CEO's Journal

First 100 days: Barack Obama

Mon, 20 Apr 2009 18:20:45 +0000

It’s shortly the landmark 100 days for CEO of the free world, President Barack Obama - the first Blackberry President. The best and most balanced summary I have read by far is Adam Boulton’s “TV President is hosting a national talk show”. This was written for News International’s Times newspaper in London and is copied below. You can also read Adam’s blog on http://blogs.news.sky.com/boultonandco

TV President is hosting a national talk show by Adam Boulton, Political Editor, Sky News

Barack Obama has become a regular fixture on US television. The President knows that he still has enough novelty value and star power to get the networks to clear their airtime and he’s grabbing every chance to dominate the agenda from the bully pulpit.

It is a class act. Although at official events Mr Obama’s message is usually scripted and read from teleprompter screens, he can talk his way out of trouble. I was moved to see the President win over US Marines at Camp Lejeune, although he opposed the Iraq war in which 4,000 of their comrades-in-arms lost their lives.

For now, his talk is invariably about the economy. Mr Obama is the most visible new president - not only because he’s a great communicator, but because Europe is blaming America for the global economic crisis and looking to Mr Obama to lead the way out it. The President’s ubiquity is designed to tell the US that it is in control of its own destiny. He must win this argument if his presidency is to succeed.

Even when the Administration doesn’t have the best arguments, or gets badly mauled, the checks and balances of the US Constitution ensure that the country’s options are debated at length; considered decisions emerge by a process of attrition. Take Mr Obama’s eye-watering, budget-busting budget. It will look very different by the time that Congress has exercised its “power of the purse”, to approve, veto or impose spending and tax proposals.

It is all so different in Britain. When the financial crisis erupted we were instantly reminded that our parliamentary democracy does not entail genuine consultation about what to do. From nationalising Northern Rock to the merger of Lloyds TSB with HBOS and the fiscal stimulus, decisions are enacted by fiat - either thanks to Labour’s decisive parliamentary majority or the Governor of the Bank of England’s right to intervene. There was nothing to be done once the announcements were made. Public attention moved on to the next emerging danger.

When the credit crunch threatened to topple Anglo-Saxon capitalism in the autumn, the discretionary power enjoyed by the British executive looked like an advantage. Gordon Brown could act while America dithered. It seemed incredible that Republicans in Congress could hold up their President’s economic rescue plan.

But Mr Brown’s pronouncements did not reverse the recession in spite of the dramatic metaphors thrown around. Meanwhile, the American body politic recognised something that others didn’t: this crisis is not an earthquake, Pearl Harbor or even 9/11. The clocks have not all stopped. This is a systemic sickness with unexpected symptoms that will take years to express themselves and be treated. All of us are threatened, but not all in one blow. There is time to talk.

And talk is what America is doing. A cacophony of politicians, officials, economists, business executives, media commentators and cable news channels constantly debate what went wrong, what needs to be done, and whether what’s been done is working.

The big reason why John McCain is not president now is that when he suspended his campaign in September at the height of his post-Palin popularity and called the nation to attention to debate the economic situation, he then found nothing to say. Mr Obama shifted his campaign from inspirational rhetoric to battling economic troubles in his acceptance speech in August. He hasn’t stopped talking since.

In only two months the new Administration has signed into law the $800billion stimulus package, published a budget that raises the federal deficit to new heights and set out policies for healthcare, housing and the banking system.

The President conceded in advance that not all his plans would work. In particular, proposals from the US Treasury have looked tentative and weak. But there’s no hiding failure and on Monday Tim Geithner, the Treasury Secretary, was forced to pacify Wall Street and revisit the Troubled Asset Relief Programme.

The Administration is also taking full ideological advantage of a crisis that calls for big government cheques. As Rahm Emanuel, Mr Obama’s chief of staff, warned in November: “You never want a serious crisis to go to waste...Things that we had postponed for too long, that were long term, are now immediate and must be dealt with.” Much of the new spending is only loosely linked to boosting the economy now. If not quite ushering in the United Socialist States of America gloatingly detected by some right-wing radio hosts, the President is shifting the economic balance, redistributing wealth by taxing the rich to expand central government support for health, education and welfare.

With anti-spending Republicans to the right of him in Congress and spendthrift Democrats to the left, Mr Obama cannot smuggle his plans through. So he goes on television to argue his case with conversational eloquence.

In Britain, it took until the run-up to Tony Blair’s third election victory before new Labour would even use the R word - “redistribution”. Mr Brown has equal difficulty with today’s R word - “recession”.

Unlike Mr Brown, the President is not implicated in the decisions that led to this mess and he can shift the horizon convincingly from the pessimism needed to get his stimulus package passed to this week’s optimism that “America will emerge from this stronger”.

Having left Mr Geithner to make his first, disastrous TARP presentation on his own, Mr Obama did not make that mistake again, bookending the Treasury Secretary’s testimony on AIG, the failed insurance giant, earlier this week with an appearance on 60 Minutes and a White House news conference. Even if the worst happens and Mr Geithner’s memory lets him down over approving executive bonuses as it did over paying his taxes, his loss would be a sideshow - in no way comparable to, say, the loss of Alistair Darling, the Chancellor, whom the Prime Minister has left to front the nasty bits of this crisis on his own.

Mr Obama is leading a great American conversation on the economy - jobs, homes and banks. He won’t win all the arguments. But this voluble President, and the wisdom of the founding fathers, are together helping the American people to take ownership of their fate with credible plans that have been tested by exhaustive discussion. Britons, meanwhile, must sullenly await what their political masters choose to throw at them.

Adam Boulton is on special assignment for Sky News covering President Obama’s first 100 days

Redemption for the Royal Bank of Scotland

Fri, 03 Apr 2009 12:16:22 +0000

I have posted below an edited version of the Royal Bank of Scotland’s public statement today at its Annual General Shareholder Meeting.

