2012: A humbling year for the powerful
On both sides of the Atlantic some big names, from company bosses to giant corporations, were brought low by political pressures, investor anger or outraged public opinion in 2012
The UK view by Jamie Dunkley
Hester in the hot seat
Finding a new job is high on the agenda for many at the start of a new year. None more so than Stephen Hester last January after Royal Bank of Scotland's chief executive found himself at the centre of a storm over his near-£1m bonus. With taxpayers still smarting from the bank's nationalisation at the height of the financial crisis, the Prime Minister was urged by Opposition leader Ed Miliband to block the payment, despite the fact that the bank's difficulties arose under previous management.
Mr Hester eventually bowed to "enormous political pressure" and waived the bonus. He has already forfeited his 2012 payout following an embarrassing computer glitch at NatWest in the summer. Wonder what will be top of his wish list this new year?
Investors on the march
Mr Hester later admitted he was "within inches of quitting" RBS during the bonus row. He also claimed it was a "catalyst" for the "shareholder spring" that was later wreak havoc among some of Britain's largest companies.
The revolt began in April, when 30 per cent of Smith & Nephew's investors refused to back the company's remuneration report at its AGM. By the end of the AGM season, Citigroup, AstraZeneca, Barclays and Aviva had suffered from the shareholder fightback.
Sir Martin Sorrell, chief executive at the advertising giant WPP, was given a major rebuke when about 60 per cent of investor votes were cast against his £6.8m package. Andrew Moss, Aviva's chief executive, quit after a similar refusal of shareholders to back his generous remuneration.
Barclays in the dock
Mr Moss married his sweetheart Deidre Galvin within days of Aviva's shareholder revolt. There was no such happy ending for the year's other big losers, including Kweku Adoboli, who landed the Swiss banking giant UBS with a £1.5bn rogue trading scandal in 2011. His misdemeanours landed him with a seven-year stretch in jail – the kind of place Barclays' boss Bob Diamond probably wished he could hide in when the Libor trading scandal erupted.
Barclays was handed a £59.5m fine for rigging the interbank lending rate in June, having spectacularly misjudged the public mood. The bank had hoped to be treated with leniency by becoming the first bank to settle for fixing Libor. The reality was much harsher and Mr Diamond was on his way within days.
Year of the mega-merger
The line between politics and business is blurred at the best of times, especially when it comes to issues like defence and European politics. In September BAE Systems announced it was in talks for a £30bn merger with the Airbus owner EADS. Talks rolled on for several weeks, with some big investors speaking out against the deal while others espoused its merits. Eventually, the German Chancellor Angela Merkel said "nein". Her concerns over the future of German jobs meant the merger was dead.
The outcome was more positive in the other major deal of the year, but only just. Glencore and Xstrata's mega-merger survived obstacles including price, retention packages to senior executives and Qatar's sovereign wealth fund building a 12 per cent stake in Xstrata. Qatar eventually backed the deal in November with the proviso that Xstrata's management would not receive "golden handcuffs" pay deals planned for them.
Investment bankers spent many a long night working on both deals – the perfect scenario for coffee, which was one of 2012's unlikely talking points, when it emerged that Starbucks had paid just £8.6m in corporation tax in the 14 years it had been in the UK. MPs queued up to have a go at the company and customers voted with their feet.
Starbucks eventually agreed to pay £20m in corporation tax, but other companies in the firing line, such as Amazon, were left in no doubt what taxpayers felt about their behaviour.
Where are the women?
Despite many calls for action over Britain's male-dominated boardrooms over the years, just 6.6 per cent of current FTSE 100 executives are female.
In 2012 three leading female executives announced they were quitting: Kate Swann of WH Smith, Cynthia Carroll of Anglo American, and Dame Marjorie Scardino at Pearson.
Will we finally see a female chief executive at a British bank next year? Keep delaying Stephen Hester's bonus and there might be a vacancy …
The US view by Nikhil Kumar
Smile wiped off Facebook
Hell hath no fury like investors misjudged: that sums up what went wrong when Facebook made its debut as a public company this year. Hyped as the stock market flotation of 2012, the social network's shares tanked after it went public in May. Why? Many issues are still being debated, but the basic mis-step appeared to be pitching too high. Facebook priced its stock at $38 (£23.50) a piece, which proved too rich for investors, even for a business that has become central to the way many millions around the world experience the internet. The ambition of the company and its advisers was soon proved to be misguided, as the stock began to fall in the day after listing. At the end of last week it was well below $30.
