When Sir Graham Melmoth raises concerns about what is going on at the Co-operative Group – as he did recently in the Guardian – then it is worth listening. Graham Melmoth was a highly successful Chief Executive of the Group and is the man who saved the Co-op from de-mutualisation.
He is just one of a number of committed co-operators who are highlighting that there is something extremely troubling happening under the cover of the General Election. The Co-op’s new bosses are pushing through what amounts to a corporate takeover of the business, trying to end a century of democratic political involvement. Continue reading
The evidence piles up that the private sector auditors of banks have manifestly failed in their duties. All the major banks received unqualified audit opinions from Deloitte & Touche, PricewaterhouseCoopers, KPMG, and Ernst & Young. Private sector auditors have a history of silence and are immersed in too many conflicts of interest.
The evidence is their silence at Barings and Bank of Credit and Commerce International (BCCI), as well as at other debacles. Accounting standards for banks are set by the International Accounting Standards Board, but astonishingly this is a private limited company in London funded by the Big 4 accounting firms who audit the banks and major corporations – a nice cushy cartel whereby the accountancy companies control by their funding the body that is supposed objectively to set their standards. The rules have enabled banks to publish opaque annual accounts, and vast amounts of assets and liabilities have not been shown on their balance sheets. Continue reading
Whilst the economic debate surges around austerity, recession and claims of recovery, it’s remarkable that next to nothing is being said about the flaws of corporate governance. As a result the dominant theme of shareholder value is accepted almost without question. Yet it is deeply compromised both in theory and in practice. Most obviously it isn’t only shareholders who bear risks or supply important inputs: both taxpayers and the workforce do. But the fundamental problem with shareholder value is short-termism. The average time that a share is held for is now measured in days.
There are several reforms needed that could diminish or eliminate the blight of short-term churning of shares or the short-termist outlook of senior managers obsessed with enhancing the share price above all else as a means of boosting their bonuses. Directors’ legal duties should be reformed so that they are required to promote the long-term success of their company as their primary aim. Ending the requirement for quarterly reporting would remove one of the key pressures that makes for a very short-term perspective. Capital gains tax should be changed to encourage long-term share ownership. Corporation tax breaks should be used to favour investment and penalise companies sitting on cash surpluses. Continue reading
Vince Cable, to give him credit, is the one member of the Cabinet who is seriously concerned about pay extremism in the boardroom. The rest are seriously in favour of it. But the measures he has so far put in place, albeit harried at every turn by the Tory Right, will achieve little.
He has given shareholders a binding vote at least once every 3 years on executive pay policy, and that each CEO’s remuneration package should be published as a single total. He has now written to the chairmen of remuneration committees of Britain’s FTSE-100 companies insisting they do more to curb top pay, and if they do not, then with indeterminate menace their ‘business’ licence to operate’ could be undermined. What the latter threat actually amounts to is anybody’s guess. Continue reading
So after informing the authorities in the public interest that the gas market pricing system was being rigged, Seth Freedman, an employee of ICIS Heren, a lead company in the market, has just been sacked. The man who told the public about price-fixing in the gas retail market (shades of the Libor scandal in banking) is evicted from his job, while those who cheated the public wholesale and have amassed illegal wealth have, so far at least, gone unpunished. Continue reading