The Terror Approaches: Sir Fred pleads for mercy

February 10, 2009

Fred Goodwin and Tom McKillop

The leaders of failed financial institutes are being dragged out of their chateaux and paraded through the streets. I can hear the distant rumble of the tumbrels

Or, to shake off that fearsome image, let’s start with the show trial which took place today. Erstwhile heroes of capitalism were called to account by that Robespierre of the New labour Revolution, the Treasury Committee chairman John McFall

The BBC covered the proceedings

The former bosses of the two biggest UK casualties of the banking crisis have apologised “profoundly and unreservedly” for their banks’ failure.

Former Royal Bank of Scotland chief executive Sir Fred Goodwin told MPs on the Treasury Committee he “could not be more sorry” for what had happened.

The wrath of the prosecutors was reported in The Guardian

Sir Michael Fallon: “You [McKillop] were in charge of this board. You’ve destroyed a great British bank.”
John Thurso: “… I have rarely never heard such anger about an issue … And that’s because so many sound businesses are at risk of going under because they can’t get funding. 99.9% of my constituents believe that if a black hole opened up and every banker, and every derivatives trader and arbitrage trader fell into it, the world would be a better place ….”
George Mudie: “…The anger that the public feels is because you’re all in denial.”

But the jury remained unmoved. Chairman Tom McFall dismissed their grovelling pleas for mercy.

“They did give an apology and it seemed fulsome, but, as the session went on, I think they were drawing back from that and saying ‘Well, look, there were events outside our control’. If you ask me my opinion – yes, they were advised to do it (apologise). Was there a hint of arrogance still there? Absolutely.”

The Terror begins

I can’t get that image out of my mind’s eye. It took the French Revolution over a year to get down to the really brutal stuff, the show trials and public executions. But that was then. No chance of public executions here …

But the public anger might be as intense, and approval for meting out the harshest punishment possible on those accused.

So far, the most virulent attacks have showered down on the Leaders of the biggest financial institutions, and then The Government. But there is a more general wave of anger directed to all politicians, and that ‘least worse system’ of representative democracy.

And who next?

Business Leaders? Entrepreneurs? Foreign workers? “Make them walk naked ..stand in public with clown hats. ”

It is coming. The terror. And intellectuals will not escape scrutiny. What training did these people get to equip them to run a bank? Well, the answer is, a great deal of training. So let’s reserve a tumbrel for the leaders of business schools. Once again, the cry will be heard. What did you teach the MBAs at Harvard Business School?

And after that the tumbrel. Stop, enough. I want to get back into a state of denial.


Battle of Ideas: Picking on the Apprentice

October 19, 2008

Alan Sugar acts out the leadership myth

Alan Sugar acts out the leadership myth


Creative leaders are idea warriors. Which is why many will be found engaging in the debate on bullying at work organized by The Institute of Ideas

The Fourth annual Battle of Ideas will involve over 1500 participants including strands on bullying at work, biomedicine, the family and (inevitably for election week).

The bullying at work session has marketed itself as Picking on the Apprentice. Leaderswedeserve has had a few points to make in the past on the television program. Like ourselves, The Institute of Ideas is more interested in hitch-hiking on the over-publicized programme to get at a far wider wider range of issues.

The bullying event will examine the recent case when a Marks & Spencer employee was fired for whistle blowing. And the example of Jason Toal, a black fireman bullied by colleagues who hurled racist taunts at him and allegedly soaked him with water and binned his paper work.

Other sessions will explore whether management consultancy and the professionals are in need of a stronger moral compass in the interests of the community, and (if that appeal is not enough) for their own post-credit crunch survival.

Political correctness running sane

Many people have developed a kneejerk reaction to describe their feekings of frustration and anger under the catch-all phrase political correctness gone mad. It might be interesting to trace the origins of this.

I have no doubt that themes within the Battle of Ideas will attract the inevitable media take of political correctness running mad . Which is OK. It is a comfort to think that debate offers a chance to develop more balanced views, and more importantly to act accordingly. On balance I’d say that is political correctness operating in a socially healthy way.