I believe the words and sentiment are so striking, so honest, that we all need to pause for a minute to read them. This is not corporate marketing spin. These words represent a profound change of direction and in my view are a watershed for all business leaders to take note of. See our previous blog on "To the G20: the answers are to be found in Scotland". This is truly the place where salvation can begin.

Let me say this publicly: Harvey Nash is proud to be associated with the Royal Bank of Scotland Group (including Citizens and ABN Amro) over the last 12 years. We have enjoyed an excellent and supportive relationship through good times and bad. The RBS team who work with us are truly world class talent. Our business, its cash flows and our trading model is well understood by the bank, indeed we have turned to the Royal Bank many times for advice in all areas of banking and cash management across the world, in the US, UK and Holland.

We are therefore delighted that RBS has sent this strong message and we support the call to stop the political "football" concerning controversial pension settlements and Board squabbles. These public arguments are deeply upsetting for us as clients and we want them to stop. We recommend that the government, the Prime Minister, the Cabinet and the Treasury take proper responsibility for their failures too, and put this behind them in everybody’s interest.

We have been commenting for some time on the new generation, (Gen Y) entering the workforce. They are the future Power of Talent, employees with different values from those associated with the 20th century. They display a zero intolerance approach to bad corporate behaviour. They reject organisations which are perceived to be greedy, polluting, uncharitable, authoritarian and corrupt. We have been warning for over two years now that they will not work for companies who don’t care about these sensitive issues.

For those who do care about values, who understand Generation Y will one day fill leadership positions all over the world, there is a bright future for their employer brand equity. RBS can begin to rebuild theirs, starting today.

Here is our edited version for Blackberry’s and iPhones-

Statement by the Chairman of the Royal Bank of Scotland 3 April 2009. The full statement can be found on www.rbs.com

Talent

Many of our employees are shareholders, and our people are, of course, the heart of our Group. They share the financial pain while also having to face a difficult period in their working lives. Like too many people right now, they are worried for their jobs and have seen the reputation of their industry and profession attacked. The majority of RBS staff in the UK earn less than £21,000 a year. They are not fat-cats or City Slickers, they work in branches, call-centers and offices in every community in the country serving our customers to a standard of service that is amongst the best in the industry.

They deserve better from their top management, and they do not deserve to share the worst of the criticisms being laid at the door of their employer and their industry.We need to retain, motivate and attract talented people to restore the fortunes of the Company. We will try to do that whilst being amongst those banks leading the industry in changing the way we operate.

Fault and blame

Only a tiny minority of staff in RBS were in any way responsible for the major credit market losses we suffered in 2008. It is remarkable that there were only a few hundred people responsible in the relevant segments of our businesses chiefly in the financial centers of London, Amsterdam and New York, most of whom have now left the Group. And this is out of a global population of around 180,000 employees.

RBS profitable

Given the complexity of the Group and the progress of integrating the ABN AMRO businesses, it is impossible to unpick the results with complete accuracy. However, that said, our estimation is that RBS would have made an operating profit before tax and goodwill impairment in 2008. In other words I don’t think there can be any doubt that the key decision that led RBS to its difficulties was the acquisition of ABN AMRO.

Remuneration and rewards for failure

Reforms have been made as we undertake a comprehensive review of all remuneration policies in 2009. The new approach will I think be seen by most reasonable observers to have balanced the difficult conflicting issues we face. Reward will be longer term and more directly aligned to shareholder interest rather than short-term return. Our new Chief Executive has, at his own insistence, a clause in his contract ensuring that he will receive no reward if he leaves the company for reasons of his own failure.

Culture, corporate values and poor practice

We must make other changes. In particular our risk processes and aspects of our management culture must change and will.And in a more symbolic way some of the practices that were accepted at the height of a boom when the Bank was recording £10bn profits, cannot be acceptable now if indeed they ever really were.The CEO and his team are moving quickly to do what we can to demonstrate that the Company recognises its position and is changing.Would we choose Formula 1 sponsorship if we were starting from here? No.Should we retain a corporate jet? Its up for sale immediately.

The Future

I believe we should bring an end to the public flogging and focus on the good and enduring people and businesses of RBS and allow them to earn our way back to success. The past is done but this company is not. The legacy of the last year will stay with us but now is the time to look forward.

We have the foundations in place to rebuild the Group to standalone strength and everyone at RBS is committed now to doing just that.

Interesting facts about RBS

·+ 15 million UK retail customers

·No 1 bank for small business and corporates like Harvey Nash.

·Top 6 in the world for Foreign Exchange, Top 10 for International Bonds.

·Top 5 global transactions services provider

·Ulster is Top top three in Ireland

·Citizens is in the Top 10 in the US

·No 1 in the UK for Private Banking

To the G20: The answers are to be found in Scotland

Wed, 01 Apr 2009 16:27:56 +0000

There are many things that are unique and different in Scotland.

This was not always appreciated by the world, particularly across the Atlantic where you may be forgiven for thinking it could be the next Donald Trump resort.

In fact it’s a wild and wonderful country which has over the centuries led the way in banking and financial innovation. The Scots have made their presence felt in the financial services sector on this island for over 300 years now. Even today the national character is positively associated with thrift, prudence and caution.

The Royal Bank of Scotland became the first bank in the world to offer an overdraft in 1728. Scottish banks still retain the right to issue their own banknotes which are widely circulated and may be used as a means of payment throughout Scotland and the rest of the United Kingdom; although they do not have the status of legal tender, but rather promissory notes. Unfortunately in a cruel twist of irony both their large banks, Royal Bank of Scotland (chartered 1727) and the Bank of Scotland (established 1695) have effectively been nationalised with taxpayer support as a result of the financial crisis. The "promise" was spectacularly broken were it not for the Bank of England’s intervention.

