British Gas needs a bid to end its malaise

COMMENT

Being economical with the actualit seems to come naturally to privatised utilities, but British Gas appears to have taken it a stage further and developed it into a fine art. Its first complete disclosure of directors' remuneration, published yesterday, reveals a company scandalously prone to distortion of the truth. Cedric Brown, in his evidence to MPs, asserted that the increase in his total remuneration was 28 per cent, not the reported 75 per cent, a figure he described as just the change in basic pay.

The difference, British Gas insisted right up to last month, was a result of a change in 1994 to a higher level of basic pay accompanied by lower bonuses. Overall remuneration therefore rose much less dramatically, Mr Brown and his paid mouthpieces said.

This claim is simply not true. The report lays bare the plain fact that Mr Brown's remuneration rose 71.2 per cent between 1993 and 1994, almost as much as the increase in his basic pay. The attempt to minimise the award now proves to have been a cynical exercise to bamboozle the public, the press and the commons employment committee.

Lurking in the footnotes, it is just possible to piece together the twisted logic that allowed British Gas to put forward 28 per cent as the appropriate figure. It happens to be roughly the percentage increase Mr Brown was given over and above the £388,852 he would have received in 1994, if the old bonus system had been continued.

This is a ridiculous way of looking at things, since it measures a pay rise on top of a pay rise in the same year. The figure of £388,852 is already more than £100,000 higher than Mr Brown earned in 1993.

A company so cavalier with the truth is suffering from a deeper malaise than an inability to get its public relations right. Mr Brown has embarrassed even the senior businessmen who have been defending him in public on the grounds that his rise was "only" 28 per cent. It is about time this deeply unhappy company was put out of its misery. Let's hope the rumours about a bid from either British Petroleum or Hanson turn out to be true.

Hollywood is harder than it looks

Can the Canadians do any better than the Japanese at owning a Hollywood studio? That is a question Edgar Bronfman Jr., chief executive of the drinks company Seagram, may soon be in a position to answer.

The Hollywood experience of the Japanese electronics companies Sony and Matsushita has not been happy. Both bought their respective stakes at very high cost and at altogether the wrong time, when the dollar was much higher than today and when budgets for big US movies were spiralling ever upwards.

Both Sony, which bought Columbia, and Matsushita, which gobbled up MCA, were convinced that vertical integration in the entertainment business was the clear avenue to take. The never very convincing logic of the deals was that there was benefit to be had from owning a piece of the whole process, from film studio to VCR, from music recording studio to CD player.

Few other large companies ever accepted this as a reasonable strategy. Instead, large media companies are today concentrating on copyright protection and efficient distribution. Laying a technological bet that cable will do better than satellite, or that video tape will survive the arrival of video on demand, holds little interest. Likewise, most hardware manufacturers realise it will take all their management expertise and R&D funds to stay abreast of changing technology. If Matsushita wants to succeed, it needs to stick to what it knows best: electronics.

There are exceptions, of course. Philips Electronics is both a big manufacturer and a growing player in movies and music, through its PolyGram subsidiary. Can Seagram be an exception too?

This may take some doing. Seagram's undoubted skill lies in marketing, branding and distribution into high street shops and elsewhere. Some of these talents can be put to use in the music and film-on-video business. But Seagram has no record in film production, music recording and theme parks. Edgar Bronfman is known to be a believer in "multimedia", the exciting new world of on-line services, movies-on-demand and other elements of the information superhighway. Whether owning MCA is a way into this emerging and still fragmented market remains to be seen. Mr Bronfman may have an easier time than Sony or Matsushita running an American studio but there is little outward sign he understands Hollywood any better than the Japanese.

The test for the policy commission

Diehard Tories may dismiss the Commission on Public Policy & British Business, which had its first session yesterday, as the world of industry cuddling opportunistically up to the next Labour government, but that is only part of the story.

Indeed, the charge is such a likely one that the commission, set up by the Institute for Public Policy Research, the left-of-centre think tank, went to considerable lengths yesterday to distance itself from Tony Blair. It pointed out that - unlike the Commission on Social Justice - it has not been set up on the Labour leader's initiative.

While Lord Hollick, the Labour peer and managing director of MAI, is a prime mover behind the commission, and John Monks, general secretary of the TUC, is a member, it has also attracted figures who can hardly be described as Labour groupies.

These include Bob Bauman, chairman of British Aerospace, George Simpson, chief executive of Lucas, and Sir Christopher Harding, chairman of Legal & General. John Kay, chairman of London Economics, who has recently been defending the City against newly fashionable charges of short-termism, is also a member, as is Professor George Bain, principal of the London Business School - once highly influential in Margaret Thatcher's thinking.

Probably the best way to look at the commission's work is as an attempt by the centre left to cover the same ground as Michael Heseltine's competitiveness White Papers. Even the commission's brief - to examine tax, training and education, competition, corporate governance, social policy, regulation, finance and research - reads like the chapter headings of Mr Heseltine's White Paper. The test of whether the new commission does its work effectively is whether it produces policies that a Labour government can embrace and a Tory one will be tempted to steal.