Business

Something I don\’t know and wondering whether anyone does.

Executives at Britain\’s top companies saw their basic salaries leap 10% last year, despite the onset of the worst global recession in decades, in which their companies lost almost a third of their value amid a record decline in the FTSE.

This rise in pay: is it including or not including the pay rises which one assumes that people will get when they are promoted to a board/CEO position?

In other words, is it the pay rise that the CEO position gets, or is it the pay rise that someone becoming CEO gets (or even a combination of the two?).

At the other end of the spectrum, the worst-paid staff are those working in the retail and leisure sectors and for mining companies.

Including the miners there is a bit off: we\’ve virtually no mining in this country so almost all of those \”low paid\” miners are in lower wage countries.

The Johnnie Walker brand makes Diageo £1bn per year.

Hmm.

Guinness brewer Diageo today revealed its profits took a minor fall as it admitted entering a challenging period.

Profits before tax for the last 12 months stood at £2.093 billion, down £2 million on the previous year.

Gosh.

The Johnnie Walker brand makes half of the company\’s profits, does it?

Or are we using the word \”makes\” to mean revenue, without actually looking at the costs of getting that revenue?

Providing social mobility the capitalist way:

Nine out of ten of our restaurant management staff started out as hourly-paid crew members

Economists have long argued for this flexibility in pay over the economic cycle – remuneration going down when times are hard and going up when times are good. Pay takes the strain rather than jobs. The difficulty has been persuading workers to accept that cuts in their pay are fair.

What you do is split pay into two parts. There\’s base pay, something that exists in good times and bad, and then you add a bonus to pay when the times are good for the organisation as a whole.

The problem is that you don\’t like that either, do you?

Is that when you\’ve got another mineral that you need foreign capital and technology to extract, there\’s no one willing to offer you the technology and capital you need:

\”But there is a problem. Bolivia\’s socialist government has a habit of clashing with foreign multinationals in other sectors and has not clinched a deal – and, according to some, may never seal one – with the investors needed to extract significant quantities of lithium.

Foreign companies are afraid to deal with a government that confiscates assets and rips up contracts, said Carlos Alberto López, a former energy minister and consultant with Cambridge Energy Research Associates. \”Bolivia\’s ­ideological face does not square with business and commercial realities. I doubt lithium\’s potential will be realised in the short or medium term.\” Pessimists fear a fiasco: carmakers lacking batteries to power electric vehicles and Bolivia, one of the continent\’s poorest countries, losing an opportunity to develop.\”

Or, umm, Scaletrx? Scale…..no, I don\’t know how to spell it either.

Anyway, those of who were indeed boys at one point will remember the joy of being the junior petrolhead. The placing together of the track, the creation of impossible hairpin bends and the like.

And. of course, those who weren\’t those boys and junior petrolheads will wonder what in tarnation I\’m talking about. Which is useful of course. No, really. For VW have, as part of the ad campaign (yup, this is an ad) for the new version of the Golf GTi, created a virtual Scaletrix Scalectrix track for us all to try.

You can access all the fun and games here. One hint, click on the white coat to let you in.

A second one, don\’t enter on a little computer. This is a memory hog.

Ladeeees and gennlemen, start your engiines please!

This is a paid advertisement for, umm, I guess, VW UK.

Academics rediscover the Peter Principle:

\’Our research finds that the mental health of managers typically deteriorates after a job promotion, and in a way that goes beyond merely short-term change.

\’Just because people in managerial positions find themselves to be healthier does not necessarily mean this is as a direct result of their occupational positions.

\’These findings suggest that there are other determining factors because we found that there were no physical health benefits at all.

\’When it came to mental health we found that promotions actually make people feel more stressed – meaning promotions may not actually be good for your health.

\’It\’s not completely clear why this is but it may be that promotions are not the best route for everybody due to increased pressure and stress levels. We found that some people just don\’t cope in certain positions.

What is the Peter Principle you ask? That everyone is promoted to their own level of incompetence.

Something which is, as you can imagine, somewhat stressful, being out of your depth.

Finally, some sense:

In his speech, Obama appeared to prepare the ground for bankruptcy, saying that a chapter 11 filing for either GM or Chrysler would "make it easier to clear away old debts weighing them down," and that it need not involve years of court procedures.

Yes, that´s the way to go and it has been all along.

Clear out the wreckage of the debts, the promises made and allow the assets to be employed productively. If they can´t be employed productively, then Chapter 7 beckons…..liquidation, not just bankruptcy.

The latest figures produced by the Society of Motor Manufacturers and Traders showed that there is no end in sight to the gloom that has engulfed the industry since last Autumn.

Months of lay-offs, factory shutdowns and shift cuts have led to a 59 per cent fall in February compared to the same time last year.

So, we\’ve got the head of the car makers organisation showing us how terrible things are while he\’s arguing for the taxpayers to bail his members out.

Surprise!

