Martin Sorrell: Hero of unbridled capitalism

March 18, 2015

Sir Martin Sorrell is a global superstar of entrepreneurship and hero of unbridled capitalism. But is he likely to become an election asset in the UK?

His business success is grounded in his deals that resulted in an acquisition of a wide range of the largest international advertising agencies, including Saatchi & Saatchi, and J Walter Thompson. His track record as entrepreneur and capitalist is noteworthy.

Although his business empire is built on creativity, his own skill is as a high-level financial innovator who found ways of releasing creativity of others in highly profitable ways.

As a Harvard MBA, and a governor of London Business School, his leadership makes a nice business school case.

This week [March 15th 2015] he made headlines with an annual bonus taking his earnings to £40 million.

The Independent reported:

Sir Martin Sorrell’s pay package is set to top £40m for last year after WPP, the advertising giant he founded, said that he was given £36m-worth of shares last week.

The shares were granted under a controversial long-term bonus plan called the Leadership Equity Acquisition Plan, or Leap, and which shareholders voted to abolish in 2012. The latest grant covers the five years from 2010 to 2015, when Sir Martin and 16 other executives received the maximum of five times their original investment in the scheme.

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Alibaba’s Jack Ma goes down the Bill Gates charitable route

May 5, 2014

Alibaba’s Jack Ma and the company’s co-founder Joseph Tsai are following the path taken by Bill Gates and Warren Buffett in creating a philanthropic trust.

An article entitled China’s Carnegie in The Economist, [May 3rd, 2014. P12] outlined this further example of creative capitalism.

The article traces the philanthropic ‘conversion’ of business pioneers and wealth generators from the days of Andrew Carnegie to today’s Jack Ma who has recently [April 2014] announced the formation of a $3 billion trust.

A cynical view of giving

The Economist is suspicious of altruism if a self-interested explanation comes to hand. It tests the ethical orientation of Ma’s actions and implicitly those of Bill Gates by suggesting that a cynical view that might be ‘straight out of a Silicon Valley public relations play-book ahead of Alibaba’s expected public offering this year which could value the company at $150 billion.’ Regardless of such imputed motivation, the initiative could add impetus to China’s efforts at environmental sustainability.

The Gates Foundation

Bill Gates and Warren Buffet have been leaders in a movement for the wealthiest capitalists to pledge sizable proportions of their assets for charitable purposes. The Gates foundation is admirably led by Biil and Melinda Gates.

From Silicon Valley to Shanghai

The movement has spread into other parts of the world including India. Jack Ma is overcoming reluctance of the wealthiest Chinese entrepreneurs to reveal their wealth as the country develops its new mixed socialist/capitalist political economy.


The Co-operative Group: A noble business failure?

March 12, 2014

The Co-operative Group has its place in the social and political history of modern Britain. Yet it is in deep crisis as its departing leader Euan Sutherland declares it ‘ungovernable’

On March 11th 2014 the following statement appeared on the website of The Co-operative Group

The Co-operative Group announces that Euan Sutherland has resigned as Group Chief Executive with immediate effect. Richard Pennycook, Chief Financial Officer, has been appointed as Interim Group Chief Executive.

The statement then quoted its former CEO’s damning indictment of its professionalism and governance:

“It is with great sadness that I have resigned as Chief Executive. I have given my all to the business and had hoped to be able to lead its revival. However, I now feel that until the Group adopts professional and commercial governance it will be impossible to implement what my team and I believe are the necessary changes and reforms to renew the Group and give it a relevant and sustainable future.

“Saving The Co-operative Bank and with it The Co-operative Group from administration was a huge task, but the changes required do not stop there, with fundamental modernisation needed to safeguard the future for our 90,000 colleagues and millions of members.

“The Group must reduce its significant debt and drive major efficiencies and growth in all of its businesses, but to do so also urgently needs fundamental governance reform and a revitalised membership.

“I will not accept the retention payments and long term incentive payments previously agreed for the delivery and protection of value in the Group and the Bank, even though this was successfully delivered. “I would like to thank all of the Co-op’s hard working colleagues for the support they have given me during my time. I wish them all well. The Co-operative has some wonderful people who deserve a great future.”

Concealing more than it says

Even without further background knowledge by the reader, the news item is of interest to any student of leadership. [Hint to tutors. Try redacting the name of the company and offer the resignation statement for class discussion.]

The resignation statement may be read as a farewell message, concealing more than it says. Why did the CEO fail to achieve the ‘fundamental modernisation’ he believed necessary? What does a revitalised membership imply? How do we interpret the statement that ‘The Co-operative has some wonderful people who deserve a great future.’

