How and why Vince Cable wants to shrink takeover market

It's all about buying the market and its customers. What follows is not necessarily a welcome import of efficiencies and advanced production or service delivery but often a wind down of UK productive resources with loss of jobs exported to overseas areas of cheap labour and in many cases Victorian working conditions.

A small step to sensible intervention and shame on the last Labour government for being more Thatcherite than Thatcher that saw manufacturing diminish so markedly in the last 13 years.

"The phrase "gravy train" could have been invented for the takeover industry."
Indeed, could have been invented for all industries including banking Robert. Self interest is what motivates capitalism. Ever bigger companies are the goal of capitalism, in fact the ultimate goal of capitalism would be just one company (the only source of water in a desert scenario). I sense once again, there will be another attempt here to 'control' capitalist tendencies, the trouble is it is trying to prevent what is a natural part of the process, and therefore it will fail. The cracks in the system seem to be increasingly obvious in a period of turmoil dont they.

Takeovers in the banking industry can be realistically argued to have created the conditions that have led to the depression that we have entered.

It is all very well bemoaning the takeover culture, but like closing the door after the horse hos bolted - what is he going to do to break up the banks and other oversized conglomerates?

Thee are also issues of corporate governance that takeovers were supposed to ameliorate - what is going to be done? - can we adopt, for instance the German company board model of workers in management through a different supervisory board structure?

The problem of the dictatorial power of management must be tackled - arrogant bullies need to be forced to do what is best for the business and stopped pursuing conflict for conflicts sake. Having a corporate strategy of gross exploitation must be curbed. If a boss could not say with his hand on his heart that he would want his son/daughter/wife (or even himself) to work in every post in his own company then there is something wrong with the corporate management structure.

Allied and closely connected to this is the pay differential between bosses and workers - the government is aiming at a maximum of 20 times - it this a too bigger differential? My guess is that we need to put downward pressure on this multiple of say progressively down to 10 times. (Of course a maximum pay policy would do just as well- but apparently this is still unacceptable to contemplate!!!)

Prices paid for acquisitions have also been driven by how big a debt the acquired business is able to sustain rather than through any meaningful understanding of what its worth. This is very bad for shareholders. I would argue that many acquisitions in the last few years demonstrate that the new management has little clue, empathy or understanding of what they have acquired.

Robert, Don't just blame BIG COMPANIES because they are BIG!

To state simplistically

"Well only those who noticed that - more often than not - takeovers appeared to be driven less by carefully crafted wealth-creating strategies and more often simply by a crude desire to turn a big company into an enormous one."

misses the real parasistes of companies - private equity debt takeovers, hugely damaging to the business sector.

Private Equity takeovers damaged any incentive for any management team to produce a 'big profit making company. In fact, decent managers often quit, leaving competency shortfalls.

Private equity, raising loan finance in the markets at ludicrous rates to "buy" the company's shareholders out, gives it free access to all the cash and assets. The equity team pockets the dosh and the remaining "shell" company survives only IF it can afford the debt repayments.

Is this an incentive to work for a living? I think not. More like business rape!

Historically, successful large companies made a profit because their owners had a product and had the drive to succeed against any competition.

Mergers and takeovers, equity buyouts have wrecked the business landscape because the sole purpose is to make cash for their owners (irrespective of who) and irrespective of product or workforce.

Maybe that is price of free enterprise, but if making money for money's sake is the sole purpose in life, who will clothe, house or feed you all when that is destroyed, raped by greed.

Don't just blame BIG COMPANIES because they are BIG!

We don't have much left to protect, and most of what remains is owned by foreigners.

Coal, steel, shipping, engineering, machine tools, food production and retail, cars, trains, planes, gas water & electric utilities, electronics, computers, white goods, printing and publishing, banks, finance houses etc etc etc all either wiped out or handed over to overseas interests.

All that's left in British hands are a few wee crumbs, the cupboard is bare Vince.
The stable door has rotted right off it's hinges with this one.

Meanwhile, in countries like France and Germany, where they still invest in production, they have(for example) thriving homebased car and engineering industries gainfully employing tens of thousands of people.
Our guys only get to work if an accountant in Tokyo flicks the go switch.

First they came for the shipbuilders but I was not a shipbuilder so I did not speak out
Then they came for the coalworkers but I was not a coalworker so I did not speak out
Then they came for the carworkers but I was not a carworker so I did not speak out
Then they came for the utility workers but I was not a utility worker so I did not speak out
Then they came for the finance workers but I was not a finance worker so I did not speak out

Then they came for me at the BBC and took my pension away because by then there was no one left to speak out for me

This coalition government is rapidly and accurately taking aim at all the stupidities that have marred the UK for decades. Everyone else in the developed world has seen that if you've a gem you lock it up, not flash around for the next spiv to tell you it's a worthles piece of paste. Honest 'guv, you don't want that candy maker any more, or that bankrupt oil major/car maker/pharma company/chip maker/... - we'll relieve you of that responsibility (and all those jobs).

In so many cases, viable and vibrant UK companies are being swallowed and then hollowed out with jobs shipped to low wage regions or nationals from those regions being brought to the UK to run their new conquests. I'm not being jingoistic, but to me its a sense of identity and employment. If we lose a grip on both we are lost.

Now, time to get rid of the paste. Anybody want a couple of clapped out money shuffling shops? Two reckless owners, cupboards full of skeletons; ideal logo for a dribblers rear.

Y'know I genuinely wake up every day anticipating a further myth busting initiative from the new government. However I do take Roberts point about fat lazy UK managers; we'd better sort that to. And yes, they can!

> I refer to a profound shift away from the idea that there should be
> the freest possible market in the buying and selling of whole companies.

You'd have to be a blockhead to even imagine that the "freest possible
market" could be a good idea.

> weaker companies would be gobbled up by stronger ones;

Yes. Until you have 1 "strong" firm!!


> "paid a multiple", "massive fees", "bankers, lawyers, accountants", "gravy train" ...

You're pressing all the right buttons. Those are the Sir Greedies, who caused all this.

> push up the so-called merger fees payable to the Office of Fair Trading

Yes. Hit the Sir Greedies where it hurts them most - in the pocket.


> All of this will trigger panic attacks in a variety of City firms who live off the
> fruits of the takeover trade.

Another reson to rejoice. If they hate it, it must be good for the rest of us!

> management becomes self-satisfied, fat and lazy if not made to feel anxious
> that the punishment for poor performance would be defenestration.

They are self-satisfied, fat and lazy anyway.

Not really a surprise. There was a study published some years ago which concluded that, far from creating wealth, some TWO THIRDS of takeovers actually resulted in a net reduction in shareholder value, while most of the rest produced no more than a fraction of the benefits expected in advance. The conclusion was that most takeovers occur not for the stated reasons (synergy, economies of scale etc), but to feed the CEO's vanity and self-image as a big wheeeler-dealer.

The chairman of the small company I used to work for was keen on growing quickly by acquisition rather than slowly by organic growth. His target turned out to be a turkey, and was effectively wound up within a year. This takeover wiped out much capital and that year's profits, as well as taking an inordinate amount of management time that could have been better spent. The cost and diversion of effort involved probably contributed materially to our own takeover a couple of years later. The new owner was similarly keen on growth by acquisition, and made several equally unsuccessful takeovers. It eventually went bust a few years later.

"And there are massive fees for the bankers, lawyers, accountants and PR firms advising on such deals."

Sadly, Robert, this is about six tenths of The Establishment. This is their "bread and butter! The press baron's are another part and it will be interesting, if not entirely predictable, to see them all beginning to rub shoulders to rubbish anything Vince has to say on such matters. With all the professions, the PR industry and the media "on board," any politician attempting to shout down this lot, in the interests of ordinary people, (like you and me,) will be crushed under a daily barrage of insulting print and scornful TV comment across the news channels.