Then there is the Institute of Chartered Accountants of Scotland (ICAS). Did you know it was the world’s first professional body of accountants, receiving its Royal Charter in 1854 and was the first to adopt the designation "Chartered Accountant" and the designatory letters "CA". As a CA(South Africa), not only do I have plenty of friends in the stalls of Murrayfield, but I also share the sense of ICAS history having qualified as a Chartered Accountant (SA) myself over 17 years ago. These ancient roots bind me to a place 6,000 miles from the country of my birth.

All of this history came together for me personally when Harvey Nash co-sponsored an excellent BBC IR Society event "The Inside Story of the Economic Crisis’ with Robert Peston and Douglas Fraser. Douglas is the Business Editor for BBC Scotland and of course all BBC viewers will be acquainted with its current superstar journalist, Robert Peston. The event was professionally chaired by the Chief Executive of the Institute of Chartered Accountants of Scotland, Anton Colella. The IR Society and Tayburn Corporate Reporting were appropriately supporting the corporate governance agenda.

But it hasn’t been a good week since then. This nation’s image has been hurt with the collapse of the Dunfermline, Scotland’s largest building society and the violence against the Royal Bank of Scotland branch in the City of London. All this on the day the leaders of the world’s most important nations came to London.

This got me thinking as the G20 protest march passed in front of our Mayfair offices. The challenge facing the G20 today is not really the future of Anglo-Saxon capitalism. The really big issue is that in spite of Brown and Obama’s rhetoric - no doubt positioned carefully to stop the French from leaving prematurely - the debate needs to focus on corporate behaviour and values. Robert Peston certainly understands what created the crisis, he has won awards for describing the unfolding drama but what does he think the future will look like?

How did the once great (Scottish) banks with pages of award winning governance jargon collapse so spectacularly, and how do bankers all over the world who have received generous bonuses and pensions find redemption and salvation amidst the failure and chaos.

The answer may be closer to home than we think. Presbyterianism, another Scottish institution, places great importance upon education and life-long learning, generally considering that the point of such learning is to enable one to put one’s faith into practice. Apparently Presbyterians generally exhibit their faith in action as well as words, by generosity, hospitality, and the constant pursuit of social justice and reform according to Wikipedia.

Let’s learn from this crisis. And let’s reject a failed box ticking approach to governance in favour of leadership with strong character and personal values. We can no longer avoid the moral question.

We may even find ourselves back in a spiritual Scotland of the past, the Reformation. Where sound judgment, thrift, prudence and putting one’s faith into action in the interests of a broader agenda for social justice was the norm.

That may be the very place, for the banker, the politician, the hedge fund manager, or even the modern CEO, to find salvation.

Click on Robert Peston’s "million hits a day" blog to get the inside track on the G20 and the financial crisis as it unfolds. www.bbc.co.uk/blogs/thereporters/robertpeston/

Welcome: The first Blackberry President

Mon, 19 Jan 2009 09:42:53 +0000

“I’m still clinging to my BlackBerry,” Mr. Obama said last Wednesday in an interview with CNBC and The New York Times. “They’re going to pry it out of my hands.”

The Times in London reports extensively on the up and coming Presidential inauguration. Great American presidents have emerged from the great challenges. Rees-Mogg says "The greatest president of the 20th century was Franklin Roosevelt who had to overcome the challenges of the Great Depression and the Second World War. The greatest president of the 19th century was Abraham Lincoln, who had to meet the challenge of the Civil War. The presidency of Barack Obama will also be shaped by the challenges he faces; he has to overcome the depression that began in 2007. He also has to create a foreign policy that will restore international confidence in the United States. Apparently, according to insiders, Obama has taken Roosevelt and Lincoln as his chief role models, and it is the image of Lincoln he has chosen to emphasise as he prepares for his inauguration. The first black president naturally feels kinship with the president who abolished slavery. Mr Obama has formed his Cabinet on Lincoln’s principles, appointing the strongest individuals, whether or not they agree with each other and whether or not they have been his rivals for the presidency. Mr Obama is said to have been reading Team of Rivals, an excellent book on Lincoln’s choice of colleagues written by the Pulitzer prizewinner Doris Kearns Goodwin."

Obama, like Lincoln and Roosevelt, is a natural orator of exceptional gifts, his speeches allow him to persuade the public to support his policies with gifts of eloquence, humor and sympathy. Mr Obama has already said that the recession will be the biggest problem for his new administration and this is likely to prove correct.

President Obama, as he will be tomorrow, has changed everything about America already - not just by being what he is but by being who he is. He is not just the first black president. He is the first Blackberry president. And the first President to mobilise Generation Y in such an impressive way last year. It is said that when George W. Bush hit the campaign trail in 2000, the personal possession he brought with him from home was his feather pillow.

Tina Brown, editor in chief of www.thedailybeast.com says what the pillow was to Mr Bush the Blackberry is to the new President. Mr Obama has been resisting the security agencies’ attempts to pry his fingers from around his beloved electronic device. His fight to keep his Blackberry shows how strongly he doesn’t want to be cut off and how much at home he is with his personal communication and technological devices. Like Generation Y, President Obama will be connected. Wired and online. Of that we can be sure. When he applied his skill to the internet, 12 million volunteers were literally conjured out of the air. Not only could he deploy his web army to distribute his leaflets, raise his funds and sell his policies, he could speak directly to them whenever he hit a snag. When he accepted the Democratic nomination, tens of thousands held up their glowing mobile phones like candles at a rock concert. Like Lance Armstrong’s use of Twitter to control what his fans hear about him from the traditional media, these "rock stars of the people" can set and control their own personal agendas. That’s the real power of the current technology.

But Mr Obama was not just ahead of the curve in the way he understands the web. He understands instinctively that the old structures have to be broken down and reassembled if we are to compete in the new world. The same will prove true of business. The election delivered a seismic shock not just to the political world but to the top of Fortune 500 corporations. Call it the Obama effect - a sudden hunger for creativity and innovation, a recognition that we have to be less "massive" and more nimble. It may have come too late for some, as we watch in unbelief at the bankrupt auto dinosaurs sending their leadership to Washington with begging bowls in corporate jets.

