ICT magazine » Economy

Schumpeter: Of companies and closets

John Beckham — Thu, 09 Feb 2012 16:02:40 +0000

IN “LITTLE BRITAIN”, a television comedy, Daffyd Thomas, who insists he is “the only gay in the village”, tries to expose the homophobia of his fellow Welsh villagers by wearing outrageous clothes (bright red rubber shorts are a favourite) and picketing the local library. But he is constantly frustrated: the inhabitants of Llanddewi Brefi are all either tolerant or gay themselves.The corporate world is not yet as gay-friendly as Llanddewi Brefi. But attitudes have changed dramatically. Some 86% of Fortune 500 firms now ban discrimination on the basis of sexual orientation, up from 61% in 2002. Around 50% also ban discrimination against transsexuals, compared with 3% in 2002. The Human Rights Campaign (HRC), an American pressure group, measures corporate policies towards sexual minorities in its annual “equality index”. Of the 636 companies that responded to its survey this year, 64% offer the same medical benefits for same-sex partners as for heterosexual spouses. Some 30% scored a fabulous 100% on the group’s index.Progress has taken place in a wide range of industries. The 100% club...

Cosmetic treatment for men: Beauty and the beasts

John Beckham — Thu, 09 Feb 2012 16:02:40 +0000

But the picture in my attic is hideous

IN GEORGES ROMAN’S clinic in London, women queue to see a cosmetic dermatologist renowned for zapping wrinkles and smoothing brows. These days, alas, they have to share the waiting room with men. In the past few years Dr Roman has treated a succession of bankers and businessmen in London and Paris. They don’t want to look beautiful, he says, just “fresher and less worried”.Typically, a swift shot of Botox, a toxin which freezes muscles, targets the deep forehead cleft which can descend on men over 40, especially if they spend all day frowning at a screen. Other favoured treatments are lasers, which perk up skin-tone, and cosmetic fillers for those deep grooves between the nose and the mouth. Englishmen, says Dr Roman, are big spenders. This is just as well: Botox treatment starts at £300 ($477). Fiddlier procedures can cost twice as much. The French tag along with their wives; Britons sidle in alone.Botox was used 336,834 times by American men in 2010, up 9% from 2009, according to the American Society of Plastic Surgeons. But women are...

Model economics: The beauty business

John Beckham — Thu, 09 Feb 2012 16:02:40 +0000

ON FEBRUARY 17th London’s spring fashion week begins. Across the capital, young women in vertiginous shoes and skimpy dresses will be teetering along catwalks. And thousands of young doughnut-dodgers will be inspired to queue outside agents’ offices for the slim chance of becoming the next Kate Moss.Careers in modelling are typically short-lived, badly paid and less glamorous than pretty young dreamers imagine. Yet the business is changing. For one thing, educated models are in. This may sound improbable. In the film “Zoolander”, male models are portrayed as so dumb that they play-fight with petrol and then start smoking. But such stereotypes are so last year.Lily Cole, a redheaded model favoured by Chanel and Hermès, recently left Cambridge University with a first-class degree in history of art. Edie Campbell, a new British star, is studying for the same degree at the Courtauld Institute in London. And Jacquetta Wheeler, one of Britain’s established catwalkers, has taken time out from promoting Burberry and Vivienne Westwood to work for Reprieve, a charity which campaigns for prisoners’ rights.Natalie Hand of...

Planes and pollution: Trouble in the air, double on the ground

John Beckham — Thu, 09 Feb 2012 16:02:40 +0000

If the skies were clear, you’d see the planes

COULD a fresh row over airline emissions lead to a global trade war? That is the scariest prospect raised by China’s objections this week to the European Union’s new plan for controlling greenhouse-gas emissions from aeroplanes. The scheme, which came into effect on January 1st, forces airlines flying into the EU to buy tradable carbon credits as part of its broader emissions-trading system.Many countries are unhappy with the policy, but China’s proclamations this week—official news agencies report that China has “banned” its airlines from participation without specific government approval—appear to be an escalation. Not least because Chinese and European officials are expected to meet for high-level talks in Beijing next week. It also raises the temperature of the row in advance of a meeting of 26 dissenting countries, including India, China, Russia and America, in Moscow on February 21st.As an effort to make airlines pay for their pollution, the EU’s action is overdue. In global terms, their emissions are modest, about 3% of the total....