We hear so much about foreign companies taking over British business. Is this situation never reversed? The way the media reports it, no British company has taken over a foreign business for many, many years. Surely that isn't the case?

Highly recommend and agree with post #7 09:54am on 6 July 'ady'.

In addition. It can't be denied also that Crown Estates are beginning to consider to 'sell-off' Aldingham Estate in Cumbria? A link from a BBC news website story.

Crown Estates are responsible for the stewardship and guardians of huge areas of 'protected' land and important buildings in Britian?

There is a fine line between take-overs and selling the ground from under you? Just a thought? Have a look at Crown Estates website - an amazing eye-opener and, for me, an education?

“absentee landlords…” Wow ! – I like it ! – The theme I post about a lot on this blog is that the financial system should be a reflection of reality, and as we don’t use something like NEFS Net Export Financial Simulation it’s not. In terms of your current post there is a relevant point here as well in regards to this.
Take 10 small companies processing 10 Tonnes of stuff and only using 10 units of power or some other resource.
Now take 1 large company, less efficiently processing 10 tonnes of stuff and using say 11 units of power. In this example small is better. If we look at their P&L accounts though – due to the large company being able to get cheaper loans and maybe charging higher prices – monopoly-esque and all that - the P&L of the large company ‘looks’ better – Finance is meant to reflect reality and frequently it does not – the current financial system distorts the signals that allow the most efficient use of resources

The true enemy of capitalism is the corporate fascism (in its most basic form) currently in existance. It constrains innovation and entrenches oligarchies in positions of power creating a status quo of (more or less) contented government clients and commercial fat cats.

One way to start to change this would be to start to decrease the quantity of interest on debt that can be offset against tax (a blatant subsidy of bad practice if ever there was one) which distorts free markets by giving absurd amounts of leverage to the people on the inside. The problem is I don't think the UK is the only country to do this and the number of fleeing companies would become a stampede if this aspect of the "business model" was removed as an option.

I support what Vince Cable seems to be trying to achieve but big takeovers are of course only one half of the problem.

What about the issue of the selling off of state owned companies to foreign buyers? Could there have been legislation to prevent Brown from selling the reactor builder Westinghouse to the Japanese just before the Labour Govt declared their intention to increase our nuclear capacity? Or indeed should similar legislation be put in place to prevent utilities such as Scottish Water being sold to the private (probably foreign) sector?

This comment was removed because the moderators found it broke the house rules. Explain.

3. At 09:08am on 06 Jul 2010, John_from_Hendon wrote:
Takeovers in the banking industry can be realistically argued to have created the conditions that have led to the depression that we have entered.

It is all very well bemoaning the takeover culture, but like closing the door after the horse hos bolted - what is he going to do to break up the banks and other oversized conglomerates?


Maybe he could insist that the lease agreements and interest payments on the BSF money that we owe to RBS corporate finance, Lloyds et al are nulled in favour of us releasing our "shares" in the institutions, and then let the competition regulators do the rest to break them up?? Or am I missing something?

Sorry, I meant, in return for our "shares" in the institutions being released.

Good piece Robert, and fair to point out the dangers of the extreme opposite situation, but........really, we are nowhere near where we were when the "British disease" was a phrase in general circulation. That was thirty years ago and more!

It was a phrase above all linked to overbearing union power, union demarcation, regulations etc etc. But look at the statistics of union membership now.... hardly at all in the private sector. It's only in the public sector now that we still have an issue - and some evidence of a continuing "British disease" (but hopefully not for much longer!).

Vince is doing the right thing - making it more difficult for the money-men, the lawyers, the advisors, and the company executives to extract huge fees via an illusion of creating wealth.

There are very few industries where real economies of massive scale actually exist, where very large market shares are justified, and these are almost always where huge long term investment bets have to be taken involving large up front R & D costs (e.g. aero engines).

As you quite rightly suggest, we have for too long been suckered by the money men into believing that they exist in a whole raft of other sectors.

I hope Vince continues his good work and looks also at:
- reducing the market share levels deemed to be 'anti-competitive', thereby preventing companies simply buying up market share and levering up prices (maybe generally 30%+ at the mo, but needs to be 10-15%)
- removes the tax subsidy of debt interest
- the revolving doors between the regulators and the regulated (OK, this will now the BoE rather than FSA)
- much greater financial info disclosure requirements for all money businesses under the Companies Act, if they are going to benefit from limited liability (.... we need the management accounts of all financial co's presently regulated by the FSA in the public domain please! - what harm will this do? - and just think what better levels of competition and service and integrity this will lead to!)

Re The Establishment

#11 spareusthelies wrote:

'With all the professions, the PR industry and the media "on board," any politician attempting to shout down this lot, in the interests of ordinary people, (like you and me,) will be crushed under a daily barrage of insulting print and scornful TV comment across the news channels.'

------------------------------------------

Yes...and it's exactly what happened to Nick Clegg yesterday regarding electoral reform...even by members of his own party!

Multinationals aren't only about investment and management efficincy, they're also about brain-draining, transfer pricing and many other details often neglected but all to the profit of the acquirer.

In this market, the people who actually produce the wealth are never considered. They are just numbers engaged or otherwise by that accountant flicking that switch in Japan or India. The productive individuals matter not a toss to the top bosses as long as they're there when wanted. And when they're wanted they should be grateful because they can live in their homes without fear of repossession for a while at least; feed their families etc. But they have no security. What a miserable life they lead.

The luckiest, of course, will make good and be sucked into the hub of the resultant company which may ultimately be to the detrement of the UK economy. Of course, things are changing and opportunities for those in the swallowed up company seem to be growing less.

Actually Robert, whilst I agree that "management becomes self-satisfied, fat and lazy if not made to feel anxious that the punishment for poor performance would be defenestration", I would also suggest that shareholders too become self-satisfied, fat and lazy if they're making a comfortable amount of money. Why work hard making money when you can just sit back and watch it roll in?

Alternatively, perhaps it needs to be made easier for shareholders to exercise their powers and rights to intervene in the running of companies and to have a more powerful and more effective say in how their Board members run the gig.

Just make takeover fees a percentage of the market value of the company being taken over, that would be bigger than a rounding error

@ 11. At 10:23am on 06 Jul 2010, spareusthelies wrote:
>> massive fees - bankers, lawyers, accountants PR firms advising ...

> This is their "bread and butter! The press baron's are
> another part

Press barons are neutered now. Social blogging is where the news flows.

> rub shoulders to rubbish anything Vince has to say on such matters.

Nobody under 45 listens to “press barons”!

> With all the professions, the PR industry and the media "on board,"
> any politician attempting to shout down this lot, in the interests of
> ordinary people, (like you and me,) will be crushed under a daily
> barrage of insulting print and scornful TV comment across the news channels.

There's more chance of being crushed by a buttercup. Print is dead, and TV is
only good for sport and drama for active people. Nobody uses that
old thing for news, surely?

Nope - all the old stuff is over, and only our opinion counts for anything, now.

Let us hope that Cable now gets his head around the importance of IT to the UK also.

I hope he gets off his high horse about blaming IT for all the ills in the UK economy.

I hope he will quickly realise that the massive outsourcing of IT jobs overseas, or by allowing in workers from Indian to come and work in the UK on Indian salaries, has done enormous damage to the UK high tech workforce.

The City has also played a huge part in the off-shoring of British IT jobs in the past decade, aided by politicians in Labour of course, which has lost enormous tax revenues for the Exchequer.

You can't move forward as a vibrant economy by adopting a Luddite mentality to IT. It is a massive wealth generator for the US and was once for the UK also.

