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
Sandy Weill’s belated conversion to the reinstatement of Glass-Steagall – the act that he helped to demolish – is a significant moment. It suggests that the pressure for greater and more effective structural reform of finance is becoming overwhelming.
Mr Weill was a major force behind the Gramm-Leach-Bliley Act that ended Glass-Steagall and allowed the merging of commercial and investment banking in the US. Now, he seems to think it would be better to have Glass-Steagall back. Read more
Contrast the reaction to rewards paid to UK bank executives – £28m in share bonuses and long-term incentives to nine Royal Bank of Scotland officers, for instance – with the response to stock awards worth almost $100m for Ford Motor’s Alan Mulally and Bill Ford.
Both pay-outs are being made to executives who took on big turnround jobs – and had no responsibility for what went before. Both contain deferred elements. Both, let’s face it, are huge in absolute terms, however you cut them. But whereas many people seem to believe Mulally, Ford’s CEO, deserves his pay-out, his RBS counterpart Stephen Hester and colleagues have attracted mainly brickbats for their rewards. Read more
“Strong banks want strong regulation.” That fact has been misunderstood in the wake of the financial crisis, according to Bob Diamond, Barclays chief executive.
“No one has suffered more than those strong banks that have been thrown in the same reputational basket as weak banks”, he said at a panel this morning at the Clinton Global Initiative in New York. Read more
By Alan Rappeport
Tune back in on Thursday morning at 9am ET when Sheila Bair, Mary Schapiro, Eric Holder and Lanny Breuer face the Financial Crisis Inquiry Commission.
First panel is now concluded and breaking for lunch. In the afternoon, Michael Mayo, J. Kyle Bass and Peter Solomon will face questions. Streaming video can be found here. Read more