Monthly Archives: December 2012

The post-Christmas come down is a depressing time for a lot of people. For many retailers it is the final straw, when they have to admit that even the December shopping binge has failed to provide enough cash to keep the business trading legally.

As a result, insolvency practitioners and shrewd business journalists will be watching like hawks this week for filings at Companies House, when those in dire straits need to admit that they are planning to call in the receivers or look for a fire sale buyer. Read more >>

Andrew Hill

Research for the latest Harvard Business Review ranking of the best-performing chief executives since 1995 – topped by Steve Jobs, as it was in 2010 – also yields some interesting new insights about whether to pick insiders or outsiders to run the company.

The study points out that, overall, insider CEOs do better, ranking on average 154 places higher than outsiders on long-term measures of total shareholder return and increase in market capitalisation. But there was little difference between the performance of insiders and outsiders in continental Europe, China and India. Read more >>

“If you see a Swiss banker jumping out of a window, follow him. There is sure to be a profit in it,” Voltaire is once said to have remarked. These days, no action by a Swiss banker should be taken on trust.

Andrew Hill

Cerberus plans to sell its stake in gunmaker. Getty Images

The 12th and most difficult labour of Hercules was to vanquish Cerberus, the three-headed hound guarding the gates of the Underworld – without using weapons.

How appropriate, then, that California State Teachers’ Retirement System (Calstrs) has disarmed Cerberus Capital Management, the private equity firm, so quickly and comprehensively. On Tuesday, Cerberus said it would sell its stake in Freedom Group, manufacturer of one of the weapons used in last week’s Sandy Hook school shooting.

There are obvious reasons why Calstrs, which was reviewing its investment in Cerberus, moved so fast. In fact, it seems somewhat extraordinary that it had not previously noticed and severed the indirect link between its beneficiaries’ retirement funds and gun manufacturers. It is also arguable whether divestment by Cerberus – presumably to another, less sensitive buyer – will achieve real policy change. But it is a start. Read more >>

You have two weeks until the end of the quarter – which, for many companies, is also the end of the financial year. Instead of developing strategy, or working on long-term plans – let alone buying gifts or dressing the Christmas tree – you’re locked in a windowless office. Your sole objective: to hit your targets for 2012.

Andrew Hill

Gerard Depardieu gives a thumbs up to Belgium. Getty Images

Every time they heard about a disaster in another part of the world, the parents of Belgian friends used to intone: “Qu’on est bien en Belgique” – roughly, “How lucky we are to live in Belgium.”

French (or, perhaps more precisely, French-born) actor Gérard Depardieu may be thinking along similar lines, given his threat this weekend to give up his passport and take up residence in the village of Néchin in Belgium. “I’m leaving,” he wrote, in an open letter to Jean-Marc Ayrault, the French prime minister, “because you consider that success, creativity and talent… must be sanctioned” – a clear protest about rising tax rates in the country of his birth. Earlier this year, France’s richest man Bernard Arnault applied for Belgian citizenship, though he said he was seeking dual Belgian-French nationality and would continue to be tax-resident in France.

I’ve lived in Belgium and it has plenty going for it, including the usual cliché attractions of beer, chocolate, mussels and Tintin, but low personal tax rates never seemed to be one of the benefits of residency. Read more >>

Andrew Hill

In the list of phrases that should be scratched from the management lexicon, “safe pair of hands” comes pretty high.

The man named to be chief executive of BG, Chris Finlayson, is the latest to be awarded this dubious accolade. He meets two of the requirements for the safe-hands epithet: he’s an insider – though he’s only worked for the UK oil and gas producer since August 2010 – yet he is also “seasoned” (another term that should be banned – executives aren’t sauces, for goodness’ sake).

There are four main reasons why the phrase is more curse than compliment:

1) It has a damned-with-faint-praise tone, sometimes implying that the company couldn’t find a really exciting candidate, so they played safe.

2) It is often an indication that people don’t know as much about the corporate insider as they would know about a high-profile outside candidate.

