Lawslot

It is often the everyday that illustrates the story. My cab driver the other Saturday told me that late afternoon the day before he had spent 45 minutes looking for a fare. The problem, he averred, is that aren’t spending: or not the ones who would usually call a cab. It seems that M&S have had the same problem with selling food.

A damning article by Luke Johnson in this morning’s FT, Bank leaders are a disgrace to capitalism. Johnson reserves his special contempt for RBS,

“Bank directors are not under-rewarded. The six executive directors at Royal Bank of Scotland, for example, took home £16m in cash last year – on top of their accumulated pension entitlements of £26m. These are not entrepreneurs who risk their own capital in life – they are just bank employees. That sort of cash should buy geniuses who never fail. It should pay for leaders who understand the larger role RBS plays in the system, and the vital contribution it makes in financing the private sector, since it claims it has the number one brand in corporate banking.

Yet in undertaking the “largest banking acquisition ever” by buying ABN Amro after the market had begun to turn, RBS has destroyed value and its management credibility on a breathtaking scale. How can they dare to withdraw facilities and berate borrowers when no one has been sacked for such gargantuan incompetence? How do the bosses retain the confidence of their staff, clients and stockholders? RBS was forced into a rescue £12bn rights issue in spite of saying it did not need one. The arrogance of certain of our top bankers is a disgrace to capitalism, while many of the board members of the Big Five appear to have been asleep at the wheel in the past couple of years.”

Yet only a few weeks ago, one of the senior local managers of the bank was telling everyone that the “success” of the rights issue meant that they now had plenty of money to lend. Quite unbelievable.

Leaving aside the fact that in private I tend to say sorry rather too often (a failing I apparently share with the majority of Englishmen of my age and background: probably early Prep school trauma), in the world of work my early bosses were committed exponents of the “Never explain, never apologise” school. I have always tended to favour the opposite, reckoning that my clients would prefer me to put up my hands if something has gone wrong. The complicating factor, at least for lawyers, is that professional indemnity insurers have their own take on this subject (veering very much more to the somewhat more robust approach of my first employers) and equate sorry to an admission of liability. The trick is to find a way of saying sorry, meaning it and not losing cover. In yesterday’s FT there was an excellent article by Stefan Stern, Say sorry and mean it – or don’t say anything at all. In the right context, saying sorry is a very powerful statement. As Stern notes:

Genuine apologies disarm opponents, win new friends and help you hang on to old ones. In business, when necessary, bosses should apologise sincerely and quickly, or not at all.

This is certainly true of clients. The danger is saying sorry in such a way that it is quite clear you either aren’t, or worse are saying it because you have to (train managers on First Great Western). Perhaps the only thing worse is when it is a pre-recorded announcement (next time you are waiting for a late train, listen hard!). 

For a number of years I pestered my partners to consider corporate social responsibility. I prepared papers and advocated our involvement at board meetings. They were reluctant, and unless able to identify a definite return (profile raising, marketing opportunities etc.), very few initiatives got through. What they considered as simply doing good was left to individual involvement. We had a line in our corporate brochure about it, but this was in truth mere lip-service. Recently two things have occurred. First I too began to question CSR, and whether there are better ways to engage with the communities in which we live and work. When law firms involve themselves, or more usually their junior fee earners, in pro bono work (as for most lawyers in private practice this is what they think about when they do think about CSR), there usually has to be a payback somewhere. And secondly, my partners have warmed to the idea, and a recent Strategy Board minute confirmed that CSR is now on the radar. So it was with interest that I read Michael Skapinker’s column Corporate responsibility is not quite dead in yesterday’s FT.

“Is corporate social responsibility dead? Yes, says Harvard Business Review’s “Conversation Starter” blog. CSR will increasingly be seen as a public relations sham, the bloggers say.

Yes, says my colleague Stefan Stern, who recently predicted on this page that companies would abandon CSR in favour of “sustainability”.

No, says the European Commission, which commends companies that “go beyond minimum legal requirements to address societal needs” and has just spent three years and €1.4m ($2m) producing a 108-page report on CSR.

Many will regard the Commission’s endorsement as a sure sign that CSR’s time has past. Its report, written by academics from Insead and other European business schools, certainly contains a fair amount of nonsense, including the “finding” that managers become more socially responsible if they meditate. Doing yoga, according to the report, seems to produce a broadly similar result.”

Skapinker is upbeat about corporate responsibility (you need to read the whole article) and I am rethinking my position.

An interesting report by Norma Cohen in the FT this morning on a key test case involving Sea Containers’ legal challenge to a ruling made by the Pensions Regulator last June, when ‘the Bermuda-based, US-domiciled company, received the regulator’s first ever Financial Support Direction last year after the regulator, which is chaired by David Norgrove, concluded that the two schemes of the company’s GNER rail subsidiary were “in a parlous state”.’ Moral hazard involving pension schemes is a difficult concept it seems for corporates. Last year I had to advise an Austrian client and his lawyer on the powers of the UK Pensions Regulator. They didn’t believe it. All the managing director could say was, “No. Surely this cannot be right. This is like Romania”. At the time the received wisdom among pension lawyers (as Norma Cohen notes) was that the Pension Regulator’s ability to use his powers on overseas companies and those in bankruptcy were in doubt. And so I also advised. In the event, the Austrian client did not pursue the opportunity and we never had to decide how best to deal with a UK pension scheme in significant deficit. Probably just as well.

Mervyn King was very honest last night in his speech to the South West CBI-IoD dinner about what is in store for UK plc in 2008. Listening to him with upwards of 725 other South West businessmen was a sobering experience: no flashy delivery, no blinding with science, no self-congratulation on a job so far done well (how unlike Gordon Brown, who cannot resist telling us that even if things aren’t quite as good as they might be (a) it isn’t his fault and (b) that that it is as good as it is is all down to him and his best friend Prudence). Instead, from the Governor a critical summary of where we are, why and what is in store. Aside from the main points in his speech, and see an excellent report by Norma Cohen in today’s FT, two things remain in my mind: that as consumers we must save more and spend less (fairly obvious, but blindly ignored by most of us); and that the fear of what is still to come out of the sub-prime catastrophe in the US is as potent a destabilising force as what is already known.

This year will be different to last year. No doubt very obvious but the real difference is that this year people are prepared to talk about hard times coming; and they are. If property is an indicator of recession, then we are already well into one. In the South West the developers stopped buying land some months ago, and a number of transactions that with a fair wind would have completed well before Christmas were turkeys long before that. It is not all bad news. Read Luke Johnson’s The Entrepreneur column in today’s FT.  I am sure we are at his grim moment of reckoning, but he quotes Euripedes, “There is in the worst of fortune the best of chances for a happy change”. As for whether the experience (of a more sober and testing time) could be character forming, probably: but don’t forget that a lot of us have been there before, and are even now getting out the T Shirt.