The mantra of the next decade will be more consensual, less top-down, more cellular, less gigantic. By the end of this new presidential era every CEO who boasts that he has no time to use the internet, or cannot understand what the iPhone revolution has done to business, will be gone.

Right now, however all eyes are on Washington. Harvey Nash has sent technical expertise from its Nash Tech research facility in Nuremburg to the inauguration ceremony to support a US based client.

Many people already feel that expectations have risen into the stratosphere, and that the new President will never be able to meet them. There must be a high risk of "expectation deflation" as the global economy deflates in 2009.

But, if anyone can renew the progress of the American people, it will be the Blackberry President.

A hard landing is made easier with a good pilot

Fri, 16 Jan 2009 16:37:19 +0000

I spent this morning talking downturns, job losses and economic recovery with CNBC on their ‘Strictly Money’ program*. See below and click on www.cnbc.com for more information. I was joined by Sir Andrew Cahn, Chief Executive of the Government’s Trade & Investment (or BERR).

We covered a range of topics but the speed and severity of job losses associated with the global economic downturn dominated the opening question. In the UK, during the first four days of this week, 8,000 job losses have been announced by major corporations - many still in Financial Services. The actual figure will of course be much higher, if one includes small and mid sized enterprises who don’t tend to announce. Totalling over 10,000 per week or half a million people losing their jobs in the UK alone before the end of the year feels catastrophic, which of course it is. The government’s own estimates are one million will be added to the unemployment benefit list by mid 2010.

Across the Atlantic, a total of half a million Americans were made redundant by US employers in December, and 3 million jobs have been lost during 2008. The mounting toll of job losses drove the unemployment rate in the world’s largest economy up to a 15-year peak of 7.2 per cent last month amid predictions that it will leap to 9.5 per cent or more by the second half of next year. Europe has a built in lag factor, as structurally the labour market is more inflexible therefore the real impact of the credit crunch has yet to bite. Unfortunately, if one looks back historically, that means any expected recovery in employment also lags in a global upturn. No country remains unscathed, and even the previously booming economies in Asia are shedding jobs in what has become a truly global downturn.

So the mood is certainly gloomy, but is it hopeless?

Well, yesterday’s ‘miracle on the Hudson’ - where a US airways commercial jet had to make an emergency landing in the Hudson river in New York - was a wonderfully positive story given the negative newsflow generally. Experts praised the pilot and crew, "who had done everything right." So the potential Hudson air tragedy has become the "Hudson miracle"... an unprecedented story of zero casualties in a full scale commercial air accident.

In a similar way, tremendous skill by business and political leaders will be required to handle the global economy’s hard landing this year. Let’s pray the casualty list will be relatively light, the most pessimistic of pundits proved wrong and the upturn quicker than expected. Miracles can and do happen.

Global rebalancing, lower borrowing, more sensible asset prices, lower inflation, more realistic expectations from all stakeholders are all side-benefits of the downturn. Even geopolitics can benefit as less than friendly governments and hard nosed leaders soften their tone, in the light of lower energy demand and lower oil prices.

Recently, at a dinner hosted by Harvey Nash’s Life Sciences practice, Ian Kent, a seasoned life sciences entrepreneur and founder Director of a number of successful bioscience companies spoke about the need for Government to further incentivise global companies to place high value R & D in the UK. There is tough competition from Massachusetts USA and parts of Europe. This was raised as a topic during our debate. My co-panelist on the show, Sir Andrew Cahn, made a good argument that the UK is still the overall investment destination of choice for many industries from across the globe, including professional services and the creative sectors. Britain leads the world in security and the use of technology to solve potential threats. While admitting that all firms are facing challenges, he sounded an optimistic note by concluding that the UK remains a highly entrepreneurial culture, with a focus on talent at the heart of the UK Trade Investment strategy. He was confident this will not change in the long term and even went so far as to say there would a be a strong Financial Services sector at the end of all this. I agree.

And of course there are other areas of growth. The public sector is going to benefit from greater investment as a result of Government stimulus packages, and both private firms as well as public bodies associated with healthcare, education and public transport are looking to expand and grow.

Take the green agenda. The road to a lower carbon economy means E.on (German Energy) and EDF (French Electricity) are both getting ready for the boom in building Nuclear power stations. It is no secret that President-elect Obama is placing ‘green jobs’ at the centre of his economic recovery, with a pledge to create three million new jobs within environmentally friendly industries. Whether this includes the development of green technology within automobile manufacturing or alternative energy sourcing and security remain to be seen; but investment in new energy technologies has always generated a positive knock-on effect in talent development. There is a lot more to come on this topic as new ideas are explored and Government investment flows. Technology organisations like The Symbian Foundation are hiring as convergence in the wireless sector takes hold.

So there are still pockets sectors and companies that are still hiring. They are simply not releasing announcements and the media aren’t covering it.

It’s certainly gloomy, but hopeless?

No.

To view the clip from CNBC please click here

* "Strictly Money" is a CNBC program that focuses on you and your money. It’s essential viewing for the UK business person, home owner, investor, consumer and anyone who is serious about understanding the current environment for business, the economy and how to build and protect their assets and investments. CNBC understands how the political and economic environment affects you and your business and knows what drives the British economy.

Credit crunch prompts UK brain drain

Tue, 18 Nov 2008 11:23:34 +0000

The UK labour market is on the verge of a ‘brain drain’ and struggling to retain home-grown talent, according to our latest research.

Official ONS statistics of emigrants leaving the UK are due out in a few weeks time and are expected to be significantly worse than the record 400,000 who left in 2006.