Time for Cable to realise this and to force through new laws:

1. Stopping the ousourcing of UK IT work overseas.

2. Stopping incredibly cheap IT workers to come and work in the UK thereby putting our workers on the dole.

3. Stopping the big IT consultancies from cornering all the UK Public Sector IT work and demanding that 50% of all Public Sector IT work is done by UK-based and owned SME IT firms - which is the case in many US states.

The last point will not only generate work locally for thousands of high tech workers but will allow such SMEs time and support, by doing Public Sector work, to potentially grow into firms capable of drawing in work in the private sector here in the UK and from overseas.

While agreeing fully with Vince Cable, I believe he should also be looking at the Directors of Great Britain PLC. I always thought the difference between a country and a company is that a country has a social conscience. After the latest takeover, it seems the two are one and the same.

We still have few thing to sell, NHS, SCHOOL, the end of this parliament Vince will sell our Royal Mail. I certainly agree to sell all the Royal and House of Common so all the MPS will work for the Private company!!
This is the idea for those people believe in every thing private sector is better than public sector

"The British disease, historically, is that management becomes self-satisfied, fat and lazy if not made to feel anxious that the punishment for poor performance would be defenestration."

The so-called "British disease" is the right-wing newspaper catchphrase frequently used back in the 70's and ever since really. It is typically used whenever a British company has a Union dispute on its hands.

But I find your version of the British disease, "...historically, is that MANAGEMENT become self-satisfied, fat and lazy....." really rather refreshing. It's the idea, lost on so many, that it's NOT just the unions that are always to blame.

At some point, somewhere, global business has to take place on the Earth's surface. Where it does it will have a local impact. We have to question whether or not it really is fine for business in one locality to to trash another in another locality, leaving it in ruins. That's what happens today. Applying a bit more measure, being looked at by Vince, is not a bad thing.

"Well only those who noticed that - more often than not - takeovers appeared to be driven less by carefully crafted wealth-creating strategies and more often simply by a crude desire to turn a big company into an enormous one."

yeah - we noticed it it's just a shame none of the numerous bodies responsible for regulating it did.

The idea that takeovers increase value is often nonsense. If the takeover is an example of vertical integration (you take over your supplier or retailer) there is a possibility of increased value - but this is always at the long term expense of running a part of your industry you're not so familiar with.

On the other hand, horizontal intergration (where you take over a rival) - never actually increase value - what they do is allow the new larger company to use it's larger customer base to extract more wealth from the consumer.
This is often mistakenly shown as benefits arising from production almagamation (1 machine instead of 2 etc.) - but this is offset by the reduction suffered by that machine supplier, or the labour employed (and now not) to run those 2 machines.

You see in the corporate world 'increasing value' is a very narrow term applied to their bottom line, their slef interested view of the outside world.
The reality is that value is merely transferred from somewhere else - in the case of mergers and takeovers this is either on the dole queue (for the excess labour) - in the reduction in machinery supply (borne by the supplier) or in the form of debt - which is stretched into the future - i.e. transferring value from the future back to today (a classic method of generating value - and one we're all now familiar with the consequences of)

You see all that nonsense taught in Economics is based on bottom line from the individuals or indiviudal companies position - not the essence of value in society.

This is one of the reasons why Governments are continually spiralling into debt. Private sector value is being 'created' by simultaneously destroying public sector wealth all the time.

Still, what do I know, I don't have 3 letters after my name - I swapped it all for a brain that has to think for itself instead. Meanwhile all Economics students just accepted this as fact - without question.

If you want evidence, can you name any takeover between 1980 and 2000 which didn't eventually result in job losses (burden on the state), factory closures (burden on the community and state) or a detrimental effect on the supply chain? - I don't think you'll find many.
(changes after 2000 are a bit too soon, most of the effects are not seen for many years)

Look at the hotile TWA takeover in the 80's by Carl Icahn - it produced so much 'value' the company was insolvent by 1992 - and the cost of all those job losses simply became a burden on the state - not TWA.

History is littered with examples like this - hailed as great for improving value at the time - but a couple of decades later and they always end up going sour....by which time the architect of the takeover has pocketed his dough and left town. Clearly there is a vested interest in making the general public think takeovers are a 'good thing' - demonstrated by the 'warning' Robert has issued about a loss to productivity.

Productivity is not the same as profit Robert - you seem to be getting confused. I can be productive all day long and not 'make a penny' - it's time you seperated the honest form of production and the dishonest form of money representing production - which it's now clear - as banks have demonstrated that you can get paid a lot of money for actually be so unproductive - you're actually destructive.

How a good company, that creates genuine wealth, has made itself impossible to be the target of a takeover...and yes...you are right...it's German...

Robert Bosch GmbH
https://en.wikipedia.org/wiki/BOSCH

Dear Vince Cable,

Do you believe in the Office of Budget Responsibility?

Obviously this is a rhetorical question, but neverthless a serious point to make with so many threats to employment, especially front line workers?

If a take-over of chocolate factory, or a water company can happen without impunity - can we assume the land from under our feet and houses and the water we drink be of equal vulnerability?

I think undestanding why corporate amalgamations do not appear to work ought to be the first step. Anything between 65-90% appear not to deliver enhanced shareholder value according to academic research. Anything that makes such amalgamations harder is in the interests of all stakeholders.

However, erecting barriers against amalgamations is not as easy as RP makes it sound. When he, and VC, talk of "British" companies, what they really mean are companies listed on the London Stock Exchange. Shift the ultimate holding company and main quote of a company, and any UK legislation is immediately avoided. A stricter interpretation of certain tax legislation in the later years of the last government caused something like that to happen, with several mid- and large-cap UK companies moving their ultimate holding company to Ireland to avoid it (where they were listed was irrelevant in this case). Even BT looked at redomiciling apparently.

On takeovers, VC has more wiggle room, as most jurisdictions are less liberal than the UK when it comes to takeoevers. However, I still think he should seek a strengthening of EU takeover rules, so that UK companies cannot just move HQ to Ireland and avoid any new rules.

Great analogy Robert - 'absentee landlord'?

UK PLC FRUIT TREE has been cherry-picked and continues to be so?

We can only hope that Vince Cable stops endlessly pontificating in the House, and gets on with his job by working and enacting protection of UK PLC in the same way that Germany plc and France plc do?

Come on Vince, less jaw jaw ... please?!! We still have faith in you, just?

This is the first time I have left a message on this blog, I've mainly been reading at lunch and have a good old chuckle at all the left wing 'noddy know it alls' who spout inane drivel whilst they are meant to be working. If you are all such experts, (you all know who I'm referring to incidentally) why so much time on your hands? would you not have managed to work yourselves into a position where you could be 'plannning' an economy like the great planned economies of say North Korea? As an aside I work in a quasi public sector organisation and the waste is incredible, with local authority partners being the worst. I welcome cuts.

Does that mean that they will or won't be selling off the Royal Mail or HS1
(can we have joined up government for a change please)

29. At 12:45pm on 06 Jul 2010, spareusthelies wrote:

"But I find your version of the British disease, "...historically, is that MANAGEMENT become self-satisfied, fat and lazy....." really rather refreshing. It's the idea, lost on so many, that it's NOT just the unions that are always to blame."

I like to look at it this way - if the Unions are lazy and represent lazy workers - then isn't it time the non-unionised people - got on with some work??

It's like the general (3 day I think) strike in the 20's - when the rich had to get off their horses and drive buses. I think it's time we returned to this scenario - if these wealthy indiviudals are so clever and talented - well how about they show us. Can't wait until Lord Snootlbry is driving me around on a 39 bus.

