About Cass

Media advisories

Media advisories are timely opinion and insight on breaking news stories from Cass faculty. Authors are expressing their own views, not those of the School.

16 March

Commenting on Google's A.I. system AlphaGo, Professor Andre Spicer said:

“The triumph of Google's AlphaGo over South Korean Go grandmaster, Lee Se-dol, has led many to ask what this might mean for jobs and the wider economy. Often people rely on the doom scenario. AlphaGo is only the tip of the iceberg in applications of Artificial Intelligence (A.I.). According to some scenarios, A.I. will quickly replace many forms of complex knowledge work ranging from lawyers to librarians, professors to policy analysts. For instance, there are already robo-journalists which scour news feeds and then automatically generate stories. This could be a serious problem for developed economies where large proportion of well paid jobs are forms of knowledge work. The main kinds of work which are relatively immune to the application of A.I. involve direct human interaction such as massage therapists.

“A.I. could also have big implications for how organisations are run. Instead of being managed by a person, we could become managed by intelligent machines. This is already happening at companies like Uber where drivers are hired and fired automatically on the basis of feedback from consumers. If a similar process happens in other sectors, many middle management jobs could be rendered obsolete. However, it is vital we don't get too carried away with the promises of A.I. A quick look at history shows us that new technologies often end up creating jobs as well as destroying them. During the late 20th century, we witnessed a revolution in an office technology with the rise of computers. This was supposed to be reduce labour required in administration and radically boost productivity. The results were quite different. The number of administrative staff has ballooned and there have only been modest gains in productivity. One reason for this is that automation creates opportunities for new kinds of work job would not have been possible. For instance, the introduction of computers into the workplace created a millions of IT jobs. Another reason is that automation often creates work for existing employees. For instance the introduction of email has meant office workers spend over 3 hours a day at work dealing with emails. Computerisation also created a huge amount of 'shadow work' - these are tasks like filling in forms which were once done by professional administrators and now we have to do ourselves. If history is anything to go by A.I. may not do people out of job - it could actually create more tasks for already strained office workers to do.”

14 March

Commenting on the costs of zero hours contracts, Professor Chris Rowley of Cass Business School said:

“The ONS has just confirmed the continued growth of zero hours contracts that do not guarantee a minimum number of hours of work. Of course, this may in part be due to the greater recognition of the term and publicity surrounding them as well as seasonal work.

“While the 800,000 plus workers with them represent just 2.5% of the employed workforce, they are not evenly spread. Rather, they vary by certain worker categories and sectors and firms. First, they are more prevalent among the young, part timers and females, many of whom have more than one contract as there are 1.7 million such contracts. Second, the percentage of businesses using such contracts varies considerably by sector. In the hotel and catering industries more than 25% of employers use them compared to only 5% in the construction sector. Also, such contract use varies by firm. Last year just 1.8% (72,000) of workers, in retail and wholesale were on zero hours contracts. Yet, Sports Direct alone employed nearly 20% of these with 75% of those working in its stores on such contracts.

“Why should we worry or care? Employers insist such contracts are beneficial as they allow ‘flexibility’ and many workers on them are happy. On what basis and evidence? The trade unions insist such contracts are unjust, allowing the use of cheap and casual labour to cut costs. TUC research found average weekly earnings for zero hours workers were £188 compared to £479 for permanent employees. Many struggle with not only low but fluctuating pay levels, making it hard to budget, leave alone even consider a mortgage.

“Also, such contracts provide only numerical, not functional, flexibility, with long term implications for not only commitment but productivity. Allowing this lazy use of ‘disposable’ employees not only indicates a lack of commitment from employers, which is reflected back from employees with a lack of motivation, but also encourages ‘whipsawing’ in a ‘race to the bottom’ in employment terms and conditions.

“Furthermore, all this comes ‘home to roost’ in areas such as a lack of investment in training and skills and innovative production and processes - hence UK plc’s abysmal manufacturing labour productivity level, lower than the G7 average and our European neighbours - not only the mighty economic power house of Germany, but the often criticised France and Italy too.”

26 February

Commenting on Facebook’s launch of ‘Reactions’ Dr Ammara Mahmood, Lecturer in Marketing at Cass Business School said:

“Facebook launching its ‘Reactions’ is an update we’ve been expecting for a while now. Facebook users have wanted a better tool to express themselves and now they have an additional five reaction buttons (emojis) covering a wide spectrum of emotions which is good. The ‘like’ button, introduced five years ago, was a hit with users. Similarly, in a world with mobile platforms and the popularity of using visuals to communicate, these emojis are definitely going to be used extensively. Emojis are here to stay.

“But what does that mean for brands? ‘Likes’ have been used as a means of measuring engagement for a while in social media marketing. The new icons are still going to be a ‘like’ in the algorithm but eventually there will be more data on the sentiment of the user for brands to analyse. Overall, because of the wide spectrum of emotions I foresee more user engagement with content than before, as people who disagreed or felt saddened by content may not have engaged with it despite being affected by it. However, actual commentary may decline as people begin to express their emotions via emojis, so care will need to be taken to understand how consumers use these reaction buttons, especially if they become a substitute for comments.”

15 February

Commenting on HSBC’s decision to keep their headquarters in London, Professor Andre Spicer of Cass Business School said:

“The focus on regulation and the current state of the Chinese market has blinded us to other reasons why HSBC chose to stay put - it is likely the collective interests of the UK corporate elite played a role. HSBC is an important part of a network of interlocking directorates; it is also a vital source of revenue for consultants, accountants, lawyers and many others. They probably tried their best to ensure the bank did not move. We know that physical proximity is still vital for securing work in these industries. It is likely it would not just be the elite who benefit. When job cuts come, they tend to be administered much more harshly to far flung operations. Having HSBC headquartered close to home is likely to soften the blow of any restructuring.

“Another reason why HSBC probably did not move was that it would be stepping into a completely different business environment. All the evidence shows that when firms move headquarters, they start to copy their new neighbours. This would have meant that HSBC would slowly become more like a Chinese firm. That would have meant a culture which emphasises personal connections over almost anything else and a large role for the state. The share price of HSBC would have more closely followed other firms located in Hong Kong. This could have been dangerous in a world where China is looking uncertain.

“We often over-estimate how easy it is for corporations to shift headquarters. Just like us, corporations are quite place-bound. Between 1996 and 2006 (a high point in globalisation) only 6% of large multinationals relocated. If moving house is awful, then moving headquarters is much worse.

“We also ignore the fact that corporate headquarters can be determined by things which don't show up in the annual reports. For instance, the location of a CEOs primary residence, the availability of inter-contential flights the availability of business services and history all play a big role. One of the key factors is being close to investors - not close to customers. Even in this age of nano-second electronic investing, being able to rub shoulders with your investors - or the people who tell them what to do (like analysts) - often counts much more than keeping your customers happy. London is the perfect place to do this.

“The impact of HSBC's decision is likely to be good for the City. It will keep elite corporate networks interacted. It will mean the demand for business services created by the headquarters will remain and restructuring is likely to be less painful closer to home.

“The big challenge now is how HSBC presents its decision. Past experience suggests that it presents its decision as about cost cutting, then the share price is likely to go up. If it presents its decisions as being about personal advantage for the senior managers, then the share price is likely to take a hit.”