Almost half (49%) of British employers are concerned that their highly skilled professionals will soon be looking for career opportunities abroad. The survey of over 500 senior decision makers revealed that as many as one in four (26%) employers are already feeling the effects of increased UK skilled emigration, with over a third (33%) of respondents finding it difficult to recruit skilled UK candidates and two in five (40%) concerned about their ability to retain skilled British talent. With rising inflation and the consumer price index⁽ⁱⁱⁱ⁾ currently above 5%, three quarters (72%) of respondents blame the UK’s squeeze on the cost of living for skilled UK executives seeking opportunities abroad. In addition, many businesses are shrinking their workforce in the UK, whilst continuing to invest in subsidiaries, particularly in emerging economies. One in three (30%) respondents believe that greater job satisfaction and improved career prospects is the most important element to retaining skilled staff, followed closely by salary (29%), and then work/life balance (25%).

The problem is this; those ideally suited to leave Britain in search of greater opportunity tend to be the young and the brightest part of the workforce. When they leave they take not only their families, but their financial capital and also their intellectual property. It’s an "off-shoring" of sorts but with all the worst effects on the national economy.

In the past, immigration into this country was mainly younger, skilled professional people from Europe and Asia attracted to the booming British economy and we first calculated in 2007, they contributed £54bn in direct and indirect value added GDP. Emigrants were mainly those not fully active in the global economy, older workers retiring or wealthy British nationals relocating to sunnier climes. This will not be the case now.

As the economic climate continues to worsen, and redundancies loom in many sectors, we must not be complacent about our active talent pool. It may feel premature to "look through" the current financial crisis to the longer term. However, countries, like companies, can risk losing their competitive advantage through mis-management. We have a world class pool of talent, a wealth of knowledge, experience and skills here in the UK combined with some very unique natural advantages in the global marketplace. That needs to be nurtured and developed for when the recovery sets in as it surely will.

For additional information see The Telegraph article http://www.telegraph.co.uk/news/uknews/1579345/Biggest-brain-drain-from-UK-in-50-years.html

The moral hazard from a different angle

Mon, 29 Sep 2008 13:55:40 +0000

Only governments can save us.

This was the press headline covering the unfolding drama in the financial services sector. Just recently a British mortgage bank (Bradford & Bingley), a European bank (Fortis) and two American banks (WAMU and Wachovia) lost their independence. Forty eight was all it took for governments in the G7 to nationalise the banks or orchestrate rescues.

It continues to roll on with volatility and the $1 trillion bail out package in the US. So what does the impact going forward begin to look like and what are the effects?

1. Tax payers are footing the bill, but they were also the beneficiaries of the bubble. This is inflationary of course as countries now start printing free money.

2. Nationalising the losses through increased taxation is equitable and desirable but will push up interest rates in the long term, another factor re-inforcing (1) above.

3. Helping the banking system, helps the victims. They are the ones who will not be able to access credit. But when a large industrial conglomerate employing 100,000 workers/voters appeals for cash can the government say no? I don’t think so. They bailed out the bankers they have no choice but to bail out companies which are "national champions". They are all safe for now.

4. Wall Street didn’t have the monopoly on greed, buy-to-let schemes and property speculation was classless and borderless.

5. The Euro effect is to protect weaker countries (Ireland, Belgium, Greece) with stronger German French and Dutch balance sheets. This will ultimately make the case for entry into the Euro much stronger or the Euro currency may fall apart completely. Its an either or but we wont know until its over.

6. Iceland has no safety net because its outside the Euro and outside the European Union. Its guarantees are worthless unlike Ireland in a similar position, but who’s guarantees are backed up implicitly by the European Commission and the European Union. Ireland will have no choice but to vote YES in the next referendum I think.

7. Elements of the US congress were trying to stop the bailout being available abroad. The rest of the world has already written off billions in US sub prime losses so excluding European and other countries from the rescue package is morally unthinkable.

8. The flight to quality means that the US dollar will most likely strengthen at the expense of emerging markets.

9. Wall Street loses out again to the City of London as British Prime Minister Gordon Brown leads the world by being the first to address the re-capitalisation of the banking sector, which is the only solution.

10. The accountants and auditors who have signed off on the going concern issue in all the large banks and brokers must be concerned, this also presents a major crossroad in the next reporting round.

I was caught short today

Fri, 19 Sep 2008 14:58:42 +0000

Having been caught "short" on my optimistic view of the talent crunch, I finally had to face the music in the form of money market channel CNBC and three interviewers on live television this morning. I was there to comment on the global financial crisis enveloping the world and would have to justify my optimistic position on employment and recruitment in general.

The doomsday scenarios on job losses on Wall Street and London are being touted as anything up to 250,000.

Even though I believe this to be an over-reaction, I felt I had to agree that in the Financial Services sector, at least in the short term, the news was not good for recruitment companies exclusively focusing on investment banking and its risky family of counter parties. I am sure Jon Moulton of Alchemy partners would agree.....

Just for the record, we don't do schadenfreude* at Harvey Nash so I reminded the viewers of the following facts given the media headlines crying foul over executive pay, stock options and greedy "spivs".**

1. There are other sectors showing growth such as professional services, new media, embedded technology, security, public sector management and wireless applications. Global skills shortages will not disappear overnight as the bankers jobless queue grows.

2. Many of those working in the City of London are skilled professional immigrants, the impact on the local workforce would therefore be reduced by the effect of these immigrants returning to Europe, the US, South Africa, Australia, New Zealand and South East Asia. That's where our own research tells us they hail from - and they number in the hundreds of thousands. Many are being caught by the so called non-dom taxes and don't need much more to get them packing. So my personal view is that white collar unemployment in London is not going to rise as much as the economists expect for this simple reason.

3. The unemployed traders and bankers facing the current reality check are going to have to make an expectation adjustment in terms of their next job, remuneration, status etc. But their education, smarts, trading skills and innate feel for prices in a global market are being sought after in other sectors which rely heavily on commodity prices, hedging and forward contracts. A good example is the oil and gas industry. Also the retail energy sector, which has whole divisions involved in this activity.