It seems that I am not the only one who can see this coming - I mean even "the city" has woken up to the fact that they have caused extreme damage with their greed and that the people who have been 'skimmed' for the past decade might be a little peterbed.

Check out this headline...

https://www.cityam.com/issue/2010-07-06

I see Sir Alan Budd is to leave Bertie Wooster's flagship 'Office of Budget Repsonsibility' after just 3 months.

Obviously impressed with how well things are going.

Hopefully, very strong measures are in place to manage conflict of interest as he moves from the very heart of government back to the multi billion pound hedge funds.

What about:

I have a phone - it is worth 5bn. Telfonica offer me 10bn for it - what should I do, hang on to it because Telefonica are not a British company or pocket double what it is worth and thus improve my pension?

The threat of takeover keeps managers on their toes , takeovers frequently result in production being moved abroad: If managers can save costs by moving production abroad and are not doing so then they are being lazy and not managing the company in the best interests of the owners. If they do move production abroad then it males no difference who owns the company.

The division of ownership in to diverse groups of shareholders allows individuals to spread their risk. Anyone with a pension scheme is what of those 'absentee owners' who are not monitoring their assets carefully enough. Don't know about you but I may have time to move my holdings around in response to poor management but certainly don't have time to try to intervene in every company I hold a minute stake in, but luckily just buying and selling shares will impact on the price and send the necessary signals about which firms need better management (potentially via a takeover!). Nice how the capitalist system does it all for you without some bureaucrat and their prejudices having to try and decide which companies should be championed.

And we haven't even mentioned the demonstrated result that international ownership of local companies tends to improve domestic management practices and bring in new skills and technologies.

36. At 1:47pm on 06 Jul 2010, BobRocket wrote:
Does that mean that they will or won't be selling off the Royal Mail or HS1
------------------------------------------

Like most recent rail company changes in ownership I expect the concession to HS1 will be sold to Deutsche Bahn. Strange that so much of our rail network is run by the (some ex) state rail companies of Europe.

Unproductive take-overs have been happening in the pharma industry for years. In an effort to stay one of the biggest companies large pharma's have taken over rival after rival.

The take-overs have crippled the companies as many people focus on the politics of keeping their jobs for a couple of years rather than moving the business forward - those that do focus on moving the business forward rather than watching their backs get ejected.

The result - the companies fire the wrong people in the synergy savings, it's internal pipeline suffers and a few years down the line has to repeat the process all over again to bring products into the pipeline - in the process again destroying the organisation that created those products.

It's extremely difficult to manage a large take-over well - most of the decisions about who keeps their job or who's in charge is based on non-talent or productivity measures such as who took over who, size of department ( if your department of X is bigger than their department for X then your in-charge as bigger is better... ie efficiency is punished ) and who is better at internal politics.

However it's not all bad news - the creative people who lose their jobs can go on to create or contribute to startup's that allow them to pursue ideas not possible in a larger organisation - which eventually get bought by the larger company, rewarding the creative people in way not possible if they had stayed in the large company.

The only problem in the UK with this model is the relatively poor environment for venture backed startups, versus the US.

The UK has world class universities ( at the moment - BTW this should be considered as an industry to be built up, not as a national cost! ), but a second rate environment for funding hi-tech startups and more importantly support for taking them across the SME to large company boundary - too often they are sold off rather than built up ( to get back to the original point! ) Again the UK banks and money markets are at fault - some of the most innovative companies in the UK which hit the headlines only employ a handful of UK people.

#35 charlie_hurley

Yes, I agree.
As you are ideally placed to make a stand in favour of public sector cuts I suggest that on principle you resign your position immediately.
Due to the hiring freeze you will not be replaced and so will be saving public money for the benefit of the hard-pressed taxpayer (I salute your sacrifice for the greater good)
You had better not sign on though, that would only be reinforcing the benefit culture of the scroungers, better just use your savings to live on and emigrate when they run out.

I, meanwhile must go to my private sector job.

Cheers

30. At 12:52pm on 06 Jul 2010, writingsonthewall

Excellent post by WOTW! Recommended.

Markets do not work well when they are dominated by big players. Therefore there should be special rules applied to companies that have more than a certain proportion of their market. The Monopolies Commission can do this, of course, provided the government refers a merger to it. The fact that companies do become too powerful, indicates that the Commission should act more vigorously. Reference should be automatic and based upon well defined criteria, so that it cannot be avoided by intensive lobbying.

How much of this is a sign of the rise of protectionism?

Consoldiation of wealth has caused some problems. As companies have grown larger they have more revenues and although the actual percentage of profit is not higher the real monies are. The other method employed by larger firms is to buy smaller firms, close them and sell off the properties and assets. Although the smaller firm may have been profitable it can still be subject to these attacks by larger firms in need of cash for an even larger take-over. The markets have substaintially changed and the investments are in Asia. The governments trying to hold on to national based firms is not such a bad idea and incentives should be created as we have seen the bankers have no national interest and will sell anyone out for a profit. The global economy is basically an unregulated wasteland surveyed by bankers for the most profit. They fund the highwaymen that rob communities of jobs and wealth.

@ 35. At 1:44pm on 06 Jul 2010, charlie_hurley wrote:

> I welcome cuts.

Fingers crossed, then. Pretty soon you might have plenty more time to post
stuff on the Internet...

35 welcome. I too come here sometimes and share your views. The expertise is incredible. I just wish I had them running my company we would be so much more successful. You do wonder why they are here given that all the problems of the world could be solved if only they were out there making these things happen…..
The issue for me on takeovers is to separate out the good from the bad. I have been in a Company which was taken over and I have been involved in taking over others (and by the way RP’s assertion that it is driven by the desire to be an enormous company is not my experience). Some are good and some go bad depending on the standard of the people and the way they manage the change. There is always a balance to draw between the benefits of scale and the greater difficulty of managing a bigger and bigger business. I am sure some businesses have got that balance wrong.
But there are also a large number of businesses in the UK that are less effective than they should be. If you take away the possibility of a take over then I worry that the incentive to improve will be less and in the long run that will be bad for UK business.

#38 jon112uk,

Yes. Probably a rather more newsworthy event than VC's move into corporate advisory work. I wonder why RP was given access to VC's plans today? :)

Even the Conservative Party's official news agency, aka the Daily Telegraph is pretty scathing about Budd's departure.

https://www.telegraph.co.uk/finance/comment/damianreece/7873915/For-the-OBR-to-lose-Sir-Alan-Budd-so-quickly-is-irresponsible.html

I think the most damning quote is:

"...to have any long term credibility [the OBR] needs a permanent chairman who we can all believe in and independent in-house number crunchers who are not on day release from the Treasury. So far it has none of these."

Closely followed by:

"Hardly the image you want for a body with responsibility in its very name."

Remember the forecasts produced by this organisation are a significant input to the public expenditure cuts/tax rises currently being developed. Probably of rather greater immediate concern than the more academic exercise of controlling corporate amalgamations that the government prefers to highlight today.

34. At 1:42pm on 06 Jul 2010, corum-populo-2010 wrote:

"Come on Vince, less jaw jaw ... please?!! We still have faith in you, just?"

I have to agree - whilst in opposition VC was impressive - but now in power his pecker seems to have shrunk. Is this evidence of power corrupts? - maybe if everybody was in opposition and nobody in power this would be resolved - but I guess that would be anarchy.

I suspect VC is fighting hard behind closed doors - but the 'controlling party' - who are the Tories, aren't going to allow their big business friends to lose out to some wet Liberal.

How long before VC realises this and quits I wonder?

#39 Michael,

Of course what you say is eminently sensible and correct in theory. However, there is a body of post-acquisition academic research which shows that somewhere between 65-90% of amalgamations do not add value to acquiring shareholders. With the benefit of hindsight those shareholders ought to have voted against the deals.

