Outlook: Rod Eddington gets the dog while Cassani has the cream

Don't blame the City; Punch Taverns

It's enough to drive a chief executive to air rage. Even if Rod Eddington succeeds beyond his wildest dreams in pulling British Airways out of its nosedive, he will earn just a fraction of the money Barbara Cassani has made out of Go.

The BA share price would need to rise more than twenty-fold before Rod's share options were worth the £9.5m Ms Cassani pocketed last week after the no-frills airline was sold from underneath her. What makes the comparison all the more galling is that, for all her undoubted talents, Ms Cassani owes her good fortune entirely to BA. She received a big fat dowry to launch her no-frills airline in the first place, and paid not a penny for her 4 per cent stake when the management subsequently bought the business from BA.

Still, Rod has the kudos of running a flag carrier with 40 million passengers, which must be worth something, as well as the consolation of knowing that if he is doing a good job then the employment prospects of another 53,000 BA personnel are that bit more secure. There has been a lot more stick than joy in the BA cockpit since the affable Aussie took the controls two years ago. Even yesterday's better-than-expected figures had the gilt taken off them by Dick Cheney's warning that another 11 September-style atrocity was a virtual certainty.

The £200m loss annual loss reported by BA yesterday wasn't as bad as it might have been – analysts were fully expecting a lot worse, and in the final quarter of BA's financial year to the end of March, traditionally the company's weakest, the airline actually made an operating profit. Revenues are still falling but costs are shrinking faster, which means that when the banker's shuttle across the Atlantic resumes normal service, BA ought to start making money all the time.

But as everyone from Mr Cheney to BA's chairman Lord Marshall keeps warning us, the outlook remains uncertain. This, as BA remarks, makes the visibility of earnings poor, which is another way of saying that it has very little idea how good or how bad the summer season is going to be. Meanwhile, Mr Eddington has the challenge of turning a £240m loss on BA's short-haul European routes into a profit in the face of a more powerful easyJet and a recharged Ryanair. If he can crack that one, he will have earned his keep – not that it would butter many parsnips in the Cassani household, of course.

Don't blame the City

As a recipe for chaos, Sir Iain Vallance's suggestion of "one man, one vote" at annual meetings takes some beating. As things stand, the system works on the basis of one share, one vote, which in equity is plainly the right way of doing things. The former BT chairman none the less reckons governance standards would be enormously improved if every shareholder had an equal say. It's hard to see how. Many agms would be reduced to pure farce. Directors would be repeatedly ousted, remuneration packages overturned, auditors sacked and dividends recklessly increased.

And that's before you even begin to think about all the loony single-issue causes that companies would have forced on them as policy. If Hartlepool can elect a man dressed as a monkey as its first mayor, then the same thing could happen at British Telecom. Some might reasonably think this an excellent proposition, but it is hardly a formula for good corporate governance.

Sir Iain is right about the parlous state of shareholder democracy. He's also right about the manner in which vested interest in the City tolerates poor practice and promotes sometimes damaging strategy in the boardroom. But it is also a good deal more complicated than he makes out, as the disastrous performance of BT in the last four years of his reign, culminating in the humiliation of a rescue rights issue, bears painful witness.

For years BT resisted persistent calls from the City to restructure the balance sheet and pay out what was then seen as surplus capital to shareholders. No way, came the reply. The company needs the money for investment purposes. Not much evidence of the City forcing reluctant directors to do what they didn't want to there. Ironically, had BT followed the advice of analysts such as James Dodd of Kleinwort Benson and handed over the loot, the ruinous profligacy of later years might have been avoided.

Eventually the City changed its mind, and as the technology bubble reached its zenith, BT was urged to go out and spend, spend, spend. But again, by the time BT got round to entering the fray with conviction, it was already too late. Sir Peter Bonfield, then chief executive, couldn't understand it when he was castigated in the City for the king's ransom he paid to buy out the minority in Viag and wholly finance its bid for a 3G mobile licence in Germany. But that's what the City asked me to do, he whined, even though the effect of the deal was to put his company in severe financial peril.

It is not the City's fault when companies so mismanage themselves that they are forced to come cap in hand to the financial markets for a bailout. Indeed, were it not for "institutional vested interest", BT would now be in the hands of insolvency experts. Only weak managements allow vested interest in the City to boss them around with every latest fad. Good management leads from the front, and is generally supported in doing so, however unfashionable the furrow they might be ploughing.

Punch Taverns

If at first you don't succeed ... less than a week after humiliatingly pulling its stock market flotation, Punch is back, this time with a lower price (230p against last time's bottom-of-the-range 250p), and a smaller float (£174m against £250m). When Punch abandoned the initial public offering there was much macho chest beating about the decision. We don't need the City's money, said its sponsors. If investors don't want to pay up for a decent business with sound prospects, then they can go take a hike, they said.

Over the weekend, wiser counsel prevailed. The company needs the new money after all, it would seem, and is now being forced to swallow its pride to get it. This time around it seems Punch will succeed. Exactly the same amount of new money is being raised, in order to avoid the charge that it was being unnecessarily greedy last time, but investors will get more of the cake and existing shareholders will sell less. As a result, investors have resisted the temptation to draw blood by rebuffing Punch again. They've already played a good game and know when to throw their hand in.

The truth of the matter is that to carry on growing as planned, Punch needs a share listing and the clout in capital markets that goes with it. If Punch had obstinately refused to come back to the table, the name would have become tarred with the brush of failure and the company would have found it hard to interest investors for some time to come. Punch has been beaten to the punch, so to speak, by the superior firing power of the publicly quoted Enterprise Inns on several acquisition opportunities over the past year. To compete on an equal footing it needs this listing. Compromising was the grown up thing to do. The IPO market may still be open for business after all.

jeremy.warner@independent.co.uk