So my humbling was somewhat mitigated and I am sticking to my original optimistic observations about the professional and senior executive markets. Slow down, yes. Even a sharp correction, Armageddon? Mostly definitely not. Most of it looks to be priced in from where I sit.

But the best bit of luck was the record increases in stock markets all over the world on screens behind me as the selling stopped and now there was frantic buying. The crisis seemed to have hit the floor, at least for now, with the US Treasury intervention.

That suddenly made my confidence in the middle of the storm (in the studio) look quite a bit more intelligent.

*A word of German origin, philosopher and sociologist Theodor Adorno defined Schadenfreude as "largely unanticipated delight in the suffering of another..."

** Spiv is a British word for a particular kind of petty criminal, who deals in stolen goods or fraudulent sales, especially a well-dressed man offering goods at bargain prices. The goods are generally not what they seem or have been obtained illegally.

Recruitment and the global slow down

Tue, 15 Jul 2008 11:23:55 +0000

There’s been a lot of speculation over when the downturn will affect recruitment companies. It’s fascinating to watch analysts cut this year’s earnings forecasts only to be wrong-footed by better than expected performances from the quality players.

In the USA, notwithstanding the slowdown over the last twelve months, the impact on quality recruitment groups with global exposure has not been as severe as most feared, in fact our own experience in that market has positively surprised investors as they were fearing the worst.

Some time ago I wrote on my blog that inflation and the economic climate would increase turnover of staff and make it more difficult to retain top talent. I put forward my personal view that low unemployment, growth in emerging markets (in other words, globalization) and the increased mobility of professional skills and talent will continue to feed the employment market. Baby boomers are retiring or starting to take it easy, portfolio careers are in fashion and traveling the world on a fifty-something career break is all the rage right now. 50 is the new 40. Politicians are waking up to the challenge of attracting highly skilled people from around the globe. Australia led the way in the last decade and Europe is introducing a similar system.

The impact on remuneration and wages cannot be underestimated. Experienced management is getting scarcer, see how many young professionals are being recruited as CEOs for FTSE 100 companies. A generational change is occurring in every area of professional life. BT, Glaxo and BP are recent examples. Barack Obama represents the new generation of politicians, very Generation X and almost Generation Y. Then there is the inflation issue which is also putting pressure on disposable income, another driver of wage inflation and employee churn.

So it comes as no surprise that despite the economic downturn, UK employers are still experiencing difficulties in recruiting and retaining staff. A recent survey reported that workers are shunning company loyalty in favor of high pay. Apparently less than 60% of employees had been in their job less then two years and 68% were planning to move jobs in the next six months. The most common reasons for changing jobs were cited as pay, employer’s culture and ethics, and lack of training.

Staff turnover rates in organizations had escalated from 30% per annum in 2007 to 42%. I took some comfort that at Harvey Nash our training and leadership development budget has doubled and our emphasis on core values, culture and ethical trading has never been stronger.

Recruitment companies generally prosper in markets with strong demand for talent and high churn rates. It seems obvious to me that while unemployment is such a low risk in our core markets, talent will still be hard to find and even harder to retain.

Whether Wall Street and the City of London can adjust their pessimistic forecasts and doomsday scenarios to reflect this, remains to be seen.

Cherie Blair speaks her mind

Thu, 26 Jun 2008 11:51:44 +0000

This morning we hosted the Harvey Nash Annual Business Breakfast in the City, featuring Susan Haird (Deputy CEO of UK Trade & Investment) and Cherie Blair (barrister and spouse of the former Prime Minister for Britain, Tony Blair).

Susan Haird stood in for Lord Jones (Digby to many of us) and did an outstanding job of bringing out the many competitive advantages the UK has in the global marketplace. Of course, the current "direction of travel" is concerning business and we urged Susan to relay to Lord Jones and the government that as a community we need fiscally responsible administration, competitive tax and policies, wage restraint and the strength to stand up to special interests in the interests of the country as a whole.

The topic was diversity and equality in the workplace and our responsibility to implement policies and cultures which support equal opportunities for all, based on sound values and respect for human dignity.

Cherie Blair is an excellent and charismatic speaker. Contrary to perhaps the tabloid’s expectation of a practising barrister defending human rights in the British workplace, she presented sympathetic views to strong opinions expressed by some members of the audience, particularly for small business and the impact on costs of the regulation in this area. Cherie also shared thought provoking practical solutions and answers to these and other questions of flexibility and the work-life balance debate.

Cherie is a champion for women’s rights the world over and in her former role, as spouse to the British Prime Minister, she often sneaked away to pursue her passion for understanding the role of women in emerging economies and to show concern for their upliftment. Cherie spoke engagingly about her experiences in Saudi Arabia for example.

What does this mean for us. Well, Generation Y are entering the workplace and are the leaders of tomorrow. And then there is Generation A. The 400m twenty to forty somethings in Asia Africa and Latin America described by analysts at Macquarie bank as the key consumer group to drive global business mega trends in the next twenty years.

We will of course need to hire talent drawn from these groups, and indeed provide the goods and services they seek. They are particularly attuned to Cherie Blair’s message and are asking hard questions of business, not only concerning diversity but also in the area of climate change, the environment and respect for human rights.

Cherie ended her speech with outlining the key to upliftment and equality. Its all about education and skills. Nobody said it better than Nelson Mandela, "Education is the most powerful weapon which you can use to change the world."

Obituary: Bear Stearns

Mon, 17 Mar 2008 18:33:09 +0000

Commenting on the rapid decline of Bear Stearns, the US investment bank Hank Paulson, US Treasury Secretary said: "There’s always a decision to be made to say what’s best for the stability of the marketplace, the orderliness of the marketplace. I think we made the right decision".

This contrasts hugely with the messy and protracted nationalization of Britain’s Northern Rock bank. The speed at which the US Treasury accomplished a merger of Bear Stearns with JP Morgan was breathtaking and showed regulatory competence whatever the critics may say. In fact this is a nationalization of sorts with the Federal Reserve agreeing to fund up to $30bn of Bear’s less liquid mortgage backed assets, avoiding a fire sale and further meltdown in those markets.