5 February

Commenting on BP’s record losses and how this may affect potential M&A activity, Professor Meziane Lasfer of the M&A Research Centre at Cass Business School said:

“The general consensus is that companies are likely to be taken over after significant underperformance, mainly because the target will be considered to be cheap. In this case, BP can be seen as a potential target. Its current share price of £3.30 is 34% below its 52 week high of £5 reached in April 2015, or 51% below its all-time high of £6.76 reached in January 2006. However, BP may not be a takeover target for the following reasons:

“The undervaluation does not always trigger a takeover. If the undervaluation is due to market inefficiency and/or to bad management, then a potential bidder who could restructure operationally the target could launch a bid. In this case the bidder is likely to assess fully the business risk of the firm and undertake some strategies to reduce costs and increase revenue. These operational synergies are likely to make the bid a positive NPV project. Similarly, if the underperformance is driven by excess leverage, making the target more risky, the potential bidder may undertake some strategies to, say, sell assets, get cash and reduce the debt level. In the case of BP, these two arguments are less likely to apply.

“The firm’s problems are driven by macro-economic risks, namely the decline in oil prices. There are outside the management’s discretion. A potential bidder will have to face them and is unlikely to reduce them. Therefore, a takeover of BP may only lead the bidder taking a high risk. Given that such bid will result in overpayment, the takeover is likely to be a negative NPV decision. Related to this point is the fact that the reported losses are excessive. A potential bidder can only be a very large oil company such as Exxon Mobil to be able to cover the losses. There are not many such bidders in the market and they are likely to have other worries to deal with rather than take over another underperforming competitor. Also, BP is a very large firm. At today’s price of £3.30, its market value of equity is £62bn. This is likely to be out of reach of any bidder including Exxon Mobil. My overall opinion is that the oil companies are likely to carry on underperforming for some time so long as the oil prices are under pressure. A sign of an oil price recovery may lead to some bids, but I would expect them to be mainly in small companies.”

4 February

Commenting on Sainsbury’s buying Argos owner Home Retail Group, Dr Valeriya Vitkova of Cass Business School said:

“The Sainsbury's/Argos deal is not just an attempt to diversify away from the structurally challenged UK food market (margins destroyed by hard discounters like Aldi and changing shopping patterns making large parts of the retail estate redundant), it is also a property and logistics driven acquisition. The idea is to utilise surplus space in Sainsbury's supermarkets to house Argos’s concessions selling non-food items. At the same time Argos's range can be widened with Sainsbury's products. In addition, Argos's stores can be closed where there is a nearby Sainsbury’s store. In terms of timing the deal takes advantage of the low valuations currently being suffered by UK non-food retail companies. Given that the challenges Sainsbury faces are no different from those faced by the other big-box food retailer (Tesco, Asda, Morrison) we would expect further similar deals should the market welcome this one or should it prove successful in time. There are other long suffering UK non-food brands like M&S and Debenhams but they are either already present in food or would have limited appeal for a food retailer. So similar deals are challenging and may have to involve small acquisitions.”

28 January

Commenting on Apple’s latest profits and whether or not the company can sustain its upward trajectory, Professor Andre Spicer of Cass Business School said:

“Apple may have had the largest quarterly profits in history but it could go from darling to dud within a few years. This happened to Nokia before, and it could easily happen to Apple. Its strategy of providing a limited range of high priced products could backfire. As smartphones increasingly become undifferentiated commodities, people will start asking why they are paying such a huge premium and Apple could find itself trapped by what it is good at. Sales of the watch have not really taken off yet. Now Apple is trying to make up for flat sales of its core product by moving into other markets like healthcare, financial services and cars. The big hurdle it will face is these are very different industries - they are tightly regulated, filled with many large, well-established players and are extremely complex. It is uncertain where the skills of making cool looking mobile phones will translate into banking.

“It is easy to paint a doom and gloom scenario but what is more likely is that Apple will shift from being outstanding to being simply ordinary. When this happens, many of the habits which you find in middle aged companies will kick in - cost cutting, fashion following, and pointless and repetitive change programmes. It is likely shareholders will put more pressure on the company to return dividends and engage in typical financial ‘boosterism’ like increasing share buybacks. Some investors will be eyeing Apple's cash pile, hoping they might see it returned to them rather than being reinvested to reinvigorate the company. If that happens, it will probably be the first nail in Apple’s coffin.”

19 January

Commenting on Bank of England governor Mark Carney’s comments that the UK economy is not strong enough to contemplate raising interest rates, Dr Peter Hahn, senior lecturer at Cass Business School, said:

“Perhaps it’s time for the Bank of England to communicate its intentions on the role of the base rate in our future? Is it a reflection of inflation, growth, market demand for money - or something else? Perhaps the base rate should be set as a ‘forward indicator’ of one these factors? For the last few decades central bankers often seemed to have viewed manipulating base rates as using the fine-tuning dial on an old fashion radio to control the economy – with a the occasional big spin; surely this notion is no longer credible? Clearer statements on the ‘point’ of the base rate can only help the markets to manage more efficiently.”

19 January

Dr Valeriya Vitkova of Cass Business School asks if $20 oil could be a reality? She said:

“The oil price has dropped 20% in the first seven sessions of 2016. Since mid-2014 there have been concerns that supply has been outstripping demand. But what has changed recently are concerns on the demand side of the equation, in particular from China and the US. Chinese growth has driven global oil demand in the last decade, any slowing in that growth rate, even if still growing, means the gap between supply and demand is unlikely to close. In the short term the oil price can become disconnected from demand and supply fundamentals and instead driven by technical and psychological factors such as the possibility of a $20 oil price or forced selling by long oil investors seeing margin calls. In addition, the strength of the dollar, itself a function of fear in the markets, will impose downward pressure on an oil price that is largely expressed in dollars. However, as the oil price approaches the marginal cash cost level for certain producers there will cease to be an incentive to produce oil. As a result we may see production stoppages from the higher marginal cost producers such as shale. Looking at the bigger picture, the much publicised entry of Iran into the oil export market will eventually, as the source of the 5th largest oil reserves on the planet, add substantially to the glut of oil, but immediately contribute to short term fears around the oil price.”

18 January

Commenting on the “Blue Monday” phenomenon, and how humour can be used as a management solution, Paula Jarzabkowski, Professor of Management at Cass Business School said:

“Today [18 January] is what’s known as ‘Blue Monday’ or the most miserable day of the year. Apparently it’s the combination of being fed up with winter, the grim aftermath of Christmas spending, and the back-to-work blues. While it may be just pseudoscience, who feels like dragging themselves to work on any Monday in January?

“Well actually, new research shows that going to work may be funnier than you think. In our two-year ethnographic study of a major change in a telecommunications firm, we found that workplace meetings are typically full of laughter; in each meeting at least two people, and often the entire meeting, laughed on average 13 times, and well over half of these episodes were about people’s specific workplace problems.

“Laughter is a natural, everyday response, even to grim situations, and humour is one way that people deal with tensions at work. Organizations often have competing objectives – for example global control and local autonomy, increasing patient care and reducing costs, or even implementing work/life balance.

“So why do people laugh in these situations? Laughter creates an interactional dynamic in which staff can legitimately acknowledge these workplace paradoxes, in which it may not be possible to satisfy competing demands. All businesses face contradictions and competing objectives. These are often frustrating for the employees involved and cause costly delays in business processes. Managers who pay more attention to humour – a simple everyday response to conflict – can better understand these pressure points, and relieve them. In this sense, laughter really can be workplace ‘medicine’.”

18 January

Commenting on Amazon China registering to operate as an ocean freight forwarder in the United States, ManMohan Sodhi, Professor of Operations & Supply Chain Management at Cass Business School said:

“There are two things at play here: Amazon’s relentless pursuit of market share and the desire of any company to control its supply chain upstream and downstream by becoming more vertically integrated. The fact that it is stated as Amazon China and not Amazon is simply a nuance. So is the fact that freight rates are low – these factors only help with barriers to entry but Amazon is big enough to surmount such barriers. This move by Amazon is good news for Chinese sellers in reaching western markets at a time when the Chinese ‘production’ only economy has slowed down. Western consumers will benefit from lower prices and faster deliveries from China. However, it is bad news for the environment: more unrecycled packaging for small goods and more ‘air’ being shipped all the way from China to the West with the $0.13/package cost, not including the permanent damage that this will do to the environment.”

