The John Lewis group, which owns the department stores and the Waitrose food supermarkets, had an excellent 2009 trading year with a 10% rise in profits. In consequence, every one of the workforce, even someone who joined only last week, will receive a 15% bonus, which is equivalent to eight weeks pay.
Note that the John Lewis group faces stiff competition on the high street, especially from food supermarket chains such as Tesco, Asda and Morrisons. John Lewis, the UK's favourite stores proves that mutual ownership beats the very best competition at its own game. The key ingredient is the company loyalty and dedication that mutual ownership confers. Something that the Wall-Mart owned Asda will never be able to offer, given its style of authoritarian management.
Saturday, March 13, 2010
Arthur Andersen reprise
So, the demise of auditor Arthur Andersen almost 10 years ago, amid the Enron scandal, has not taught the audit profession anything. Thanks to the 2200 page report by bankruptcy examiner Anton Valukas, we now have a definitive account of the accounting tricks the led up to the collapse of Lehman Brothers in 2008. Lehman's collapse led, in turn, to the general collapse of the world's financial system.
The Anglo connection in this mess is quite clear. No law company in the US would certify the off-books financial manipulation employed by Lehman. Lehman then turned to its London based office to find a compliant lawyer in the "light touch" regulatory environment created by New Labour. Linklaters was the London law firm that provided the legal certification for the off-books transactions. Ernst and Young then relied on this legal opinion in auditing Lehman's books. In the process Ernst earned $100 million in fees over the four year period heading up to Lehman's collapse.
The role of Lehman's board of directors in this mess provides an interesting facet into the working of corporate America. The directors have a duty of care in overseeing the financial affairs of any corporation ( see Chapter 7 in Sabotaging America). However, the crucial point here is that the duty of care is to the corporation and not to the shareholders, who actually own the company.
The net result of this artificiality is that we have a self interested accountant providing advice to a mythical person (the US corporation), which is accountable to no one but itself. It is a world of cynical liars who have yet to be brought to justice for the evil they have wrought. I expect they never will be.
My next blog will give some good UK news about how things should be - but America is not interested.
The Anglo connection in this mess is quite clear. No law company in the US would certify the off-books financial manipulation employed by Lehman. Lehman then turned to its London based office to find a compliant lawyer in the "light touch" regulatory environment created by New Labour. Linklaters was the London law firm that provided the legal certification for the off-books transactions. Ernst and Young then relied on this legal opinion in auditing Lehman's books. In the process Ernst earned $100 million in fees over the four year period heading up to Lehman's collapse.
The role of Lehman's board of directors in this mess provides an interesting facet into the working of corporate America. The directors have a duty of care in overseeing the financial affairs of any corporation ( see Chapter 7 in Sabotaging America). However, the crucial point here is that the duty of care is to the corporation and not to the shareholders, who actually own the company.
The net result of this artificiality is that we have a self interested accountant providing advice to a mythical person (the US corporation), which is accountable to no one but itself. It is a world of cynical liars who have yet to be brought to justice for the evil they have wrought. I expect they never will be.
My next blog will give some good UK news about how things should be - but America is not interested.
Sunday, March 7, 2010
The sabotage continues
As every day passes it becomes increasingly clear that the Washington centered project for sabotaging America continues apace. Most thinking citizens now despair for the future of their country. Narrow financial and ideological interests dominate all political debate. For example, Democrat abortion opponents hold hostage even the pathetic attempt at health care reform. The Republicans are determined to stop any legislation from passing however beneficial it might be to the country. Reform of the utterly corrupt financial system is now only a dream.
As usual, the media has been more concerned with distractions than with public duty to hold to account the politicians we pay for. The groveling apology that Tiger Woods felt obliged to make was totally in keeping with the warped values of the news media. In general, the public at large has been kept in woeful ignorance of the true state of the US position in the world.
The Press and Congress continue to let America down. One cannot be hopeful that anything will change for the better. Good luck one and all.
As usual, the media has been more concerned with distractions than with public duty to hold to account the politicians we pay for. The groveling apology that Tiger Woods felt obliged to make was totally in keeping with the warped values of the news media. In general, the public at large has been kept in woeful ignorance of the true state of the US position in the world.
The Press and Congress continue to let America down. One cannot be hopeful that anything will change for the better. Good luck one and all.
