Drugmakers, Arms Dealers, Banks are the face of the Livery piratical past
Banks, drugmakers and arms dealers are the new face of our piratical past
If British history is, as has been suggested, an endless struggle between dashing freebooters and conscientious plodders, the freebooters have been in the ascendancy for far too long
The Observer, Sunday 8 July 2012
Britain’s bankers are swashbuckling pirates in a long tradition that stretches back 400 years. Pirating is not exclusive to Britain, but we have always been adept at stealing and extorting under the guise of free trade. Britain’s merchant class created the largest empire the world has known using the techniques learned on the high seas: much of the booty our forebears crowed about was money deftly stolen from others (who mostly stole it themselves). The East India Company gave the lead and successive governments followed.
In a recent BBC4 documentary, our history was characterised as a tension between roundheads and cavaliers. Cavaliers, from Sir Walter Raleigh onwards, rarely relied on efficiency or productivity or having the largest ships, but skirmished with frigates to bamboozle and destroy the enemy.
In the modern business world, that equates to waking up each day with a determination to live on your wits and deploy every tactic in your bag of tricks to sell whatever you have to hand.
David Cameron was cast as the inheritor of the cavalier tradition. Bob Diamond, the deposed Barclays boss, is less colourful but represents an industry that revels in dealmaking and bamboozling its clients. Each day is another opportunity to invent a form of words, a complex scheme, that can command a premium over the simpler fare offered by rivals.
That doesn’t mean there is a total absence of strategy. There are the sloggers who keep the economy moving even when cavaliers prefer a day at Cowes or Henley, or time on the golf courses of the Algarve. These are the roundheads: the civil servants, farmers, unflashy yeomen and women of the shires who piece together the business and social fabric of the nation and diligently maintain it. In politics, Vince Cable would be their leader.
In a recent article, Matthew Parris, the Times columnist and former Tory MP, said people who decry the activities of the banks need to throw off their naive view of Britain. He argues that a trading nation needs to live on its wits – and, more than that, fight dirty.
Financial services, the arms industry and the pharmaceuticals business can lay claim to being the UK’s biggest net exporters. The balance of payments is bad at the moment, but would be much worse without them. Yet they all have one foot in the gutter.
Arms manufacturers are among the UK’s biggest employers. Greece, until recently the world’s sixth-largest importer of arms, is a long-standing client; so are many other nations who cannot really afford to tool up for wars they may never fight.
The arms trade tops the list of corrupt sectors, according to Transparency International, the non-governmental organisation that monitors global bribery and corruption. Britain’s arms sector is the second-largest in the world. Surely that means we are winning contracts because we grease more palms?
The antics of GlaxoSmithKline fit less easily into the pirate image. It takes a lot of planning to bring a new drug to market: lots of diligent roundheads must toil in the laboratory for years before submitting their efforts to the regulators. But shareholders love a buccaneering boss. They deny it, but throw huge rewards to executives who can show the biggest returns.
Pharma bosses may not look much like pirates, but they have adopted the same tactics as the banks and the arms traders when it comes to selling their wares. There are plenty of instances of drugs trials that are less than rigorous, and marketing campaigns that target vulnerable customers, including the latest scandal at Glaxo.
New Labour ran scared of cleaning up naughty industries. Each one was characterised as a golden goose. But the time has come to throw off 400 years of history. A country run by roundheads may be less exciting, but fear and corruption breed economic instability, not success. If we can tame the cavaliers, more people, not fewer, will want to do business here.
Unpromising away fixture
Roll up, roll up: who wants to buy shares in a famous Cayman Islands-incorporated company? It doesn’t pay a dividend, or have plans to do so, since it’s currently got £423m of debt, which is £90m more than last year’s revenue. And your shares will carry only one tenth of the voting power of the insiders’, so don’t get fancy ideas about your importance.
Not tempted? Come on, this is Manchester United, arriving on the New York Stock Exchange soon.
There’s a price for everything, of course, so, after a false start in Singapore, the Glazer family should achieve a public listing for their football club as long as they don’t get greedy on valuation. Would-be investors, however, should understand what they would be buying into.
First, this float is happening in the US because dual-voting structures have been deemed unacceptable by UK investors for about two decades. There’s an excellent reason for that – equal economic risk should carry equal votes. The likes of Google and Facebook might be able to argue that the entrepreneurial talents of their founders are best retained through a form of benign dictatorship. But the Glazer/Man U combination doesn’t fit that description. The voting structure here is about control, pure and simple.
Second, the stock won’t be actively traded, even if the Glazers issue as much as £200m of new shares (and the rumour is it will be less than half that). Illiquid stocks tend to suffer a discount to fair value, other factors being equal. And most UK private shareholders will have to pay top-tier dealing fees to dabble in a US-listed firm.
Third, the only point in owning a non-dividend-paying share is the hope of capital appreciation. At Man U, the big event for shareholders (and fans) will come on the day the Glazers decide to exit. When’s that? Next year? Next decade? Some time after that? Until it arrives, outside investors are back-seat passengers who won’t know the destination. To be attractive, the pricing of this flotation needs to be well below premier league.
Grand gesture at Ulster Bank
Two and a half weeks have passed since the NatWest computer blackout left thousands of customers without access to their money. At Ulster Bank, the problems rumble on and might continue, it admits, for another two weeks.
Ulster Bank’s chief executive, Jim Brown, told an Irish parliamentary committee on Friday that there would now be a full inquiry into what has been described as a “glitch” – though that is far too small a word for a problem that will have affected more than 500,000 Irish customers for up to a month. Compensation will be paid to any customer who has lost out.
What’s more, Brown said, he had decided to waive his own annual bonus – an “I feel your pain” gesture to identify with customers who have been unable to find out if their salaries have been paid in or make bill payments.
Is he expecting applause for such a magnanimous gesture? A more apt response would be to question why any bonus might have been payable in the first place when Brown’s job is to offer a banking service, and the service completely broke down.