Acknowledgement: The Institute of ideas for the press release which prompted this post


Leaders in the news: Winners and losers

October 13, 2008

Howard Schultz Starbucks

Howard Schultz Starbucks


In times of crisis, some leaders step forward, others are deemed to have failed. There have been examples of each, as the global financial crisis enters a new critical stage

Fred the Shred takes the fall

Pressure mounted on Sir Fred Goodwin to resign as chief executive of Royal Bank of Scotland (RBS) as the bank seeks to tap the Government’s £500 billion rescue fund. The Government is reluctant to a deal with RBS’s participation unless he relinquishes his role. Although he clung on tenaciously this has been a very bad week for Sir Fred. Another former city hero exits ignominiously.

Sir Fred Goodwin 0

Gordon Brown is no dead cat

The deeper the crisis, the more polls seem to swing towards Prime Minister Gordon Brown. David Cameron and George Osborne grudgingly offer support the government. Are we seeing a ‘dead cat bounce’, or is there life in the political career of Gordon Brown? He appears more relaxed in the last two weeks than he has been since taking over from Tony Blair as Prime Minister.

Brown 1, Cameron 0, Osborne 0

Boris Forces Resignation of Sir Ian Blair in Leadership Battle

The resignation of Sir Ian Blair [October 2nd 2008] develops into a political story. The BBC traced his turbulent career. Boris Johnson, incoming Mayor of London, is proving a hands-on leader willing to act forcefully. Sir Ian, under pressure on operational and personal fronts, was called into a ‘meeting without coffee’ by the Mayor before tending his resignation.

Boris 1 Blair 0

Obama and McCain Round 2

The second televised debate between the two candidates [October 7th 2008, Nashville, Tennessee] is as stage-managed as the first.
A key negative moment was was reported widely as

Jabbing his finger and spitting out “that one” instead of naming Barack Obama, John McCain showed an angry side

Polls suggest that Barack Obama is moving ahead.

Obama 1 McCain 0

Dick Fuld faces the music

Dick Fuld, controversial CEO of Lehmans has had a very bad few weeks. When ‘invited’ to testify before a hostile congressional committee following the crash of his company, he demonstrates his robust leadership style, denying wrong-doing or ethical weakness. He ticks the boxes for the callous Wall Street fat cat. Fuld very much the loser here.

Dick Fuld 0

Darling’s drastic rescue bid of the banks and maybe Gordon Brown

As The Times sees it
Chancellor Alistair Darling [October 8th 2008] launched a drastic rescue of Britain’s high street banks [to avoid] a cataclysmic failure of confidence by announcing a part-nationalisation plan with £50 billion of taxpayers’ money. Alistair Darling, like Gordon Brown has had a better week.

Alistair Darling 1

Starbucks, Schultz and the running taps

Howard Schultz, returned to the chief executive role at Starbucks earlier this year, faced with serious loss of froth in the business. Poor figures and closures continue. This week [October 8th 2008] the ‘running taps’ story threatens to sully the firm’s good environmental reputation.

Starbucks 0, Howard Schultz 0

And in the long run?

Not all these cats are dead. And, as we know, cats have seven lives.


BA: Musings on mergers, marriages, partnerships and takeovers

August 16, 2008

BA announces a new partnership with American Airways and Iberia. It raises the old question of the nature of business alliances

BA has cooperated for some time with American Airlines. Any joint venture seems likely to tick one important box, namely that the partners seem comfortable with one another. So there is at least the possibility that the cultural chemistry is not going to be a problem.

That is not to say that cross-cultural issues can be safely ignored, just that many of them have been thoroughly tested in practice over a period of two decades by the two airlines.

Even so, a global alliance presents global problems (or challenges as the remorselessly upbeat business speak encourages us to say). Business Schools prepare the new case for analysis. This one has another layer of complication. The deal is the more complex by the presence of Iberia. Hard enough to get a grip of a bi-party deal.

Oneworld

Where to begin? American Airways places considerable emphasis on its role as partner (and co-founder) of the global oneworld® Alliance,

…which brings together some of the best and biggest names in the airline business, enabling them to offer their customers more services and benefits than any airline can provide on its own. Together, its members serve more than 600 destinations in over 135 countries and territories.