8 January 2016

Commenting on Twitter potentially increasing its character limit to 10,000, Caroline Wiertz, Professor of Marketing and Dr Tom van Laer, Senior Lecture in Marketing said:

Professor Caroline Wiertz: “Twitter users consider the brevity of the platform an asset. In our research, we found that consumers like to consult Twitter for movie recommendations because the brevity of the message makes the recommendation clear and easy to process (Hennig-Thurau, Wiertz, and Feldhaus 2015). After all, it is hard to be ambivalent in 140 characters. I wonder whether 10,000 character tweets are a useful addition to a social media platform that thrives on its distinct (and succinct) personality.”

Dr Tom van Lear: “Research proves that there is a place for long form on social media. Pan and Zhang (2011) show that lengthy book reviews receive more positive feedback on Amazon.com. But changing the basic nature of Twitter, which is essentially a micro-blogging social media platform famed for its brief but entertaining content will just make it like every other platform available.”

18 December

Comparing A Christmas Carol with the Dickensian working conditions of Sports Direct, Chris Rowley, Professor of Human Resource Management, has this advice for Mike Ashley:

“After the recent exposé of its draconian, backward looking working conditions, alleged failure to even pay the minimum wage, and a call for an inquiry, you would think Sports Direct would think carefully about its response, with its reputation in tatters and the annihilation of £400 million of its value.

"So, what has it done? The wrong thing: the rebuttals and review of agency worker terms and conditions are naïve at best. The review is a sop as it cannot be objective given it is being overseen by the founder.

Someone in the organisation needs to have the courage to say that this will make things worse, and appoint an independent person to produce and evidence-based and objective review.

"So what should the new T&Cs look like? Rather than being involved in a drive-to-the-bottom with its exploitative employment conditions and mere legal compliance, it could take the moral high ground and operate ethically to aim to become an employer of choice with practices of respect, trust and motivation. It could include clearly setting out career progression routes from the wilderness of continuous zero hour contracts and agency working to permanent employment.

"The intrusive Big Brother type surveillance and monitoring, control (such as even banning the wearing of 802 clothing brands) and rigorous searches in unpaid time, are counter-productive to this. Workers in Britain deserve better as we move closer towards the third decade of the 21st century.”

Commenting on Sports Direct and how its corporate governance model has put the retailer at risk, Hugh Willmott, Professor of Management at Cass Business School said:

“Last week, Sports Direct lost 11% of its stock market value on Thursday, resulting in £400m being wiped off its market value. That was not just bad news for Mike Ashley, the company’s billionaire owner who lost about £237m. The Guardian investigation revealed draconian working practices such as how Sports Direct conducts lengthy and rigorous searches of employees and also imposes harsh penalties for comparatively minor misdemeanours.

“The responses issued by Sports Direct were predictable enough, but what the responses fail to address is the business model at Sports Direct. The model which is driven by immediate profit-seeking to maintain the share price is not a “one-off” or particularly exceptional. A leading Sports Direct shareholder, who did not want to be named, is reported to have said: “Sadly we have come to expect this sort of problem at the company.” Indeed. So why have such leading but conspicuously ‘unnamed’ shareholders not taken up the ‘stewardship role’ that is emphatically asked of them by the UK Corporate Governance Code and the Stewardship Code? Why do investors only become restless when the stench of malpractices, such as those emitted by Sports Direct, becomes public?

“A business model based upon short-term shareholder value maximization has become widely accepted. This model has placed many millions of pounds into the pockets of Mike Ashley and the Sports Direct shareholders by appropriating the wages and unpaid working time of its employees. Simon Walker, speaking for the IoD, acknowledges that such practices are a ‘scar on British business’ but claims that “Sports Direct is categorically not a representative of British business”. Such condemnations are welcome, but they ring rather hollow.

“As long as investors continue to support companies that apply a narrow corporate governance model that distributes rewards so unevenly, most firms are obliged to contempate the adoption of the same kinds of practices exposed by the Guardian’s investigation of Sports Direct. If major parties in this debate, such as the IoD and institutional shareholders react to uneven distributions and oppressive employment practices only when they are publicly embarrassed or when it directly hurts their wallets, their protestations will have little credibility and will fail to restore public trust in business.

“To restore the trust and respect of taxpayers, consumers, and employees, a reform of corporate governance theory and practice is needed. It must ensure that the claims of the stakeholders who create the assets and reputation of companies are taken seriously. Had Mike Ashley given a moment’s thought to who made him his millions, he might today be many millions better off, as well as being respected rather than castigated.” 

2 December

Speaking today at the Westminster Business Forum Keynote Seminar: The future for general insurance in the UK: regulation, competition and innovation, Paula Jarzabkowski, Professor in Strategic Management said:

“Many countries around the world – including the UK - are underinsured, and this could be a potential threat if a disaster hits. But it is also an opportunity for UK and London insurance companies to expand in new markets and grow.

“Governments around the world are taking a more active role in insurance and reinsurance, and in particular the UK government is intervening in the insurance value chain creating reinsurance pools that can hold substantial amount of risk.

“It is of paramount importance to make sure that these pools are an effective mechanism in the insurance markets. All these recent developments reconfigure the relationship between risk, reward and responsibility and so we need to locate where risk resides when the dynamics of this relationship change.

“What we need is better risk transfer mechanisms - that may not be necessarily insurance based - to make sure that the UK and London remain attractive for insurance markets.”

1 December

Commenting on Fortnum & Mason’s expected Christmas performance following record annual sales, Professor Fleura Bardhi of Cass Business School said:

“It’s not surprising that Fortnum & Mason are predicted a successful Christmas period, although I doubt it is solely related to an increase in luxury product consumption in the sector. Rather, I believe this is a case of Fortnum & Mason representing ‘Englishness’ and tradition (and being very good at selling the experience and the products associated with it), rather than just a case of luxury consumption.

“Firstly, Christmas is a consumption ritual that entails three important aspects in which Fortnum & Mason excels: gifts, tradition and celebrations. The fact that Fortnum & Mason expects their sales at Heathrow and Piccadilly to skyrocket is a clear indication that travellers and tourists are a key target market for them. For these consumers, it is not just about the purchase of a gift (that can be done anywhere), but rather about bringing with them a flair of ‘Englishness’ and a symbol of festive tradition. Fortnum & Mason has positioned itself very well, providing the traditional English experience through its marketing and store experience. For example, the retailer has associated its brand historically with British royalty, as well as the recognised tradition of ‘taking tea’. Additionally, it empathises its retail stores’ atmospherics and branding around English culture.

“All of these retail strategies have fostered its position as a luxury English brand, one that harks back to ‘old world’ tradition in the minds of the consumer. In other words, it is selling a particular brand of English tradition, which is very strongly associated with Christmas. After all, as Fortnum & Mason states on their website, they have been doing Christmas for more than 300 years!”

23 November

Responding to The Independent’s ‘Small Talk: Fear of failure is putting off many would-be entrepreneurs’ (23 Nov), Professor Costas Andriopoulos, Associate Dean for Entrepreneurship at Cass Business School said:

"I am not one of the proponents that failure should be celebrated. But I do strongly believe that starting a new venture is a risky endeavour (there is ample of evidence that supports this) and that we should embrace failure and learn from it. Thomas Edison put this very eloquently: 'I have not failed. I’ve just found 10,000 that won’t work'.