A missing story

As editor of LWD I am disappointed that after 1000 posts I have not reported one that dealt directly with the important history and current financial problems of the Co-operative Society. Even a juicy scandal earlier this year did not warrant a mention, although it led to the departure of Euan Sutherland’s predecessor. The story is one which includes one of the most powerful forces towards an alternative capitalism merging socialist ideals with self-help and corporate effectiveness.

What do you think?

I will offer more of the story as an addition to this post. In the meanwhile, I would be particularly interested in receiving the views of LWD subscribers who are unfamiliar with the history of the group, and their assessment of the situation as indicated in Euan Sutherland’s resignation statement.


Hollywood blockbusters and the message for Big Pharma

January 6, 2014

AvatarThe business model for blockbusting films is coming under increasing scrutiny. There may be a message for the major drug companies

Last year, [2013] 26 films costing more than $100m each were released by the major Hollywood studios – more than ever before. They are likely to have raked in tens of billions of dollars in worldwide box office revenues as a result. But despite the runaway successes, there are concerns that blockbuster budgets are getting dangerously high.

The business model

The business model works because the large blockbuster is more the visible part of a process than a stand-alone product. The basic plan is to develop a series of movies after an initial demonstrated [financial] success. Each successor is part of marketing campaign now well-routinized of spin-off products and deals.

Only a fraction of revenues come from ticket sales with the bulk coming from television licensing, DVD sales, and assorted merchandising deals. Arguably it is the model for sporting franchises as well.

“There’s eventually going to be an implosion, or a big meltdown,” said Hollywood elder statesman Steven Spielberg in a speech earlier this year. “Three or four or maybe even a half dozen mega-budget movies are going to go crashing into the ground, and that’s going to change the paradigm.”

Spielberg had warned of an “implosion” in Hollywood as In 1980, Heaven’s Gate effectively bankrupted United Artists.

Half full or half empty?

British film academics John Sedgwick and Mike Pokorny have found that blockbuster films become have become more reliably profitable: in the late 80s just 50% of major studio films turned a profit. In 2009 it was 90%. Flops have become rare. Spielberg worries with others who note the changes in the market place. DVD sales are threatened by online streaming services such as Netflix. Studios are seeing profits growing more from their TV interests.

Aesthetic bankruptcy

Others refer to dumbing-down and “aesthetic bankruptcy”. Screenwriting talent is increasingly moving over to television.

Entertainment has flourished on change since silent moves found its voice, and later its glorious in sound and visual transformations. The blockbuster model may well be bust. The challenge to Hollywood is one that also applies to the giants in Big Pharma

A message for Big Pharma?

It is the challenge facing other industries where the early winners face being overtaken by outsiders as the name of the business game changes. Maybe Big Pharma will learn from Hollywood that the days of searching for big blockbusting drugs are over.

What else?

The question may be addressed by the stirrings of interest in new leadership approaches in recent years. The last movement to claim New Leadership was in the 1980s. That involving visions and transformations. Newer ideas are trying to recentre business leadership as utterly concerned with ethics and also with distribution of power and authority. [see here for a more critical view of distributed leadership]. It calls for further rethinking of the ultimate rationale for organizational structures and patterns of behaviour.

We not be able to wait another forty years for such ideas to be applied effectively and globally.


Antony Jenkins leads a transformational programme [‘RISES’] at Barclays

April 27, 2013

 

NOTE TO SUBSCRIBERS:  THIS POST FROM APRIL 2013 IS UPDATED AS THE CASE STUDY DEVELOPS

By Nigel Aldcroft

Antony JenkinsAntony Jenkins has been Group Chief Executive of Barclays PLC for less than a year and has already made quite an impression within the company. His RISES programme is accompanied by nearly 4000 job losses

A recent article in Business Week suggests that Barclay’s self-described ‘transformational leader’ [image above] faces a number of key dilemmas.

Banking Turnaround

Amid the recent banking scandals, and in an effort to turn Barclays around, Jenkins has announced that following on from a recent strategic review he intends to reduce headcount by at least 3,700 this year across the group as part of the new ‘Transform’ programme.

He recently introduced a plan which creates the positive sounding acronym ‘RISES’ [Respect, Integrity, Service, Excellence and Stewardship]. These are not values that immediately spring to mind in banking, yet progress can be seen at most Barclays’ offices.

Jenkins has taken a no-nonsense approach telling staff to ‘shape up – or ship out’ This abrupt and clear approach suggests symbolic leadership signals.

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Occupy movement helped shift thinking about the ethics of banking

November 30, 2012

Posted by Tudor Rickards

Andrew HaldaneAndrew Haldane, [image supplied] an executive director of The Bank of England, recently told a meeting organised by Occupy, that the protesters had touched a “moral nerve” for the financial sector. He might also have been referring to the Church of England

A year ago, the direct action group Occupy had targeted the London Stock Exchange [15 October 2011] then formed a protest camp at nearby St Paul’s Cathedral, until their eviction by police.

