Should Northern Rock become a mutual building society?

Can Northern Rock be made a mutual building society again?

 

The Chancellor, Alistair Darling, is not opposed to mutuality. But Treasury civil servants want the £14.5 billion of tax payers money returned to the government soon. 100 Members of Parliament support mutualisation of  Northern Rock.

 

To mutualise or not? Who will win; and why does it matter?

 

Supporters would gain a lot. Savers would feel that their money was more secure in a mutual building society than in a bank; or a building society that had also become a bank; or in a high street bank with or without more risky investments in hedge funds etc.. More jobs could be created in the North East of England. Existing jobs in Northern Rock would be more secure.  There would be more choice and competition with the few mutuals left, specifically the largest Nationwide. Mortgages might become easier to get; if not cheaper.

 

Critics of mutualisation would also gain. In particular, the good reputation of British banking, as measured by indices in America, would be enhanced. This is important as their have been rumours that one index might reduce it’s rating for Britain. This undermines international confidence in Britain and its banks; indeed in the whole economy. Returning the £14.5 billion would give a big boost to international confidence, and help the banking industry to grow.

 

But how bad is this reputation. Of the main big banks Barclays has received nothing from the government: neither has HSBC, which took over the old Midland bank. Barclays has received money from the Middle East. HSBC is a truly international bank, with large assets in the Far East.

Lloyds bank, now incorporating Royal Bank of Scotland, and Nat West and Halifax, currently has the government as a major shareholder. But Lloyds is about to offer shares to existing shareholders to raise more capital. This may be a controversial move, but the bank is attempting to assert control over itself. Does all this suggest a bad reputation?

 

What do you think?

 

City Bonuses: Can they be justified?

City Bonuses. Can They be Justified?

Thursday, October 1, 2009

City Bonuses: Can they be justified?

1 On what grounds might one justify a large bonus?
2 To whom might one offer a justification?

Firstly, one could argue that the size of the bonus itself, or even a larger sum, had already been earned for the employer. This could then be seen by the employer as a "no cost" expense. The employer already had the bonus, because of the past actions of the employee.

There are many problems with this justification. Even if the employee had "earned" the bonus, many of his/her colleagues, including the office cleaners, had contributed to this earning. Put differently it is a mistake to see this earning as simply an individuals achievement. Further, it is unlikely that the many colleagues will get the same level of bonus if they a lower in the firms hierarchy. Indeed the cleaners may get nothing above the minimum wage.

From the employers point of view the past monies brought in by the employee, may be less salient than the size of the firms bank loans. Where these bank loans cannot be repaid, the paying of large bonuses may hasten bankruptcy, and consequent unemployment.

Secondly, it is very unclear to whom one should justify these large bonuses. To ones family, ones colleagues, ones employer, ones friends; the list can be extended.
In the case of the family the increase in wealth may lead to increased expenditure on leisure , private health education etc.. Should this years bonus not be repeated in future years this can cause much family distress and argument.

Justifying to ones colleagues may not be possible if there is a Prohibition on disclosing this information to colleagues. And if one does disclose, it may cause resentment, and affect the team culture.

Justifying to ones employer may, or may not, be necessary. These meetings may well be confidential, and hide what can be quite acrimonious discussions.

Justifying publicly may require public relations firms, and their costs.

All these difficulties and more, do no stop large bonuses

What will? Alastair Darlings imposition of Pittsburgh Agreements?

Posted by Brendan Caffrey at 1:20 AM 0 comments

 

 

Royal Mail Strike: Who will win?

05 November

 

Royal Mail Strike: Who will win?

 

There is currently a battle of words in the media between Royal and the Communication Workers Union.

 

Firstly, the union claims that a majority of it’s members support the strike. This may or may not be true. What is required by the 1992 Act is that a “majority voting in the ballot” vote yes for the strike. The union correctly claims that a clear majority, about two thirds, of those who voted supported the strike call. But what about those who did not vote? One can only speculate about their support. If the non-voters are a small minority then it remains true that a majority supports the strike. But the truth of the union’s claim depends on the size of the minority: the larger the minority of non-voters the less likely is the claim to be true. The Act does not require non-members of the union to declare support, but their allegiance to the strike is very dubious, as they are not even members.

 

Secondly, Royal Mail has problems with this strike. This is the first strike in a long time that is not apparently about money for workers. It is about modernisation. But what does modernisation mean? To management it is about more sophisticated machinery for sorting mail and packages. To workers it is about working faster, and walking faster on the daily delivery. More fundamentally workers fear that faster sorting will result in redundancies. So this strike is about job security in hard times. But money does rear it’s head at this point. Redundancies, voluntary and involuntary, cost management money. New machinery cost money. Royal Mail does not have enough money to pay pensions.

 

What to do? Should Royal Mail offer to pay decent compensation for voluntary redundancies. Raise charges for all commercial letters and packages, and use the extra to subsidise post for pensioners, and the outer islands of Britain? Ask the Chancellor for more money to pay for pensions? Pay for 30,000 extra wokers for the duration of the strike, and beyond? These are all hard choices, and produce a determined management. The prospect of job loss also produces determined workers. Who will win?

 

Lastly, Royal Mail has a problem in that modernisation is clearly an issue to be sorted by management. Or is it a problem to be sorted by both parties? In this case unions start to look good to the general public.   

 

 

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Royal Mail Strike: Who will win?

Who will win? Royal Mail Strike?
 
There is currently a battle of words in the media between Royal and the Communication Workers Union.
 
Firstly, the union claims that a majority of it’s members support the strike. This may or may not be true. What is required by the 1992 Act is that a "majority voting in the ballot" vote yes for the strike. The union correctly claims that a clear majority, about two thirds, of those who voted supported the strike call. But what about those who did not vote? One can only speculate about their support. If the non-voters are a small minority then it remains true that a majority supports the strike. But the truth of the union’s claim depends on the size of the minority: the larger the minority of non-voters the less likely is the claim to be true. The Act does not require non-members of the union to declare support, but their allegiance to the strike is very dubious, as they are not even members.
 
Secondly, Royal Mail has problems with this strike. This is the first strike in a long time that is not apparently about money for workers. It is about modernisation. But what does modernisation mean? To management it is about more sophisticated machinery for sorting mail and packages. To workers it is about working faster, and walking faster on the daily delivery. More fundamentally workers fear that faster sorting will result in redundancies. So this strike is about job security in hard times. But money does rear it’s head at this point. Redundancies, voluntary and involuntary, cost management money. New machinery cost money. Royal Mail does not have enough money to pay pensions.
 
What to do? Should Royal Mail offer to pay decent compensation for voluntary redundancies. Raise charges for all commercial letters and packages, and use the extra to subsidise post for pensioners, and the outer islands of Britain? Ask the Chancellor for more money to pay for pensions? Pay for 30,000 extra wokers for the duration of the strike, and beyond? These are all hard choices, and produce a determined management. The prospect of job loss also produces determined workers. Who will win?
 
Lastly, Royal Mail has a problem in that modernisation is clearly an issue to be sorted by management. Or is it a problem to be sorted by both parties? In this case unions start to look good to the general public.