Such alliances have increasingly and rather unobtrusively making air travel a little more joined up Less frequent fliers like myself increasingly find themselves going with the flow and discovering that the short-haul or regional leg of their journeys is being managed on behalf of a larger and more familiar name.

The alliances fit with the messier business world in which cooperation and competition co-exist. Incidentally, it is a world which poses further ‘challenges’ for traditional arguements regarding the ultimate economic virtues of competitive markets. It will be interesting to read the take on all this from that intelligent newspaper The Economist.

According to OneWorld

The oneworld global airline alliance has warmly welcomed and strongly supports the application for anti-trust immunity filed on August 14 by its members American Airlines, British Airways, Finnair, Iberia and Royal Jordanian. .. The filing was made as American Airlines, British Airways and Iberia signed a joint business agreement covering their flights between North America and Europe and unveiled plans for further co-operation.

John McCulloch [oneworld spokesman] said: “oneworld has for many years been the only global alliance without the benefit of anti-trust immunity between its key transatlantic partners. This has put oneworld at a considerable disadvantage. We’ve had to work a great deal harder and smarter than our competitors [Our rival alliances SkyTeam and Star] have grown much bigger and the anti-trust immunity they enjoy has been extended far more widely to deliver the alliance services and benefits that our customers have come to appreciate so much.

Richard Branson’s response

Richard Branson leading from the front for Virgin, enters the fray with a typically high-profile response.

Sir Richard Branson went on the attack yesterday against his old adversary British Airways to try to block plans by the UK flag-carrier to join forces with American Airlines and Spain’s Iberia across the North Atlantic. The three carriers, all members of the Oneworld global airline alliance, said they had signed a “joint business agreement” covering flights between North America and Europe.
They intended to co-operate commercially on flights between the US, Mexico and Canada, and the European Union, Switzerland and Norway while continuing to operate as separate legal entities. They would share revenues but not profits.
Sir Richard, president of Virgin Atlantic, said a BA tie-up with AA would “create a monster monopoly that would push up ticket prices and substantially reduce competition on the busiest air corridor in the world”.
But other opponents to closer ties between the two airlines, such as Continental Airlines, are likely to tone down their lobbying efforts, as they await regulatory approval for their own proposed partnerships.
BA and Iberia have recently begun negotiations to merge.
It is the third attempt by BA and AA in 11 years to gain antitrust immunity for their alliance. Heathrow, BA’s global hub and the Europe gateway for travellers from the US, had been opened to full competition for EU and US carriers since the end of March [2008].

This is the way in which Virgin Atlantic has developed such a positive brand identity and reputation.

‘This is not a marriage’

Stephen Beard argues in Marketplace that this is not a marriage.

At a time of crisis in the airline industry, [BA and Iberia] want to huddle closer together. They want to cut costs, coordinating flights and fares, perhaps running a joint frequent flyer program. The two airlines feel at a disadvantage. Lufthansa and Air France both operate very closely with U.S. carriers. BA and American need to be allowed to do the same .. American have tried this before, but failed to win the support of regulators. This time, they believe they’ll succeed, because the Open Skies Agreement has opened up competition in transatlantic air travel.

What happens next?

Some more turbulence of shareprices. Further informal collaboration between the one world partners. Maybe a full- blooded merger between BA and Iberia. (My blink view is rather cold on this one. But whatever happens, I would not rely on a two-second judgment, if I were into BA speculation). Even more Business School attention on the nature of global alliances. Richard Branson in need of more strategic initiatives to protect the future of Virgin Airlines. We will hear a lot more over the next few months [August 2008].

Note: For a full account of Richard Branson’s statement see The Wall Street Journal


Cruz missile ditched at Morgan Stanley

December 4, 2007

zoe-cruz.jpg

Zoe Cruz of Morgan Stanley is the latest high-profile financial leader to depart in the wake of the sub-prime turbulence. The current bloodletting increasingly appears to be more symbolic than rational

According to Forbes

Zoe Cruz was promoted to acting president in 2005, after a glittering career in the company she had joined twenty years earlier. Her promotion occured at a time of considerable board-room battles.

