Trouble at Barclays and Marks & Spencer boils down to failures in corporate governance-againby John Plender / January 20, 1999 / Leave a comment
What a latterday Prospero is Alan Greenspan, chairman of the US Federal Reserve. With a wave of his wand he dispels the financial storms and spreads amnesia around the financial community over the troubles in Asia and elsewhere. The result is a new lease of life for an ageing bull market. The folk in London and Wall Street have thus returned to their favourite pastime: extracting huge fees for marriage broking around the corporate sector.
The most impressive of these proposed marriages is between Exxon and Mobil, which re-assembles what the US anti-trust authorities had torn asunder in the days of John D Rockefeller. It is a reminder of just how durable, in the course of this century, has been the tenure of big oil at the top of the corporate league tables-despite the efforts of the regulators.
General Electric, which vies with Microsoft for the title of the world’s biggest stock market capitalisation, was also one of the giants, alongside Rockefeller’s Standard Oil, at the start of the century. But unlike Exxon, GE has completely changed its spots, having conglomerated itself out of mere electricity into aerospace, financial services and goodness knows what.
In contrast, the oil giants’ attempts at diversification have failed. Yet the black stuff continues to provide a good living. How lucky for the Exxons, Shells and BPs that industrialisation-a story which runs and runs-is so energy-intensive, and that exploration and refining are so capital-intensive. The barriers to entry give a huge advantage to those who dug their wells first. Yet the game is growing tougher. A collapsing oil price forces the giants to focus on cost-cutting as much as on revenue generation. And that is the rationale for much merger and acquisition activity.
Too many cooks at Barclays
For bosses, unlike oil companies, life is becoming tougher and shorter-witness the departure of Martin Taylor from Barclays after five years, when he had been expected to hang on for ten. His departure demonstrates, once again, that wonky corporate governance is a sure sign of trouble ahead.
Not only did this chief executive have to cope with an executive chairman, Andrew Buxton, but Buxton also insisted on appointing an executive deputy chairman, Andrew Large, Britain’s former chief financial watchdog. Large had to look around for ways of justifying his existence and his pay, which inevitably involved second-guessing Taylor.
With too many executive cooks around…