Corporate governance again

Is not the problem that company law enshrines the primacy of the shareholder? Directors, whilst having regard to their stakeholders, have to put their owners first. 

As well as escalating dividends, this is manifest in share buybacks, using money that should have been invested in the business. Markets demand this as shown in comparative market ratings. It is also shown in the number of companies sold to overseas owners.

We may recall that Theresa May promised Company law

reform following her appointment as Prime Minister; nothing came of this. 

If Labour is serious about rebalancing the economy, Company law needs a radical overhaul to embrace all stakeholders, something that will demand the Wisdom of Solomon but also an eye to the practice in other countries.  

The role of private equity highlights the problem with so much of public life hidden from effective governance. 

Executive pay is demonstrably far too high as your leader and two previous articles rightly point out.

It seems that the coterie of senior executives and their counterparts in their large shareholders are some sort of mutual benefit society. However, what they are doing is not only legal it is almost encouraged by a company law that is wedded to the primacy of the shareholder. If you scratch my back…

Absurd levels of executive pay are bad enough, the primacy has for me an equally damaging impact: senior executives and shareholders all too often sell out to the highest bidder, leaving jobs at risk and the nation’s manufacturing sector denuded.

Theresa May said she was going to address this fundamental flaw and bring in wider responsibilities to all stakeholders. I hope that this government may at last take action.  

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 I write blogs on the subjects covered by my books: Military, Manufacturing, Biography. This blog is different and varied.  

My happy place - The British Library

I adore Shakespeare and so write of productions I have seen.

I am fed up with politics, but remain addicted

Some years ago I had a proper passion as chair of trustees at the Lincoln Arts Trust which ran the wonderful Drill Hall.

I love books and for some years chaired the Lincoln Book Festival. I offer occasional blogs on books I am reading. 

I hope you enjoy.

A wealth tax

 I have written elsewhere about the growing divide between the rich and everyone else. This wealth is substantially in the form of land and buildings which causes a problem since the payment of tax demands liquidity. That is a problem to be overcome.

I have written about the negative impact of wealth concentrated in the hands of the few and have suggested how such concentration may have happened. 

Recent debate about youth unemployment has prompted me to stand back from my research into the history of manufacturing and to see both how employment levels have varied and how the comparative shares of profit between capital and labour have shifted. 

AI brings another player on stage. How will that share be rewarded and how taxed? 

Youth Unemployment

Alan Milburn has published the first part of his report on Youth Unemployment. 

The Guardian ends its leader on target when it says say ‘there needs to be work’. What is the point in training for jobs that don’t exist?

I have spent the last five years exploring the story of British manufacturing witnessing from afar how more and more people were drawn into the business of making things. I have noted that there were years where jobs were good and reasonably paid. I have then seen jobs disappearing. 

Yes, some went overseas, but others went because the job was done. We had everything we needed; marketeers then worked at persuading us we needed more.  Or we can think of much of our infrastructure, the job was done we have a national grid. We now see that that that work needs doing again. 

Mechanisation did replace people, but if demand grew those people found work. Demand for many things is if anything shrinking. 

So what can young people do?

We need more houses and they need to be built by people. AI can’t do plumbing. The existing housing stock needs upgrading and insulating and this definitely needs people.

The care sector is growing and demand is not being met. The same is true within the NHS. These are people-facing jobs where AI won’t work.

People talk of fast growing tech businesses and it is true that these need people, but not that many and those needed require high qualifications. 

It may be true that ultimately it will be the few which drive the economy. When that becomes the case, people, not just young people, still need work. There are always jobs to be done and payment can be achieve by a universal basic income. 

Government needs to acknowledge that, as manufacturing employment reduced, manufacturing activity didn’t and it was capital which benefitted. So there is a tax dimension too.

I have seven grandchildren and I want them and their peers to have fulfilling lives.

The Good Man Jesus and the Scoundrel Christ - Philip Pullman

 This book is both disturbing and rewarding. Whilst Pullman emphasises that it is a story, it does follow, in a great many respects, the story of Jesus as told in the Gospels.

