No-one emerges well from the legal battle between Goldman Sachs and Deeb Salem, its former mortgage trader who claims that his $8.25m bonus for 2010 amounted to severe underpayment. It is no wonder that Goldman tried to seal the documents in what it calls an “utterly ridiculous” case.
The problem for Goldman and other Wall Street firms is that they have encouraged that sense of entitlement among employees – one that strikes almost everyone outside Wall Street as delusional. Mr Salem’s claim is merely an extreme example of a much wider problem.
Presumably, although he denies it, Brady Dougan considered resigning as chief executive of Credit Suisse this week when it became the first global financial institution since Crédit Lyonnais in 2003 to plead guilty to criminal felony in the US. In any case, he stayed.
The recent history of Britain’s Co-operative Group is so peculiar it is tempting to paraphrase the opening lines of Anna Karenina – “Happy companies are all alike and every unhappy company is unhappy in its own way” – and dismiss it as a management aberration.
A speech by Lionel Barber, Financial Times editor, at Hughes Hall, University of Cambridge, May 1, 2014. An accompanying video can be viewed here.
Ladies and gentlemen, distinguished guests, I am delighted to be here tonight at Hughes Hall in the University of Cambridge. This is the prestigious City lecture, but sadly I will not be providing slides. As Lord Acton might have said, power tends to corrupt, PowerPoint corrupts absolutely.
Tonight I want to talk about bankers and banking. These days, bankers are widely viewed as greedy, self-serving, amoral or actually dangerous. Estate agents, even journalists, are held in higher regard.
This past week’s kerfuffle over bonuses and remuneration at Barclays and Royal Bank of Scotland is a reminder that bankers continue to be held responsible for the financial crisis and the economic calamities which followed.
Bankers appear to be living in a parallel universe, where the rewards are far out of kilter with what the rest of society can expect. This speaks to a deeper unease about inequality which explains the unlikely best-seller on economics, Thomas Piketty’s Capital in the Twenty-First Century.
My questions tonight are: Can bankers mend their ways and their reputations? Is there a path to rehabilitation? Read more
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
What is Goldman Sachs up to? The bank has been behaving strangely this week. When Michael Lewis unveiled his book Flash Boys: A Wall Street Revolt , in which he alleged the equity market is “rigged” by high-frequency traders, the bank discreetly lent him support. Then it emerged that Goldman is leaving the New York Stock Exchange floor, selling Spear, Leeds & Kellogg, a broker it bought for $6.5bn in 2000.
Newsweek’s flawed attempt to expose a 64-year-old Californian called Dorian Nakamoto as Bitcoin’s mysterious inventor has come at an opportune moment for exponents of the cryptographic currency. It has distracted from a crisis of trust caused by the failure of Mt Gox, the Tokyo Bitcoin exchange.
Denigrate, imitate, eliminate are the three steps that incumbents typically take to see off challengers using an unconventional business model. But there is a fourth – regulate.
At 78, Carl Icahn shows little sign of retiring, or of becoming more polite. After finally prodding Forest Labs into a $25bn takeover by Actavis, he renewed his attack on eBay this week, accusing John Donahoe, its chief executive, of being “completely asleep or, even worse, either naive or wilfully blind”.
Russia’s nascent crackdown on Bitcoin is misguided, in my view, but it reinforces a point that some supporters of virtual currencies tend to underestimate: governments can ban them if they choose.
That sounds like an obvious point, but some libertarian enthusiasts for Bitcoin talk as if it can challenge fiat currencies without governments and central banks being able to stop it. John McAfee, the anti-virus entrepreneur, is one of them: Read more
Bitcoin is being forced to grow up fast. The arrest last week on money laundering charges of Charlie Shrem, a leading Bitcoin champion, coincided with a regulatory hearing in New York to consider what on earth it is – a virtual currency, speculative asset or a means of exchange?
