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You can find the current article at its original source at https://www.theguardian.com/business/nils-pratley-on-finance/2018/sep/26/big-business-should-look-in-mirror-before-damning-labour-plans
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| Big business should look in mirror before damning Labour plans | Big business should look in mirror before damning Labour plans |
| (2 months later) | |
| Lack of business experience in the Labour party too often “fuels ideas that are appealing on paper or conference platforms but unworkable in reality”, said Carolyn Fairbairn, director-general of the CBI, after hearing Jeremy Corbyn’s conference speech in Liverpool. | Lack of business experience in the Labour party too often “fuels ideas that are appealing on paper or conference platforms but unworkable in reality”, said Carolyn Fairbairn, director-general of the CBI, after hearing Jeremy Corbyn’s conference speech in Liverpool. |
| She has a point, of course. Exhibit A this week would be the plan to make large companies give 10% of their shares to workers, as unveiled by the shadow chancellor, John McDonnell. The flaws are obvious. If you are going to cap employees’ dividends on those shares at only £500 a year and allow the Treasury to bag the rest of the proceeds, the big idea is a really a big tax-raising measure, as financial projections demonstrate. | She has a point, of course. Exhibit A this week would be the plan to make large companies give 10% of their shares to workers, as unveiled by the shadow chancellor, John McDonnell. The flaws are obvious. If you are going to cap employees’ dividends on those shares at only £500 a year and allow the Treasury to bag the rest of the proceeds, the big idea is a really a big tax-raising measure, as financial projections demonstrate. |
| UK pension funds would be also be heavy losers if their investments were diluted by a tenth. And companies might just try to flatten wages. | UK pension funds would be also be heavy losers if their investments were diluted by a tenth. And companies might just try to flatten wages. |
| So, yes, more business experience might have produced a better designed plan, especially as most large quoted companies run employee share schemes already, as Fairbairn noted. | So, yes, more business experience might have produced a better designed plan, especially as most large quoted companies run employee share schemes already, as Fairbairn noted. |
| Where is the outrage over boardroom pay excesses? | Where is the outrage over boardroom pay excesses? |
| But Fairbairn and the CBI, before they accuse Labour of having a tin ear, should examine their own record and consider why trust in business has fallen so sharply. Where is the aggressive business-led campaign to shame corporate tax avoiders into paying their fair share? Where is the outrage over boardroom pay excesses? | But Fairbairn and the CBI, before they accuse Labour of having a tin ear, should examine their own record and consider why trust in business has fallen so sharply. Where is the aggressive business-led campaign to shame corporate tax avoiders into paying their fair share? Where is the outrage over boardroom pay excesses? |
| It is possible to hear CBI folk give virtuous speeches on these subjects – but usually only in vague terms. “We’ve got much more to do on trust, on transparency and on gender pay,” the then president Paul Drechsler said in May. But then you get absurdly defensive statements from the CBI such as the one that followed the damning report by two cross-party committees into the collapse of Carillion. | It is possible to hear CBI folk give virtuous speeches on these subjects – but usually only in vague terms. “We’ve got much more to do on trust, on transparency and on gender pay,” the then president Paul Drechsler said in May. But then you get absurdly defensive statements from the CBI such as the one that followed the damning report by two cross-party committees into the collapse of Carillion. |
| “The language of the report suggests committee members think business in general is greedy and reckless,” opined the CBI, which was a complete mis-reading of what was said. MPs had stated: “Most companies are not run with Carillion’s reckless short-termism.” | “The language of the report suggests committee members think business in general is greedy and reckless,” opined the CBI, which was a complete mis-reading of what was said. MPs had stated: “Most companies are not run with Carillion’s reckless short-termism.” |
| The CBI has subsequently tried to sound angry about Carillion but, really, if the first reaction on reading a 100-page evidence-based report into a collapse of a major outsourcer is to see an attack on business in its entirety, one wonders whether minds are truly open. | The CBI has subsequently tried to sound angry about Carillion but, really, if the first reaction on reading a 100-page evidence-based report into a collapse of a major outsourcer is to see an attack on business in its entirety, one wonders whether minds are truly open. |
