Excess that divides Britain
THE General Election campaign has done nothing to calm down excess in the boardroom. Centrica did extremely well to bring in Iain Conn from BP to replace Sam Laidlaw. The new chief executive recognises that as the owner of Britain’s biggest energy supplier it needs a whole new approach in dealing with customers if the steady drift away to other suppliers is not to become a torrent.
But Conn and Centrica chairman Rick Haythornthwaite also need to better understand the sensitivities of investors.
The 34pc revolt against Conn’s pay package largely focuses on the golden hello of £2.7m – the cost of buying out his contract from his former employer.
While this does not remotely compare to the big payments due to Conn’s opposite number Helge Lund at BG Group, who could walk away with as much as £25m for working a few months, it does once again flag up the big societal problem of fat-cat pay among directors and in the City. It has been one of the greatest vulnerabilities for the Tories at the hustings.
A striking figure from the just released Sunday Times Rich List is that since 2009 the wealth of Britain’s super-affluent doubled to £547bn, while the standard of living for much of the country stagnated.
Admittedly, much of this can be explained away by the jump in share and property prices as they recovered from the Great Recession. Nevertheless, this is not a picture of fairness either in that most of the gains from quantitative easing, the printing of money, look to have been enjoyed by the superrich also assisted – in some cases – by non-domicile tax status.
The gap between the wealthy and the rest of the population is the centrepiece of Nobel prize winner Joseph Stiglitz’s new book The Great Divide.*
In the book, Stiglitz notes that in America 1pc of the population are taking 25pc of the nation’s income and control 40pc of the wealth.
A quarter of a century earlier the numbers were 12pc and 33pc respectively.
The gap that has opened up between ordinary members of society and the privileged few is underlined by the annual report from luxury shoe brand Jimmy Choo.
The company’s chief executive Pierre Denis received a pay and perks package worth £5.35m for less than three months.
It is one of the quirks of the boardroom that executives most able to pay for private education for their children are allowed to fund the cost by preying on investors.
One of the galling things about chief executive Stuart Gulliver’s decision to inaugurate a review of HSBC’s domicile is that he, personally, is a non- dom (although paying tax on his UK income) and in the past felt it necessary to park his pay overseas in Panama to escape the prying eyes of jealous colleagues. It is part of a mind-set that has helped to create Stiglitz’s great divide.
And it militates against social and political cohesion.
Big numbers
A DIP in the rate of growth from 0.6pc in the final quarter of last year to 0.3pc in the first quarter of 2015 is probably not the number that George Osborne would like voters to carry into the voting booths with them.
It allowed Ed ‘flat-lining’ Balls to argue that the economy has ‘not been fixed for working families’.
In a few decades GDP elbowed its way up the ranking of data and is now widely regarded as the critical measure of economic performance.
But it may not carry the same weight as Britain’s balance of trade with the rest of the world in 1970 when a deficit of £550m (caused by a couple of aircraft engines) was blamed by then PM Harold Wilson for his defeat to Ted Heath.
At the time the link between Britain’s export performance and the pound was so strong that no government felt it could defy the foreign exchange markets.
The end of fixed exchange rates with the ‘Nixon shock’ in 1972 allowed currencies to adjust more flexibly.
The worry for sterling after May 7 is Balkanisation of British politics and months of wrangling and uncertainty as the public finances spin out of control.
Elliott the Menace
THE capitulation of Katherine Garrett- Cox to the marauding hordes unleashed by Elliott Partners does not speak well to Alliance Trust’s understanding of its share register.
Having locally based Beano owner DC Thomson on side is one thing but when the Bash Street Kids from Aberdeen, L&G and Axa beat you up in public it’s not much fun.
Garrett-Cox is accepting a couple of Elliott nominated directors onto the board and will have to achieve a turnaround in uncertain market conditions with the enemy on the inside.
Bam! * The Great Divide by Joseph Stiglitz is published by Allen Lane, £25.00