Glencore and Xstrata: Ore inspiring

John Beckham — Thu, 09 Feb 2012 16:02:40 +0000

ANALYSTS have been poring over the mathematics of the proposed all-share merger between Glencore and Xstrata, announced on February 7th, trying to work out which side has the better of the deal. Is one share of Xstrata, a mining company based in Switzerland but listed in London, a fair swap for 2.8 of its Swiss neighbour, Glencore, a miner and by far the world’s biggest commodities trader? Mick Davis, Xstrata’s boss, proposed a different equation for investors to ponder. “One plus one…equals 11,” was his summary of the merger’s merits.Mr Davis, an accountant by training and a qualified cricket umpire, is generally given to more sober judgments. Perhaps he can be excused his excitement. A deal would forge the world’s fourth-largest mining company with a market capitalisation not far shy of $90 billion, and Mr Davis will be its chief executive.The return of the mining mega-merger was no surprise. Ivan Glasenberg, Glencore’s boss, has long talked as if a merger had already taken place. His company owns 34% of Xstrata, which was formed by a spin-off of Glencore’s coal mines in 2002. Part of the motivation for Glencore’s initial public offering last year was to put a value on the company and give it a currency with which to strike a deal.The alliance would extend Xstrata’s lead as the world’s biggest thermal-coal miner, giving it more than one-tenth of the market, and make it...

Underpaid bosses: They really exist

John Beckham — Thu, 09 Feb 2012 16:02:40 +0000

A chief executive’s pay should depend on the earnings growth and total shareholder returns of his company. That, at any rate, is what Hermann Stern, the boss of Obermatt, a financial-research firm, believes. Yet at big American firms (ie, those in the S&P 100), a typical boss’s pay is correlated neither with performance nor with market capitalisation. By measuring performance against a peer group, Obermatt calculates the "excess pay" companies gave their bosses between 2008 and 2010. Occidental Petroleum, an energy firm, was the worst offender. Its boss, Ray Irani, who earned over $200m in 2008 alone, received almost eight times his "deserved" pay. Some bosses, however, were dramatically underpaid. Apple should have given the late Steve Jobs another $85m, by Obermatt’s measure (though he owned a lot of shares in addition to his $1-a-year salary). Others who delivered value for money included Eric Schmidt of Google, Scott Davis of UPS and Warren Buffett of Berkshire Hathaway.

Corporate governance: Not King Coal

John Beckham — Thu, 09 Feb 2012 16:02:40 +0000

IN AN early episode of “Sergeant Bilko”, a 1950s TV comedy, the eponymous hero rents an empty store. His fellow soldiers, convinced that the army’s “smartest operator” sees a business opportunity, beg to be made partners. Not all do well out of the deal.Nat Rothschild also has a name that inspires confidence among investors. The scion of a European banking dynasty (some of whose members own stakes in The Economist), Mr Rothschild raised £707m ($1.08 billion) to create his own empty store, a London-listed “cash shell” named Vallar. He then used the cash to buy stakes in two coal-mining ventures in Indonesia associated with the Bakrie group, a family-owned conglomerate.Bumi PLC, the British-based company that emerged with Mr Rothschild as co-chairman, appealed to cautious punters who might otherwise have shied away from risky commodity bets in faraway places. But the marriage of British finance and Indonesian business is on the rocks, and investors are sore.On February 3rd the Bakrie family and Samin Tan, an Indonesian businessman, called on Bumi’s shareholders to unseat Mr Rothschild from the board. The move came after months of boardroom strife, which began when the Bakries sold half of their stake to Mr Tan, to pay off debts. It worsened last November when Mr Rothschild called for “a radical ‘cleaning up’” of the “balance-sheet and corporate culture...