However, we\’re not told the details….part of which is that several of the largest manufacturers have simply idled their factories. The workforce is still getting paid, the resources, installations, human capital are all being preserved. Things are already being managed without that bailout.

Somewhat lessens the argument for the bailout, doesn\’t it?

The Prime Minister indicates he will attempt to cap executive pay at the forthcoming G20 summit. He said that pay should reflect "hard work" and values rather than risk-taking.

"Most people want business to have the same values as they practise in their everyday life," he said. "People would rather reward hard work rather than risk-taking. They want to support enterprise and not excess. They want to support people that take responsibility and not run away from it."

The reason we hire managers is to take risks on our behalf. To essay ou capital into the turbulent seas of commerce.

Of course we don\’t want to just pay for hard work, for time serving. We would much rather pay for success, for risks aptly and ably taken. As Napoleon didn\’t say, we\’d happily pay purely for luck, that rarest of attributes.

What is the Scotchman talking about?

Completely missing from the excitement over the 25th anniversary of the miners\’ strike was the most interesting point about it. Our coal industry went into the strike with 187,000 miners and 174 pits, of wildly varying efficiency. Four years later the inefficient pits were closed and the workforce cut by two-thirds. Yet output, at 100 million tons a year, was much the same as before the strike. Productivity had trebled.

The joint leader of Unite, the union, Tony Woodley, said the crisis is now so severe that a major car plant faces the threat of immediate closure.

Quite. It\’s just what he car industry needs too.

There\’s massive over capacity globally…..and this is nothing to do with the credit crunch either.

We\’ve got more car factories capable of producing more cars than anyone wants to buy at or above their production cost. Thus some of those factories should close and the various resources should be employed doing something else.

As Polly keeps telling us, we should be more like Sweden. As Polly doesn\’t keep telling us we should copy things like their absence of a national minimum wage, their absence of inheritance tax, their absence of a national health service and their voucher driven schools system.

Now while the current government is, by Swedish standards, free market, they\’re still socialists by the standards of just about any other country. But they\’ve just done one more thing that we supposedly more free market types should copy:

General Motors is slashing 47,000 jobs worldwide to shore up its home base and to assure Congress that US federal aid will save American jobs rather than leaking overseas.

The company has threatened to wash its hands of Saab after twenty years unless the free-market coalition of Fredrik Reinfeldt offers a subsidy. The pleas have fallen on deaf ears.

"The Swedish state is not prepared to own car factories," said Maud Olofsson, the enterprise minister. She accused GM of shabby tactics and attempting to hand over responsibility for its own management failures to Swedish taxpayers. "We are very disappointed in General Motors. But we are not prepared to risk taxpayers money, this is not a game of Monopoly," she said, dismissing opposition calls for a state aide as reckless frivolity.

If you can\’t make money making cars then clearly, you should stop making cars.

Oh that either Obama or Mandelson had the cojones to tell their own supplicant manufacturers where to go.

Alistair Darling was ridiculed last night after it emerged that the Treasury\’s new review into City bonuses will not be completed until the end of the year – by which stage some banks will have already partially paid out their 2009 rewards.

Thankfully we can trust a bureaucracy to act with the appropriate urgency in a crisis, can\’t we?

Advice on how to ride the downturn published on the Department for Business website tells firms that cutting hours is one way to reduce overheads and ride the economic storm.

Wages are a variable cost, overheads are by definition not variable costs.

And, err, the department of he government supposed to deal with business matters doesn\’t know this?

Or should we comfort ourselves by noting that three journalists between them don\’t know this?

So, add together these two things.

1) We\’ve got a recession and shops are going bust all over the place. There will be, therefore, any number of places that can be taken up on month by month or even week by week rents.

2) We\’ve got the ban on incandescent light bulbs. But this isn\’t a *legal* ban. This is a *voluntary* ban. One that current retailers will of course obey, for they have long term interests. But an upstart working on monthly rents and for the short term wouldn\’t give a shit about such a *voluntary* agreement.

Thus, buy a few containers of incandescents, take up a month by month shop lease and start selling.

I know where to start looking for them wholesale (I am, after all, already in the light bulb industry) and I\’m also pretty sure I can get such a plan into the newspapers.

So, anyone interested in having a go?

The US Senate rejected last night a $14bn bail-out plan for the ailing US car industry,

Bloody right too.

Chapter 11 is the right route.

Here\’s why.

Republicans refused to back federal aid for Detroit\’s beleaguered Big Three – GM, Chrysler and Ford – without a guarantee that the United Auto Workers agree to wage cuts to bring their salaries into line with Japanese carmakers by the end of next year. The UAW refused to do so before its current contract with the carmakers expires in 2011.

Everyone\’s going to have to take a haircut here. The shareholders wiped out, the bondholders taking a loss….but so too do the workers have to take a loss. That\’s why Chapter 11, that\’s the system designed specifically to enable such losses to be shared around.

I believe the appropriate response is, "how exactly did that czar-thing work out for Russia?"