Monthly Archives: December 2012

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.

John Gapper

With the Leveson report into the UK press published, the tectonic plates are shifting inside Rupert Murdoch’s empire, with a series of interlocking reshuffles underway. The outsider remains Elisabeth Murdoch.

The restructuring, in which Robert Thomson is to become chief executive of the new News Corp publishing company, with Gerard Baker succeeding him as editor-in-chief of the Wall Street Journal, is already causing ructions. Tom Mockridge has resigned as chief executive of News International, the UK publishing arm.

All this coincides with a lengthy profile in The New Yorker of Elisabeth Murdoch, Mr Murdoch’s daughter by his second marriage, who fell out with her brother James over the phone hacking affair. In Ken Auletta’s article, News Corp resembles Dombey and Son, the Charles Dickens novel. Read more