Media chatter is now turning toward the subject of the losers.

There are the large direct investors, such as the hedge fund RAB Capital, holder of a significant stake in Northern Rock, who continue to trade shares even after the damage done by the developing credit crunch last summer was revealed. Similarly, Bahamas-based British investor Joe Lewis, who has a reputation as a big speculator in currencies is thought to have lost $1.6bn by investing in Bear Stearns too soon after its troubles became public knowledge last summer.

Then there are the sovereign wealth funds, offered "bargains" in most of the worlds banks over the last twelve months. From Singapore to Dubai, they have poured money into businesses as diverse as Barclays, Citigroup, Morgan Stanley, UBS and Merrill Lynch, and have also seen their investments drop by a third or more in a matter of weeks. It was thought at the time that the terms on which they invested were pretty onerous, and that they took full advantage of the banks’ need for capital. But even those terms will not be good enough to compensate for the capital losses since. The Chinese also put $3bn into Blackstone (US private equity) when it floated but the shares have halved in value in less than a year.

This is where it gets interesting. The banks’ losses continue to mount and the new capital raised lags well behind the write-offs already announced, let alone the others which may still come. So most of them will have a pressing need for yet more money. The likelihood is that some will have to go to the equity markets and many will return to those sovereign capital wells and tap them again.

However, with the US financial markets beginning to seize up this looks like a case of "taxpayer to the rescue" now. Twenty years ago, the American government decided to de facto nationalize the savings and loans problem and make the taxpayer pick up the bill in what was by far the biggest financial bailout the world had seen. Japan followed suit in the 90’s with their own particularly brand of banking nationalization.

It seems history is repeating itself. I believe the US and European taxpayer will now fulfil the role of ultimate "lender of last resort". Recent actions of the Bank of England and the Federal Reserve will probably cost the taxpayer quite dearly in years to come, in ways we can’t foresee today. Both monetary and taxation policy will now be dictated by the stresses of providing financial liquidity and keeping the broken market alive. With some of the markets on virtual life support, much vaunted public services reform and spending priorities will be quietly pushed to the backburner. Its a fight for survival.

I predict the fight over inflation will weaken as rising asset prices and increasing "nominal" wages will be seen as one of the few really effective ways to ensure owners of debt - toxic mortgage and credit card securities - are repaid to avoid further crippling write offs and embarrassing political announcements. The UK Government/Bank of England and the US Government/Federal Reserve are either explicitly or implicitly guaranteeing many of the billions of losses and liabilities you read about in the financial press. That’s you and me. Our future earnings and productive working lives have already been mortgaged to save the system. Only yesterday Britain was criticised by the European competition commissioner for undermining the UK banking system with the current Northern Rock commercial approach to savings products. Expect a lot more of this in the future.

And if I am right, two things will happen.

Firstly the banking class, including the rest of the middle and professional classes, will foot the bill through higher taxes on income in the future - some would say a fitting twist to this saga if one considers who started this in the first place.

And secondly, the ongoing skills shortage will result in accelerating wages of specialist technical skills (IT and Accounting) and rocketing financial packages for scarce experienced senior management talent. This will be driven by the need to maximise income to offset higher mortgage interest bills, personal taxes and the dreadful performance of their equity/pension portfolios.

And that’s one of the main reasons why professional and executive recruitment businesses will continue to prosper seemingly against the odds. Their revenue is derived from a gap in demand and supply of talent, multiplied as a percentage of wages.

Britain's 2008 Budget

Wed, 12 Mar 2008 14:36:46 +0000

One hour ago the Chancellor here in Britain gave his Budget speech for 2008. Here is our immediate response.

A "no change" budget

Most of the measures announced were either small or insignificant. This was a no change budget. We believe business and the broader public will be underwhelmed and quite frankly, in a time of global financial upheaval, strong leadership is now required.

There was much trumpeting of past success but very little about the future and how the government was going to prioritise competitiveness and skills.

International competitiveness

We agree with the Chancellor’s opening quote that Britain is "one of the best places in the world to do business". On many measures the UK has thrived as the booming markets for capital and talent have favoured the strategic advantages offered by our capital city, London.

However, this positive perception is now being undermined by the 80% increase in capital gains tax and the introduction of fresh taxes on so called "non-domiciles". Indeed in Switzerland, where we have offices in Zurich and Geneva, these tax initiatives have made headlines and many of our clients and candidates have been surprised by the negative publicity this has attracted. An own goal in global competitiveness terms.

In summary we are disappointed that the opportunity was not grasped to lead the world in the current economic crisis

- no further signals on corporation tax reductions were given other than confirming the new rate of 28% going forward.

- no mention of technology, or any initiatives in accessing and attracting high tech skills in a knowledge based economy.

- no U-turns were announced on the controversial taxes on capital gains and non-domiciles.

Growth Downgraded

The Budget speech also downgraded UK GDP growth to a low of 1.75% this year from between 2-3% in 2008/9. Lower tax receipts and lower growth will result in higher than expected borrowing, so projections were adjusted accordingly. The leader of the opposition party noted that the UK has the highest interest rates in the G7.

Tax increases

In essence it was a tax raising budget with significant increases in alcohol, tobacco and larger-engined passenger vehicle excise duty. It could not be described as a green or low carbon Budget as some expected. The measures will largely allow for increased benefits for the elderly and children with the remainder plugging the hole in the public purse as a result of the slowdown.

In conclusion we agree with the Director General of the CBI, Richard Lambert, in his most recent statement on Britain’s competitiveness.

"In today’s world of global markets companies have more choices to make about where to invest their capital and their talent than they did in the past....the worry is that on current trends our position relative to other developed economies will deteriorate further in the next two or three years."

Today our government missed the opportunity to turn around that perception and begin to head in the right direction.

