Bourneville chocolate with Kraft cheese slices? Not a recipe I’d recommend
The £10 billion bid for Cadbury by Kraft Foods, Inc of the US has provoked little protest — other than from the chocolate maker itself, which says it would rather remain a ‘pure-play confectionery business’ than become a component of Kraft’s ‘low-growth conglomerate’. The fight will come down to price, sentimental factors such as history and culture swiftly forgotten. Cadbury, in its model village of Bourneville on the edge of Birmingham, used to be an icon of progressive Quakerism in business. Now, with its workforce shrunken and its ‘Bourneville’ brand made in France, it’s a modern company like any other, led by a tough-talking American, Todd Stitzer. But that still doesn’t make Kraft — whose chief contribution to civilisation is the processed cheese slice — an attractive suitor. In my part of the world, Kraft is remembered as the acquirer of Terry’s of York — whose dark Chocolate Orange is now made not in York but in Poland. Cadbury shareholders might care to remember a recent advertising slogan for the Kraft-owned Orange: ‘Round but not round for long.’
The Ashdown of banking
There was a time when calling someone ‘the Paddy Ashdown of international banking’ would have sounded snide. But in applying this tag to Sir Win Bischoff, who has just become chairman of Lloyds Banking Group, I mean it as a straightforward compliment. Let me explain. The two men are almost twins in age. Both led tirelessly from the front in their earlier careers — Ashdown as Lib Dem leader, Bischoff as globetrotting chairman of Schroders — but you would not have tipped either for the formidable assignments they have taken on at a time when most of their peers have retired to the golf club. Ashdown won global respect as High Representative for Bosnia and Herzegovina, and would have gone on to be the UN’s proconsul in Afghanistan if Hamid Karzai had not vetoed him. Similarly, Bischoff emerged during the financial crisis as chairman of the giant but troubled Citigroup and has now, at 68, taken the helm at Lloyds, where he is expected to cull the board and generally bring Ashdown-style backbone to the governance of this banking equivalent of a failed state. Cometh the hour, cometh the man.
Mind your bowels
I have been enjoying Grumpy Old Bankers, a compilation by the Centre for the Study of Financial Innovation of ‘wisdom from crises past’ by financiers of the generation a few years older than Bischoff. I particularly like the contribution of Sir Brian Pearse, the ex-Barclays man who was drafted in to run the almost-broke Midland Bank before it was absorbed into HSBC in the early 1990s. He offers two simple pieces of advice for today’s bankers. First, beware of investing in the United States, where ‘so many billions of pounds have been lost [by British banks] pursuing the American dream’. He refers to Midland’s disastrous ownership of Crocker National Bank in California, and to HSBC’s experience as parent of the subprime lender Household Finance; but he might also be issuing a coded warning to his old colleagues at Barclays to stop being quite so smug about how much profit they’re making from the bits of Lehman Bros they picked up cheap after its collapse last year. Secondly, he says, always listen to ‘the bowels of the bank’ — to the messages coming up from managers who see daily business flows and understand market pressures. The Augean stables of global finance would certainly have required less hosing down if last year’s bosses had been swifter to notice the peristaltic gurglings from below.
Malus aforethought
For a writer, there are few things more exciting than discovering a potent new word. An old friend in the investment banking world has just introduced me to one: ‘malus’. In botany, I discover, it’s the family name for apple trees. But in finance and insurance it means the opposite of bonus, and my friend believes it is the missing link in the debate about how to reward bankers in a way that recognises performance but discourages reckless risk-taking. The answer, he says, is a three-year rolling cash bonus pot for each executive, with top-ups in good years, malus deductions in bad years, and strict controls as to how much cash can be withdrawn — although the recipient can borrow against the pot. It would help, he acknowledges, if leading banks agree to a moratorium on poaching each other’s people, except perhaps during an annual Premiership-style ‘transfer window’ timed to minimise the pay spiral. And he argues that cash is a fairer reward than shares, because in recent times there has rarely been a direct correlation between individual or team performance and the way bank shares have zoomed up and down. He says this with feeling: after a long, steady career with one employer, his own accumulated shareholding in it has dropped in value from £80 million to £6 million. Even if you think both those numbers are grotesque — indeed, even if you think all bankers, whatever their track records, are the spawn of Satan — that’s an awful lot of malus.
Eau de vie
Reports from the British tourism industry have been relatively upbeat this summer, despite the weather. Millions of you have been motoring cheerfully round the English countryside instead of fighting your way through Ryanair’s check-in challenge or the Paris Périphérique. My local paper even claims that scenic North Yorkshire (boosted by frequent promotion in this column) may have had its best summer ever for visitor revenues. My neighbour Keith the Stick Man, who makes and sells beautiful walking sticks, says trade has rarely been busier. ‘Can’t wait for this recession to end,’ he told me the other day. ‘I might get a bit of a break.’
As for me, I bucked the ‘staycation’ trend and I am still enjoying the afterglow of August in France. Just before I came back, I picked up a local paper near Cahors. One of its minor stories was about the stack of economic and employment-related issues waiting in the presidential in-tray for Sarkozy’s own return from holiday. But the banner headline was ‘Don’t let end-of-season fruit go to waste’ — above a picture of an ancient travelling still whose hereditary licensee will tow his contraption to your house and turn your surplus plums or pears into super-potent, perfumed eau de vie to keep you warm when winter turns harsh. That’s what I call work-life balance.
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