"There are two questions that then become interesting to consider. Firstly, how can we manage our fear of failure? Our research shows that start-up founders and innovators can manage their fear of failure by:

  • Accepting that failure will happen. Now is the time to reframe our view of failure. We may have failed, for instance, in raising funding for our new venture, yet it is worthwhile exploring what we have learned. We are one step closer to achieving our goal. We are now more experienced and knowledgeable and can use this to the next pitch meeting.
  • Understanding what we are really are afraid of. Now is the time to list our fears, translate these into objectives and work towards overcoming them by asking for help or working them out on our own.
  • Taking little “bets”. This will illuminate what features or benefits of our product offerings work and don’t work. The focus here is to hone the product offering.
  • Being ready to pivot! If our business model does not work, then pivot to Plan B. I always perceive this activity as a way to discover additional growth or growth that we may have overlooked.

"Secondly, what can we do if failure knocks on our door:

  • Take a short break and focus on something that will make us feel good about ourselves.
  • Treat failure on the one hand as a temporary setback and, on the other hand, as an opportunity to learn.
  • Persevere – Continue to think big. Never stop pursuing our dreams!"

19 November

Commenting on the HBOS report, Professor Andre Spicer of Cass Business School said:
 
“The report released today shows HBOS was a textbook case of corporate stupefaction. The bank employed senior people who had little experience in the industry, people were dissuaded from asking tough questions, and the regulator also avoided examining them with too much depth. Risks were largely ignored so the bank bosses could hold on to a rosy picture of the world where the business grew 20% a year. As a result, otherwise smart people ended up making stupid decisions, which created large costs that the tax payer had to bear.
“Additionally, a virulent sales culture was encouraged throughout the bank. In one branch, they had a cash or cabbage day: The best sales people would get a pile of cash on their desk. The worst performers received a cabbage.

“HBOS fell victim to a common disease in corporate life - believing that a strategy, which helped you grow in good times, could get you through bad times.

“The report suggests such a colossal failure could have been avoided if the bank had more experience, better skills at listening and was willing to fundamentally question their strategy.
“The entire sector has learned many lessons from the failure and are in the process of changing their culture. Boards are now filled with more experienced people and regulators have upped their game and are carefully monitoring firms’ conduct. The big risk now is whether institutions remember the lessons learned from the past.”

9 November

Commenting on Equal Pay Day, Chris Rowley, Professor of Human Resource Management, said:

“Why is 9th November so important in the UK?

“It is because it is ‘Equal Pay Day’. This marks the day until the new year that women in full-time employment will in effect work for nothing because of the gender pay gap of men earning more than 14%/hour more than women (ONS; Fawcett Society). While this year EPD is 5 days later than in 2014, indicating the gender pay gap narrowed, at this current rate it will still take 50 years to close the gap despite over four decades of legislation in the area.

“The gender pay gap is even wider among high earners: in the top 5% men earned 45.9% more than women and in the top 2% some 54.9% more (TUC).

“This gap is not, as some naively suggest, simply due to women’s poor pay negotiating skills. Rather, it is due to a toxic mix of embedded corporate cultural and institutional factors. This requires good equal pay practice, which includes structured rewards systems, job evaluation, collective bargaining, pay transparency and equal pay audits to produce more equity.

“Finally, laws need greater compulsion, monitoring and penalties to expose and penalise those companies who continue to be discriminatory payers.”

5 November

Dr Tom van Laer comments on the realism of social media following recent admissions from Instagram personality Essena O’Neill who stated that social media “is not real life.”


“Realism on social media can be summarised in one concept: storytelling. Academics have developed two rival notions of storytelling: fictionality and verisimilitude (or the authenticity of a story). Fictional stories are stories whose plots are purely imaginary or resemble real events but do not claim to accurately represent real-world events. In contrast, nonfictional stories are grounded in real characters and events that actually happened.

“However, when this concept is taken into the realm of social media, then each platform user will express dominance in accordance with the position that he or she holds, which grants the social media user who tells a story the power to determine what a story will and will not be: how much will be fictional and how much will be authentic. However, on platforms such as Instagram, users may not be able to see the difference between nonfiction and fiction and are therefore persuaded equally by both!

“What matters more for story realism is verisimilitude. People assess analytical expressions (reports, speeches, etc.) in terms of their truth, but assess stories in terms of their verisimilitude or ‘lifelikeness’. The central focus of verisimilitude is on believability and not on consistency and non-contradictions. Truth in fiction is not about empirical evidence. Thus, we define verisimilitude as the likelihood that story events may actually happen. The higher the level of verisimilitude, the greater the suspension of disbelief and the more social media users who receive other users’ narratives) lose themselves in the story and the more they are persuaded by the story that is being told to them.”

4 November

Commenting on Volkswagen admitting to false emissions data in 800,000 of its cars, Professor Andre Spicer said:

“As Volkswagen goes through its dirty laundry, it’s likely to find many unpleasant surprises. Today, VW discovered that 800,000 cars produced more carbon dioxide than they claimed: this will add an additional €2 billion to its already mounting bill. But the real costs will come from the further damage to its brand. Customers will start asking questions: ‘Is my car more polluting than I thought? Are VW’s cars less fuel efficient than advertised? What else haven’t they told us?’

“Markets for complex products like cars run on trust – there is a huge imbalance of expertise between the engineers who build cars and the people who buy them. Consumers trust companies like VW to give them the best deal. That is why people buy their products. If this trust breaks down, customers could start see the organisation as untrustworthy.

“The market for VWs could easily turn into what economists call ‘a market for lemons’ – that is a marketplace where there are huge imbalances of information and customers are routinely suspicious of what sellers have on offer. This suspicion is likely to spread to other brands as consumers start to treat technical details as reliable as the fanciful car advertisements seen on television: they might make us feel good, but they don’t describe reality.

“The problem with calls for transparency is that Volkswagen has built a culture for decades which has encouraged a lack of transparency! Building a culture of transparency is going to take time. It will be under pressure to overhaul its corporate governance system, but establishing effective oversight is unlikely to be enough. What is needed is effective undersight – giving lower level employees the chance to speak up if something goes wrong again in the future.”

28 October

Commenting on Volkswagen’s posted losses, Professor Andre Spicer of Cass Business school said:

“The huge loss posted by Volkswagen today shows the cost of bad behaviour. Like many other companies before, the automaker set itself impossible goals, found itself unable to deliver them, then decided to cheat to make up for this.

“To return Europe's biggest automaker to profitability, executives face tough decisions. Some short term options might include cutting back the workforce (VW uses nearly twice as many workers to manufacture their car compared to their competitors), selling loss making brands (such as Bugatti), or placing greater emphasis on untainted brands (like Audi or Skoda). There is as a tendency among senior executives to get all the bad news out of the way at once.

“However, the longer term is more difficult. It needs to rethink its current reliance on clean Diesel and explore other technologies such as hybrids. The danger is competitors already have a big head start. VW needs to rebuild its trust and short term gimmicks and PR are unlikely to be enough. Finally, the organisation needs to processes in place to ensure that similar misbehaviour will not happen in the future. This means reforming governance structures, ensuring scope for people to speak up when they see wrongdoing, and transform the culture of the firm.

“Our own research on ‘On the Forgetting of Corporate Irresponsibility’ suggests that when firms face a crisis such as this, it is vital they put in place mechanisms to ensure they don't forget lessons learned. The great irony here is that this is not the first time VW have been in trouble for fitting defective devices. They were fined by US authorities for doing this in 1974. The real tragedy is that they did not seem to remember or learn from this harsh lesson.”

