20 Apr 2011

What to read in the Financial Times

I read various newspapers, in an irregular manner. By that I mean that, although I have my preferences, I hold no newspaper subscription (apart from bike magazines that is) and try to take a look at a wide range of papers from time to time. But I rarely buy a paper more than three times per week.

I see the Financial Times regularly when travelling, but I only buy a copy very occasionally. It is often on offer for free on planes or in hotels, and I usually take it. Although I skip all the financial stuff which does not interest me, I nearly always find plenty of very good articles to read. In fact it is a great newspaper, since it confides its columns to people who can write and who know their subjects well.

On the topics that regularly interest me, the Arts articles are usually excellent, as is the wine section in the Weekend issue, written (usually) by Jancis Robinson. Amongst the regular contributors who write about business issues in a general way that links them to what I consider to be the real world (ie human beings), I always read what Lucy Kellaway has to say, as she is a brilliant columnist. She is shown on the top left-hand corner of the image below, and her column is usually to be found on a page called Business Life, which is quite suitable as she indeed covers the link between the two words.

In a copy of the FT (dated Monday April 18th 2011) that I picked up recently on a trip to London, she wrote about the salaries and bonuses of top executives, and the difficulty of finding clear information and honest justification for these amidst the waffle that fills the pages of companies' annual reports. She nearly always manages to make her subjects both clear and funny, and this article is no exception. I cannot resist quoting a couple of passages from it.

"I have just spent the morning doing something that has left me feeling bored and grumpy. I have been reading annual reports and proxy statements, concentrating on the bit where companies try to justify why their top person got paid quite so much. What has annoyed me isn't just the fact that most chief executives earn more than they are worth: this has been the case for such a long time that outrage fatigue has set in. Instead, it is the increasing quantity of flannel and pseudo-scientific analysis in which the numbers are now wrapped."

She goes on to give three examples, from the annual reports of Barclays, Hewlett Packard and Kraft. About the latter, she says this: "my favourite statement this year is Kraft's, which seeks to explain why Irene Rosenfeld got a bonus of $2.1 million in return for missing her financial targets. Just in case anyone is simplistic enough to think that if you don't hit the target you don't get a bonus, the report pulls out of the hat a whole new set of reasons for why she deserved one. Some of these are pathetically mundane....but other are more puzzling. "Improved talent pipeline developed through retention of Cadbury leaders" it says. I think this horrible, tortuous phrase means that Rosenfeld has hung on to a few top people at the confectioner - which isn't the impression one gets from reading the newspapers."

Kellaway concludes her article thus: "It makes me wish for a return to the bad old days when companies simply named the sum paid to the top people. No explanantions or excuses were given. Shareholders didn't have the foggiest idea of how the figures were arrived at, but then, for all the pages that I've ground through this morning, I'm none the wiser either. The bland numbers, stripped of all excuses, would surely be easier to grasp - and harder to defend. And they could be made harder still by the addition of one further figure: the ratio of the pay of the person at the top to the person at the bottom."

That's the stuff Lucy!

Read on ....