The banker loving, baby-eating Tory party thread (regenerated)

[a m ole]

Can you imagine these bosses agreeing to pay out bonuses to their staff when they don’t meet their targets? 

lol.

[StefanAVFC]

2 minutes ago, a m ole said:

Can you imagine these bosses agreeing to pay out bonuses to their staff when they don’t meet their targets? 

lol.

"You didn't sell anything but I'm going to give you your 15% commission anyway". Can you imagine it?

Typical Tory mentality. Defending big bosses getting their bonuses when their business is going down the pan.

Edited January 16, 2018 by StefanAVFC

[snowychap]

10 hours ago, chrisp65 said:

We do seriously need some of these people, running some of these company based scams, to start going to prison.

We need to rethink the mechanism(s) by which we hold directors of companies to account for not fulfilling their statutory duties.

The directors' duties codified in the CA 2006 have no real bite. The remedies for breach are limited to a claim by the company, by a liquidator/administrator once the company is insolvent or by shareholders through derivative claims. None of these are good enough or take in to account, sufficiently, the duties to employees, suppliers, customers and the community [CA 2006 s 172 (1) (b),(c), (d).].

[tonyh29]

9 hours ago, chrisp65 said:

We both know I'm right.

@Risso tbf  I think you've lost this one  ...taken at face value  I can't really see any defence for the way they've acted here ... I accept there may be stuff we don't know about in regards to these contract changes etc but at present it looks fishier than Baldrick's Apple pie

[peterms]

47 minutes ago, snowychap said:

We need to rethink the mechanism(s) by which we hold directors of companies to account for not fulfilling their statutory duties.

The directors' duties codified in the CA 2006 have no real bite. The remedies for breach are limited to a claim by the company, by a liquidator/administrator once the company is insolvent or by shareholders through derivative claims. None of these are good enough or take in to account, sufficiently, the duties to employees, suppliers, customers and the community [CA 2006 s 172 (1) (b),(c), (d).].

Andy Haldane at the BoE wrote a piece in the LRB a few years ago (The Doom Loop) about banks and the way limited liability and leverage had contributed to mad risk-taking which would not have been happening a hundred years before.  He was writing about banks, but some of the same issues about allowing people unlimited profits while protecting them from loss will be similar.

One thing about how we hold directors to account may be to consider what motivates them, in order to be able to influence their behaviour in ways we would want.  If they are strongly motivated by greed and status, for example, then we should be looking at punishing misdeeds with seizure of personal assets, preventing them from holding positions on boards in future, certainly stripping them of any honours they may have acquired and making them ineligible for any in the future, and of course imprisonment.  This would also go some way to counter the anger and cynicism that most people feel when these directors are seen to escape with rewards for a level of misjudgement and often irresponsibility that would have most people facing a life on the dole.  It would be socially useful, as well as helping to introduce incentives against behaving badly. 

[snowychap]

11 minutes ago, peterms said:

Andy Haldane at the BoE wrote a piece in the LRB a few years ago (The Doom Loop) about banks and the way limited liability and leverage had contributed to mad risk-taking which would not have been happening a hundred years before.  He was writing about banks, but some of the same issues about allowing people unlimited profits while protecting them from loss will be similar.

One thing about how we hold directors to account may be to consider what motivates them, in order to be able to influence their behaviour in ways we would want.  If they are strongly motivated by greed and status, for example, then we should be looking at punishing misdeeds with seizure of personal assets, preventing them from holding positions on boards in future, certainly stripping them of any honours they may have acquired and making them ineligible for any in the future, and of course imprisonment.  This would also go some way to counter the anger and cynicism that most people feel when these directors are seen to escape with rewards for a level of misjudgement and often irresponsibility that would have most people facing a life on the dole.  It would be socially useful, as well as helping to introduce incentives against behaving badly. 

I think they're all fair points. I wonder how many directors do actually get disqualified as a result of action taken by liquidators? Perhaps we ought to make it automatic for a certain period and make it longer lasting for those deemed to be the worst culprits?

I also think that we need to think about how we treat suppliers as creditors in cases like this. My memory's a bit sketchy on the hierarchy of creditors but aren't suppliers likely to be unsecured creditors and thus at the back of the queue? Maybe they ought to treat suppliers of a certain size or below as preferential creditors along with employees?*

*I guess that putting some suppliers above secured creditors may have an unwanted negative effect upon investment.

Edited January 16, 2018 by snowychap

[bickster]

1 hour ago, tonyh29 said:

@Risso tbf  I think you've lost this one  ...taken at face value  I can't really see any defence for the way they've acted here ... I accept there may be stuff we don't know about in regards to these contract changes etc but at present it looks fishier than Baldrick's Apple pie

You bloody raving lefty! 