There is a jarring early on as the Annunciation is replaced by a rather equivocal scene with Mary and an angel in the guise of a young man. The result is twins and this provides the machinery of the plot. The elder, Jesus, is a good man who does not claim to be God. His younger and weaker twin brother, named Christ, has no such scruples. Jesus is passionate about calling all to repentance for the Kingdom of God is very close at hand. Christ is altogether more circumspect.

There is real pleasure in coming across stories from the Gospels told so refreshingly and well. That of the Prodigal Son would come first on my list. But there are then those stories, which although based on the Gospel account, deviate in some material way. This can both upset and let the hackles rise, until the note on the back cover is recalled: This is a Story. It is a story and, for a story to work, particular actions and motivations must be present. On a second reading and on reflection these deviations begin to shed light. Some are precious Gospel stories and so the deviations also jar deeply.

Peter’s confession at Caesarea Phillippi is met by a furious denial by Jesus, but, in the context of this story, this is in character. The Feeding of the Five Thousand in this story is about sharing. The parable of the wise and foolish virgins is given an intriguingly different twist. With others the precious elements are missing. The journey to Emmaus has none of the burning in the disciples’ hearts as the scriptures are revealed; Jesus is not recognised as he breaks bread. There is no Last Supper and so no washing of Peter’s feet. The Eucharist is introduced after the resurrection and then misunderstood.

For all the jarring, I found myself drawn yet more closely to Jesus of Nazareth and his goodness and honesty. Pullman has created vivid depiction of the man, even if many Christians would dispute his theology.

JD Vance and the European leaders

Everyone, apart from Putin and Trump, is reeling from the comments the American Vice-President chose to make to the assembled European leaders. Much of what he said was right wing hubris designed to rile. 

I suggest there are three areas where serious attention is merited. 

The unheard. Over the past five years I have been studying the decline of British manufacturing and I know this decline is mirrored elsewhere. I have seen that by and large attempts at rebuilding employment have failed. These industrial towns were proud, prosperous places; they have been forgotten and it is hardly surprising that those living there are angry. They need to be heard.  

Immigration. War and climate change are displacing millions of people and hardly surprisingly some head for safer and more prosperous places. This cannot be ignored, but the answer is not fences and cruelty.   

Defence. America is fed up with defending Europe. Perhaps they are justified in saying Europe must step up to the mark.

All of this will hurt, but I suggest it can’t be ignored. 

The wealth divide, the damage it causes and how it came about

'The poor will always be with us.' So says Jesus in the new testament gospels. Whilst surely true, the gap between the rich and the poor just gets bigger. A couple of recent newspaper articles explore this.

Apart from basic fairness, wealth that is not spread about is bad for the economy. If wealth is spread, everyone has more and so can spend it on goods and services to the benefit of all. Wealth in the hands of the wealthy is often ‘invested’ in non productive assets like residential property often left unoccupied. Investment in farm land became unproductive when the price of land rose so far above its economic value. This happened because individuals and companies could rollover capital gains into assets that would also qualify for agricultural property relief for Inheritance Tax. In past generations wealth was invested in new industrial plant or the privately owned transport infrastructure : the railways and canals. This led to the multiplier effect much loved by teachers of economics in times of gone by.In the course of my lifetime, beginning when the Second World War was still fresh in people's minds, I have seen the gap first almost shrink in the fifties and sixties, but then open up and in recent years accelerate alarmingly.

In Britain there has always been a gap - the rich man in his castle, the poor man at his gate. Land was key. With the growth of trade and then industrialisation different people grew rich. The traders, and this includes slave traders, and those who served them. Then the factory owners, the canal and railway entrepreneurs but especially the financiers, the bankers. All the time, those working in mills, factories and mines and the many thousands working from their dwellings became only slightly less poor when the economy boomed but destitute in slumps. The Factory Acts and the trades unions slowly improved conditions. Equally British manufacturing and trading companies enjoyed a strong market position really until the start of the First World War.

