Interest rates.
Nat West Bank is owned by the Royal Bank of Scotland. It has just warned business customers that it might start negative interest rates. The reality of such a decision would be the bank charges customers for holding their money. This is partly due to fears that the Bank of England’s base rate could turn to a minus figure. Moves in this direction have happened already in several countries around the world. For example, Denmark, Finland, Germany, Holland, Japan and Switzerland. More than $10 trillion of bonds trade at yields below zero.
Executive pay under scrutiny
The Executive Remuneration Working Group of the Chartered Institute of Personnel and Development (CIPD) is chaired by Nigel Wilson, chief executive of Legal and General Group. This influential committee has called for more transparency in the way senior managers/executives/directors are rewarded and intends to recommend wider disclosure of ratios in pay. Also, businesses should end any reliance on long-term incentive plans (LTIPs). This is a bid to simplify and reduce the size of remuneration for executives. The approach is supported by some of this country’s largest shareholders and investors. Stefan Stern, director of the High Pay Centre, has said a greater proportion of chief executives’ salaries should be fixed and cash is preferable to shares in bonus schemes. ‘Performance-related pay is hard to operate successfully. To claim one individual has effectively been solely responsible for a big company’s performance is ridiculous. People are free to buy shares in their company, but to use them in pay is flawed.’ Research by the CIPD last year found that six in ten employees believed the high level of pay to chief executives across the UK demotivated them at work. Dr Almuth McDowall (Birkbeck University) has added that executive pay has risen beyond effective sums. Watch this space.
Know thyself.
Research in America shows that eight out of ten subordinates have a more accurate opinion of a manager’s performance than her/his own boss. The survey questioned 1,100 people from seventy firms, many are in Fortune’s top 500. None of this is new. Protective pyramids at employers have prevented reliable access to informed comments. A manager should earn her/his mandate. And it’s not about popularity. Leaders make you feel different, not always better.
Pensions, again
The Intergenerational Foundation says employers in the UK spend twenty times more on direct benefit schemes than on defined contribution ones. And this is an advantage for only one-third of eligible people. The calculation concludes that around £42 billion is paid into defined benefit schemes, compared to £1.8 billion for those based upon defined contributions. The Foundation recommends a change in the measure of inflation, removal of ‘fair value’ from presentation of deficits in balance sheets and cessation of the tax-free lump sum for members of defined benefit schemes.
Leadership.
Leadership seems to be discussed seriously when it is absent. Your scribe notes that those who think about it a lot are not leaders. Natural leaders are those who do not reflect on leadership, but have never considered any other position.
Be careful.* ‘Always remember that the crowd that applauds your coronation is the same crowd that will applaud your beheading.’ Sir Terry Pratchett , 1948 - 2015. English novelist. More than 85 million books sold worldwide in 37 languages.
Think ahead.* ‘The art of statesmanship consists as much in foreseeing as in doing.’ John Bright , 1811 – 1889. A Quaker, British radical and Liberal statesman. President of the Board of Trade, 1868 – 1871.