Monthly Archives: September 2012

Andrew Hill

Add another episode to the saga of the overworked modern chief executive: Akzo Nobel announced on Tuesday that Ton Büchner, appointed to the Dutch company only in April, will take a “leave of absence” having been “diagnosed with temporary fatigue“.

It is all reminiscent of Lloyds Banking Group’s decision to give António Horta-Osório, the UK company’s chief executive, a rest last November, to get over insomnia and exhaustion. The Portuguese CEO has since recovered – sufficiently to trounce the FT’s banking editor at tennis a couple of months ago. Read more

For BAE Systems and EADS, the European aerospace and defence companies whose courtship was revealed last week, it’s simple. Business logic will help level the political hurdles and bridge the legal pitfalls that lie in the path of their proposed union.

Andrew Hill

Shareholders in BAE Systems and EADS should know what they’re getting into. The FT’s Alison Smith laid out the governance pitfalls on Friday, and Steven Davidoff has pointed out for the New York Times’ Dealbook that setting up a dual-listed structure requires an “unbelievably complex set of agreements in which [the companies] agree to equalise their shares, run their operations collectively and share equally in profits, losses, dividends and any liquidation”.

But a picture is worth a thousand words, so here are three illustrations of the full horror of some dual-listed structures. Expect EADS-BAE, with the added political and defence ingredients, to be 100 times more complex. Nice work for investment bankers, corporate lawyers and company secretaries; hard work for everyone else.

1. This classic describes the consequences of Reuters’ 2008 merger with Thomson Corporation (from the 545-page prospectus that one investor likened to War and Peace). Easy to see why the Anglo-Canadian DLC ended up abandoning its London listing in 2009:

 

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If regrets, apologies and promises to behave better were redeemable for cash, the world’s banks would be rolling in it.

Andrew Hill

Social media buzzed around Mark Zuckerberg’s comment on Tuesday that he wrote the “founder’s letter” for Facebook’s initial public offering registration statement on his mobile phone. (Big deal – investors who have suffered since must wish he’d used the phone’s computing capacity to set the offer price at a more reasonable level.)

I was more interested in his admission that the social networking group had “burned two years” betting on the wrong mobile technology. For most companies, that doesn’t sound like a long time to spend exploring a potentially highly profitable dead-end, but remember, Mr Zuckerberg hit the button that launched “Thefacebook.com” on February 4 2004. It has barely been in existence eight years. In that context, to burn two years is like Ford (founded 1903) wasting a quarter of a century developing a five-wheel car or General Electric (1892) blowing 30 years exploring the possibilities of a steam-powered lightbulb. Read more

Andrew Hill

Antony Jenkins, new chief executive of Barclays, and Rich Ricci, chief executive of corporate and investment banking, have said the right thing. Can they now do the right thing?

The rhetoric of their speeches to analysts on Monday was fine. Mr Jenkins said Barclays would “operate to the highest ethical standards. It will be balanced, less risky and more profitable”. Mr Ricci expanded on this:

We have always scrutinised our businesses based on their ability to generate returns, with careful evaluation of risk and controls embedded in that analysis. Now however, I feel it is appropriate to modify that assessment by explicitly looking at reputational risk as the first hurdle. We have to take a fresh look to see if there are products and services in which, given the changing environment, we no longer deem it appropriate to do business, regardless of financial return.

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Asked to choose between government intervention in the delicate business of innovation and government withdrawal from the field, I always used to plump for the latter.

Andrew Hill

Anyone who reads Sir Howard Davies’s acerbic regular diary column in Management Today magazine will know that the former head of the CBI and London School of Economics is extremely well-qualified to lead an independent inquiry into UK airport capacity. He seems to spend much of his time travelling by air between international destinations – dropping in the occasional barb about the airports he passes through.

In July, he pointed out that “you need a sense of humour to fly from Venice airport. Congested? It makes Heathrow Terminal 1 look like a county cricket ground on a wet afternoon”. Last December, he recounted a bad Paris-Munich TGV experience, but added he was “instinctively pro-train, except when it is owned by Richard Branson”.  Read more