I think this highlights two points. Firstly, why do those shareholders who, in the main, are represented by educated and experienced asset managers, vote in favour of acquistions? Secondly, what should you do as a small shareholder with limited time and influence?

The answer to the first question is that institutional shareholders are often conflicted in takeover deals. They frequently own both companies involved. Just look at the debate that raged on this very topic during and after the Lloyds acquistion of HBOS. You would also be utterly amazed at the number of asset managers who have standing instructions with their custodians always to "vote with management". In other words they simply fail to engage with management in even the most basic way. This is far less of a problem in the pension fund arena than it used to be. They have become far more activist over the last 10 years. However, the typical UK equity fund sold to individuals as part of their personal pensions or ISAs rarely or ever votes against incumbent management. So it contributes to the problem of not challenging failing incumbent management, and at the same time effects minimal control over those with grandiose plans to rule the world.

As for what you should do with your own small holdings, that's simple. Always vote For the takeover of companies you hold, and always vote Against acquisitions by companies you hold. Vote against granting Boards the right to issue shares without offering you pre-emption rights (that stops them making relatively small acquisitions without any need to involve shareholders). By following this plan you will miss out on some good acquisitions, but the research shows that for each one of these you will also avoid at least 2 dogs so, overall, you'll be better off and have to do very little work to achieve that result.

37. At 2:03pm on 06 Jul 2010, writingsonthewall wrote:

It seems that I am not the only one who can see this coming - I mean even "the city" has woken up to the fact that they have caused extreme damage with their greed and that the people who have been 'skimmed' for the past decade might be a little peterbed.

Of course they are noticing. The police in Toronto spent an estimated 1-2 billion dollars in security at the G8/G20 meeting recently. Apparently, only journalists who meet the necessary background checks were allowed to pass police lines....

They've got themselves some sound cannon too! https://www.cbc.ca/canada/toronto/story/2010/06/25/g20-sound-cannon.html
Now that sound canon isn't intended to block out the sound of Bianca blasting out of the telly as she gets on with all that yelling at anyone on Eastenders is it?

I presume only the spivs will be buying the ultra-expensive ear protection gear to ensure they can carry on wheeling, dealing and drinking latte during the coming demos and noise!

Good blog Robert.
Sadly the misinformed 'comments' are at best painful and at worst toe-curlingly embarrassing to read. It's a sad indictment of financial journalism and standards of media reporting generally. And down to the explosion of websites that encourage the expression of uneducated opinion for its own sake...

35. At 1:44pm on 06 Jul 2010, charlie_hurley wrote:

"This is the first time I have left a message on this blog, I've mainly been reading at lunch and have a good old chuckle at all the left wing 'noddy know it alls' who spout inane drivel whilst they are meant to be working."

How do you know we're all supposed to be working? - do you assume that only the left wing works? - Mmmmm bit Marxist of you to assume that only the working class work - maybe it is you who is the left wing know it all.

I"f you are all such experts, (you all know who I'm referring to incidentally) why so much time on your hands?"

I don't know about the rest of them, but I do the work of 3 men in 1 day. Therefore I can go at 1/3 speed and still make people around me look slow. I guess I must not restrict myself with the psychological boundaries that the rest of them do.

"would you not have managed to work yourselves into a position where you could be 'plannning' an economy like the great planned economies of say North Korea?"

Is that your extent of 'great planned Economies'? Well all Economies are planned, it's just whether it's central planning or anarchic free market planning. The only difference is who benefits, in North Korea it's Kim Jong il and his party - in the UK it's the ruling class. There is little difference - you would find yourself 'out of the picture' in both worlds if you persist with a middle of the road attitude.

"As an aside I work in a quasi public sector organisation and the waste is incredible, with local authority partners being the worst. I welcome cuts."

Quasi public sector - does that mean a private sector company being funded (or part funded) by the public sector? Well surely in the interests of boosting private sector demand your job and organisation will be perfectly safe. As for the local authorities - well you can hardly blame them for being wasteful - they're following the private sector model

They employ chief execs who do virtually nothing, award themselves big pay - and leave just before the whole thing crumbles. They appoint their friends into the service on inflated salaries and they hold no responsibility when it all goes wrong and people lose their money (Certain Councils investing in Icesave - RBS investing in CDO's)

Don't worry, you will get your cuts - it's what comes after those cuts that should make you very afraid. Hope you like walking to work!

40. At 3:05pm on 06 Jul 2010, Kit Green wrote:

"36. At 1:47pm on 06 Jul 2010, BobRocket wrote:
Does that mean that they will or won't be selling off the Royal Mail or HS1
------------------------------------------

Like most recent rail company changes in ownership I expect the concession to HS1 will be sold to Deutsche Bahn. Strange that so much of our rail network is run by the (some ex) state rail companies of Europe."

Well already they're not going to upgrade the existing fleet of trains - remember the age of the train?
https://www.ft.com/cms/s/0/a46d4c7e-8904-11df-8925-00144feab49a.html?ftcamp=rss

get used to trains breaking down - it's what happens when you don't upgrade your fleet!

44. At 3:20pm on 06 Jul 2010, stanblogger

One question - why should we (the taxpayer) pay for this?

I agree that the regulations are too weak, but to make them strong and enforce them costs a lot - and we're expected to pay every single time.

At least criminals are fined to contribute to their own policing (even though they owe us £1.3Bn) - fines in the world of mergers are tiny by comparison and virtually pointless. Of course if you don't like what the MMC say you can always ask the Government for special dispensation (as the banks did in the crisis)

Sorry but this is politics without any degree of common sense.

Increase fees payable to OFT... well of course that only applies if the combined company passes the threshold to be in a market dominant position. So a combination of no 4 and 5 in a market which makes them no 3 sized company in a very fragmented market will not need to apply to OFT.

Increasing threshold for success to 60% is just plain stupid. Company makes bid, acquires 50%+1 share and is told he is not in control...simple trawl through companies law which show the acquiring company not has ability to fire the directors and put in place their own board. ONly thing they cannot do is pass special resolutions. They do control day to day management. So that idea is hopeless.

Disenfranchise speculators: only problem how do you define who is a speculator and who simply bought the shares believing they were cheap a couple of days beforehand. The idea is completely unworkable.

So that leaves only one idea making offers subject to advanced notification to regulators. Even a moments consideration will work out what a remarkably dumb idea that is. The information will need to be revealed to the market (and in any event would leak out), that means the entire market knows the target is in play, short term shareholders buy shares based not on fundamentals but likely response of regulators result is even more anarchy than currently the case.

The role of regulation in the share market should be to ensure fair dealing for all shareholders whether they are big institutions or individuals holding a couple of shares. What the proposal seems to involve is govt not wanting the public to have the right to buy and sell their own assets other than to people govt approves of, at a price govt approves of and at time govt approves of. Now there is nothing wrong in principle with the type of govt (usually called some variant of communism) but all the evidence is that in practice it is useless and corrupt.

On one point 41# raised. There are already rules about large companies dominating the market. Much to the disappointment of many of the more left wing posters on this forum, there is something we can learn from the USA. Their anti-trust legislation has over the years been much more successful is reining back (and sometimes even breaking up) companies who abuse a dominant position. It is not perfect but much better than the OFT/EU.

#39

The problem with the free market is that it never is pure. ie the market doesn't pick up all the costs of the destructive side of such deals - the state does in terms of benefits etc. I think RP has the emphasis is wrong the main reason for the deals is that you can generate short term share gains, by effectively asset stripping - managers and shareholders are aligned with the views of short term capital, not long term company building. If it was only ego then share holders wouldn't agree - they are not stupid and can see through any mis-represenation of the reasons for the deal.