She was regarded as a supporter of Philip Purcell who controversially replaced President Stephan Newhouse and appointed Zoe Cruz and Stephen S. Crawford as Co-Presidents. Several senior figures left the organization at the time, presumably caught up in the in-fighting. Subsequently Crawford also left, and Cruz became the sole ‘acting’ president.

Capella University’s useful executive remuneration site reports that her compensation package amounts to $17 million, hardly big potatoes in these times for someone whose bonuses had pushed past $7 million a year in the recent past.

Financial correspondent Tom Bawden suggested that

The departure from Morgan Stanley of Zoe Cruz, Wall Street’s highest-paid female executive, has heightened fears that the firm is poised to unveil further mortgage-related writedowns. Her exit comes just three weeks after John Mack, the bank’s chief executive, is thought to have reiterated that she was his favoured successor. However, Ms Cruz, 52, was responsible for the division which made the loss-making mortgage investments and appears to have been sacrificed as the latest high-profile Wall Street victim of the credit crisis.

According to the report, the epithet Cruz missile is a reference to her combative business style. However, Mack had publically acknowledged her significant role in the company’s success over recent years.

Her departure has resulted in speculation that the dismissals have also created opportunities for the pool of available and talented executives such as Cruz. Mention has been made of Citygroup.

The BBC quotes a senior financial analyst, David Easthope

“The captains are going down with the ship. Whether they are rising stars or not doesn’t matter. The losses are so large and embarrassing to the organization that they are getting rid of people to satisfy the public perception that they are fixing things.”

Echoes here of tipping point theory of change.

The theory of tipping points, which has its roots in epidemiology, hinges on the insight that in any organization, fundamental changes can occur quickly when the beliefs and energies of a critical mass of people create an epidemic movement toward an idea.

leadership questions

Can we learn more about the nature of leadership as a symbolic process through study of the well-documented demise of high profile leaders?

Might the case anecdotes also permit an evaluation of the nature of tipping points within periods of change?


The Post Office Saves the Day

November 22, 2007

father-christmas-stamp.jpg

The Post Office offers a Christmas savings scheme to meet the needs of savers damaged in last year’s Farepak crash. This is a financial services innovation which is welcome news to many of the most vulnerable families in the community. It also demonstrates that The Post Office may still be able to develop new strategic options for itself

The Post Office has been under threat for some time. It has hardly won accolades for its leadership, as competition increasingly invades once-protected markets. The Royal Mail group continues to present a beleaguered image. Its current news bulletin begins

We apologise to all of our customers for the inconvenience and disruption caused by the recent industrial action and are pleased to announce that there is no strike action currently taking place.

The announcement concludes in less than convincing style

We are pleased to confirm that the CWU EC has ratified the deal on pay and modernisation and that this acceptance of the proposal means that Royal Mail is now able to go ahead with plans to modernise the business and make it more flexible, efficient and able to compete more effectively. We are making sure that any changes we make will not cause any disruption to our customers and where we have mail for customers, deliveries will be made each day across the country.

The Post Office and Royal Mail

As its website indicates,

Post Office Ltd is a wholly owned subsidiary of Royal Mail Group Ltd and operates under the Post Office® brand. Managing a nationwide network of around 14,300 Post Office® branches, we are the largest Post Office network in Europe and the largest retail branch network in the UK handling more cash than any other business…

Post Office Ltd is one of the three arms that make up the Royal Mail Group, along with Royal Mail and Parcelforce Worldwide. Post Office Ltd’s Chief Executive and non-executive Chairman sit on the Group’s management board.

A leadership opportunity?

When are there leadership opportunities? At times of great threat. Why? Because there the obviousness of the threats will have encouraged considerations of what to do about them? Doing nothing may indeed by good for rather subtle reasons. This amount to ‘doing nothing in a calculative way’ rather than in a helpless way, the latter backed up by denial. Doing something can also be backed up by denial and by false calculation.

In other words, not acting is also a possibility. Acting or non-acting can be strategies. They can be considered strategies. They can be well considered and doubtfully considered. The circumstances surrounding threat at least may increase conscious efforts to do something better and different. Sometimes the strategy has been elevated to a leadership principle of masterful inactivity.