[peterms]

7 minutes ago, snowychap said:

I also think that we need to think about how we treat suppliers as creditors in cases like this. My memory's a bit sketchy on the hierarchy of creditors but aren't suppliers likely to be unsecured creditors and thus at the back of the queue? Maybe they ought to treat suppliers of a certain size or below as preferential creditors along with employees?*

*I guess that putting some suppliers above secured creditors may have an unwanted negative effect upon investment.

If you compare a firm which has provided goods and services to another, and a bank which has provided finance, then our system gives overriding priority to the bank.

However, the firms in the supply chain have spent money and effort to create or supply something, and have foregone other uses of those resources as a result.  The bank has simply created a line of credit - it has not used any real resources, or foregone the use of anything.  It is very hard to see why the bank should get first call on any remaining assets in the event of liquidation, rather than the firms which have actually provided (and sacrificed) something.

The argument for the current system, as you say, is "if you change it, we won't lend".  To which the answer is to create a network of publicly owned banks, creating credit for socially useful purposes like financing investment in creating real goods and providing real services rather than lending to bid up asset prices.  Of course bankers and financiers would detest such a system, which is another argument in its favour.

[Risso]

1 hour ago, tonyh29 said:

@Risso tbf  I think you've lost this one  ...taken at face value  I can't really see any defence for the way they've acted here ... I accept there may be stuff we don't know about in regards to these contract changes etc but at present it looks fishier than Baldrick's Apple pie

But I haven't defended them.  Clearly, the shit has hit the fan big time, and the buck starts and finishes with the directors.  But the only figures I've seen for bonuses were for 2016, and were based on set criteria regarding earning per share, that the company appeared to achieve.  Now, if the accounts were massively wrong, then KPMG are going to be in the firing line as peterms rightly says, and those are circumstances under which the directors' bonuses can be clawed back.  Personally, I think this is reasonable.  If a bonus is paid because a company has hit its earnings targets as Carillion did in 2016, then that's surely all above board and transparent.  If it then transpires that these results were misstated, whether fraudulently or because of carelessness, then the bonus should be taken back where already received, and cancelled when it's deferred.  In the circumstances where a firm has gone bust in a year (and I'm not saying this is what happened at Carillion) because say, a major customer has gone to the wall and not paid its debts, then in those circumstances I wouldn't automatically think it's fair to clawback previous years' bonuses, where those bonuses were paid because of genuine profitability.  Clearly though, something is very wrong indeed, because where a business can at least partly be saved, administration rather than liquidation is the usual course of events.

[tonyh29]

5 minutes ago, Risso said:

But I haven't defended them.  Clearly, the shit has hit the fan big time, and the buck starts and finishes with the directors.  But the only figures I've seen for bonuses were for 2016, and were based on set criteria regarding earning per share, that the company appeared to achieve.  Now, if the accounts were massively wrong, then KPMG are going to be in the firing line as peterms rightly says, and those are circumstances under which the directors' bonuses can be clawed back.  Personally, I think this is reasonable.  If a bonus is paid because a company has hit its earnings targets as Carillion did in 2016, then that's surely all above board and transparent.  If it then transpires that these results were misstated, whether fraudulently or because of carelessness, then the bonus should be taken back where already received, and cancelled when it's deferred.  In the circumstances where a firm has gone bust in a year (and I'm not saying this is what happened at Carillion) because say, a major customer has gone to the wall and not paid its debts, then in those circumstances I wouldn't automatically think it's fair to clawback previous years' bonuses, where those bonuses were paid because of genuine profitability.  Clearly though, something is very wrong indeed, because where a business can at least partly be saved, administration rather than liquidation is the usual course of events.

 ah my bad ...

 

But I think you should have said  the rest of your post the first time out though  

 

[Risso]

My original point were that their salaries, in comparison to other big Plc's didn't seem to be especially high, and that when businesses start getting into trouble and having cashflow problems, it's ALWAYS suppliers who get hit first, and that's true for all companies.  Again, not defending them, it's just currently how it is.  For possibly the first time ever, I find myself broadly in agreement with peterms, creditors should be the first in line for whatever is left to be paid out, with banks and HMRC way down the list (although he would probably disagree with that last bit).

 

[a m ole]

52 minutes ago, Risso said:

My original point were that their salaries, in comparison to other big Plc's didn't seem to be especially high, and that when businesses start getting into trouble and having cashflow problems, it's ALWAYS suppliers who get hit first, and that's true for all companies.  Again, not defending them, it's just currently how it is.  For possibly the first time ever, I find myself broadly in agreement with peterms, creditors should be the first in line for whatever is left to be paid out, with banks and HMRC way down the list (although he would probably disagree with that last bit).

 

You literally used the word ‘bonuses’ in your first post.

[Risso]

38 minutes ago, a m ole said:

You literally used the word ‘bonuses’ in your first post.