Often companies are bought that are cash rich and are in investment phase - the companies are bought for the revenue stream and the future investment closed down - as a lot of industries have poorer short term return on investment than get be got elsewhere.

Perhaps, if a company had to pay the full economic costs of the asset stripping, rather than freeloading off the state then the market may operate better. ie if companies have to support employees until they found new work, rather than tax payers.

@ 53. At 4:23pm on 06 Jul 2010, Ratatouille wrote:

> websites that encourage the expression of uneducated opinion for its own sake...

Yes. Uneducated opinions are like orifices - everybody's got some.

52. At 4:23pm on 06 Jul 2010, copperDolomite wrote:

> I presume only the spivs will be buying the ultra-expensive ear
> protection gear to ensure they can carry on wheeling, dealing and
> drinking latte during the coming demos and noise!

There's even a concerted effort by the spivs to get "back to normal". Some of the pariahs have even been snooping around here, trying to find a way to fit back in. They are like a bad smell - you just can't get rid of them.

They'll have less luck in America - everyone (and I mean everyone) hates Wall Street. They'll never make a come-back, and what happens in America happens here, after a short while...

Oh dear. I suspect another wave of City hero types sniveling and bemoaning their slowly shrinking freedom to rape the country dry.

Still, if they don't like it they could always **** off to Switzerland.

Which would be nice.

Too late the good stuff has gone.

Now are they planning to do a number on BP?

I know certain parties have hated BP for years, and are longing to short them down divide it up !

First the Bank Shareholders, next Britains Oil Companies, and then, maybe Pharmaceuticals will be targeted next.

Shameful treatment of Bradford and Bingley Shareholders.

48. At 3:49pm on 06 Jul 2010, blogjt wrote:
I am sure some businesses have got that balance wrong.
But there are also a large number of businesses in the UK that are less effective than they should be.

Who sets the rules? Who decides what effective is? And on what basis?

See what I'm thinking is this. If customers are the masters, then why can't I find a mobile phone so simple that my wee mum and her mates can use it, and I'll never again hear her say 'But I didn't delete the phone numbers. It isn't just me you know, Old Eddie can't even answer his and he's the Bowling Club Champion!'

#39 Michael.

But you're only looking at a tiny part of the picture. You're not just an investor, are you? I assume you're a citizen of the UK, a voter, and a responsible person. If one of these does not apply then you should not be commenting.

If all I cared about is cash in my hand, and nothing about the society I lived in, I'd be shorting the UK in every conceivable way. But I do care, and I think most people on here care too.

I care that there will be strong, respected and ethical British companies in the future. I care that future generations will take pride and comfort in the foundations we've laid them. We can't live forever but our legacy will.

You mentioned 'moving production abroad'. You seem not to be worried by the social consequences; all the enhanced pension in the world is useless if you can't live in peace in your home. Can you ever see a contented 'Blade Runner' type society where the rich live in their (reinforced) ivory towers and the rest grovel the streets for their fallen scraps. If you allow the continual hollowing out of the UK that is exactly what you will bequeath.

Of course the biggest refutation of this policy is that, plain & simple, it doesn't work. Managers are NOT incentivised to work harder by the threat of takeover. That's not the way it works. As it is now, the owners decide which financially engineered solution suits THEM the best; it's got nothing to do with how any individual department head works (for instance). That, is what VC is trying to stop and more power to his elbow. In reality those DH's will be distracted by the furore and will be driven to do what they have to do to survive.

One of the biggest ironies of the whole scheme, as it is now, is that target companies often end up paying for the due dilligence of the predator. If the attacker is US, we're talking of a fee > £1M. When, as is not infrequent, the deal falls through the victim pays.

I'd rather the UK was championed by Virgin, Vodafone, BP (yes), BAe, Rolls Royce.. than, say, Vedanta.

Ah that old chestnut, the take over market!
Why don't we just nationalise (without compensation) all the big companies that are required for our National survival?
Let's start with power and water, transport (rail, air and bus), nuclear, banks, oil.
That would stop, at a stroke, the takeover industry (if they thought that they might lose money).
The Public sector should own outright any service that is vital to the National interest. Basically, reverse all the sell-offs which that nice Mrs Thatcher forced through (for her own reasons).
I fear Mr Cable will not be able to propose a solution which would work since we are talking about greed.

#50. At 4:20pm on 06 Jul 2010, writingsonthewall wrote:

"How long before VC realises this and quits I wonder?"

Not long.

You could just avoid the "ghastly cliché", Robert, and say "the tide has turned". Also a cliché, but not quite so ghastly.

Live coverage of the debate on regulating bankers bonuses and pay of banking directors
https://news.bbc.co.uk/democracylive/hi/europe/newsid_8167000/8167452.stm

Takeovers are just one way that some of the hangers on get to make their living.
Generally they snuff out the hard work done by many over the years.

What you have to ask yourself is what will the myriads of lawyers, financiers, human resource specialist etc do if one of their major activities is closed down.

It plain wont happen.
VC is being allowed to posture.
It suits the Tories.

@25 Jacques Cartier wrote "...Nobody under 45 listens to “press barons”!"

This may be true but how many of those making the decisions are under 45? Social media may well be causing all sorts of changes but the effects will not be felt immediately.

And I am sure that old Rupe would describe himself as a multi media mogul - what's the age range for them?

I think the Kraft-Cadbury deal well and truly debunked the myth that badly-run companies are taken over by better-run ones. In that instance almost the exact opposite was the truth, a few PR faux pas regarding salmonella notwithstanding.

So, in answer to Robert's last point, I do feel, very strongly, that active shareholders are infinitely more likely to keep management honest than the threat of a takeover. Where is the threat, when there are bound to be sweeteners for the existing management to help the deal go through?!

65. At 6:24pm on 06 Jul 2010, splendidhashbrowns

I always wonder what Chruchill would make of private water companies.

Someone once said (and I forget ho) that the problem with our form of capitalism is the concept of "Limited Liability" - not Limited Liability as applied to equity based companies but Personal Limited Liability where individuals can take extreme risks with potentially unlimited up-side knowing full well that the most they can lose is their jobs.

For the vast majority of people this isn’t much of an issue because the opportunities to "shoot for the moon" rarely if ever occur and, even if they did, would not be taken because the consequences of losing employment is potentially devastating.

However for some people - those with a few million in liquid assets and a significant income stream separate from their actual employment - losing their job isn’t an issue as long as "limited liability"c protects everything else they have.

For example, see the recent Prudential / AIG (AIA) fiasco - that cost the Prudential shareholders in the region of £1B for something they didn’t ask for and did not support. The Pru's CEO keeps his job for the moment but even if he was sacked he would be wealthy enough (share options, severance pay etc) to live in luxury for the rest of his life without doing a stroke.

If the deal had been successful he would have tripled the size of his empire (with all the benefits that come with CEO of a global corporation)

So where was the downside for him? Nowhere I can see because the liabilities all fall elsewhere - namely employees and shareholders and the welfare state.

There are dozens of examples of this in the last couple of years alone (Lloyds / HBOS being another particularly contentious one).

I don't expect that limited liability will be rescinded anytime soon but if it was then I'd bet a lot of these takeovers wouldn't have happened if the drivers of the takeovers (including their advisors and consultants) were personally liable in the 2 out of 3 cases where is goes wrong.

Also, much of the investment banking c**p wouldn’t have happened either if the traders (not their employers) had been personally liable for "erroneous" advice and trading bad investments.