There were dark clouds on the horizon. In Germany, Krupp and other industrialists were creating a vast war machine. In the USA, the benefit of a large home market was reaping rewards in establishing an electrical industry which was all too happy to supply the former imperial power. Westinghouse set up in Manchester and British Thomson-Houston in Rugby.

In addition to the cost of many thousands of lives, the war drained the nation's coffers as it, and Empire nations, provided the astonishing quantity of arms and ammunition used on an industrial scale by the Allied nations. The same would have applied in Germany. Yet, the production of war materiel maintained employment in the waring nations and importantly for them in the USA.

In the UK, jobs had already been lost in textiles as the nation's near monopoly position slipped away. Similarly in the other old staples jobs were lost in iron and steel and shipbuilding as developing nations took up the baton. The USA already had a strong steel and shipbuilding industry which had prospered from the demands made on it during the war. Germany began to rebuild itself under the 3rd Reich. Jobs lost in the northern British towns, despite some government initiatives, were seldom replaced and these once prosperous urban areas became deserts of unemployment.

Newer industries prospered: motor vehicles, electronics, chemicals and consumer products. These industries also prospered in competitor nations. Britain had lost its lead.

The Wall Street crash triggering the Great Depression was devastating for workers on both sides of the Atlantic. Winners took advantage of their strength and position. Those who avoided the crash did well.

Preparations for a Second World War brought back employment to old and new industries alike. The aircraft industry, which had been in an hiatus after bursting onto the scene in the First World War, was busy again developing new aircraft.

When war came, once again the nation was busy, but once again the coffers were further drained. America provided arms and much more, at a price.

War left Britain exhausted yet it had to find the energy for an export drive in order to pay its way. Hard work created the nation that had never had it so good, but its wasn't everyone.

The fifites and sixties saw a move away from steam powered railways and the Clean Air Acts, both of which reduced the demand for coal. Mines shut with corresponding unemployment. The steel industry grew until the sixties, but then foreign competition triggered its decline. Shipbuilding suffered in much the same way. The aircraft industry, with the notable exception of Rolls-Royce, simply couldn't compete with the American giants. 

The indigenous motor industry gave way to foreign ownership. The TV and Radio industry followed suite. The coming of North Sea Oil raised the exchange rate making exports more expensive and imports cheaper; manufacturing declined. Jobs were lost with some replaced in the low pay service sector. Coalminers and steel workers had been the aristocracy in their communities, not so warehouse, call centre or delivery workers.

Computerisation hit middle management and clerical employment.

The Thatcher revolution was predicated on inequality with rewards for hard working and ability. The reality turned out to be rather different. The Financial sector became to be seen as the saviour of the economy. Banks grew alarmingly. Deregulation led to ever more risky products and reward that was disconnected from risk. Banks allowed people to borrow beyond their ability to repay and house prices rocketed. A small number of people became very rich. The argument was put forward that this wealth would trickle down.

In 2008 the banks crashed leaving savers with losses, businesses without borrowing facilities and bankers unscathed. A number of banks merged to become even bigger. The Bank of England pumped money into the economy under the label of 'quantitative easing'. This money found its way into yet higher property prices. Austerity that followed bled the public sector, losing jobs and depleting services.

The decision to leave the EU, in effect our large home market, cost a fall in growth which in turn has resulted in lost jobs or the lack of new jobs.

Covid came as very near the last straw.

The economy and indeed the fabric of the nation is now in desperate need for repair. A parallel comes to mind of that which faced the Attlee government in 1945. Yet, as then, there are grounds for hope. We are a talented nation. There are huge challenges, not least the appetite of the UK capital markets for investment. Will Hutton has much of interest to add in his book This Time No Mistakes.

The question remains of whether growing the economy can benefit all. Aditya Chakrabortty raises questions but offers no answers. This is a complex subject and so that is hardly surprising. just to add a further layer of complexity, here is a piece exploring an alternative world view.