27 October

Commenting on the government’s proposals to relax the rules around Sunday trading hours, Professor Vince Mitchell of Cass Business School said:

“Will relaxing the rules around Sunday trading hours increase consumer convenience for some? Yes. Will it erode other Sunday family activities? Yes. Will it increase retailer costs and the anti-social hours of shop workers? Yes. But, perhaps the biggest unknown is whether this will actually boost consumer spending, thereby off-setting increased retailer costs and helping the economy to recover, and on that question, this is an irrevocable social experiment which is probably not worth conducting.”

26 October

Dr Aneesh Banerjee of Cass Business School responds to comments made by CEO of TalkTalk, Dido Harding, on a “cyber security arms race”:

“The cyber security ‘arms race’ between the hackers and the e-commerce industry is on the verge of the so-called Red Queen Effect from evolutionary theory. As the two sides continue to invest valuable resources in more advanced techniques to hack and defend their technology systems this is likely to show properties of ‘Looking-Glass Land’ from Lewis Carroll’s Through the Looking-Glass where, as the Red Queen points out to Alice ‘Now, here, you see, it takes all the running you can do, to keep in the same place’.

“As the Red Queen Effect becomes stronger we are likely to see increasing investments in IT security. This will mean diverting resources from other revenue generating priorities towards a cost-centre topic. We can expect strong growth from firms that are able to evolve quickly, increasing pressure on weaker rivals including exits, and a higher barrier to entry for new firms. However, this situation does presents new growth opportunities for cyber security firms.”

22 October

Commenting on Credit Suisse, Peter Hahn, Senior Lecturer at Cass Business School, said:

“The perpetual shortage of Swiss Franc denominated investments assures its fund raising target, but investors are right to wonder about one more bank grasping at the often illusive returns of asset management. While navigating the regulatory labyrinth will be difficult, Credit Suisse needs to develop more of a Berkshire Hathaway type investment vehicle than compete with Black Rock.”

22 October 

Commenting on the CMA retail banking review, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

“The CMA avoided grasping the nettle over free current accounts. It is a public secret in the industry these accounts are only free in name. To make money on the accounts, banks use some of the tricks which budget airlines favour - charging you for any kind of irregularity. The result is a fee structure which make most of our heads spin.

“The use of 'trip wires' to trigger questions about whether customers would like to switch will probably add more bureaucracy to the banking process - it is uncertain about how much genuine switching that will drive.

“There is a question whether increasing choice actually leads to better outcome for customers. Some recent evidence suggests that if you give customers more choice among financial products, you make them confused, and as a result they end up picking a worse deal than if you offered them only a few clear choices. The mushrooming of choice in the banking market could create this confusion.

“In some cases, increased choice can have negative impacts on industry standards. In our research on the UK retail banking market, we found that the introduction of new players into the industry during the 1980s lead to the big banks adopting a more aggressive sales culture to keep up. This had the effect of aggressively banks pushing financial products onto people. It was at the root of scandals in the sector such as misselling of PPI. We must remember that Northern Rock was a challenger bank.

“The other big question is whether it is realistic to increase competition. The UK banking sector has been concentrated in the hands of a few big banks for a century. Small players have come in to the market from time to time, but they had subsequently disappeared or been acquired. It looks like in the digital age the big banks will continue to control the industry by controlling the payments systems. There will be a blossoming of small financial service providers targeting very specific niches - but they will still need to use the big banks payment system. These systems are likely to give the big banks a dominant position for many years to come.”

13 October

Commenting on Dell’s $67bn acquisition of data storage maker EMC, Aneesh Banerjee, Lecturer in Management at Cass Business School said:

"What is interesting is that the Dell and EMC mega deal goes against the logic in the technology industry, where large mature firms like HP and eBay are splitting up to be more innovative. Michael Dell’s strategy to create a mega one-stop-shop for enterprise technology and hybrid data centres will only work if he can deliver genuine integration across the various offerings without losing the capability to produce market leading innovation."

12 October

Commenting on a report that said the Competition and Markets Authority (CMA) might propose scrapping free current accounts, Peter Hahn, Senior Lecturer in Finance at Cass Business School said:

“Rumour is the Competition and Markets Authority (CMA) is expected to propose ending free current accounts for consumers to create more transparency and competition. While no one would argue with the need for greater transparency in banking, has the CMA thought about how customers might pay for this change, and what the government’s position might be for those families with limited financial resources?

“MPs might have to explain to their lower middle income constituents why they now have to find around £50-120 per annum (a rather large unknown) to pay for a current account that for most part has been fee-free for decades. The argument that it will inspire more sector competition is controversial when bank product changes may likely only benefit those who are better off and receiving a higher interest rate on their savings. Where are these less resourced families supposed to find the money for the fees? Should they take it from their already dwindling food and rent budgets?

“Perhaps it’s a bit too easy for the CMA to suggest scrapping free accounts without taking into account broader issues of consumer choice of banks, changing technology in the industry and the role of banks in payments. Perhaps, this is already a bit of a ‘Robin Hood’ product, where those less fortunate are subsidised by the wealthy? This is not an easy issue. Who will benefit from this is quite confusing.

“But one thing is certain in this discussion. For about 30 years, the largest banks have wanted to re-instate the current account fees they gave away to competition in the 1980s, however, they each knew it would be suicide to fee first and it would be illegal to fee together – and the government may now hand it to them on a silver plate! In this bizarre world, the large banks might even end up arguing to keep free current accounts while the government finds itself arguing for consumer fees. MPs beware!”

28 September

Commenting on Sepp Blatter’s refusal to step down as Fifa President despite an ongoing criminal investigation, Professor Andre Spicer of Cass Business School said:

“Blatter's refusal to step down smacks of hubris. It seems his power has deafened him to even the loudest calls for him to leave. This is common when a leader has been all powerful for some time. They have typically been surrounded by yes-men. As a result, they become impervious to even the most obvious negative signals. By not heeding all signs of failure, they can end up dragging their firm down with them. This is what seems to be happening with Blatter.

“While this head-strong attitude may have served a leader well during their rise, often it becomes a serious problem for them and their organisation later in their career. They start to believe they are the organisation. They cannot image a future for the organisation after them. Blatter is an extreme case.

“Fifa is already a severely stigmatised organisation. It has become a byword for corruption. To move on, the football federation needs a clean symbolic break. This means changes in leadership. But it also needs to sort out the root causes of the problem. This means both better oversight (in the form of governance), but also better under sight (in the form of scope to speak up).

“Our research on organisations facing serious scandals shows that organisations can quickly forget lessons learned from past bad behaviour after the crisis has passed. At Fifa, it seems that no lessons have been learned at all. This begs the question, what will it take for the federation to start learning that its corrupt ways are dragging it down?”

17 September

In response to comments from The British Automation and Robot Association (BARA) about robots in the workplace increasing productivity, which “creates jobs in other areas”, Professor Peter Fleming of Cass Business School said:

“The British Automation and Robot Association (BARA) suggest we need not worry about robots replacing our jobs because ‘the net effect is that it creates jobs in other areas’. There is no doubt that automation – including the use of robots at work – increases productivity. However, mainstream economists continue to propound the spurious idea that although unemployment follows automation, this negative effect is offset by the creation of new jobs elsewhere in the economy. It assumes that consumer demand increases when firms can produce more goods and services at a cheaper cost. And that increased spending creates more and better jobs.