New moves at Yahoo
Talking of Silicon Valley, Yahoo went searching for another chief executive this year, and ended up poaching a rising star from rival search engine Google. Marissa Mayer was named the new boss over the summer, following the departure in May of Scott Thompson, formerly of PayPal, who left amid a controversy over an embellished résumé .
Ms Mayer, who was appointed while she was expecting her first child, has already made her mark at the business, which has had four chief executives in as many years. She signalled a greater focus on Yahoo's core products such as email – and, in a sign that she is alive to changing trends in internet usage, spoke of her intention to hire more mobile engineers. She removed the trademark symbol from the Yahoo logo, and shook up the board with the appointment of Max Levchin, co-founder of PayPal, and the exit of Brad Smith, the boss of Intuit, and David Kenny of the Weather Channel.
HP's massive write-down
Among the most eye-catching moments on Wall Street was the announcement by Hewlett Packard of a nearly $9bn write-down, most of it connected to its acquisition of Autonomy. The reason was equally startling: HP claimed that there was a "wilful effort on behalf of certain former Autonomy employees to inflate" the British software star's financial metrics, and thus mislead buyers like itself. All this, the American company claimed, hindered its ability to "fairly value Autonomy" when it paid around $11bn to buy it last year.
The allegations turned the focus not just on Autonomy's erstwhile management, but also HP and the legion of advisers on whom it relied when deciding to seal the deal.
Whatever the truth of the claims – much of what was said will be contested in court, with lawsuits already lodged and Autonomy's founder, Mike Lynch, vigorously denying the allegations – the writedown was astonishing.
A shocking departure
On Monday, 15 October, Citigroup's chief executive, Vikram Pandit, seemed to be riding high after unveiling third-quarter earnings that, though dampened by a near $5bn writedown connected to the bank's stake in the Morgan Stanley Smith Barney brokerage business, was seen as evidencing a turnaround in the financial behemoth's fortunes. But the next day, Mr Pandit announced his resignation. Why? Accounts suggested a showdown with the chairman, Michael O'Neill over issues such as the Smith Barney writedown, a shareholder vote against Mr Pandit's pay package, and Citigroup's failure to get its capital plans backed by regulators following a stress test. Whatever the precise facts, Mr Pandit's sudden ousting and the equally abrupt installation of Mike Corbat in his place demonstrated the ruthless nature of Wall Street. No one, it became clear, was immune – not even the head of one of American capitalism's most storied institutions.
Fed links rates to jobs data
Traders and investors spend hours trying to gauge the direction of interest rates. PhDs are hired to build complex models, and many dollars spent on data that might offer clues. The chairman of the US Federal Reserve, Ben Bernanke, made the game a whole lot easier this year when he announced that the Fed, which has kept rates at near zero since the financial crisis struck in 2008, would tie its decisions on the matter to the health of the US jobs market. Although he later clarified that the Fed would continue to weigh a number of factors when deciding whether to raise rates, the idea of publicly linking the direction of rates to a parameter such as the level of unemployment signalled a new approach to policymaking. The Fed, Mr Bernanke said, would only begin tightening policy and raising rates when the jobless rate falls below 6.5 per cent. He also linked policy to specific thresholds on inflation.
Signs of economic life
America's economy remains weak, but one area that did show signs of life was the housing market, the epicentre of the financial crash that tipped the US into recession in the first place. Buoyed by loose monetary policy, market indicators began flashing amber and then, soon after summer, a light shade of green: residential construction projects and figures on building permits both began to show improvement as the year progressed, while a number of banks spoke of strength in their mortgage arms.
Though eye-catching, critics highlighted the record level of support underpinning the housing sector. Near-zero interest rates and the Fed's gambit of buying up billions in mortgage securities every month have been supporting activity. But an improvement certainly seemed in motion. 2013 will tell us whether it can hold water.
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