There is at least one man who is unlikely to share the hostility commonly felt towards Tony Hayward, the embattled boss of BP. Two months ago, in the wake of the disastrous collapse of Prudential's deal to buy the Asian assets of AIG, the knives were out for the British insurer's chief executive, Tidjane Thiam. But it seems the world can cope with only one "should he go or should he stay?" drama at a time. Since the speculation began to mount that Mr Hayward would have no choice but to fall on his sword over the Gulf of Mexico oil spill, the pressure on Mr Thiam has eased.
The oil man has, in other words, done Prudential's boss quite a favour. Indeed, the scale of the BP disaster also sets the insurer's mishap in context. Next to an environmental catastrophe that has cost lives and left BP with a bill running into billions of pounds, Prudential's failure to persuade shareholders to back its management's expansion plans looks pretty trifling, even if it did cost it several hundred million in advisers' fees and contractual penalties.
The relatively limited impact of Prudential's troubles also explains why, in the longer term, Mr Thiam has a better chance of keeping his job than Mr Hayward. If the Prudential boss can go on generating improving financial performances, as he has begun to do, he should, in time, be able to put this debacle behind him. It will be harder for Mr Hayward to do so, having seen his relationships in the US turn so poisonous, and facing bills that will continue to arrive for many years to come. Interestingly, however, the whispers in the City in recent days have suggested that just now, the chairmen of BP and Prudential should have more reason to worry about their jobs than their chief executives. BP's Carl-Henric Svanberg and Prudential's Harvey McGrath could prove to be the sacrificial lambs that critics of their companies are demanding.
There are some specific reasons for this. At BP, Mr Svanberg has been deeply unimpressive for much of this crisis, barely appearing in public during the early phase, and continues to look out of his depth. At Prudential, meanwhile, Mr McGrath is under fire for having failed to rein in his young chief executive. Many in the City rate Mr Thiam highly and point out that there is not a great pool of talent in the life-insurance industry from which to draw a replacement. It might instead be better to be shot of the chairman.
Leaving aside the merits of these particular cases, however, we should welcome the fact that in these post-credit-crunch days, when a company gets into trouble, its chairman is likely to find himself in the line of fire alongside his executives.
What the financial crisis revealed about the way British companies are managed is that two many executives are free to make poor decisions because the boards to which they are supposed to work are too supine to stop them. It is about time we held the chairman and his fellow directors to account.
The markets are not all sunshine and light
What a difference a week makes. Seven days ago, world stock markets were preparing to open following an extended period of dismal performance and some frenzied talk of "death crosses" – a formation of moving averages of index gains or losses that sends technical analysts, or the chartists, into a panic. Yet here we are on Monday, wondering whether the markets can sustain the gains of past week, during which the FTSE 100 index posted on five days its best increase for a year.
Unfortunately, it is difficult to explain, let alone justify, the sudden uplift of confidence among equity investors. Even the positive straws in the wind last week came with some pretty unpleasant caveats attached. The International Monetary Fund's upgraded forecasts for global economic growth, for example, were accompanied by downgrades of its estimates for the outlook for many countries, including the UK, and a fresh warning about the possible impact of problems in the eurozone. And talking of Europe, those stress tests for the Continent's 90 or so largest banks may have calmed the nerves for a moment or two, but they hardly look convincing.
Moreover, there was plenty of less happy economic news that you might have expected to unnerve the market, notably in the US, where the services sector does not look to be in good shape. Maybe it was the sunny weather that persuaded London-based traders at least to come to work in a more optimistic frame of mind. Whatever the reason, don't bank on these temperate climes for the stock markets to last: there will be plenty more stormy outbreaks to come.
The risk of an Office of Budget Irrelevance
Sir Alan Budd broke his silence during the weekend to insist that his Office for Budget Responsibility (OBR) had not changed at the last minute its assessment of the impact on jobs of public spending cuts for any reason other than a shift in methodology. Politics did not come into it, he promised.
That's as maybe, but Sir Alan's comments are unlikely to be enough to put an end to the doubts that now surround the OBR. It is simply too close to the Treasury for people to be confident about its independence.
It may be time to begin thinking of Sir Alan's premature departure as a blessing in disguise. If the Chancellor can find a high-profile replacement who is universally admired – Robert Chote of the Institute for Fiscal Studies comes to mind – and quickly, all may not be lost. If not, the OBR runs the risk of becoming irrelevant.
Comments