For students of perverse incentives created by tax, it is a bonanza week. Apple has raised $12bn in bonds to buy back shares, despite having $130bn sitting in cash overseas, and Pfizer wants to turn itself into a UK-domiciled company by acquiring AstraZeneca for £60bn.
Managers are notorious for prioritising short-term demands when they clash with long-term goals. Research in the US has shown that most executives would shy away from a value-enhancing long-term project if it caused them to miss a quarterly earnings forecast.
How companies can manage such clashes was the subject of a “Strategy Live” debate organised by the Financial Times in London this morning. Chaired by management editor Andrew Hill, the session featured senior figures from finance and industry, who spoke on a non-attributable basis under the Chatham House rule.
Participants used the example of Barclays to launch a broader debate, examining its controversial decision to increase bonuses to its investment bankers even as it – seemingly paradoxically – tried to move to a less abrasive, more long-termist culture. Read more
Shuanghui sausages on display at a Beijing supermarket
First Alibaba, then Watson, now WH Group. The decision from the world’s top pork producer – with dominant businesses in China, the US and much of Europe – to ditch its initial public offering in Hong Kong is not just a blow to the company, which must now fork out millions in extra debt service costs, but also to the city itself. Having started the year with four possible blockbuster deals, Hong Kong will be lucky now to get even one.
The first blow came in January, when Hong Kong Electric – a spin-off by Li Ka-shing’s Cheung Kong – chose to slash the size of its deal on tepid demand. Even the smaller deal was tough – getting it over the line was a ‘near-death experience’ according to those familiar with the sale. Investors just weren’t convinced.