David Prosser's Outlook: Darling can't play the Rock blame game</i>

Another row at Sports Direct; Facebook is fun, but not at that price
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The Independent Online

Whatever your politics, it's difficult not to feel a modicum of sympathy for Alistair Darling – he couldn't have become Chancellor at a more inopportune moment. The public finances, stretched to the limit by the government borrowing Mr Darling inherited, look even dicier in the context of the global economic slowdown most commentators now expect. And within months of taking office, the new Chancellor has had to cope with the first run on a bank in living memory.

It's not as if Mr Darling has the luxury of blaming his predecessor for his woes. So it was that the Chancellor yesterday mounted a staunch defence of the tripartite authorities (copyright Gordon Brown, 1997) responsible for regulating banks and maintaining financial stability.

Yet Mr Darling's support for an arrangement that failed to prevent the Northern Rock crisis isn't simply based on political expediency. The biggest worry about a system in which the Treasury, the Bank of England and the Financial Services Authority are tasked with maintaining stability is that key roles in the task fall between the cracks through miscommunication.

In fact, all the evidence is that these authorities did a perfectly good job in communicating with each other.

The more fundamental problem was that one of them, the FSA, dropped the ball in its dealings with Northern Rock.

Why pick on the FSA in particular? Simply because it was the body with the primary responsibility for policing the activities of Northern Rock. It was the regulator that should have stepped in at the first warning signals from the bank, long before the crunch that caused the crisis in August and September.

Make no mistake, those warning signals existed. Three years ago, for example, Northern Rock promised to reduce its reliance on the securitisation markets for capital funding, following a nasty little profits warning. In fact, it subsequently increased the funding raised this way. Moreover, the FSA was telling Northern Rock to increase the severity of its "stress tests" well before the current crisis, anticipating correctly that the bank's risk management models were not sufficiently robust.

The defence of the FSA, repeated again by Mr Darling yesterday, has been that no one could have anticipated a situation in which credit markets would come to a complete standstill. Yet there have been plenty of warnings about the effect of a liquidity crisis on British banks – from those much-maligned ratings agencies, for example, and even the Bank of England itself. Northern Rock has clearly not been blameless in its demise, but regulators exist to protect the public interest in such situations (and to protect banks from themselves). On this test, the FSA failed and at a cost that is still rising. The Bank of England released figures yesterday which suggest Northern Rock has borrowed a further £4.7bn from it in the past week.

Naturally, however, the Chancellor felt no more inclined to criticise the FSA – another of Gordon's inventions – than he did the tripartite arrangements. Mr Darling must be wondering what other nasties the Prime Minister has left lurking in the Treasury cupboards.

Another row at Sports Direct

More fun and games at Sports Direct. On the face of it, the retailer's hiring yesterday of two new independent non-executive directors looks a breakthrough for a company repeatedly criticised for its corporate governance. But as ever with Sports Direct and its founder, the billionaire Mike Ashley, there's a row brewing.

Joining the board are Malcolm Dalgleish, a retail property expert, and Dave Singleton, a former senior executive at sports company Reebok. Both men have impressive credentials, though they also have histories of dealing with Sports Direct, which might raise a question or two about their independence.

Leaving those doubts aside – and there's no reason to think either man will act with anything but total integrity – it is the manner of their appointment that will raise yet more eyebrows. As Messrs Dalgleish and Singleton join the Sports Direct board, Chris Bulmer is resigning. Ms Bulmer has been serving as Sports Direct's only non-exec since the resignation earlier this year of the chairman, David Richardson, who quit following a series of rows with Sports Direct executives over its handling of relationships with the City.

The timing of Ms Bulmer's resignation is no coincidence. She is leaving after a run-in with Mr Ashley and Simon Bentley, Sports Direct's acting chairman. Mr Bentley has still not managed to find a suitable candidate to replace Mr Richardson, a position Ms Bulmer had insisted should be filled before the appointment of more junior non-execs.

When two candidates for that job ruled themselves out of the role earlier this week, Mr Bentley asked Ms Bulmer to convene a nominations committee to discuss the appointments of Mr Dalgleish and Mr Singleton. And when Ms Bulmer pointed out that she believed Sports Direct should first appoint a new chairman, she was outvoted by Mr Bentley and Mr Ashley.

It's a tangled tale, but the over-riding theme is that Sports Direct is continuing to operate with little regard for the standard practices of good corporate governance. The extent to which that matters depends on your perspective. Mr Ashley and his colleagues insist they are getting on with the job of running the company and have precious little time for such trivialities. Shareholders, on the other hand, are entitled to complain that Sports Direct is now trading at less than half the price it floated at back in February.

Some of that collapse is down to a difficult trading environment for sportswear retailers. But at such times, companies need a good relationship with the City and Sports Direct's seemingly never-ending controversies have left investors feeling jaded.

Still, Mr Ashley is unlikely to be losing too much sleep over the latest boardroom ructions at his flagship company. He'll be far too busy counting the winnings on the super-smart bet he has just made snapping up 15 per cent of the sportswear manufacturer Umbro. Ashley-watchers had assumed Sports Direct's purchase of the Umbro stake was a precursor to a fully fledged bid for the company, which would have been yet another controversy. Instead, it turns out to have been an inspired investment – Nike's recommended bid for the company means the stake is now worth £20m more, a tidy profit by anyone's standards.

Facebook is fun, but not at that price

Is Facebook worth $15bn – the value implied by the $240m Microsoft will pay for a stake in the social networking site? The short answer is no – the long answer is not now, and not any time soon.

Microsoft's money buys it a global deal to sell adverts on behalf of Facebook. In a market where online advertising spend is increasing exponentially and Facebook is adding several million members each month, you can see why the Californian computing giant feels compelled to follow Google, which has secured a similar deal with MySpace.

Unfortunately, Facebook, despite its mass membership, remains an exceptionally blunt tool for advertisers who have no way of targeting users likely to be receptive to their messages. As a result, their communications are ignored. Indeed, my straw poll of Facebook users conducted unscientifically yesterday suggested most had not even noticed the existence of adverts on the site.

Rupert Murdoch, a relatively late convert to the commercial merits of the internet who has nevertheless spent heavily on MySpace, said last week he could see no sense in the valuations attached to Facebook. He's right – Facebook friends should be poking founder, Mark Zuckerberg, right now and urging him to sell up while the going is so good.

d.prosser@independent.co.uk

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