In the absence of that anything that makes predatory companies (or their egotistical management) have to analyse the disadvantages as well as the advantages of a merger and publicly discuss them with ALL their stakeholders (not just the ones with money in the pot) then we'll have taken a shuffling step forward

Shareholdings of the big companies and takeover targets are owned mainly by the institutions or pension funds. They will do whatever it takes to improve shareholder value and get a good lunch. In that respect they are no better than the empire building management. Private shareholding should be encouraged by companies; it makes them less vulnerable to a takeover but AGMs can be uncomfortable.
Never mind regulation, it doesn't work. The merger fees by the OFT should be 1% of the value of the company being taken over. It's the management's job to make the case, and the OFT should have a wide remit to stop the takeover unless benefit of the merger for the shareholders can be clearly demonstrated. The fee would be payable whether or not the takeover goes ahead.
The problem with mergers is that the takover company has no real idea of the business it is taking over, eg Lloyds, and the enlarged company dissipates management effort which is why the failure of the Pru takeover was good for the Pru.

36. At 1:47pm on 06 Jul 2010, BobRocket wrote:
Does that mean that they will or won't be selling off the Royal Mail or HS1

+++++++++++++++++++

Erm? Isn't there a bijou problemette with the PENSION FUND???

RP: ' Takeover Market'
#######################




Is this a euphemism for ' Leveraged Buyouts'??

37. At 2:03pm on 06 Jul 2010, writingsonthewall wrote:
It seems that I am not the only one who can see this coming - I mean even "the city" has woken up to the fact that they have caused extreme damage with their greed and that the people who have been 'skimmed' for the past decade might be a little peterbed.

It is all going to be terribly OK because they've got friends to help them out of a jam - the G20 has refused to tax the trades and deals etc. And if Justin150 is right, then this is a superb show at doing nothing and not worth bothering about. Vince looked like he had strong legs, now he's looking like he has the legs of a cheap catalogue put-together-yourself coffee table.

This is where knowing even just a little history can help you see the future.
https://www.youtube.com/watch?v=nNOV_W6UnbE

Vince should quit immediately. If he is left wing enough to want to further regulate the takeover business, which is already over-regulated, he should join the Labour party where he can love it up with the other wreckers of enterprise.

60. At 5:34pm on 06 Jul 2010, Jacques Cartier wrote:

There's even a concerted effort by the spivs to get "back to normal". Some of the pariahs have even been snooping around here, trying to find a way to fit back in. They are like a bad smell - you just can't get rid of them.

Some smells take special agents to get rid off.

No imagination have they! No creativity have they! If they did they could perhaps look for new careers in Detroits - as the Friday night entertainment around the camp fire playing clowns.

66. At 6:37pm on 06 Jul 2010, NorthSeaHalibut wrote:
#50. At 4:20pm on 06 Jul 2010, writingsonthewall wrote:

"How long before VC realises this and quits I wonder?"

Not long

Seconded.

After everything that has happened it is just amazing that economists have the nerve to keep using the term "free markets." We have something called private enterprise that is susidized and shored up by public funds directly and infrastructure and tax breaks. The private sector has tax advantages, investment incentives (other tax breaks) infrastructure from public funds, and political allies who will pass laws and regulations to the disadvantage of legitimate competitors. Economist call this the Free Market. Is this just habits from a prior and outdated education or an attempt to continue to fool the public? The one good thing is that evolution has taught that the inability to adapt is the end of a species.....so long economists.....and those companies that make paper for charts.

Corporate governance is at the heart of the question. The merrygoround of self serving boards of directors who each get chums from other boards to be their non-execs, thus guaranteeing hugely inflated remuneration packages without any attempt at oversight, let alone protection of shareholders real interests. Bonuses for failure, and obscenely expensive severance packages, when the scope of an individuals failure, can no longer be ignored.

Worse still, institutional shareholders (insurers etc) mirror all the worst aspects of the union block vote in the Labour party of the 1970's and 80's - wherein a few get to decide on behalf of the many (ie - yours and my pension fund, etc), but with no real attempt to reflect their views or needs. Drastic reform of corporate governance & remuneration that involves the real stakeholders and not the chairman or the CEO's chums is what is needed to focus minds, and eliminate poor management.

Tinkering with the rules of the takeover panel is but a sideshow.

Instead of constantly complaining about the corporate world why don't you hit them where it hurts by selling all your shares, boycotting their products and refusing to go into debt?

People often talk about over-regulation when in fact the issue is that most regulation is so weak there is a process of trying to make it meaningful in some way and accordingly it is changed and minimized at each turn. So they deal with the mundane because they can never pass what is really needed in some simple and understandable language. This is partly because the industries want to be able to call the language un-understandable and the regulators can look the other way when they shouldn't and be able to justify inaction and the lawmakers are called upon once again to make a new law that will follow the same process and the bureaucrats can continue to schedule meetings. This is government. Industries are often the initiator of regulations as they can usually place competitors at a disadvantage through regulations and can often have language that appears to be something it is not and often to limit liability for things that they should be liable for. Modern governments is basically a toilet that will not flush.

84 - Ghostof - I do not understand your post - are you calling for more regulation (which you admit benefits larger companies at the expense of their competitors) or less?

72. At 7:49pm on 06 Jul 2010, copperDolomite wrote:
'I always wonder what Chruchill would make of private water companies'

I don't know what he would have thought, but I think:
The very essential of our existence sold off.
Never agreed with it, never will.

65. At 6:24pm on 06 Jul 2010, splendidhashbrowns wrote:
'Why don't we just nationalise (without compensation) all the big companies that are required for our National survival?

You only need to do one industry if the truth be told, 'Banks'.
Control the creation of money as debt and you've pretty much got the rest.

83. At 9:57pm on 06 Jul 2010, truths33k3r wrote:
"Instead of constantly complaining about the corporate world why don't you hit them where it hurts by selling all your shares, boycotting their products and refusing to go into debt?"

Can't speak for anyone else but it's the extremes of the "corporate world" that I have a problem with not the corporate world per se.

There are many very well run companies out there that are well run and socially responsible and I'm all in favour of the millions of small & medium enterprises that have owner-managers intent on building something for themselves and not being a burden on anyone else. (I've done that twice - one success and one failure but both were fun).

But at the extremes of corporate capitalism we see behaviour that only a completely self-centred egomaniac could possibly think is for the overall benefit of this nation.

I just can't see why you would have a problem with people complaining about those extremes and discussing how they think things could be improved - that is how intelligent people improve things over time.

It's either that or we have a revolution - certainly withdrawing to a mountain top and living on berries and bugs (the logical consequence of boycotting everything) never solved any problem ever.

Though in answer to your points (1) " selling all your shares" - I'm very selective about investments the ones I have are OK I think (2) " boycotting their products" - doing that (3) " refusing to go into debt" - done that.

Nothing seems to have changed though so I think I'll carry on complaining and see if that works out.

truths33k3r @ 83

Your suggestion only works if, foe example, buying a pension didn't involve buying annuities from insurance companies etc and all that that entails.

Capital markets have been corrupted into becoming little more than casinos, whereas their stated, and original intention, was to provide opportunities for company growth, and as a byproduct, wider ownership. The balance needs to be tilted back towards serving shareholders, not corporate gamblers.

It's not helpful to imagine that the corpate world is somehow separate from the rest of us, and thus its activities do not affect us. The whole world of business is inextricably interwoven into our lives. Suggesting selling shares (which I suspect few own) or boycotting products - especially when it is so unclear who actuallly own who in the corporate world - would not achieve anything.

86. At 10:16pm on 06 Jul 2010, Dempster wrote:
I don't know what he would have thought, but I think:
The very essential of our existence sold off.
Never agreed with it, never will.