“But the latest wave of automation doesn’t follow this principle. Demand is relatively inelastic because lower or higher prices in say property or childcare has little effect our spending habits. Just look at the London property market! More sensible economists use the example of artificial light. Over the last 100 years there have been have been massive efficiency gains through automation. Does that mean you buy more light bulbs? Of course not. The coming new age of robots and automation will also be a world without jobs. It is this disconnect between technology progress and the social institution of work that we must urgently address.”

16 September

Commenting on Mark Zuckerberg’s recent announcement that Facebook will add a "dislike" button to its social network, Professor Andre Spicer of Cass Business School said:

“Most people feel gagged by the ‘like’ button. It means we can only express positive emotions: this might be okay if it’s a cute cat picture, but it is clearly wrong if you are reading a story about a three year old child who has drowned. The ‘like’ button severely limits the range of emotions people can express on Facebook.

“The ‘like’ button nudges us to be positive and upbeat. We are told that positive thinking is good for us, but recent evidence suggests that only being positive can make people less realistic, more likely to overlook risks, less likely to point out problems, and in some cases, it can make people who have negative emotions feel worse. Some studies even show that positive thinking can even make you more egotistical.

“The ‘dislike’ button is an example of the rise of 'negative thinking'. Researchers have known for some time that allowing people to express negative emotions can have a big upside. It can help to blow off steam, it allows people to point out problems without obvious solutions, and it helps them to extend their emotional range.

“Companies are now starting to catch on, for instance, many organisations are starting to encourage employees to blow the whistle on problems or bad behaviour. Some firms have appointed devil's advocates whose job it is to identify everything which can go wrong. One really interesting technique for negative thinking is the pre-mortem: this involves asking experts to put their negative thinking cap on and identify everything which can go wrong in a project. The Facebook ‘dislike’ button could help to spread a little (beneficial) negative thinking more broadly.”

2 September

Commenting on the NHS's employee wellness initiative, Professor Andre Spicer of Cass Business School said:

“The NHS's employee wellness initiative is likely to have little impact on staff health, however, it will make unfit and overweight employees feel guilty and insecure. If the health service was really interested in the wellbeing of its employees, they would look at changing unhealthy work-practices not reforming unhealthy workers.

“The NHS's new employee wellness initiative is part of wider changes taking place in companies around the world. Large firms in the US spend $6 billion annually on employee wellness. 75% of fortune 250 companies have workplace wellness initiatives. The extent of wellness initiatives differs: some firms offer free gym memberships, weight loss interventions and smoking cessation programmes. Others have gone much further, for example some employers track what employees eat and the amount of exercise they get using wearable technology. One Swedish company requires employees to attend the gym twice a week if they want to be paid.

“Often employee wellness initiatives achieve little. One study found most employees who need them don't participate, and those that do, who do drop out quickly. The small percentage who remain, show only modest improvements in their health. What these initiatives do achieve, is to make unhealthy employees feel guilty and in some cases insecure about their employment.

“To make real improvements to employee wellness, employers need to look at work practices not workers. In most cases firms have introduced unhealthy work practices such as overloading employees with tasks, extending working days, providing insecure employment and requiring them to be on call constantly, and giving them little time to focus on tasks. This means staff feel more stressed and are less healthy. Offering a Zumba class at the end of a stressful work day is unlikely to change much.”

26 August

Commenting on the DWP advertising 2,800 short-term contracts following thousands of full-time staff redundancies, Professor Nick Bacon of Cass Business School said:

"It is difficult to assess the underlying rationale behind the Department for Work & Pensions’ (DWP) actions but offering 18 month contracts means that those recruited will not be entitled to statutory redundancy pay or qualify to make unfair dismissal claims (both apply after two years). As such, the union has a fair point regarding casualisation as the DWP will have 3,000 employees on inferior terms than those who left under the voluntary severance scheme. Whether the DWP is justified appears to depend on whether the 18 months’ of work required could not have been deliver by existing staff and it could have avoided the costs of severance, and whether the contracts are fixed at 18 months because this is the actual time-frame of the job duties, or whether it is to avoid the employment rights mentioned above that come into force after two years."

24 August

Commenting on the impact of the recent big falls affecting global markets, Professor Andre Spicer of Cass Business School said:

“Big falls in global markets today are likely to have a big impact on the lives of real people. The people most likely to immediately feel the pinch are wealthy older people with money invested in the markets, and research suggests that following big losses, they are likely to suffer worse mental health and start consuming more anti-depressants.

“Younger people are then likely to be affected as they find it harder to get a job - something which can have an impact across their entire careers. For instance, MBA students who graduated when stock market bubbles burst found it harder to land lucrative roles in banking and also found it harder to hang on. Even those who choose to make their own way by starting an entrepreneurial venture are likely to find it tough.

“Following big falls in share markets, companies find that intellectual assets are undervalued. This makes it difficult to get backing for new ideas. Investors tend to prefer safe bets - which means established firms with tangible assets.”

11 August

Commenting on the theft of 2.4 million customers' details at Carphone Warehouse, Dr Aneesh Banerjee of Cass Business School said:

“The cyber threat landscape is constantly changing and becoming increasingly complex. In this situation, organisations often find that it is not only expensive but sometimes technologically challenging to keep up with relentless attacks that aim to exploit the vulnerabilities of IT systems.

“Most decision makers realise that it is not possible (both technologically and financially) to build defences against all future attacks. They accept that a very small number of attacks will eventually breach their defences and prepare for such contingencies by developing a set of predetermined solutions that aim to minimise exposure while maintaining business continuity.

“Even though cyber security is a cost centre, business leaders are increasingly viewing it as a strategic topic that requires a longer term outlook aligned with business priorities, an implementation plan with technology partners, and organisational practices that ensure governance.

“The latest breach at Carphone Warehouse shows that even though the theft of large amounts of customer data is appalling, it may not have a catastrophic short-term impact on the business especially if the firm is able to continue critical operations. However, if left unchecked repeated breaches can severely erode customer confidence in the brand that is likely to have dire consequences in the long run.”

3 August

Commenting on Tom Hayes, the trader jailed for 14 years over Libor rate-rigging, Professor Andre Spicer of Cass Business School said:

“The sentencing should not be written off as the story of a brilliant but flawed trader. Naturally, people will pick up on lurid details such as the fact Tom Hayes had the same super hero bed-spread between the ages of 8 and 24 and the fact he use to dream about Libor. This is more important than one man's story; it tells us a lot about the culture of the City, which created a hot-house for unethical behaviour.

“It shows traders were primarily hired for their technical skills and results orientation. This often meant they were bereft of the ability to make ethical judgements. It also shows that traders were certainly aware that they were doing wrong. Hayes himself pointed out that he did not think he was 'going to get a medal from the regulator', but he also did not think he ‘was a Bernie Madoff’.

“The trial also raised problems of collective responsibility - Hayes seemed to think that because everyone else was doing it, it was okay. Misbehaviour had become totally normal. This can be seen from the fact the price of manipulating the LIBOR rate in some instances was a Mars Bar. The trial showed that traders were evaluated on crude metrics based on short term profits. This led traders to focus solely on short term performance and disregard longer term risks.

“Another fact the trial highlighted was the role of the flawed design of the market in encouraging manipulation. Hayes pointed out that even Mother Theresa would manipulate Libor if she was setting it and trading it. Finally, the trial showed that a wide-spread denial of collective misbehaviour within the industry, meant that those in power were not willing to admit there was a problem, much less willing to put it right.”

23 July

Commenting on Apple’s share price drop, Professor Andre Spicer of Cass Business School said:

"Why would a company's share price plunge by 7.48% after it beat analysts’ forecasts and announced a profit of $10.7bn? This is the mystery facing investors in Apple today. There are no clear answers, but four factors play a role: the uncertain future of the Apple Watch, the company's offshore cash mountain, the future of China and share buybacks.