Charter Communications’ hostile bid for Time Warner Cable, on the heels of Suntory’s agreed $16bn acquisition of Beam Inc, puts me in mind of Percy Bysshe Shelley’s Ode to the West Wind:
Drive my dead thoughts over the universe
Like withered leaves to quicken a new birth!
And, by the incantation of this verse,
Scatter, as from an unextinguished hearth
Ashes and sparks, my words among mankind!
Be through my lips to unawakened Earth
The trumpet of a prophecy! O Wind,
If Winter comes, can Spring be far behind?
Like romantic poets, M&A bankers and lawyers are always trying to stir up activity, talking hopefully of their belief that deal-making is about to blossom. Perhaps there is some evidence that something is indeed stirring after the winter of recession.
Is the $13bn settlement between JPMorgan Chase and the US state and federal authorities long-overdue justice for an errant bank, or a shakedown by politicians who went back on their word?
Charles Gasparino, the maverick Fox News business correspondent and commentator, thinks it is the latter. He wrote in the New York Post this weekend: Read more
Trader A: Dude – seen the news from Markit? FT says they’re going to launch an “ambitious assault on Bloomberg’s grip on daily communications in financial markets with the start of a free viral messaging service”.
Trader B: How so?
Trader A: By bringing together the internal IM systems of Thomson Reuters, JPMorgan Chase, Morgan Stanley, and half a dozen other IBs, including my place and yours. Read more
Not long ago, Goldman Sachs was Wall Street’s lightning rod, attracting bad publicity and interventions from regulators. Its place has been taken by JPMorgan Chase.
Credit to Jamie Dimon for attempting to see the wood for the trees by felling some of the trees. The JPMorgan chief executive’s memo to staff makes clear that “simplifying [its] business” and “refocusing [its] priorities” is, well, a priority.
But what Mr Dimon is attempting is arguably the most complicated task known to managers of large multinationals, whether they sell food or financial services. It is dangerous to imply, as he does, that the goal of simplification can be achieved, once and for all, by “recognising our problems, rolling up our sleeves and fixing them”. Read more
Suicide is a tragedy and it is impossible from the outside to know exactly what led to someone taking his own life. But Josef Ackermann’s resignation as chairman of Zurich Insurance following the apparent suicide of Pierre Wauthier, its chief financial officer, is an extraordinary event. Read more
How do you value a share in an estate agency (what is known in the US as a realtor)? Perhaps as a derivative of a leveraged investment in a highly cyclical market – in other words, with extreme caution.
London investors are getting a chance to use their own methods, with the initial public offering of Foxtons, the chain of London estate agents that was bought by BC Partners for £360m in 2007 at the peak of the UK property boom. It later went through a debt restructuring as the market sagged. Read more
The decision by Kensington & Chelsea council to charge a one-off fee of £825,000 to a hedge fund manager who wanted to excavate and build a luxury basement will send shivers through the well-heeled of London.
Not many people will feel too sorry for Reade Griffith of Polygon Investment Partners but it throws a light on the high, and sometimes hidden, transaction fees attached to the inflated London housing market.
Section 106 agreements, the legal avenue used by Kensington to extract the fee from Mr Griffith and his wife, are usually struck between planning authorities and developers of commercial or residential developments, rather than individuals. Read more
The admission of wrongdoing by Philip Falcone, pictured left, and his hedge fund Harbinger Capital Partners, along with a five-year ban from the securities industry, is a step in the right direction for the Securities and Exchange Commission.
The deal with Mr Falcone (documented here) is the first evidence of a tougher policy on serious regulatory breaches by the SEC under Mary Jo White, its new chairman. This actually requires the offenders to admit to something when they settle and pay a fine.
The previous deal that Mr Falcone and his lawyers had struck with SEC staff – to pay a fine and accept a two-year ban while neither admitting nor denying a breach (the usual SEC formula) was thrown out by the commissioners earlier this year. Read more