| Or try a subject that Corbyn didn’t mention yesterday but could have done – the big auditors. A debate currently rages about whether the Big Four auditors should be broken up to address conflicts of interests, declining standards and scandals that extend further back than Carillion. What’s the CBI’s take? The audit profession “must continue to evolve”, it says, which is meaningless. You do not have to be a cynic to suspect the CBI’s reticence may be connected to the fact that all four big auditors are among its leading members. | Or try a subject that Corbyn didn’t mention yesterday but could have done – the big auditors. A debate currently rages about whether the Big Four auditors should be broken up to address conflicts of interests, declining standards and scandals that extend further back than Carillion. What’s the CBI’s take? The audit profession “must continue to evolve”, it says, which is meaningless. You do not have to be a cynic to suspect the CBI’s reticence may be connected to the fact that all four big auditors are among its leading members. |
| As with Labour, we’d be surprised if the CBI didn’t look out for its members’ interests. But there’s a wider point here, and Jim O’Neill, the former Goldman Sachs executive cited by Corbyn, made it well when he referenced lack of awareness, or indifference, in boardrooms. “Chief executives need to realise that rising profits are, at some point, supposed to make markets more competitive and [deliver] greater benefits for employees,” he wrote in the FT. | As with Labour, we’d be surprised if the CBI didn’t look out for its members’ interests. But there’s a wider point here, and Jim O’Neill, the former Goldman Sachs executive cited by Corbyn, made it well when he referenced lack of awareness, or indifference, in boardrooms. “Chief executives need to realise that rising profits are, at some point, supposed to make markets more competitive and [deliver] greater benefits for employees,” he wrote in the FT. |
| That’s a fair analysis. There is more lip service to inclusive capitalism than actual delivery. Big business, if it really wants to build on “common ground” with Labour, as Fairbairn suggests, could also usefully remove a few blinkers itself. Outsiders’ frustration has not arisen out of thin air. | That’s a fair analysis. There is more lip service to inclusive capitalism than actual delivery. Big business, if it really wants to build on “common ground” with Labour, as Fairbairn suggests, could also usefully remove a few blinkers itself. Outsiders’ frustration has not arisen out of thin air. |
| Surrender is the right choice for Murdoch | Surrender is the right choice for Murdoch |
| Sky was possibly Rupert Murdoch’s most daring business investment and it’s the asset, he once said, he’d be saddest to see go. But the sale of the 39% stake to Comcast will happen. In practice, Disney, which is set to inherit 21st Century Fox’s holding in the UK broadcaster, was probably the prime mover in the decision to sell. But, whoever had the final say, surrender is the right cool-headed choice. | Sky was possibly Rupert Murdoch’s most daring business investment and it’s the asset, he once said, he’d be saddest to see go. But the sale of the 39% stake to Comcast will happen. In practice, Disney, which is set to inherit 21st Century Fox’s holding in the UK broadcaster, was probably the prime mover in the decision to sell. But, whoever had the final say, surrender is the right cool-headed choice. |
| First, Comcast is paying a pretty price for Sky, as the damage to its own share price suggests. The takeover price of £17.28 a share is way beyond expectations, even after Comcast turned up as a rival bidder to Fox. Second, companies generally hate being minority investors. Continuing to hold the 39% would have irritated Comcast but the business rationale was thin. | First, Comcast is paying a pretty price for Sky, as the damage to its own share price suggests. The takeover price of £17.28 a share is way beyond expectations, even after Comcast turned up as a rival bidder to Fox. Second, companies generally hate being minority investors. Continuing to hold the 39% would have irritated Comcast but the business rationale was thin. |
| Third, Disney could use the £12bn proceeds from flogging the shares. It is in the process of buying the bulk of Murdoch’s US empire for $71bn and needs cash to keep debt under control and to invest. Common sense has prevailed, as always seemed likely. | Third, Disney could use the £12bn proceeds from flogging the shares. It is in the process of buying the bulk of Murdoch’s US empire for $71bn and needs cash to keep debt under control and to invest. Common sense has prevailed, as always seemed likely. |
| Confederation of British Industry (CBI) | Confederation of British Industry (CBI) |
| Nils Pratley on finance | Nils Pratley on finance |
| Labour | Labour |
| Sky plc (Business) | Sky plc (Business) |
| Sky plc (Media) | Sky plc (Media) |
| Rupert Murdoch | Rupert Murdoch |
| Jeremy Corbyn | Jeremy Corbyn |
| Labour conference | Labour conference |
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