3) Safety may be a virtue in some cases but an overcautious leader is not always what companies need.

4) “Safe” is often the last thing a safe pair of hands turns out to be. In fact, the record of leaders in the safe-hands hall of fame is as spotty as that of any other executive or politician. Read more >>

John Gapper

BlackBerry phones by RIM. Getty Images

We are about to find out whether Research in Motion can re-establish itself as a serious competitor in the smartphone world, or will go the way of Palm and others, crushed by Apple and Google.

Judging by alleged leaked photographs of the new BlackBerry London phone that will run BlackBerry 10 software, it seems as if RIM has gone through the full five stages of the Kübler-Ross grief model in response to the iPhone, arriving at “acceptance” and abandoning its illusions.

Having initially protested that few people would want a smartphone without a physical keyboard, and continuing to display a lot of anger and resentment, RIM has changed its management and adjusted to the world as it is. Read more >>

Bob Benmosche, the amiably loud-mouthed chief executive of AIG, took his victory tour to London this week. “We are free at last,” he rejoiced to his fellow bosses as the US Treasury sold the last of its AIG stake.

Andrew Hill

Are networks both good and bad? Getty Images

The assumption that “it’s not what you know, it’s who you know” has informed business and politics for decades, even centuries. But the benefits of strong networks – and networking – are shadowed by threats. When is a network too cosy, and, if you’re outside the network, how would you know?

The Corporate Library – now part of GMI Ratings, the governance research group – has for years been developing tools to answer this question, particularly in the US. In 2002, researchers there did some bespoke research for the Financial Times looking at cross-company links among directors of the FT 500 list of the world’s largest listed companies. It revealed that because of multi-tier boards in continental Europe, the most closely connected directors oversaw French and German companies, such as BNP Paribas and Allianz. Read more >>

John Gapper

The $2.6bn in fines levied against HSBC and Standard Chartered indicates that what used to be regarded as these banks’ biggest virtues – their exposure to emerging markets and new growth economies – are also weaknesses.

Foreign banks have been having a tough time at the hands of US bank regulators recently, and these fines have a hint of protectionism. There is clearly a feeling that foreign banks have destabilised the US financial system and systematically breached laws.

One indication of the mood in Washington is a proposal by Daniel Tarullo, a senior Federal Reserve regulatory official, to top up capital requirements on foreign banks to ensure they are in line with domestic banks. Read more >>

Only two individuals’ pictures feature in Cable & Wireless’s online corporate history. One is Sir John Pender, the Victorian subsea cable pioneer; the other is Sir Richard Lapthorne.

John Gapper

The Deutsche Bank case, in which three whistleblowers have accused the bank of hiding up to $12bn in derivatives losses during the financial crisis, is complex, confusing and opaque. But the underlying principle is simple and important.

Banks used to have a lot of leeway in how to treat bad loans at the bottom of the cycle. That allowed groups to avoid taking losses immediately, and instead to wait for the assets to rise in value again.

But the rules for recognising bad loans have tightened over the past three decades, while a lot of credit instruments are now carried on a mark-to-market basis instead of on the loan book. Their old freedom of manoeuvre has largely gone. Read more >>

Andrew Hill

There is no need to ask who will be to blame if and when Tesco’s US adventure is brought to an end. Sir Terry Leahy, ex-chief executive of the UK retailer, has already admitted it will be him.

The Fresh & Easy venture comes under “Courage” in Sir Terry’s book Management in 10 Words, published earlier this year. In the book, he called the investment in the new brand “a calculated risk” and pointed out that “even if the entire investment ultimately had to be written off, it would not threaten Tesco’s underlying viability”.

He reiterated that he was “certain that Fresh & Easy [would] be a success”, well-placed to benefit from economic tailwinds “thanks largely to the courageous people who stepped forward to turn an ambition into a reality”. Read more >>

Ian Livingston, chief executive of BT, told me last week more than a third of the telecoms group’s staff are now engineers – a higher proportion than ever. But whereas their expertise once covered mainly the maintenance and repair of an analogue telephone network, he now expects them to do more.