as Japanese phone makers break out of their national silo. (There have been reports that Panasonic is also planning to launch a mobile phone for the European market* and Sony Ericsson – already present – is, as of last week, wholly owned by Sony.) Read more

Gender fatigue is the secret lassitude that grips chief executives and directors when asked for the Nth time to discuss targets, quotas, audits and reports aimed at bringing more women into the boardroom.

Andrew Hill

A highly paid manager doing his duty for the nation resigns in a huff after his ultimate paymasters interfere with his right to manage. Fabio Capello, manager of the England football team, has done what Stephen Hester, chief executive of state-controlled Royal Bank of Scotland, declined to do.

Mr Hester – who spent most of Wednesday doing interviews to explain his decision to stay, despite the row over his bonus – has told the world that it would have been “indulgent” to resign. At the same time, he has sent a strong message to the government that if it wants to earn a return on the taxpayer’s £45bn forced investment in RBS, it should leave him alone.

To use Mr Hester’s terminology (and assuming that the England manager jumped and wasn’t pushed), by comparison, Mr Capello’s decision looks, frankly, indulgent. If the FT’s Simon Kuper is right, the resignation has less to do with the Football Association’s decision to override his view on whether John Terry should keep the England captaincy, and more to do with England’s poor prospects in the coming Euro 2012 tournament and the potential that it would put a blot on Mr Capello’s reputation. Read more

Who wouldn’t want to be a venture capitalist right now? Investment bankers may be reviled and private equity executives hammered but Silicon Valley’s billionaire elite can do no wrong.

Andrew Hill

Rakesh Kapoor has been in charge of Reckitt Benckiser for less than a  year but already he’s changed the world. Or, more accurately, he’s changed Reckitt’s view of the world, by merging its European and North American operations into one Amsterdam-based unit, and splitting the rest of the world into two reporting areas.

Like three ugly sisters, the new operations are called Ena, Rumea (Russia, Middle East, Africa) and Lapac (Latin America and Asia-Pacific). Stefan Wagstyl has pointed out on the FT beyondbrics blog that the clear message is that “emerging markets matter” for the multinational consumer goods group.

Reckitt’s change is more than a laborious redrafting of the corporate organigram. Pankaj Ghemawat wrote in World 3.0 that General Motors’ decision to make many of its non-US, non-European operations report to China was “a basic realignment of power”. The impact of Reckitt’s move to aim resources more directly at growing markets could be just as profound. Read more

Andrew Hill

Harry Potter and Viagra have more in common than you may imagine. They came to market within a year of each other in the late-1990s; they enjoyed enormous success; and what was a boon for the companies that produced and sold them could turn into a bane as their popularity fades and rivals emerge.

John Gapper

Mark Zuckerberg, Facebook’s founder, sets himself an admirable test in the company’s filing for an initial public offering – “that everyone who invests in Facebook understands what this mission means to us, how we make decisions and why we do the things we do.” Unfortunately, he then flunks it.

Like Larry Page and Sergey Brin, the founders of Google, which went public in 2004, Mr Zuckerberg has written a letter to shareholders to explain his approach to their new investors. While Google’s letter was brisk and open about how they intended to ignore short-term earnings targets, his is aspirational and vague.

“By focussing on our mission and building great services, we believe we will create the most value for our shareholders and partners over the long term . . . We don’t wake up in the morning with the primary goal of making money, but we understand that the best way to achieve our mission is to build a strong and valuable company,” Mr Zuckerberg writes. Read more

Andrew Hill

The Los Angeles Times story about the humiliation of Fred Goodwin describes Britain as “a land where essentially feudal titles still carry great prestige”. True-ish. But I have to say that the UK doesn’t do business honours like it used to.

I’ve dug up this extract from the FT of January 2 1912 – and no, as you’ll find out if you follow that link, I’m not making this up: Read more