India’s telecoms scandal: Megahurts

John Beckham — Thu, 09 Feb 2012 16:02:40 +0000

AS SCANDALS go, it is a corker. It involves secret recordings of lobbyists talking to tycoons about ministers, fraudulent documents, unrelated firms that share the same e-mail address, clueless foreigners piling into a vast market, bank drafts with dates that make no sense, PR flacks taped schmoozing hacks with honking traffic in the background, front companies named after Russian rivers, an apparently helpless prime minister, people under arrest and something between $8 billion and $20 billion pinched from the public purse.India’s telecoms scandal has been rumbling since 2008, when 122 mobile licences covering a third of India’s 2G spectrum were awarded to eight companies. (India today has 14 mobile-phone firms in all.) A constant drip of disclosures since then has numbed the public’s outrage. But on February 2nd India’s Supreme Court cancelled all 122 licences. Its 94-page ruling is required reading for anyone interested in doing business in India.Politically, the scandal’s effects are not yet known. Andimuthu Raja, the telecoms minister at the time, is in jail. His trial could reveal all manner of dirt...

Accounting in China: Seeing the forest for the trees

John Beckham — Thu, 02 Feb 2012 16:03:13 +0000

Careful where you tread

CAN you trust Chinese accounts? Many investors fear (and several short-sellers are betting) that the answer is “no”. Sino-Forest, a big forestry firm listed in Toronto, is a case in point. Last year Muddy Waters, a short-seller, accused it of running a Ponzi scheme, which it denies. On January 31st Sino-Forest released the final report of independent investigators into the charge. Insiders crow that the gumshoes found no smoking gun. The gumshoes grumbled that, lacking access to all the evidence, they were “not able to reach definitive conclusions”.America’s SEC is trying to force the Shanghai office of Deloitte Touche Tohmatsu, a big Western accountancy firm, to hand over papers related to Longtop, a Chinese software firm that was delisted by the New York Stock Exchange last year. Deloitte refuses, saying this would violate Chinese laws on “state secrets”. Deloitte may have a point. If it co-operates, its local staff could be jailed under Chinese law.Many accountancy problems spring from reverse takeovers, when a Chinese firm buys a foreign one to...

Fighter jets: Bomb bays to Delhi

John Beckham — Thu, 02 Feb 2012 16:03:13 +0000

“WE’VE been waiting for this day for 30 years,” said Nicolas Sarkozy, France’s president, on the news this week that India had gone into exclusive negotiations with Dassault Aviation, a French firm, to buy 126 of its Rafale warplanes for $15 billion-20 billion. France has not sold a single Rafale overseas, and until this week the plane’s future looked iffy. Shares in Dassault Aviation soared by 18.5%.The loser, ironically, was the Rafale’s cousin, the Eurofighter Typhoon, built by a consortium led by EADS, Europe’s defence and aerospace champion, which is jointly controlled by Germany and France. EADS itself owns a 46% stake in Dassault, a legacy of earlier French government meddling, so its own shares inched up on the news.Dassault won its exclusive-bidder status by offering the lower price. Both European jets had satisfied the technical requirements of the Indian Air Force, which wants zippier planes to guard against China’s Chengdu J-10 combat aircraft and Pakistan’s ageing American F-16s. In tests over the Himalayas and the Rajasthan desert, India had eliminated the F-16 and F/A-18, the Russian MiG-35 and Swedish JAS 39 Gripen from the process during 2009-10.The capabilities of both the Rafale and the Eurofighter were on display during the Libyan war. The Typhoon is the superior air-to-air interceptor. The Rafale switches more easily into a ground-attack mode.After...