If they sold it off here I think a lot of people would have been buying rainwater tanks and collecting whatever rolls off our brollies! It would be like trying to convince Bedouins to buy sand! https://en.wikipedia.org/wiki/Rainwater_tank

truths:

It is apparent that regulation did not protect people from the banking crisis. The banks were made whole and individuals lost retirement accounts and no one was punished in the banking world. Regulation are written by lobbyist and no one represents the people. The political system needs to be fixed or regulation doesn't matter. The consolidation of wealth always leads to abuse. The answer is in accountability, personal accountability. The ruling class has re-established itself and I await refrom in whatever from that may take. History says it will be revolution as power is never given up willingly. As the West squanders its advantage and kills the middle class the East waits patiently to take leadership. Europe will be making things for the Asian rising middle class in the near future. History will record it all started with this great banking swindle and the transfer of wealth upward and the politicians that allowed it all to happen. Actually the people allowed it to happen and failed to hold the banks and governments accountable..

91. At 02:56am on 07 Jul 2010, ghostofsichuan

Kinda agree with you.

Laws don't stop people from driving too fast. But when they are enforced that enforcement makes a big difference to the number of people who will break those laws.

What happens when you get caught drink-driving?
What happens when someone has their life taken from them as a result of another person drink driving?

We have plenty of laws directed at the public. How many directed at the corporate world to control their behaviour?

Our laws don't stop crimes, but how many of us are daft enough to think we can get away with it, and callous enough to argue that the innocent person shouldn't have been sharing the road or on the pavement when the drunk behind the wheel arrived?

As for the public failing to hold the banks and governments to account, for a large part that is true.

Unions are held in contempt by those too young too often without any understanding of history.

Too many of us have no grasp of politics or how to treat the media. I work with a lot of bright people who are used to searching for data, for facts and who dedicate their lives to learning. Too many people I know seem to think that is a weird thing to do and seem to behave as though all learning ends the moment they leave the education system although I've known school teachers to complain about not being able to use computers because they haven't been sent on a course. Generally I admire school teachers and take this as an example of the lack of initiative, of interest in anything, in an unwillingness to explore the world unless someone else makes people do it rather than an attribute of teachers per se.

It isn't just here. The GOP loves to accuse people of being elitist (usually talking to someone who is taking note of the data and asking sensible questions) in the US rather than debating the issue, looking at the evidence etc. So we have ordinary people complaining about the elitist guy with the books and not noticing what the rich 'elite' bunch are getting up to as they rake in their bonuses and build behind-the-scenes political clout.

I blame us, the media and especially our politicians for that.

Our impovirished society, and by that I mean the inability or unwillingness to demand evidence and an appreciation for analysis of that evidence has led us to a point where we've all been robbed silly with few noticing!

I'm listening to a radio broadcast while I wait on my lift home just now. There is a silly woman talking about there being no place for anger in our society and that we must all learn to stop being angry. Nice cotton wool, world is lovely twaddle! Anger is a response to an inappropriate stimulus. Happiness is a response to an appropriate stimulus. So rob me blind and I'll be angry. If you don't like it, don't rob me! When hubby buys me a good book or takes me to the hills for the day then I'll be happy. If he didn't want to make me happy (motive?) then he wouldn't bother his backside. Excuse me while I treat the nonsense from that woman with the contempt it deserves! Wonder if that woman works for a lobby group hired by a bank and is off to Greece for the next broadcast?

Good old Vince. He's absolutely right, as usual. The takeover market is a problem area. I'm pleased he's proposing to do something. Hope it works...!

# 35 and #48

Like your thinking. Ignore (i.e. don't even bother to read once you have identified them - and they stick out like a sore thumb) the trash of the Marxist loonies on this blog and read through it to find a few gems, usually by people who say little, but mean much, rather than those who are forever posting meaningless moronic twitter that they see as quite brilliant. Why they are not running the country with their genius is beyond my comprehension. Probably too busy blogging to enter the real world. On the other hand, if they attack you, it means that your post is really good and they want to trash it before people agree with you.

As to the problem identified by # 35, it will only get bigger. The spending cuts will not make the idiots cubed at the top sort through the stable for wasteful expenditure. They are generally too lazy and incompetent for that. Instead they will axe good jobs.

To # 48 I say your post is balanced and commendable. There are good, bad, and indifferent takeover. But what is it that has destroyed manufacturing industry? A series of rapacious government with all its their actual and stealth taxes, mountains of regulations, greedy landlords and bankers, and employment benefits which make it impossible for British companies to produce at competitive prices. Comapanies are being sold off to foreigners precisely so that the company can escape British employment practices, tax and regulations. If you want to change the takeover atmosphere tackle all these problems and bring down costs so that companies want to stay in the UK.

As ever, the problem is people. The people of this country want goods and services the country cannot afford, and for which they do not wish to pay. But being a democracy these are the people who drive the political agenda. The government is therefore forced into taxation and regulatory and employment regimes that the electorate demands, and the results are catastrophic. Then when things go wrong, they blame the government.

Nothing will change in this country until the scourge of socialism is completely eradicated. In addition, employers need to learn the true value of the people they employ and reward them accordingly.

Finally, and controversially, I believe a democratically elected government will be quite incapable of sorting out Britain's troubles. Only a benevolent dictatorship (which at the same time imposes some harsh laws) has a chance of success.

'Cadbury's law' type considerations are a bit late? - Horse ... stable door ... bolted.

94. At 07:07am on 07 Jul 2010, newProtectorCromwell wrote:

Finally, and controversially, I believe a democratically elected government will be quite incapable of sorting out Britain's troubles. Only a benevolent dictatorship (which at the same time imposes some harsh laws) has a chance of success.

========================================================================

Aaaah! The voice of reason! And who is this dictator going to be benevolent towards, Oliver old chap? I'm sort of guessing you, yours, and all your chums. Tough luck for the rest of us.

I also wonder about people who post long diatribes against others who post long diatribes, on the basis that the others should be doing something better with their time, like running the country as benevolent dictators, possibly. Bizarre.

73 has hit the nail on the head: Those with great power have little personal consequences for their actions.

As a small SME, limited liability is nonsense, as most of us have a business loan, which is secured on our houses, and the tax man shows no mercy.

At the larger corporate level, this is all protected from the decision makers. Address this, and suddenly, we'll have slow, but regular growth, accutely aware corporates, who really do put the customer first.

Re VC, be careful about wishing him gone. If you believe in a fraction of his approach, please support him. If he leaves, can you name anybody else who has an ounce of care for the effects of corporates on society?

I'm sure Government dilutes ideas ( yes minister?) but any movement in teh right direction is a good movement.

"A small step to sensible intervention and shame on the last Labour government for being more Thatcherite than Thatcher that saw manufacturing diminish so markedly in the last 13 years."

One thing I want to know is why so many people are obsessed with keeping the crap jobs in this country? Surely the interest of the government should be attracting good, high paid jobs and ensuring the populace is well trained and able to take them, rather than minimum wage drones nursing machinery. Come on, move on past the 19th century when heavy industry was the cutting edge of technology.

A good idea from St Vince at last!

Its a shame the Coalition will not address the real issue that you rightly highlight - lazy overcompensated management. Legislation limiting salaries and non performance related benefits to 20 x the lowest paid employee would change that but be very hard to monitor unless the onus of proof was put on the recipient not the inland revenue.

It might encourage more managers to leave the safety blanket of big companies and set up their own small businesses which is what we badly need to improve society and our economy

@ 88. At 10:49pm on 06 Jul 2010, AgeTheGod wrote:

> Can't speak for anyone else but it's the extremes of the "corporate world"
> that I have a problem with not the corporate world per se.

I certainly agree with that. But people working with money (politicians, economists, accountants, bankers, business spivs) are simple. If we have problems with the extremes of any system, reactive and predictive regulation is the way to fix it.

How else could we keep business working hard for us? Left to their own devices, they'd just fill their own pockets and cause chaos.