Saturday, February 20, 2010
Spying on our children
According to a lawsuit filed in Federal court last week, the Lower Merion school district, in a suburb of Philadelphia, used the Mac laptops it had supplied 2,300 pupils to spy on them at home. The school used a remote control webcam feature on the laptops to take pictures of the students without any form of parental permission. A student was shown a picture taken in this manner by the assistant school principal and told he was behaving in an inappropriate fashion.
It is deeply ironic that this outrage occurred in Philadelphia, home of the Liberty Bell.
The "land of the free" had better watch out; before long there will be no liberties left.
It is deeply ironic that this outrage occurred in Philadelphia, home of the Liberty Bell.
The "land of the free" had better watch out; before long there will be no liberties left.
Feudalism Returns
In the 16th, 17th and 18th centuries individuals left Europe to escape the bonds of feudalism in order to enjoy the prospect of freedom in America. Unhappily for most Americans their lives are now controlled by a new variety of feudalism - one that is Corporate in nature. Their very existence is now controlled by the power of corporations - employee working conditions, health care, pensions and income. All these critical items now depend on corporate good will and we all know that there is no sentiment in business.
The US Supreme Court has now permitted corporations even greater ability to fund election campaigns and, thereby, to control Congress. Corporations can now also increasingly fund judicial campaigns. It looks as if both freedom (legal redress) and democracy is being lost in America today.
Always remember that patritism is the last refuge of the scoudrel.
See my next blog for the latest outrage.
The US Supreme Court has now permitted corporations even greater ability to fund election campaigns and, thereby, to control Congress. Corporations can now also increasingly fund judicial campaigns. It looks as if both freedom (legal redress) and democracy is being lost in America today.
Always remember that patritism is the last refuge of the scoudrel.
See my next blog for the latest outrage.
Monday, February 15, 2010
Derivatives are back
The 2008 financial crash was caused by derivative (insurance) speculation against home mortgage default. There is always a new opportunity for betting against something and this time it is betting against a default by an entire country - in this case Greece. However, the opacity of such trading makes it open to manipulation and, of course, losses. As yet no regulation is in place to prevent another debacle.
Friday, February 12, 2010
Vampire Capitalism
It existence of share ownership permits the operation of Vampire Capitalism via the formation of Private Equity funds and Hedge Funds. The hostile takeover of Cadbury by Kraft was only the latest example of such operations, which always grows after a crisis and cheap money becomes available.
The operation can have many variants but generally proceeds as follows. A public company is targeted by a Private Equity fund as having characteristics that make it suitable for "restructuring". Such restructuring is termed "pruning out the dead wood" and "making the company more efficient". In other words the Private Equity folk are engaging, by their own admission, in helping share-owning capitalism to work better.
Step one - fund insiders put up a little of their own money and invite external participants to put up theirs. Much larger funds are borrowed from investment banks.
Step two - a controlling interest in a company is acquired.
Step three - The acquired company is restructured - assets stripped, staff layoffs, production moved overseas - anything that will reduce costs.
Step four - After several years higher earnings are achieved, as a result of restructuring. The higher priced shares are sold or refloated if the company was totally taken into private hands.
Step five- Divide up the profits, which mostly go to the insiders. Very often the external fund participants get very little in return for the risk incurred.
Step six - The company is left with much higher debt, which it is in a weakened position to pay back. The vampires have left town and on to the next victim.
The anglo-american business model at work.
The operation can have many variants but generally proceeds as follows. A public company is targeted by a Private Equity fund as having characteristics that make it suitable for "restructuring". Such restructuring is termed "pruning out the dead wood" and "making the company more efficient". In other words the Private Equity folk are engaging, by their own admission, in helping share-owning capitalism to work better.
Step one - fund insiders put up a little of their own money and invite external participants to put up theirs. Much larger funds are borrowed from investment banks.
Step two - a controlling interest in a company is acquired.
Step three - The acquired company is restructured - assets stripped, staff layoffs, production moved overseas - anything that will reduce costs.
Step four - After several years higher earnings are achieved, as a result of restructuring. The higher priced shares are sold or refloated if the company was totally taken into private hands.
Step five- Divide up the profits, which mostly go to the insiders. Very often the external fund participants get very little in return for the risk incurred.
Step six - The company is left with much higher debt, which it is in a weakened position to pay back. The vampires have left town and on to the next victim.
The anglo-american business model at work.
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