I have a column in the Weekend FT on whistleblowers:

King Lear may have been a terrible father but he was a tolerant employer. Faced with an in-house whistleblower who kept telling him that he was ruling his kingdom badly – and wrongly giving it away – he kept him on the payroll.

The protagonist of Shakespeare’s play did not listen to his Fool’s advice, but he should have. He might not have alienated his most loving daughter, lost his wits and got drenched in a thunderstorm.

Many whistleblowers – employees who alert their bosses to fraud or recklessness in how a business is being run – do not fare as well as the Fool. They are not only ignored, but are sacked for being persistent irritants and naysayers.

Yet many of those who disdain or sack whistleblowers regret it later. The global economic crisis is bringing to prominence a fresh crop of whistleblowers whose advice could have prevented a lot of trouble.

You can read the rest here and comment below.

If Bernie Madoff has lost $50bn of other people’s money, as he is said to have admitted, why did they trust him with it?

With hindsight, the whole affair seems deeply implausible. We know that nobody produces rock-steady returns of 15 per cent or more, year in and year out, unless he or she is either a genius or a crook.

Yet people lined up to entrust their savings to Mr Madoff. Many of them got a tip from a friend or adviser about a Wall Street operator with a great record. The Madoff broker network also included many funds of funds and private banks that oozed financial sophistication.

The rest of the column can be read here. Please post comments below.

Lawrence Lessig, the Stanford law professor who has become a leading expert on copyright and other matters affecting Silicon Valley companies (including, see below, net neutrality) is moving back to Harvard.

I like the sound of his new job, as director of the Edmond J. Safra Foundation Centre for Ethics:

Lessig will expand on the centre’s work to encourage teaching and research about ethical issues in public and professional life. He will also launch a major five-year project examining what happens when public institutions depend on money from sources that may be affected by the work of those institutions — for example, medical research programs that receive funding from pharmaceutical companies whose drugs they review, or academics whose policy analyses are underwritten by special interest groups.

The conflicts of interest in medical and academic research have always struck me as being interesting - not to say, disturbing. And Mr Lessig has a reputation for being plain-spoken, indeed outspoken, on legal and ethical matters.

His latest book, Remix, was short-listed for this year’s Financial Times-Goldman Sachs Business Book of the Year award. I look forward to the outcome of his latest field of research.

My FT column this week is about Jerry Yang and why founders can make bad CEOs.

Switching jobs from Chief Yahoo to Yahoo Chief does not sound like a stretch. It was for Jerry Yang.

This week, he signalled an end to his short and rocky tenure as chief executive of the company he founded. When a successor is found, he goes back to being its corporate conscience, board director, 4 per cent shareholder and resident nice guy.

Mr Yang wrote to Yahoo employees on Monday that: “All of you know that I have always, and will always bleed purple [Yahoo’s corporate colour]. I will always do what I think is right for this great company”.

That was the problem.

In terms of Yahoo’s share price, Mr Yang’s period at the helm was a failure. It stood at $28 when he took over from Terry Semel in June 2007 and fell to just over $10 on Monday, when the announcement came. Along the way, he spurned a $31-a-share takeover offer from Microsoft.

What he thought was right for Yahoo turned out not to be, and his passion for the enterprise he built, which he thought could flourish independently, was misguided. Sometimes, what a company requires is not a passionate leader but a dispassionate one.

You can read the rest of the column here and comment below.

The New York Times has a long and interesting article on how Sallie Krawcheck, Citigroup’s former chief financial officer, was pushed to the sidelines of the bank’s senior management and ended up leaving. The piece includes a lot of detail about what happened from “a person with direct knowledge of her thinking”, who is so well informed that I assume it to be Ms Krawcheck herself.

It concludes that Ms Krawcheck was the victim of internal politics and her falling-out with Vikram Pandit, the bank’s chairman and chief executive, rather than sexism:

Ms Krawcheck believes her exit from Citigroup is the result of pressures she faced from Mr Pandit to be a team player and to follow his lead on the best way to deploy talent at the bank — and not related to her sex. The two also sparred over how to compensate clients who lost money by following the bank’s investment advice.

That seems plausible, although the financial crisis has been brutal for several of the women who formerly occupied senior positions on Wall Street. The biggest names to lose their jobs apart from Ms Krawcheck were Zoe Cruz, former co-president of Morgan Stanley and Erin Callan, former chief financial officer of Lehman Brothers. Continue reading "Vikram Pandit and Wall Street’s top women"

Matthew Yglesias, whose blog on politics I like, has been prompted by Detroit’s troubles to assert that most chief executives are frauds whose jobs require no particular talent apart from convincing people that they are good at them. He also says that we business journalists treat them with undue deference.

“I think that running a major company is largely a matter of riding around on the corporate jet, etc, etc. But at the same time, I’m 100 percent sure that if you put me in charge of Procter and Gamble, the company would sink like a stone. But that’s because there’s a big element of bluff to the whole thing.”

I have three thoughts about this:

First, at the top of the business cycle, business leaders are lauded as visionaries and people start to buy shares on margin and speculate in property. At the bottom, they are written off as dolts and there are loud calls for blanket regulation. Both attitudes are suspect. Continue reading "Matthew Yglesias calls chief executives frauds"

Not so long ago, the “say on pay” movement - the effort by institutional shareholders to get US companies to have non-binding votes on executive compensation - seemed to be losing steam. But there is quite a head of steam now.

Not only have federal bail-outs for financial companies made taxpayers more angry about high executive compensation but Barack Obama, who pushed the idea in the Senate, has been elected as the next president.

The change in atmosphere struck me this morning as I listened to a panel discussing the topic at a Manhattan breakfast organised by the Drum Major Institute for Public Policy, which was founded during the Civil Rights movement.

Of course, you might expect a bunch of people from union and public sector pension funds, which have been among the leading forces pushing “say on pay” to be gung-ho about their campaign and its chances of success.

But what struck me was the renewed sense of self-confidence that this was actually going to happen, whether or not many US corporations like that. Continue reading "The president-elect wants a say on pay"

There are some assignments in in this job that can plausibly be described as work but feel more like a pleasant day out. I spent this morning, for example, sailing around New York harbour with Richard Branson, the founder of the Virgin Group, and his 26-year-old daughter Holly.

There were, admittedly, a few other people on the boat with us. In fact, there was a bevy of reporters and photographers to report on the launch of Sir Richard’s latest publicity stunt attempt to break a world record.

After taking a break from crossing oceans at high speed in boats (including one time when he sank) and attempting to circumnavigate the world in a balloon, he has returned to the fray. He and a crew that includes Ms Branson and her 23-year-old brother Sam will next week attempt to cross the Atlantic in a single-hulled sailing yacht in record time.

I must admit that I spent most of my time on board the 99-foot Teamorigin yacht taking in the New York sunshine and chatting to Ms Branson, a pleasant young woman who has just graduated from medical school in London and is taking a year off to learn about the Virgin business before resuming her training as a doctor.

Continue reading "Richard Branson and the public/private divide"