Willy fucking Hutton again

Over the last decade, a fifth of quoted companies have evaporated from the London Stock Exchange, the largest cull in our history. Virtually no new risk capital is sought from the stock market or being offered across the spectrum of companies.

Fool. Rick capital is being raised galore on AIM. Which is, err, the market for raising risk capital.

The company is conceived as nothing more than a network of short-term contracts.

And now the man\’s being seriously ignorant. He\’s a (or at least has been) a Governor of the LSE. One of the proudest products of that august institution is the Nobel received by Ronald Coase. Largely for a paper he wrote pointing out that the very point of companies, the reason for their existence, is that they are more than a network of contracts. For where such a network is sufficient there will be just the network and the company therefore will not exist. Companies are not conceived of as networks of contracts for if they were there would be no companies. Tosser.

But companies and wealth generation, as Professor Colin Mayer argues in his important forthcoming book Firm Commitment, are about co-creation, sharing risk and long-term trust relationships:

Long term, eh?

Limited liability should not be a charter to do what you like. It must be conditional on a core business purpose, along with the creation of trustees to guard it. Directors\’ obligations should be legally redefined to deliver on this purpose.

Morons. The long term is a very long time you know. Circumstances change. You can\’t set as a precise goal now whatever it is that a company should or will be doing in 50 years time.

Think about it. Rolls Royce the company predates the invention of the fucking jet engine. How could you write corporate trusts and guidelines back then for a company which now provides one third of the world\’s production of something that didn\’t sodding exist? Apple\’s trust documents would say something about computers: not the iPhone. IBM made cash registers. Goodbye a business in mainframes.

Ignorant sodding wowsers.

To solve the problem that individual shareholders – even savings institutions – do not have sufficient muscle nor sufficient incentive to engage with managements, voting rights could be aggregated and given to new mutuals.

To solve the principal agent problem we should have another layer of agents between principals and management? Can these cunts actually think?

13 comments on “Willy fucking Hutton again

  1. Tim

    Calm down. I don’t mean you are not right, I just mean your Sunday is more important then the warblings of somebody who ought to know better.

    As bad as politicians talking about creating jobs. He ought to know better.

    But your Sunday breakfast is more impotant.

  2. Where did they “evaporate” to?
    My guess would be to private equity.
    In other words, risk is transferred from risk averse pension funds etc to risk seeking capitalists.
    Which in any other context Hutton would surely applaud.

  3. “Limited liability should not be a charter to do what you like. It must be conditional on a core business purpose, along with the creation of trustees to guard it. Directors’ obligations should be legally redefined to deliver on this purpose.”

    He’s getting dangerously close to the moron’s conception of LL there. Only morons believe that “limited liability” applies to directors.

  4. BiF, got it in one. The fall of the public company was heralded by Jensen in 1989 in the Eclipse of the Public Company. The junk bond bust put paid to that, but by the 2000s we see a lot of corporate governance problems alleviated by private equity which removes the shareholders and increases returns – but sadly mainly to the general partners of the private equity firm, and not to their limited partners – so the problem of principal -agent lives on. But at least the firms are more efficient…

    The concept of a company purpose is ancient and ongoing – it is written into the articles of association, which can be amended. It’s where the concept of ultra vires comes from.

  5. But aren’t the comments wonderful. I particularly like this one. It starts:

    The whole idea of public trading of shares makes no sense.

    And then goes on to explain, in detail, exactly why we need markets in shares, before finishing – without a trace of irony, self awareness or even a hint that they might be trolling:

    We simply do not need the stock market. It is toxic and means that company directors can never look more than a few months ahead.

  6. Following on from BlokeinFrance, ISTM that one reason why companies are leaving the stockmarket is because the requirements for listing have become too onorous.

    And here we have someone saying they should be more onorous still, as if that would cure the problem!!

  7. Articles of Incorporation documents DO state what business you will be engaged in, exactly as Willy says they ought to. Any contracts entered into which fall outside the articles are unenforceable since the corporation is not authorised to enter into them.

    Of course, in practice, the articles usually say “everything”.

    What willy wants is here now and was invented in (I think) the eighteenth century – or any rate the nineteenth. As was the solution to the problem you identify.

  8. @SE#5: I looked up the author’s profile. He’s a research director at a public research organisation in France who’s decided the financial system ought to be fixed.

    I think he ought to stick to brain research. His own.

  9. Mellor,

    I went one stupider and actually read the guy’s blog. As an example:

    Fixed rate mortages like that have (for some inexplicable reason) never been available in the UK – and they still don’t exist.

    Well, sitting in the study in a house I bought on a fixed-rate mortgage … Perhaps I’m not in the UK?

    He’s a full reserve banking loon, believes that the Federal Reserve isn’t part of the US Govt (usually a right wing USian delusion – like the mysterious shareholders of the BoE is for the nuttier parts of these shores) and wholly out of his depth.

    The French are welcome to him.

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