The opportunity in the threat

My unexpected conclusion is that the Post Office has a rare asset that it carries through the financial crisis, and which is one that most other financial institutes do not have. The asset lies in the confidence of customers that any deal offered will be as near as safe as any deal can be.

The implication is that the proposed savings product, although a relatively small one, could be an indicator of futher possibilities based along the same lines of guaranteed safe and regular savings. This was the strength of the home-savings schemes and of the offerings of the door-to-door insurance salesmen epitomized by The Man from the Pru. , The Pearl, The Refuge for a century or more.

The healthy option

If this is the case, it will be a healthy option that has emerged partly as a consequence of a breakdown of trust in the current business image of high street banks and their current accounts (no pun intended). Healthy, because the good old Post Office was hardly a considered option by many ordinary people who considered themselves to have more financial savvy than to follow the untutored practice of saving with the Post Office, or with the friendly societies.

The possibility is healthy because it is not dressed up in dubious marketing promises of foolishly attractive yields. What you are offered is what you will get. Maybe, just maybe, the simple promise can not easily be copied by competitors.

Straws in the wind?

The idea is based on several assumptions. First, that the various beffetings to the international and national financial systems are producing a shift in attitudes among members of the general public. These in effect result in beliefs that banks are no longer safe havens for money. In the UK this week, the missing computer records of thirty-five million members of the public may contribute to such atttitudes for some time to come. The second assumption is that the Post Office is, in contrast, safe. Not safer, but safe.

We will see.


VW Law. All in the family as Porsch/VW consider wedding plans

November 1, 2007

porsche-model.jpg

Update [Aug 2009]

[This post offers background to the eventual merger between Porsche and Volkswagen. The original post follows ]

No-one was surprised when the so-called VW law was declared illegal. The ruling had been anticipated for a long time by Porsche through skillfully increasing its stake in VW. The stage was set for an official announcement of a merger between two German industrial dynasties which already had close family ties

European commentators had been discussing the merger for some while, as the so-called VW Law was tested in the courts. The general view was that the law contravened EU principles on competition grounds. The possibility of non-German control would encourage a ‘friendly’ takeover, with Porsche a front-running candidate.

There are strong links between the companies

Dr Ferdinand Porsche designed the original Beetle in 1936, and his grandson, Ferdinand Piech, is chairman of VW and the controlling shareholder in Porsche. Wendelin Wiedeking, chief executive of Porsche, is a member of the supervisory board of Volkswagen.

Anticipating the ruling will go against the VW Law after the advisory opinion, fellow German automaker Porsche AG increased its holding in Volkswagen to 31 percent while Lower Saxony raised its number of shares to 20.36 percent. That means the bloc of Porsche and Lower Saxony can now stop any takeover themselves with more than 51 percent combined

Frits Bolkestein was the EC commissioner for the internal market, and had no doubts about the ruling. Writing in The Financial Times, he points to Article 56 of the Treaty on the Economic Community, which states that

“All restrictions on the movement of capital between member states and between member states and third countries shall be prohibited.” This is one of the four fundamental freedoms of the European Union the freedom of movement of capital, movement of goods, services and persons.

Rumors of wars

There is a case for stating that Germany demonstrates an alternative mode of capitalism. The much-lauded strength of its industrial sector is backed by a complex governance system. Funds tend to be provided by banks rather than the financial institutions of the city. News seems to trickle through to the financial press, increasing the proportion of speculative comment over hard facts.

In November 2007, rumors suggest that Porsche intends to acquire VW, and incorporate the models under the Porsche brand through a holding company. VW declines to respond to such rumors. The powerful unions at Volkswagen sent a signal of discontent, with work stoppages, including 40,000 workers at the main Wolfsburg plant on Wednesday October 30th.

What’s going on?

Shares in VW have moved steadily upward this month. News coverage in the rest of Europe has been low. My suspicion is that plans towards securing that dynastic merger are in place. Whether the happy day is near remains to be seen.


Follow

Get every new post delivered to your Inbox.

Join 1,609 other followers