Tuesday, 26 July 2011

The real Murdoch scandal

I'm beginning to think we need to get the hacking scandal into some perspective.

I certainly don't want to diminish the seriousness of hacking into people's private phones and messages, especially when they have been bereaved in the most tragic circumstances.  These are clearly against the law, which is perhaps why they are getting the attention worldwide they are currently getting.

But in the whole gamut of journalistic excess - taking photos of ailing stars on their deathbeds, or a dying Princess Diana - they are not unique.  They also seem to be overshadowing some very serious allegations indeed and I don't quite understand why this is.

The Observer reported on Sunday that some very explicit threats were made to individuals in the government, or connected to it, about what the Murdoch papers would do to them if their bid for the BSkyB bid was not supported.  That is a corruption scandal that really justifies the current humbling of the Murdoch empire, if it is true.

But is it?  Who are the executives, still unnamed, who made the threats?  Why is this not being pursued?  Is it because of fears that it would lead to the destruction of the remaining Murdoch newspapers in the UK?  If so, are we not still in thrall to Murdoch, but in a different way?

Monday, 18 July 2011

Why Murdoch's agony points to the future of business

You cannot seek to bribe nor twist,
Thank God, the British journalist;
But seeing what the man will do
Unbribed, there’s no occasion to.

Humbert Wolfe's rhyme suggests that the News International Hacking Scandal – let’s call it by its proper name – is not a new phenomenon, but an extreme version of British journalistic excess.

What has been less commented on is that the serious inability of News International to get to grips with the problem or the scandal is also a very old pattern. It is about the sclerosis of narrow hierarchies.

News International is a classic narrow hierarchy. Its chairman is the son of its founder. It rules by fear, by its fearsome influence over public life, just as its rules its staff. It is not the kind of organisation where people find it easy to ‘speak truth to power’.

Ever since the liberal philosopher Karl Popper’s two volume sequence, The Open Society and Its Enemies, we have known that ‘open societies’ – where people find it easy to challenge from below – are more effective, less wasteful, more imaginative and faster moving than ‘closed societies’.

It is the classic argument for localism in government, just as it is the classic argument for flat hierarchies in business. It explains that leaders tend to be insulated from the truth they need to know in narrow hierarchies. That is why News International is in crisis.

It is also a harbinger of the future. This lesson is a slow one to learn for our lumbering organisations, public and private, but it is the organisations that are owned or controlled by those who work there which will in the end sweep aside the old hierarchies with their mega-salaries and bonuses. Because they move faster and see things clearer.

Wednesday, 13 July 2011

Goodbye to John Sweet

I am very grateful, as I so often am, to Jonathan Calder's blog.  This time for the sad news that Sergeant John Sweet has died at the age of 95:

John Sweet, as fans of Powell and Pressburger films will know, was the American army sergeant who played the role of Bob Johnson in their wartime classic The Canterbury Tale.  Like Jonathan, it is one of my favourite films.  It manages to combine an amazing Chaucerian simplicity with a sense of such depth and feeling that I am never absolutely sure what the film is trying to tell me.  I only know that it is about England and it makes me feel good.

Sweet was spotted at an amateur dramatic performance, roped into doing the film while he worked at SHAEF headquarters on the D-Day plans, but never acted again after he went back to America.  It is an absolutely beautiful film and I thoroughly recommend it.

Friday, 8 July 2011

Corporate vandalism and the News of the World

Watching the news last night left more than a nasty taste in the mouth (well, it often does, actually).  This morning I knew what it was - the closure of something 168 years old, in this case the newspaper the News of the World.

What looked like an act of sacrifice by News International is a rather cynical ploy to speed up what they were intending to do anyway, which is to shed the staff of one newspaper and run a seven day a week operation from the Sun.  Achieved now at a stroke.

But what really bothered me was closing an institution of that age.  If it was a building that dated back to the 1840s, there would be an outcry if it was demolished at a stroke (well, yes, that does happen).  But because it is an institution, and great men are supposed to be able to shut and merge and generally gut the institutions they control, nobody complains - beyond the lost jobs.  Governments do it all the time - lost hospitals, libraries, courts, all of them small tragedies and impoverishing.

But institutions are important.  They are part of what makes life civilised.  When the sociologist Robert Putnam hailed the Emilia-Romagna area of Italy as one that has unprecedented social capital, part of the reason - he said - was institutions that dated back to the twelfth century.

When institutions go wrong, they need to be cleansed, cleared out and reformed.  They need to be cut down to size and forced to be effective - because they matter.  They should not be just discarded.  Yes, the News of the World has clearly become corrupted, but to destroy anything that has lasted so long is an act of vandalism.  Don't obliterate, reform.

Monday, 4 July 2011

Why the Ratio matters so much

The bad news: chief executive pay in the FTSE 100 increased by 55 per cent last year alone, accelerating the creation of an inflationary class of ubermensch, with huge consequences for social cohesion.

The good news: a more effective, imaginative and flexible corporate form – the mutual – increased by 25 per cent in the UK economy last year.

Both these facts are relevant to The Ratio, the new report by myself and Andrew Simms, which suggests forcing companies – and especially those bidding for public service contracts – to reveal the ratio between their bottom and top pay levels.

We may not be able to legislate to drag the ratio back down to 1:20, which John Pierpoint Morgan said was the maximum reasonable level. But we can make sure the crucial ratio is published on the front of annual reports, were they might motivate shareholder activists who can do something about it.

But it is also time to be more positive about this. For too long, campaigns against corporate greed and ever-widening pay ratios have tended to be defensive and negative. They have been campaigns against rather than campaigns for equity, or anything else.

This needs to change partly because having a compressed pay ratio is not just a good thing ethically. Nor is it just a better way of motivating staff and providing greater equity in society, with all the economic benefits that will bring.

It is also a sign that a company is sensitively, fairly and imaginatively run, that its management and board understands the role that all their staff can play, and that collaboration inside and outside the company is as important to their success as competition.

It is a sign of a company that is more flexible, faster moving, more imaginative and more successful.

It is our contention that a more effective corporate form is emerging based on these ideas. Many of these will be co-operatives, but some will simply have a more co-operative spirit that understands the need to include staff and use their resources more effectively.

In time, these companies will push aside the kind of corporate dinosaurs that minimise the pay of their lowest and maximise the pay of their highest echelons, a sign of fatal inflexibility and short-term thinking.

They will do so because these companies will earn more money, waste less on leadership fantasies and will be more successful.

But this is not yet widely understood, either in the corporate or policy world, and there needs to be a campaign to speed the process along. The faster this process takes place, the more successful and imaginative UK business is going to be.

To get there we need to encourage shareholders to use their power to encourage more equitable pay structures, to vote down unacceptable remuneration packages and to use their power to remove, where necessary, the chairs of remuneration committees.

The transparent ratio and the Charter of Responsible Pay which we suggest in our report are both means towards this objective.

They need to take place within the context of a wider debate about corporate behaviour that emphasises the benefits and inevitability of change, rather than simply complaining about the injustice of the current situation.