Harvey Nash becomes iPhone compatible

Thu, 14 Feb 2008 15:16:09 +0000

Harvey Nash becomes iPhone compatible

Harvey Nash has become the first recruitment organisation to become iPhone compatible; and its Job Search application has already been recognised by Apple as a ‘staff pick’.

Scores of "Generation Y" professionals and older Techno wannabes have queued up in every major City across the world to buy iPhones, In fact, the launches have made the headline news in every country demonstrating how iconic the iPhone/iPod range of products have become.

We believe that at Harvey Nash we will be adding to our unique understanding of the aspirations and chosen careers of tomorrow’s leaders through our valuable Generation Y research and links with companies like Apple,- www.apple.com.

Senior executives and IT professionals can now access the very best jobs and career advice via their iPhones.The new interactive resource launched by professional recruitment consultancy Harvey Nash allows users to search, view and apply for Harvey Nash jobs as well as access unique interview, CV and career management advice.

By offering this information via a mobile device, users will be able access the advice exactly when they need it. For instance brushing up on interview tips immediately prior to an interview, or searching and applying for jobs whilst on the train.

To sign up, please visit www.harveynash.com on your iPhone.

CEO's cite skills shortage as biggest threat to growth

Thu, 24 Jan 2008 12:40:31 +0000

The global accounting consultancy PricewaterhouseCoopers has last week released its highly respected CEO survey. Here is the summary:

- As one of the top three sources of competitive advantage, people issues look to dominate the UK CEO agenda in 2008.

- Concern about the availability of key skills is cited globally as the biggest threat to growth

This top of the agenda in both the UK, and Asia Pacific. Given the UK’s expansion plans, perhaps surprisingly, language skills and global experience were perceived as critical by only 45% and 44% of UK CEOs respectively – well behind the global averages of 65% and 55% respectively.

- The largest skills shortage comes in combined technical and business expertise and the ability to develop and lead others. Reflecting the current culture and outlook of innovation in the UK, almost two thirds of UK CEOs said they were having difficulty recruiting people who were creative and innovative.

- Addressing the skills gap, almost two thirds of UK CEOs said that fundamental changes in the way they recruit, motivate and develop employees needed to occur to help them compete for talent. Investing in training and development and providing a more flexible working environment would also play a key role.

- With 43% of UK CEOs planning for a merger or acquisition in the coming twelve months they are confronting a significant skills gap in the ability of their people and company to lead and adapt to change, and realise the financial and growth benefits needed from their plans.

Of course, here at Harvey Nash our consultants are continually talking to clients and candidates so we are fully aware of the shortage on the supply side of executive and technical talent. This is exacerbating the demand gap and is the key driver of remuneration.

Corporate Reputation Investment Banking

Tue, 18 Dec 2007 16:51:19 +0000

This article appeared in the London’s Evening Standard written by City Editor Anthony Hilton. He concurs with our view at Harvey Nash that corporate reputation has taken a real battering in 2007. Here it is or log on to ...

www.thisismoney.co.uk/news/columnists/

ANTHONY HILTON, EVENING STANDARD FINANCIAL EDITOR

In his book Fooled by Randomness, Nassim Taleb, who made a fortune as a trader on Wall Street, described the whole financial markets thing as a massive game of Russian roulette. The only difference is that the pistol has more than five empty chambers, so people like him get away with playing the game for much longer than they should.

As long as their luck holds, they make huge profits for their firms, get feted like kings and earn more in annual bonuses than doctors, teachers, nurses and even journalists earn in a lifetime.

But ultimately it ends in disaster when they run out of luck and the gun goes off and metaphorically blows their head off.

By then, though, they should have made enough in bonuses to last a lifetime. Their employers are frequently less lucky and, as we see from the looming disaster of the credit crunch, so are the rest of us.

When bankers make mistakes, the rest of society has to pay. In circumstances such as these, with the world facing its worst financial crisis for 30 years largely because of the excessive greed and recklessness of bankers in the past 10, one might have thought it time for a bit of humility as we approach the annual bonus season.

But yesterday it was as if the crash had never happened. Morgan Stanley dished out eye-watering multi-million pound payments to its star performers. The financial world may be crumbling, but that appears not to be the investment bankers’ problem even if it is their fault. Investment bankers don’t do humility - or moderation. In justification, the banks and brokers say their people are worth it. If they make £20m for the firm, then why should the person responsible not get a generous cut? The real issue, though, is how the £20m is made in the first place.

How much risk is a trader taking when his bank dominates a market sector and sees most of the business? Why is it that the customers pay the banks the fees that allow them to make these excessive levels of profit, which in turn fuel the bonuses? The answer is, of course, that it is always other people’s money. When a company executive decides to pay a bank £100m for advice on a takeover, it is the shareholder’s money he is handing over, not his own.

Though the City is ferociously competitive, the competition between firms rarely extends to price - not to a degree that will derail the gravy train. It is probably what economists call a complex monopoly, a market structure where competition is controlled by convention and which allows the participants to make excess profits from which they can pay excessive bonuses.

However, no politician - here or in America - is going to launch an antimonopoly probe against them. In the US, Wall Street has in effect bought all the politicians with massive campaign contributions. Here they don’t pay but the banks are simply too powerful and too embedded in Whitehall to be seriously challenged.

The plus point in all this is that the money the City earns makes London’s wheels go round. But we should also consider the downside - the fact that doctors, teachers, nurses and train drivers can no longer afford to live anywhere near the centre of London, so the public services that depend on their skills are plagued by shortage of staff.

The City’s money drives London, but increasingly towards a world of private affluence and public squalor. It risks fracturing society when the rewards for one group are so grotesquely out of kilter with what the rest earn and even the seriously untalented city banker collects am.

Most of all in these troubled times it risks a massive backlash when these bonuses are paid against a backcloth of mounting distress across the economy - much of it caused by the bankers themselves.