"The performance of the Apple watch was not clear from the financials, but some analysts guess it has generated about $1bn. However, there are lurking questions whether smart watches are more than just a passing fad. Research has shown users are initially enthusiastic about the devices, but tire of them relatively quickly, and this poses the bigger question of whether apple can continue to attract buyers for this gadget.

"Apple continues to have $200 bn locked up off-shore, but it can’t use this for investment or return to shareholders as dividend if it doesn't pay a hefty tax. So it’s sitting on cash with few options of what to do with it.

"One of Apple's primary growth markets is China. However, the Chinese government has slashed growth forecasts from double to single digits. Recent problems on the stock market remind the world the country could be at the beginning of the burst of a huge assert bubble. If this happens, overpriced smartphones will probably be one of the first things where savings could be made.

"Finally, much of the rise in Apple's share price recently has been driven by the company buying back its own shares. In the announcement, Apple revealed it had bought $100m of its own shares. Some investors in search of returns may think this is not enough. Others however point out that buybacks can be a way that a company consumes resources today which should be invested tomorrow. Apple is a late comer to the buyback game. Arguably one of the key drivers of its success is its history of investing in R&D which pay off in the mid to long term.

"Ultimately, there are fundamental questions about how long apple can stay at the top of the game. In the tech sector, the game has a habit of rapidly moving on as old champions get left behind."

21 July

Commenting on the resignation Toshiba's chief executive and president Hisao Tanaka and Japanese corporate culture, Professor Chris Rowley of at Cass Business School said:

"Toshiba's Chief Executive and president Hisao Tanaka has resigned after the company said it had overstated its profits for the past 6 years, with Vice-Chair Norio Sasaki also stepping down. On Monday, an independent panel appointed by Toshiba said the firm had overstated its operating profit by a total of £780m, roughly triple an initial estimate by Toshiba. The findings mean Toshiba will have to restate its profits for 2008-14 which may affect results for the year ending March 2015.

"This follows the high profile resignations at Olympus in 2011 over coving up $1.7bn losses and at Toyota earlier this month, with their executive, Julie Hamp. The finance minister, Taro Aso, said the accounting irregularities at Toshiba were 'very regrettable' and undermines confidence in corporate governance in Japan. The company, created by a merger in 1938, has roots back to 1875. Its business empire stretches from home electronics to railways to nuclear power stations and is fixture of corporate Japan, helping turn in into an industrial superpower. It now has $63.1bn net sales, 200,260 employees and 421 overseas companies.

"Mr Tanaka told a media conference that the company would need to 'build a new structure' to reform itself. It will be very interesting to see what that means in practice given the continuing traditional corporate culture and corporate governance regime prevalent and embedded in ‘Japan Inc’. This is despite Prime Minister Abe’s desire for change and trying to regain global investors' confidence with better corporate governance and diversity as part of his ‘Womenomics’. For example, 'Within Toshiba, there was a corporate culture in which one could not go against the wishes of superiors,' the report said.

"Why is this? This is for a set of inter-locking cultural and organisational reasons that produces such ‘group think’. This starts from early on with the recruitment system based on strong internal labour markets producing ‘salarymen’ (sic) with ‘seniority’, life time employment. For example, Mr Tanaka, 64 and Mr Sasaki, 66 joined Toshiba in the early 1970s immediately after graduation. This leads to strong team work and consensus with dislike of ‘outsiders’ versus ‘insiders’ mixed with patriarchal hierarchies, with expectations of mutual commitment. This is seen to produce inward looking, consensual management, with a focus on the company, incremental change, the long term and a risk-adverse culture. Furthermore boards lack outside or truly independent directors and are filled with insiders: ex-managers, those with links to the company and civil servants."

17 July

Commenting on the Greek crisis, Professor Bobby Banerjee of Cass Business School said:

"The bankers and financiers that run the world have finally and unashamedly demonstrated what many of us knew: that neoliberal capitalism and participatory democracy are simply incompatible. They cannot coexist. One system has to accede and there is no doubt who is the victor here. Greece is just the latest of several countries that is being slowly strangled by the very visible iron glove that covers the invisible hand of capitalism.

"What we are seeing is not just a European crisis. It is a global problem. Greece joins three other countries that are currently defaulters to the IMF: Somalia, Sudan and Zimbabwe. We don’t see too much media coverage about how these countries are coping with austerity measures. These are of course ‘failed states’, a term that seems to invoke fear among the ‘developed’ countries of the world. The Greek Prime Minister Alexis Tsipras while acknowledging that Greece faces many more years of austerity stated that he has ‘an obligation not to let this country become a failed state’. What happens to the people that live in these failed states I often wonder? Do they go about their daily business wondering when their state will finally pass whatever tests that are imposed on them? There are many countries that have been at the receiving end of much more severe austerity programs that must be wondering what the fuss is all about. But of course they are ‘developing’ or ‘least developed’ countries that only make the news when they have wars, natural disasters, famine, or violent coups.

"So let us be less Eurocentric in our debates and discussions and recognize that we the people are fighting an epidemic of global proportions. And that democratic processes that currently exist are simply incapable of resisting the material, institutional and discursive power of neoliberal capitalism. It is not capitalism that needs to be reformed. Democracy needs reformation. We need to reclaim democracy from the clutches of the 1% and reconstitute it by putting people not corporate profits first. This will not take one revolution or referendum but thousands of mini revolutions in diverse localities. And some of them are already happening as people begin to explore different ways of participating in the economy without being held ransom by it."

14 July

Commenting on the rhetoric used throughout the Greek crisis, Dr Sébastien Mena, Lecturer in Management at Cass Business School said:

"The recent Greek epic is fascinating on several aspects. While the contents of the ‘aGreekment’ and reforms have been extensively discussed, the rhetoric used by all parties involved is another telling aspect of the crisis that has received surprisingly little attention.

"There was of course the ‘trust’ discourse from Europeans, notably with Angela Merkel stating that ‘the most important currency has gone missing. And that's trust.’ Apparently, the Greek negotiators, according to Jean-Claude Juncker, President of the European Commission, with their ‘constructive position’ (read: capitulation) have managed to get some trust back from the Eurogroup. What is interesting here is that trust is typically an alternative to strict control. In contradiction with their rhetoric, the Eurogroup nevertheless asked for stringent oversight of Greek reforms, IMF involvement, and more.

"Perhaps even more interestingly, all parties have used a war-like rhetoric to qualify the negotiations. Varoufakis, the former Greek finance minister, famously accused the Europeans of terrorism. Jean-Luc Mélenchon, the president of the Left Party in France, tweeted that ‘the German government, for the third time in history, is destroying Europe.’ Some newspapers in Greece even spoke of a ‘holocaust for Greeks’. And, of course, #ThisIsACoup is trending across the Internet, backed up by the Nobel Prize economist Paul Krugman.

"But the Eurogroup was not to be outdone: before the final session on Sunday, Mr Juncker said that he will ‘fight until the very last millisecond for a deal’. François Hollande said that ‘France has a special role to play, she has to make sure that the process of construction that linked us following the war continues’. And observers have asked Alexis Tsipras to ‘surrender’.

"According to the language, this really was a war. And despite the fact Mr Juncker claims that ‘there are no winners and no losers’, this war does have a clear loser: the Greek people (and some might argue the European Union as well). Greeks will endure austerity for a number of long years. They will suffer through closed banks and limited cash withdrawals. Also add to the list: public humiliation on a global scale.

