Accessibility links

I defy anyone to read the following without wanting to kick something or somebody. 

There is the tale of former Merrill Lynch boss John Thain who has just resigned from Bank of America. You might have thought that his disastrous management of the former investment bank might have been enough to persuade Mr Thain quite some time ago to retire quietly to one of his mansions. In fact, the reason for his hasty departure is the growing outrage not only at his decision - in the face of the imminent demise of his bank - to bring forward and increase bonuses to senior staff, but also the allegation that while Merrills slipped deeper into trouble, the Bank spent several hundred thousand dollars refurbishing his personal office, including one of the most expensive waste paper baskets in history. 

Then try Jonathan Guthrie’s piece in yesterday's FT. He describes the growing practice of company owners opting for so called ‘pre-pack’ insolvencies. By putting their companies into administration they can shed all unsecured debts, and obligations to existing and former staff. Then, sometimes just hours later, the previous owners turn up and repurchase their former assets at a knock down price. Guthrie gives an example: ‘David Charlton, founder of the Officers Club, recently bought 118 of the garment chain’s 150 stores out of administration’.

As Guthrie says ‘the morality of pre-packs becomes questionable if owner directors use them to cherry pick the best bits of their struggling business. A director who agrees with secured lenders to shed his unsecured obligations is treating his suppliers, his pensioners and the tax man [that’s me and you] prettily scurvily’. Quite apart from the morality, this practice will increase distrust and fear in the market as suppliers demand immediate payment worried that otherwise they might be ‘pre-packed’. 

Finally, read a brilliant article by Alice Thomson in yesterday’s Times which exposes the myth that those who created the economic nightmare are also suffering the consequences. If I were a Northerner reading the piece I would get a train to Mayfair and start picking fights. Thomson’s piece has one flaw – she says that Sir Fred Goodwin, the disgraced former boss of RBS and one of the dozen or so people most individually responsible for the mess we are in, is Chair of the Prince’s Trust (but surely this can’t be true!). 

One day, enterprise, driven in large part largely by the pursuit of wealth, will help us get out of the mess we are in. Occasionally, we hear the CBI and the IoD making more demands from Government. How about these august institutions – or perhaps the British Bankers Association - taking a stand for ethical business practice. As John Kay told a packed RSA Great Room last night, this crisis is not one of capitalism but of the stupidity and greed of a cadre of overpaid and under-regulated bankers. If the champions of business are to save the reputation of wealth creation they might usefully start by loudly distinguishing good business from its many unacceptable faces.


Be the first to write a comment

Please login to post a comment or reply.

Don't have an account? Click here to register.