OK, but that doesn't change the point I was making whatsoever.  Their salaries and bonuses don't seem especially high when compared to the salaries and bonuses of directors of other big Plc's.

[StefanAVFC]

Irrelevant.

The fact that they got bonuses at all is a disgrace considering the health of the company.

[ml1dch]

8 minutes ago, Risso said:

OK, but that doesn't change the point I was making whatsoever.  Their salaries and bonuses don't seem especially high when compared to the salaries and bonuses of directors of other big Plc's.

They don't seem high in comparison with the bonuses of those company directors who have managed to not direct their companies to liquidation?

That's not really comparing similar levels of performance is it?

[Risso]

6 minutes ago, StefanAVFC said:

Irrelevant.

The fact that they got bonuses at all is a disgrace considering the health of the company.

 

The 2016 bonuses were paid based on the 2016 results, where on face value, the company made a healthy profit of something like £180m before tax.  It looks like profit warnings were only issued in 2017, and as the 2017 accounts haven't been produced yet, then I don't think it's possible to see what, if any, bonuses were paid in 2017.  All I can see being reported is historic info.  The issue seems to be is that the accounting policies being used were far too aggressive, which means that a) KPMG are going to have some questions to answer, and b ) if the accounts were materially misstated, then this is exactly the scenario whereby bonuses can be clawed back.  To reiterate, I'm not defending them, but if the bonuses were paid at a time when everything seemed to be OK, then if the reason for things going belly up is that the directors made mistakes in their accounting, then I'm fairly certain they'll find their bonuses being recalled.

[Risso]

11 minutes ago, ml1dch said:

They don't seem high in comparison with the bonuses of those company directors who have managed to not direct their companies to liquidation?

That's not really comparing similar levels of performance is it?

So you think that 2016 remuneration for Carillion directors was based on the fact that that the remuneration committee knew that they were going to go bust in 2018?

[HanoiVillan]

I don't necessarily have an issue with them receiving the bonus (beyond the more generic point that the level of remuneration for management seems obscene to me, but I suppose that's besides the point). What I want a very good explanation for is why they altered the company rules specifically in order to protect those bonuses, seemingly at a time at which they must have known that the company's failure was a real possibility. 

[Risso]

Just now, HanoiVillan said:

I don't necessarily have an issue with them receiving the bonus (beyond the more generic point that the level of remuneration for management seems obscene to me, but I suppose that's besides the point). What I want a very good explanation for is why they altered the company rules specifically in order to protect those bonuses, seemingly at a time at which they must have known that the company's failure was a real possibility. 

That's the crux of the issue in my opinion.

 

Details of the 2015 bonuses are here - http://annualreport2015.carillionplc.com/downloads/Carillion_AR15_Governance.pdf from page 57 onwards.  They detail what the directors' bonuses are based on, and how they performed.  On the question of clawback on page 61 it says 

"–  A clawback provision is operated that gives the Remuneration Committee the right to recover all elements of bonus.

in relation to circumstances of corporate failure, which may have occurred at any time before malus is operated."

 

On the equivalent 2016 report at http://annualreport2016.carillionplc.com/downloads/Carillion_Governance.pdf it says the same thing, ie 

"- A clawback provision is operated that gives the Remuneration Committee the right to recover all elements of bonus." as above, but importantly adds the following paragraph later in the report:

- ‘Malus’ or ‘clawback’ may be applied if: (1) the results for the year in respect of which the award was made (or, in the case of a LEAP award, for a year in the performance period) have been misstated, resulting in a restatement of the Company’s accounts (other than where the restatement is due to a change in accounting standards, policies or practices adopted by the Company); or (2) the participant is guilty of gross misconduct.

 

So, I think the question is, was this merely a clarification of the rules regarding clawback as required by the new Corporate Governance Code, or what is it indeed put in place to protect directors' interests?  I don't think this is clear cut, as the results at the time appeared to be fairly healthy and the Remuneration Committee is supposed to be independent of the main executive board, but who knows?  I think it's largely a moot point anyway, as I would be very surprised if it could be argued that the accounts weren't misstated, and if this is the case, the bonuses could be clawed back.

[blandy]

1 hour ago, Risso said:

I think the question is, was this merely a clarification of the rules regarding clawback as required by the new Corporate Governance Code, or what is it indeed put in place to protect directors' interests?  I don't think this is clear cut

The Institute of directors thinks 

Quote

the Institute of Directors said yesterday that “the relaxation of clawback conditions for executive bonuses in 2016 appears in retrospect to be highly inappropriate”.

Presumably because

Quote

...Under the 2015 policy, the firm could claw back payment in the event of business failure, but a year later, the policy listed only the mis-statement of financial results or gross misconduct as triggers for bonus clawback.

Which looks extraordinarily clear cut to me (as a non-director and non-accountant and non financial auditor).