Let’s start with the good bits in shadow chancellor John McDonnell’s speech on “rewriting the rules of our economy”. Forcing big accounting firms to split their auditing and consulting units is justified: current conflicts of interest are too great. One can applaud the push to get workers on to boards. And enhanced voting rights for long-term shareholders is an idea worth exploring.
If McDonnell had stopped there, he would have had a worthwhile package of reforms. But he moved on to territory that ranged from radical to vague to plain odd.
Try this: “All executive remuneration packages in large companies [will be] subject to an annual binding vote by stakeholders, including shareholders, employees and consumers.” Lloyds Banking Group has 30m customers in the UK. There are 16m holders of a Tesco Clubcard. Are these companies to hold an annual mini-referendum, as it were, before executives can know what they’re being paid for the year? A vote among all consumers would be unworkable.
Companies that do not take adequate steps to decarbonise their businesses “will be delisted from the London Stock Exchange”. But surely incentives and penalties should apply equally to quoted and non-quoted companies.
Then there’s McDonnell’s favourite “inclusive ownership funds”, meaning a transfer of 10% of a group’s shares, over a decade, to an employee fund. The model has been recast so that dividends for workers would relate only to UK profits, but basic flaws remain. The Treasury ends up a big winner as it collects all dividends over £500 a head; the 10% transfer represents heavy dilution for current owners, including pension funds; and it’s not obvious how foreign multinationals could be strong-armed to participate.
One could go on. An “excessive pay” levy requires a definition of excessive. And, if you’re going to rearrange financial regulation, you must first define the role of the Bank of England, which wasn’t mentioned in the speech.
The business world will hate most of it, which was perhaps the point. There is a need for big ideas to address obscene remuneration and restore trust in business. But they must be clear and workable, and some of the shadow chancellor’s plans fall well short of that requirement.
What price common sense?
What do you get for £21m, the cost of Slaughter & May’s independent report into last year’s IT fiasco at TSB? A document that generates a squabble – but that’s about all.
Certainly, Richard Meddings, chairman of TSB then and now, has no intention of resigning, despite a finding that his board lacked “common sense” during the “replan” phase of the IT upgrade. Meddings’ view is that report “doesn’t paint the full picture of [the data] migration”. TSB says there are “aspects … with which the board does not agree.”
Meanwhile, Paul Pester, the former chief executive who was ousted shortly after the calamity, is gunning for Sabis, the tech contractor on the job and, like TSB, a subsidiary of Spanish bank Sabadell. “Sabis rolled the dice by running tests on only one of TSB’s two new data centres,” claims Pester.
At this point, an outside observer will scream in frustration. After the great crash of 2008-09 the bankers pleaded, in as many words, that “nobody was responsible because everybody was responsible.” The refrain from TSB feels the same, albeit a botched IT job – even one that cost £350m and seriously annoyed nearly 2 million customers – is less serious than a full-on collapse.
To get the full account, we’ll to have wait for the findings of the Financial Conduct Authority, which is semi-obliged to name a few names. Bring it on. The relationship between TSB and Sabadell looks to have been dysfunctional but somebody has to be judged to be responsible.
Airlines can sense the new climate
Airlines have a choice when it comes to global heating, writes Larry Elliott. They can take steps themselves to limit their carbon footprint now or they can wait for tougher curbs to be imposed on them later. EasyJet’s announcement of an offsetting scheme shows they will plump for the former.
The aviation industry is under increasing pressure to “do something” about the climate emergency. It can sense the way the wind is blowing, and the cost – £25m compared with annual profit of £427m – is surprisingly small. There will undoubtedly be more tree-planting and reforestation announcements over the coming months.
Whether there are enough schemes currently available to provide all the offsetting required is unclear. But what is certain is that carbon-offsetting can at best be a stop-gap solution, until such time as the industry cracks the problem of how to go electric. That day is still some way off.
