The buck should stop with senior executives

COMMENT: 'Calls from the SFA and other City regulators for the burden of proof to be reversed so that responsible executives have to prove their lack of culpability look more and more like the right approach'

Where should and does the buck stop in organisations hit by catastrophic loss? There are two questions here, and the answers are often very different ones. After what is claimed to be a thorough investigation by Coopers & Lybrand and Linklaters and Paines, NatWest is about to take what is billed as "tough disciplinary action" against those held accountable for its pounds 50m loss on interest rate options. The man directly responsible has already left and his immediate superior has been suspended. Up to three others are to be fired and perhaps as many as half a dozen shifted sideways into other positions.

The approach generally adopted in these exercises is to root out anyone with a fingerprint on the episode - that is to say not just those who knew about what was going on but also those who negligently failed to spot it. The latter category is always the more difficult one, for those responsible for control often have a reasonable excuse. In any case it is nearly always true that organisations where this sort of thing happens have an endemic culture of poor control and cavalier practice for which the compliance department is not wholly responsible. Ultimate accountability for the management of an organisation should always lie with the top man.

So where to stop? It would plainly be ridiculous to call in this case for the head of either Lord Alexander or Derek Wanless, chairman and chief executive respectively of NatWest, notwithstanding the embarrassing nature of their assurances only days before the losses were discovered about rock-solid controls in investment banking. But what about Martin Owen, chief executive of NatWest Markets? And if him, why not Lord Alexander and everybody else in the chain of command from top to bottom?

These are difficult questions and it would perhaps be silly to generalise across the growing number of rogue trader incidents. All the same, calls from the SFA and other City regulators for the burden of proof in such matters to be reversed so that responsible executives have to prove their lack of culpability look more and more like the right approach. There was a howl of protest when the SFA first floated the idea as part of its response to the Barings collapse.

Even so, the SFA seems determined to push through some kind of rule change in the near future. Other regulators should follow suit. The sooner City executives are made to realise that compliance and control are as important a part of their function as profits, market share and the size of their bonus, the better.

Pain of the strong pound may ease soon

As the company results season gets into full swing, there will be no shortage of complaints about the strength of the pound. Psion is the latest, warning yesterday that the fact that it priced European sales in German marks would hit its sterling profits.

For the time being, exporters are taking the impact of the strong pound on margins rather than conceding market share. How long that goes on will depend on what happens to the exchange rate during the next six months. There are two parts to this debate. One is the shifting prospects for the single currency and how that will spill over into the semi-detached pound. The other is the outlook for the UK economy itself. They are tugging in different directions.

Take the euro first. Although the more thoughtful analysts now reckon that the markets have taken the prospect of a delay too seriously, given that the chances of economic recovery in France and Germany are brightening, it is clear that the European currencies are in for several bouts of turbulence between now and next spring when the key EMU decisions will be taken. As long as the pound looks more likely to stay out than join the first wave, these bouts will tend to boost its exchange rate against the mark.

However, the domestic economic situation is likely to pull sterling in the other direction. There is short-term downward pressure anyway from the growing likelihood that Ken Clarke will resist Bank of England advice to raise borrowing costs - and might even, at an outside chance, cut interest rates in a final act of pre-election desperation. On a slightly longer- term horizon, economists now reckon that a Labour government will raise interest rates but not too much because it will have a tougher fiscal policy. With US interest rates also likely to increase soon, the peak of the UK interest rate cycle should not be high and not too far away. Once the currency markets can see it they will price it in.

Put these two together, and what does it mean for the pound six months from now? City forecasts range from DM2.60 to DM2.85 - between a 5 per cent fall and a 5 per cent rise. But with the oil price falling and Ken Clarke's monetary policy not all that tough compared to our European partners, the odds must be on a decline. Company executives should sit tight, and put up with the pain a bit longer.

A dangerous race for Ecclestone

Bernie Ecclestone's plans to float Formula One have sprung a premature leak and, rather like Damon Hill during the warm-up lap in Melbourne, he and his advisers have encountered a few technical difficulties.

First off is the vexed question of what this business is really worth. Few industries are as secretive or as prone to intrigue as grand prix motor racing and Mr Ecclestone did not disappoint yesterday. No one is saying how much revenue the labyrinth of companies run under the Formula One banner bring in and Mr Ecclestone, and his financial advisers, Salomon, have not yet even constructed the vehicle that will float.

Part of the problem is that the prospectus is still at least two months away and there is plenty of rubber yet to burn before Formula One is in a presentable shape for investors. The back-of-envelope calculations being offered yesterday suggest that it could be worth something like pounds 2.4bn based on present cash flow and with everything thrown in including that Ecclestone-owned camera technology which gives armchair Michael Schumachers a driver's eye view of every hairpin.

It probably does not matter that Mr Ecclestone owns neither race tracks nor race teams. What he does own are the much more valuable television rights and with pay-per-view around the corner, even pounds 2.4bn could be a conservative valuation. The danger from his point of view is that by floating the business and exposing its true worth, Mr Ecclestone will encourage others to demand a bigger share of the cake.

The commercialisation of football and rugby has already proved that sportsmen are as avaricious as the next. Three of the 12 Formula One teams, including the present constructors champion Williams, are holding out against the current revenue-sharing deal offered by Mr Ecclestone. It would only take a Rupert Murdoch to come along with a rival plan, the money and a vast television audience to shunt the whole flotation into the pit lane.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
News
Andy Davidhazy at the beginning (left) and end (right) of his hike
video
News
Taylor Swift is applying to trademark song lyrics from 1989
people
Voices
The popularity of TV shows such as The Liver Birds encouraged Liverpudlians to exaggerate their Scouse accent
voicesWe exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
Life and Style
Parker says: 'I once had a taster use the phrase 'smells like the sex glands of a lemming'. Who in the world can relate to that?'
food + drinkRobert Parker's 100-point scale is a benchmark of achievement for wine-makers everywhere
News
i100
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

How to make your own Easter egg

Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

Bill Granger's twist on Easter Sunday lunch

Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
Joe Marler: 'It's the way I think the game should be played'

Joe Marler: 'It's the way I think the game should be played'

The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

Cricket World Cup 2015

Has the success of the tournament spelt the end for Test matches?
The Last Word: Justin Gatlin knows the price of everything, the value of nothing

Michael Calvin's Last Word

Justin Gatlin knows the price of everything, the value of nothing