In his speech on socially useful banking as reported by the Bank of England, Mr Haldane said:

“Occupy has been successful in its efforts to popularise the problems of the global financial system for one very simple reason: they are right …
There is the quiet, but unmistakable, sound of a leaf being turned. If I am right and a new leaf is being turned, then Occupy will have played a key role in this fledgling financial reformation. You have put the arguments. You have helped win the debate. And policymakers, like me, will need your continuing support in delivering that radical change.”

An independent voice

Haldane has been speaking up in an independent fashion for a Bank of England director for some years. In 2009 at the hight of the credit crisis he challenged the argument that measures to restrict banking bonuses would lead to an exodus of talent from the UK.

His independent views have been aired from his position as executive director for financial stability of the Bank of England. He is known to oppose high velocity trading [HVT} practices which involve a form of computer-aided trades in micro-seconds. [A brief insight into the mind-boggling nature of HVT illustrates the arguments for a small financial transaction levy. This remains a controversial issue favoured by many European bankers but anathema to the City of London where it is seen as another potentially damaging Euro-scam]

Meanwhile, a new leader emerges

Now Andrew Haldane pepares for a new chief, Mark Carney, appointed this week [Nov 26th 2012] by the Chancellor George Osborne. Mr Carney is the governor of the Canadian central bank and will have new powers as Bank of England governor by the time Sir Mervyn King steps down [in June 2012].

Carney a former Goldman Sachs banker had previously ruled himself out. This, and his non-English status, made him an outsider for the post.
Sir Mervyn said Mr Carney represented “a new generation of leadership for the Bank of England, and is an outstanding choice to succeed me”

Carney is widely seen as a brilliant and independent minded figure, who will have his own ideas about a range of issues on which Andrew Handane has commented, maybe including the moral high ground held by the Occupy movement.

For students of leadership

For students of leadership, this transition of institutional power from one leader to another will make an interesting and living case study.


Sir Philip Hampton shows ethical leadership or perhaps cautious pragmatism

April 11, 2012

Future Manyumba

Royal Bank of Scotland Chairman Sir Philip Hampton [right] turned down a £1.4 million bonus in January. Was it evidence of a ‘wind of change’ or a self-saving political statement?

On the 28th of Jan this year, Sir Philip Hampton announced that he would give up his £1.4 million bonus as Chairman of Royal Bank of Scotlan. Few people may disagree with his actions, accepting that the RBS team is doing a tough job. Indeed some would question why he should take such a personal sacrifice when his colleagues in the private sector are still getting astronomical bonuses by comparison.

Frontline leadership

The decision was symbolic in nature. His actions could prove to be a watershed moment in the history of the finance sector in the UK. Sir Philip Hampton has previously held successful positions with Sainsbury plc (chairman), Lloyds Banking group plc, BT group, British Gas and British Steel.

As the head of a bank which is 83% owned by tax payers, public opinion is something that bears a strong influence on decision making. What does it say when bank executives pay themselves huge bonuses when in essence the shareholders (tax payers in the case of RBS) are having to bear with the pains of the Government’s austerity measures?

Decision Dilemma

Sir Philip Hampton demonstrated restraint by example, demonstrating the subtle and pervasive powers of symbolic leadership. He faced the dilemma of either taking the money or suffering personal loss and alienation from fellow executives in the banking industry. Accepting the money at a time when the bank is cutting jobs (cost cutting measures) would have made him look hypocritical but giving it up risked demoralising other executives (within RBS) who ultimately may feel pressured to emulate him. I believe that his choice sent out a compelling ethical view point for business and industry.

The force of sacrifice

Within days of this action, the RBS CEO, Stephen Hester decided to emulate his chairman (some may say he was left with no choice). Within a week, executives of Network Rail also decided to forego their bonuses . Through his ethical symbolic actions, Sir Philip Hampton may have started a chain reaction which is going to transform the banking and private businesses landscape. The momentum is building with politicians and business community now calling for a public debate about the morality of executives’ bonus scheme during tough times.

Challenging times – Adapt or Die

A leader does not necessarily have to ‘stay the course’ just because it is his/her natural style but has to have the flexibility to adapt to the changing times.

Hero or Villain?

It is difficult to see the actions of one man changing the bonus culture of banks in the short term. However, his actions have shown participative and visionary leadership likely to have momentous influence in the long term. He has chosen to make his actions congruent with his beliefs. Now he can stand up and talk about the need to cut bonuses of bankers with moral authority.

Acknowledgements

Future Manyumba, a LWD subscriber, is originally from Zimbabwe, and is a Process Engineer with training and experience in hard rock mining in Southern Africa (gold, nickel and copper). His interests include geopolitical global issues, leadership and football.

Image of Sir Philip Hampton is from the RBS website.