Simon Evans: Show me the corporate that will pressure China
Sunday 17 February 2008
Steven Spielberg might have quit his role working on the Beijing Olympics but the chance of any business bigwigs following suit remains remote.
It would be great to see the likes of Coca-Cola or Kodak or our very own BHP Billiton breaking ranks and bringing some pressure to bear on the Chinese regime over its human rights abuses and its role in Darfur. But any such move would amount to corporate suicide.
The role of the People's Republic in the global economy is only going to get bigger, and for companies wishing to participate in the "scramble for China", the goodwill of its government is crucial.
The trouble for those sponsoring the Olympics is that they have risked the ire of those Western consumers who could express their feelings on human rights by boycotting products.
There will be plenty of Coca-Cola drinkers who may now be considering switching to Pepsi. That Pepsi is probably just as keen on doing business in China as its rival will pass them by.
But it's hard to feel sorry for any of the Olympic sponsors. By backing Beijing they are making a public statement, and if they didn't see this coming, more fool them.
And, anyway, given the importance of the Chinese market, they will probably decide to take the bad headlines and lost sales on the chin.
That is why the only business leader prepared to sign up to last week's letter in The Independent condemning China's role in Darfur was Russell Simmons, founder of record label Def Jam, who is hardly a heavyweight and has little to lose given the endemic music piracy in the People's Republic.
Companies are keen to talk about corporate responsibility and green issues just now. But when it comes to China, money is the only thing that matters.
Is this when the AIM express finally hits the buffers? There might have been sunshine in the City of London earlier this week but the talk among senior lawyers and bankers working in AIMland was relentlessly downbeat.
Unlike the City's young-buck brokers, many of whom haven't experienced a downturn and are still freely spending bonuses they are not going to earn, those at the top know what a squeeze looks like. And we are in one.
The long pipeline of Alternative Investment Market flotations, on which Britain's small and medium-sized brokers have grown fat over the past few years, now appears to be blocked.
While the London Stock Exchange will probably weather the storm – AIM being a relatively small part of its overall business – a number of those brokers will not.
The "casino capitalism" tag ascribed to AIM by an envious American regulator last year was an unfair one but the mettle of the junior market and those who serve it will be tested severely in the coming months.
Unfortunately, too many brokers have become addicted to flotation revenues and have forgotten about the importance of holding companies' hands when they have reached the market.
The margins for this type of old-fashioned business may not be as high, but investors would be thankful for it.
How fortunes change
If last year's battle for insurer Resolution was characterised as a boxing match then Pearl's Hugh Osmond should be standing arms aloft looking down at the bloodied figure of Standard Life's Sandy Crombie.
Standard Life's attempt to buy Resolution, which included an embarrassing rap over the knuckles from the Takeover Panel, was viewed as amateurish and Mr Crombie, the financial services veteran, as clueless.
But fortunes can change quickly. On Thursday, Standard Life managed to sell off an annuity book, relieving itself of £6.7bn worth of so-called longevity risk and eliminating a major drag on its share price.
A note from broker Collins Stewart recommended buying the stock and praised the "progress turning the business around". The hordes of mums and dads who bought shares in the group at demutualisation can now breathe a little more easily.
In contrast, Mr Osmond suffered a rotten week. His big deal won't be finalised now until well into next month amid continuing rows with his partner Royal London – and that has wiped 8 per cent off the value of Resolution's shares. The founder, Clive Cowdery, has already sold up.
Meanwhile, it looks increasingly like Mr Crombie has dodged a bullet. He might not have been skilful but, thankfully for his investors, he has been lucky.
Margareta Pagano is away. Simon Evans is deputy business editor
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