AND THE CITY
The City's image
Nicholas Davenport
The appointment of a chief executive by the Stock Exchange Is a move in the right direction. He Is not only to be responsible for the management of the personnel, assets, finances and equipment of the Stock Exchange and sit on a new council's executive committee — with the chairman of the Council, and the chairmen of the standing committees — which will relieve the council of much of the routine work load. He will also, it Is said, act as spokesman for the Stock Exchange "on a variety of Matters." If this is to include Public relations, so that the chief executive becomes the man res-. Ponsible for presenting the City's Image to the public, it is a post of the greatest importance. As Sir Kenneth Keith of Hill Samuel said to a US Chamber of Commerce lunch last week, the City's present Poor image is because it is a poor communicator. It should be telling the world, he said, that it is responsible for making £600 million a Year net for the balance of Payments.
The chief executive's public relations job is to.be made easier Exchange the formation of a new Stock
txchange liaison committee comprising both members of the Stock Exchange and " leading representatives of investors and Savers" generally. I hope that this liaison committee is not to become 1-,00 stuffily institutionalised. Representatives of investors and savers" suggests official members of the life and pension nds, the trustee banks, and the unit trusts. Worthy officials they may be but do they really understand the needs and worries of the investing
ublic? Who will speak for the little man in the street? Who Will be awake to the sinister Propaganda of enemies of the SaPitalist system who want to oestroy the existing relations between savers and investors? .
What seems to me to be of first !IrlPortance for the council to bear M mind — if I may be allowed to advise them — is to see that in their public relations the Image of the City is not confused with the page of Capitalism. Certainly the ltY is the power house of the caPitalist system. It operates the capital market where the sayJigs of the people, collected a3' the life and pension funds 7.nd unit trusts, can be converted into risk investment into factories and plant
and warehouses and offices — as opposed to the non-risk social investment in 'houses, roads, hospitals, schools, sewage and other public services which are financed by government loans. Without an active, free capital market where the enterpreneur can secure risk capital for his ventures not only would the capitalist system collapse but the balance of payments would collapse — together with sterling — for the simple reason that the private enterpreneur is mainly responsible for the export trade.
So the image of the City should depend solely on whether it is seen to be performing its national economic function — the provision of a free capital market for risk-takers —'in an efficient and honest manner. That surely is what the City can fairly claim to be doing. The rules laid down by the Council of the Stock Exchange for new issues and quotations — the daily bargains—are perhaps more strict than the rules of any other Stock Exchange. The rules devised by the City panel on mergers and take-overs are also a model for fair dealing. Certainly the requirements laid down by the Council of the Stock Exchange for disclosure of information by companies before quotations on the market are allowed are far more strict than those promulgated by the Government in its Companies Acts.
I am not, of course, forgetting the market which the Stock Exchange provides in the bonds of the public authorities which finance the non-risk social investment of the nation. It is perhaps the first bond market in the world. According to the latest Stock Exchange Fact Book, which now includes the securities of the provincial and Irish markets, the bonds of public authorities and boards had a market capitalisation at the end of June of £25,710 million of which £20,399 million were British government bonds and £571 million Irish government bonds. It is good to see that between the end of March and the end of June they had appreciated in market value by 3.6 per cent. But I must once again register my protest against the Government's backward step to what it called freedom in credit control, which meant removing the government broker as the buyer of last resort in our gilt-edged market. This restricted the freedom of the market, and for a time quite demoralised it, but it is gradually getting back its confidence. Incidentally, I remain a "bull" of it for the reasons t set out in this column on October 20.
The enemies of capitalism are fond of twisting the Stock Exchange Fact Book for their own propaganda. They will say that while the worker under Phase Two was being restricted to a pay rise of £250 a year the fortunate holders of equity shares on the Stock Exchange enjoyed a rise of £1,400 million in the market value of their holdings. The figures include foreign companies as well as British. The total runs into the vast sum of £148,170 million of which £53,394 million were UK regiStered. Certainly over half "the fortunate holders" comprise the life and pension funds and unit trusts who hold the bulk savings of the people. Even including the foreign securities I note that the "fortunate holders" at June 30, 1973 had lost 9.3 per cent of their paper wealth — some £5,000 million — as compared with June 30, 1972, whereas the worker had advanced his basic pay by 16 per cent over the same period.
The inequalities of wealth which often present the " ugly face of capitalism" have nothing to do with the City's technical thermometers which measure the temperature of the capitalist economy. That is why I say the Image of the City must be kept distinct from the Image of Capitalism. The ugly face of the latter was exposed, according to Mr Heath, when
the chairman and managing direc, tor of Lonhro appeared to be getting extravagant " perks.Another incident caught the headlines recently when the chief of Fat Stock Marketing got a rise of £16,000. This was probably equivalent to £160 net of tax and arose from some profit-share agreement but it certainly looked a bad advertisement for the capitalist society. On the other hand, I have always thought that the chairmen of the publid boards receiving salaries of around £25,000 were a bad advertisement for socialism. When the; socialists propose to nationalise' the top 100 companies are they going to enlarge the inequalities of; wealth which follow on the prim-. cely salaries paid to chairmen of public boards? I have never understood why the chairmen of nationalised industries should receive more than the appropriate civil service salary grade. They are no longer running competitive profit-making risk-taking 'enterprises, although the Gas Board pretends it is by inserting absurd advertisements in the press — and any clever civil servant could do their job. If it were a risk-taking company with a turnover of £1,000 million it might be necessary to pay £25,000 a year to attract; brains for the top management. ;
The inequalities of wealth will: never be eliminated in a free; society the strong-arm trade; unionists have now advanced their ; wealth far above that of the poor ; middle class — but let no one • believe that it is due to the Stock Exchange. In the City we are now much concerned with how to prevent our portfolio wealth sinking, of which more later.
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