Monthly Archives: June 2012

Andrew Hill

As his job security plummets in line with Barclays’ share price, Bob Diamond is haunted by what he said in the BBC Today Business Lecture last year about culture:

Culture is difficult to define, I think it’s even more difficult to mandate – but for me the evidence of culture is how people behave when no one is watching.

But Mr Diamond didn’t suddenly wake up to the importance of a strong corporate culture after becoming chief executive of Barclays. He’s been talking about it for years and mainly with reference to his “no jerk” rule at Barclays Capital, the investment banking arm he used to run and that was home to the trading “dudes” skewered in the Libor-fixing scandal. Here he is talking about the rule in an interview with The Times last December:

If someone can’t behave with their colleagues and can’t be part of the culture, it doesn’t matter how good they are at what they do, they have to be asked to leave. You know what a jerk is when you see it. If we ever ignore the rule it always comes back to haunt us.

 Read more

Rupert Murdoch has a few things in common with Warren Buffett. They are both 81, they both love newspapers and they both run public companies named after their worst investments from the past. Mr Buffett’s is Berkshire Hathaway, a New England textile company, Mr Murdoch’s is News Corp.

Andrew Hill

Jonathon Porritt, the environmental campaigner, believes “almost everybody in [your] organisation knows almost nothing about energy”.

So how should companies go about instilling the necessary energy awareness and zeal for change in employees – and, ultimately, suppliers and customers?

Mr Porritt – speaking during a panel I chaired on Wednesday at the Green Corporate Energy conference in London – laid out two paths: “command and control” or “we’re all in this together”. If you follow the first path, you place your faith in technology to regulate corporate energy use. Follow the second and you rely on users’ personal engagement and sense of responsibility. Read more

One principle underpins Walt Disney Parks and Resorts: the product is not Mickey Mouse, castles, rollercoaster rides or parades; it is the whole “guest experience”.

Andrew Hill

The modern manual of chief executive apologies for corporate cock-ups is short: 1) say sorry, 2) stress customers are your priority, 3) praise staff for working hard to solve the problem, 4) say sorry again. Repeat, ad nauseam.

Royal Bank of Scotland’s Stephen Hester managed to follow these simple rules on Monday in his first public appearance since a software failure left millions of customers of RBS, Natwest and Ulster Bank unable to access bank accounts or make transactions. In an interview with Sky News, he was serious, he was plain-spoken and he was in Edinburgh. This last is important, not only because jet-setting while customers suffer is a bad look for a banker, but because there is already an undertone of complaint that an RBS decision to outsource IT services may be to blame for the problem – something Mr Hester denied. Read more

John Gapper

The Moody’s downgrade of 15 banks is a backward-looking review of the strategy that has dominated global banking for the past two decades – expanding into high-margin capital markets operations. It does not get good marks.

There was always a problem inherent in banks such as Deutsche Bank, Barclays, UBS, Bank of America, Credit Suisse and others trying to play in the investment banking world. Yet it took a very long time for a penalty to be applied.

Of course, the question is why it wasn’t applied earlier. Many of the things that Moody’s writes about in its note accompanying the downgrades were evident a long time ago – high volatility came with high margins. Read more

Two white-collar criminals received justice last week – Allen Stanford of Stanford International Bank and Rajat Gupta of McKinsey & Co and Goldman Sachs. One’s actions are easy to understand, the other’s extremely hard.

John Gapper

Microsoft’s launch of the Surface, its belated rival to Apple’s iPad, brought an interesting declaration from Steve Ballmer, its chief executive, as reported by the FT:

“We believe that any intersection between human and machine can be made better when all aspects of the experience – hardware and software – are working together,” said Mr Ballmer. Read more

Andrew Hill

I can’t help thinking that Jesse Boot and Charles R Walgreen Senior were destined to meet eventually. With Tuesday’s deal between the UK’s Alliance Boots and Walgreens of the US, the paths of the two pharmacy chains, each founded more than 100 years ago, finally cross. Boot – son of the original founder John – was said to have a “talent for business”; Walgreen, though he built his business more slowly initially, “instituted a level of service and personal attention unequalled by virtually any other pharmacy in Chicago”, according to the company history. Read more

If Ian Fleming had invented a villain modelled on “Sir” Allen Stanford, even James Bond fans would have criticised him for going too far. The Antigua-based Texan ploughed the proceeds of his fraudulent investment schemes into an unlikely passion for cricket, koi carp and tailored suits. Last week, he was sentenced to 110 years in prison. I only regret the judge didn’t add a year to the jail-term: superstitious cricketers believe a score of 111 attracts bad luck.

Andrew Hill

It was “values” day in many McKinsey offices on Friday – the annual occasion when staff take a break from client work to reflect on the principles underpinning the management consultancy. Rarely can they have had before them a case study as timely and as dramatic as that of their former head, Rajat Gupta, who was convicted that day of conspiracy and three counts of securities fraud related to trading in Goldman Sachs’ stock by Raj Rajaratnam’s Galleon hedge fund.

At “the Firm”, the impact of Gupta’s decline and fall is still felt deeply. As I wrote last year in my analysis of how McKinsey was handling the scandal, “what shocks staff and alumni is that Rajat Gupta should stand accused of precisely [the] sins of self-enrichment and self-aggrandisement” that its legendary former chief Marvin Bower abhorred.

One former partner told me on Friday that “the most aggrieved groups are alumni and senior partners who knew Rajat Gupta and continue to be somewhat baffled by what led him to do this”. Another ex-McKinseyite, Roger Parry, now chairman of UK pollster YouGov, admitted to feeling “a little bit devalued and diminished” by the scandal.

But my sense is that while the trial brought punishment and humiliation for Gupta (who will appeal against the verdict), it did not add much to McKinsey’s embarrassment. The firm will not comment but no doubt it hopes the trial has drawn a line under the affair. Read more

John Gapper

The conviction of Rajat Gupta, the former managing director of McKinsey & Co, the management consultancy, on insider trading charges is an extraordinary event – not just because it was a hard case to prove but because of his status at the apex of the business establishment.

The man who ran McKinsey and went on to become a board member of Goldman Sachs and Procter & Gamble, is very likely to receive a jail sentence in October. That makes him the most senior establishment figure to be convicted by a jury since the 2008 crisis.

He had already lost his reputation – silently disowned by McKinsey and discarded by Goldman. Lloyd Blankfein, Goldman’s chairman and chief executive, testified at his trial that leaking information from Goldman’s board – as Gupta was caught on tape doing to Raj Rajaratnam, was wrong. Read more

John Gapper

I wrote in my FT column about Sir Martin Sorrell of WPP, whose remuneration was rejected by 60 per cent of shareholders on Wednesday, and the fact that most CEOs demand to be paid at least as much as their rivals.

That leads to the steady ratcheting up of pay that has enraged UK investors in this year’s “shareholder spring”.

But one aspect of companies such as Barclays and WPP, home to the two highest-paid UK chief executives, is less noticed. It is that the bosses of investment banks and marketing groups tend to compare themselves not just to outsiders, but to the people within their organisations.

Investment banks such as Barclays Capital, employ traders and bankers who earn more than their CEOs, but are invisible because they are not on the board, and so their pay remains secret. Bob Diamond, Barclays’ chief executive and the former head of the investment bank, is the public target. Read more

The stinging rebuke from WPP ’s shareholders to Sir Martin Sorrell, its founder and chief executive, marks a turning point in how investors treat company bosses who demand spectacular amounts of money. Or, if not, it should.