Trees, beware yet another fat report is on its way from your company
Good news for papermakers, security printers and the Post Office: companies' annual reports and accounts are all set to grow fatter still. Their bulk has already trebled in a decade or so. They have to accommodate the remuneration committee's report, which describes the elaborate rewards that get the executive directors out of bed and into work, and the report on corporate social responsibility, which shows how the company fosters diversity, behaves like a good neighbour and is nice to trees. Now a new report is on its way to join them: the Operating and Financial Review. It derives from a European directive (no surprises there, then) warmly taken up by the Department of Trade and Industry (still no surprises). Consultation, for what it is worth, ends this week. Next year every company quoted on the Stock Exchange will have to publish one of these reviews, which will explain what it is trying to do and how it plans to do it. The chairman's statement would normally answer these questions, or try to, but he had better keep an eye on the review as well, because recklessly approving one of these reviews will be a criminal offence and carry unlimited fines. All this comes with the pious hope that if companies are better understood, they will be better behaved, and that this new understanding will help the financial markets to put capital where it is needed. Analysts allow themselves to hope so, though they suggest that directors will have to be given some kind of indemnity for candour. Failing that, they will pad their reviews out with waffle and top them up with good wishes to trees.
Outbursts of candour
Candid reviews would make good reading: 'Your board's first concern will be to puff up the share price, at least until the directors have time to cash in on their options.' We are clearing out the rubbish that our predecessors bought, and have taken the loss below the line, where we hope that the shareholders won't notice it.' Your company is now so lowly valued that the directors can afford to take it private.' Egg was a silly name for a bank, anyhow.' Even candour may not be a safeguard. Marconi's directors were perfectly candid. They explained what they were trying to do and then made a pig's ear of it. The winner from the DTI's latest fad will be the compliance industry, as usual, and the loser will be the Stock Exchange, as more and more companies rely on private capital and avoid the rigmarole that a listing now brings on them. 'If we had shareholders,' an old hand once explained to me, 'they would want to know why we do things the way we do — and we don't know.'
What's Watts
I seem to have missed Walking the Talk, which was written by (or at least ghosted for) three multinational boardroom grandees and published by the World Business Council for Sustainable Development. Its authors are all for corporate social responsibility — the good behaviour which, so they argue, gives business its licence to operate. This has set them at odds with Professor David Henderson, who argues in The Role of Business in the Modem World (Institute of Economic Affairs, £12.50) that it should get on with its job. which is bringing prosperity. From this counterblast, I note that Walking the Talk's co-author is Sir Philip Watts. Yes, that's right: the chairman who got shooed out of the building when it became clear that Shell's reserves had been serially overstated. Moral: the numbers are what matter. If they mislead, all the other reports and reviews are at best a distraction, and at worst (just think of all that paper) a cause of unnecessary suffering to trees.
Amazing, Abbey
The best address in Baker Street, 221b, was for a long time the home of a medical man and a private investigator, who retired (or said he did) to Sussex to keep bees. Then a building society moved in, but looked after his post and took messages for him. Then the kindly society developed new ideas and decided that 221b was too small for it and moved to a steel and glass tower with the name 'Abbey' in lights. To show how streamlined and modern this business now was, the 'National' part of its name was discarded. We should have realised that these were bad omens. The new ideas came unstuck, the dividend was eclipsed and the share price collapsed. Now the board has recommended an underwhelming offer of shares in Banco Santander, denominated in euros. I would rather have cash and if need be would sell in the market to get it. A British counterbidder would draw in the Competition Commission, which would brood for months, wear Abbey down, or even wear Santander out. Could that be a motive? Inquiries to 2211,, marked 'Please forward'.
Winners and champions
Of all Abbey's previous suitors, the bank with the luckiest let-off was Lloyds TSB, which nerved itself to pay twice today's price but was blocked by the Commission. Maarten Van den Bergh, Lloyds' chairman, still feels nettled. What a pity, he now says, that the rules don't allow us to build up a national champion. This comes oddly from a bank with a Dutch chairman. an American chief executive, and a recent but unconsummated flirtation in Germany. This week HSBC turned in half-yearly profits which were more than three times Lloyds', so perhaps Mr Van den Bergh may come to think of his rival bank as championship material — but perhaps his model is Credit Lyonnais, the state-owned bank so fearlessly promoted as a national champion, until its ambitions turned out to cost France's taxpayers £12 billion. Championships are a by-product. Winning is what counts.
The pension raider
That rumbling noise from the Mount of Olives must be Robert Maxwell, laughing. In his time the pension funds were still worth plundering. Nowadays — or so say Lane Clark & Peacock, the actuaries — they are £172 billion in deficit. They have suffered from the attentions of another raider who has taken £40 billion out of them, starting in the good times and carrying on to this day, without so much as an ocean-going yacht to show for it. How much easier these things are, the old pirate must reflect, if you can arrange to be Chancellor.
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