Martin Vander Weyer’s Any Other Business
I told you so — and I might even have said it first. ‘Hayward may have to be sacrificed,’ I wrote on 5 June. ‘In that case, the next man in the line of fire could be Bob Dudley, who has the advantage of being an American…’ I might have added that Dudley came into BP (where he takes over as chief executive on 1 October) by way of its 1998 takeover of Amoco, where he was a rising star; and the name Amoco is a contraction of ‘American Oil Company’, making President Obama’s symbolic victory over ‘British Petroleum’ complete.
The departing Tony Hayward, meanwhile, becomes the new Fred Goodwin, vilified for the size of his ‘reward for failure’ severance package. But the BP board has come up with a brilliant device to save him having to take his family into hiding abroad as Sir Fred did: they want to send Hayward to Siberia as a director of the TNK-BP joint venture he had a hand in setting up. I still have some sympathy for Hayward — who has not been brought down by excessive, ego-driven risk-taking as Goodwin was, but has simply proved incapable of getting his message across: the internal message, before the Gulf rig disaster, that operational safety was paramount; and the external message afterwards, that BP was determined to do the right thing. So he now walks the plank with a fat contractual sack of pension rights tied round his neck. But the British media should ease off on the vilification; let’s leave that to the Yanks.
As for Bob Dudley, who can he take as his role model, three of his four BP predecessors (Lord Browne and Bob Horton as well as Hayward) having fallen short in one way or another? Elsewhere in the corporate pantheon, the answer might be a combination of the leathery PR skills of Sir Stuart Rose of Marks & Spencer in good times and bad, and the sheer industrial stamina of Sir John Rose of Rolls-Royce. So Roses for Dudley, and a bouquet of wilting lilies for Tony Hayward.
Dumbed down
‘OMG!3A*!!:)’ will be the most texted message in Britain on 19 August, when the nation’s teenagers receive their A-level results. Grumpy old commentators like me will point out that the progressive dumbing-down of A-levels was a shameless New Labour scam to produce ever-improving statistics, and that a full set of A-star grades is now so common it will barely bag a place on a BSc course in photography and marketing at a new ‘uni’ George Osborne is about to close down. But the texting and hugging will go on all the same — just as it must have done in bank boardrooms across Europe last Friday night when ‘stress test’ findings revealed that only seven small and internationally unheard-of European banks, out of 91 candidates, had actually managed to fail. All the rest were judged to have sufficient ‘Tier 1’ equity and quasi-equity capital to see them through a crisis. The amount of new capital required for the delinquents (five Spanish, one Greek, one German) to pass a re-sit was set at a trifling E3.5 billion, less than the last quarter’s pay-and-bonus bill at Goldman Sachs. Even Germany’s tottering regional landesbanks scraped through.
So is this exercise one in the eye for the euro-doomsters? Unfortunately not: the ‘crisis’ model used for the exercise co-ordinated by the ‘Committee of European Banking Supervisors’ deliberately ducked the most likely scenario for financial upheaval, which is a full-scale sovereign default by one of the southern eurozone members. To have openly contemplated such a meltdown would perhaps have encouraged markets to make it happen, so the regulators merely pretended to address it by accounting for a drop in value of government bonds held by banks for trading purposes — but ignoring the much more serious hit they would take on bonds held for long-term investment and reserve purposes. Just like the A-level results, the tests give us little new information about the real strengths of the candidates, but reveal the mindset of the politicians behind the exam-setters. And it all serves to remind us that the world’s major commercial banks would have passed with flying colours any stress test their regulators might have thought appropriate to set in, say, the first half of 2008 — and look what happened next.
Patriotic socks
Two pairs of socks arrived in the post this week, not from a maiden aunt or the Red Cross but from the last sockmaker in Scotland. Johnstons of Elgin is a proud bulwark against foreign domination of what the Scots put between their feet and their boots, while south of the border a last platoon is still holding out in the traditional sockmaking territory of Leicestershire. The challenge from cheap imports is now compounded by extreme pressures on the public purse: the oldest survivor, HJ Hall of Hinkley, is arguing with the Ministry of Defence over a sock contract for the armed forces worth £5 million a year that is being switched — for a saving of £40,000 — to a Northern Irish supplier, Cooneen Watts & Stone, which boasts ‘a supply chain extended across seven countries’ and is expected to source the socks from China. As a result, 20 employees have been made redundant at Hinkley, at a net cost in terms of tax and benefits which will far exceed the direct saving to the MoD.
The calculation isn’t done that way, and a Chinese sock may well be as reliable in battle as a British one. But still, as James Sugden of Johnstons says, there’s something deeply depressing about the obliteration of the British textile industry over recent decades, with ‘mills in Yorkshire and Scotland now housing a hotchpotch of pet grooming salons and suntan studios — hardly businesses that will enable us to compete worldwide’. I remember Digby Jones, the former CBI chief and trade minister who loves to thump the tub for British industry, claiming that he wore Union Jack underpants — but I suspect even they (an exciting selection of which can be found on the internet) are now produced by child labour in Cambodian and Turkish sweatshops. We can still buy patriotic socks, however, and we’d better make a habit of doing so before it’s too late.
Incidentally, I should point out to other industrialists worried about losing MoD contracts that favourable mention in this column will not be automatically secured by sending merchandise samples. A small armoured vehicle might be useful, but I’d have nowhere to put an aircraft carrier.
Comments