"There is hope, however, for losers in war. Usually, losers are given amnesty for their ‘errors’. Thus, if we follow this war-like rhetoric, let us hope for amnesty and reparation for the Greek people, in this case in the form of debt relief. It remains to be seen if the Eurogroup will grant such an amnesty in later years. Germany was granted amnesty and a place in the predecessor of the European Union some 70 years ago. Perhaps, history will be allowed to repeat itself and reverse roles, and we may see Greece in Germany’s place in another 70 years or so. Let us hope then that we do not forget what happened in 2015."

10 July

Commenting the turbulent relationship between Greece and Germany, Dr Sotiris K. Staikouras and Dr Elena Kalotychou from Cass Business School said:

"The turbulent relationship between Greece and Germany is not that dissimilar to a passionate but flawed marriage. The husband (Greece) and his Swabian housewife (Germany) need to find a new way to conduct their relationship for everyone’s sake.

"The Greek husband’s conduct, with all his excesses, has been well documented. However, it takes two to tango, and the Swabian housewife’s obsession to discipline, set rules, and even to punish, will backfire for the whole family. What is needed now is for her immature husband to calm down and look at the future, while his 'well-behaved' wife should look at her past.

"At the same time, when the IMF had broken away from the Troika by admitting that such programs are not sustainable (look at the Latin America history); the ECB would need to lead an independent role within the EU. When the ECB decided to close the liquidity tap (although legally justified since Greece was not in a program), as we have seen in recent days, this has been perceived as an attempt to blackmail the Greeks. Such a move may have been the reason behind the NO vote, along with lack of understanding economics, a weak shadow government, strategic myopia and desperation of the Greek people.

"The NO vote would have been desirable if the country had a well-built infrastructure of public services and internal finances. A country with the means to fuel its economy and not a net importer of energy resources. A country, which apart from tourism, can offer services and agricultural products to the outside world. Given the aforementioned arguments, it is a struggle to understand the economics behind a Greek recovery outside the Euro. Greece should not be deceived by the 'support' it enjoys from some politicians in and outside Europe; for them it is not about seeing Greece prosper, but watching Germany lose a battle.

"Does this mean the Greek husband should bow and obey his Swabian housewife? This is where the NO answer fits better, because you do not build a stable household behaving like that. The words exchanged between EU and Greek politicians have been unacceptable during this process. Equally, it is insupportable to use Greece as the 'scapegoat'. Both sides should take responsibility for their mistakes, and they should enter negotiations with the aim of building a new Greece within Europe, with the sole aspiration being the long-term sustainability of the European Union."

6 July

Commenting on Greek banking, Professor Andre Spicer of Cass Business School said:

"The resounding ‘no’ vote in Greece will not just put Greek banks to the test, but test the mechanisms for cleaning up a financial meltdown. Following the 2008 financial crisis, regulators have been searching for a way to wind up failed banks without putting tax-payers on the hook.

"They hit on the idea of replacing government bail-outs with bail-ins by bond holders and investors. This was tried in Cyprus in 2013, causing great resentment. Now it is likely that Greece could be the second test case. Bond holders will find they are owners of worthless banks, and depositors will find their savings have suddenly shrunk. This can undermine balance sheets of those holding bonds and undermine trust of those with savings. The result? Potentially, a vicious spiral of failure, which will quickly spill beyond Greece and into the rest of the world's financial system. If this happens, it is likely that not only will the patient die on the operating table, but the surgeons may also catch the disease. In the longer term, it could mean regulators will go searching for an alternative to bail-in mechanisms.

"To understand the reluctance of the Northern Europeans to play ball this time, it is vital to understand the history of the negotiation. The first bail-out was actually about saving French and German banks which had heavily invested in Greek banks. The second bail-out was about buying these same French and German banks time to offload their remaining positions, therefore, shifting the problem to the taxpayer. This third bail-out is based on question of whether parties are willing to finally deal with underlying problems; meaning a mixture of debt relief and structural reforms. This is how major financial calamities have been addressed in the past. Sadly, many economists are keener on blackboard theory than learning from history.

"The rolling Greek crisis is a classically wicked problem: a deeply interconnected set of apparently irresolvable issues. Often traditional solutions make such problems worse. Most of the time, people simply move the problem elsewhere or kick it into the future – this is what the Troika have done at least twice. Now, the time has come to actually face the issue, and the first step involves recognising the intractable nature of the problem. Clearly, all parties get that. The second step involves acknowledging normal tools won't do the job. Sadly, some negotiators remain stuck in old mind-sets that more austerity will solve the problem.

"The problem needs to be reframed in order to move forward, for example moving away from the idea that this is a negotiation between thrifty Northern Europeans and profligate Southern Europe is a vital step in the right direction. Another possibility may involve changing the players: clearly the resignation of Varoufakis is an important part of this.

"Perhaps, there is another lesson of history might be played out amidst this Greek tragedy: it is usually radicals who force the issue and then moderates who execute the deal."

30 June

Commenting on the launch of Apple Music, Elena Novelli, Lecturer in Management at Cass Business School, said:

"After much anticipation Apple has launched its new music streaming service, Apple Music - the latest addition to Apple’s burgeoning product ecosystem. The launch poses a substantial threat to existing companies that deliver on-demand music streaming services – most notably Spotify, the subscription-based music streaming provider that has achieved an impressive customer base of 75m (with 20m paying for the service) since 2008.

"Competition between innovative companies is nothing new but in the hyper-connected digital world everything happens faster. The competitive advantage that a single product or service can give is much shorter-lived. The launch of a product or service on the market is immediately observed by millions of companies, globally. And the companies that have the right resources and technology to build on a good idea and possibly make more out of it are the ones that thrive."

30 June

Commenting on the publication of the MIPEX Migrant Integration Policy Index 2015, Marius Luedicke, Senior Lecturer in Marketing Cass Business School, said:

"For a country that is heavily dependent on immigration, the UK scores relatively low on integration indicators such as residence, family reunion, education, labour market mobility, and political participation as compared to other Western countries. But it does rate highly among the leading countries in terms of anti-discrimination policies.

"Rankings like these shed an important light on the performance of each country in terms of how well it integrates immigrants into markets and society. In countries like the UK, where wealth and happiness depend on creating beneficial relationships between people with myriad cultural backgrounds, politicians must use this data and learn from those countries that lead the ranking."

29 June

Commenting on the Greece and the Eurozone crisis, Dr Sotiris K. Staikouras and Dr Elena Kalotychou from Cass Business School said:

"The Eurozone crisis has brought nothing new to the knowledgeable finance community, apart from endorsing that financial crises are not very dissimilar from each other. The catalyst may differ in some cases, but economic history and financial knowledge should enable us to identify the roots of the problem before the turmoil erupts. Sovereign defaults are nothing new at all.

"It does not take a genius to realise that a country like Greece, in desperate need of billions of euros, will never be able to repay such debt when its economy is based on tourism and theoretically on services and agriculture. The problem has drawn on for far too long expecting that one side (Greece vs Creditors) will give way. Greece’s default is of no concern to its EU partners. What concerns them is the impact of such meltdown to its financial structure. It becomes even more convoluted when issues like debt forgiveness, moral hazard, EU internal controls, social unrest, geopolitical instability, as well as the inexperience of the Greek team to renegotiate the term/conditions of its debt are brought on the table of negotiations.

"To our mind this is the time for the EU to place solid internal controls to monitor member states when they operate under a single currency and monetary policy. For Greece this is the last chance to realise that its inability to short out its ‘golden goose’ (public sector) has cost at least twice as much to the state, and its people, via the layoffs and the stagnancy in the private and financial sector. Its internal revenue system is in desperate need for reigniting itself to conform to its statutory definition; while the whole political establishment needs to be revamped and serve its people as the parliament postulates."

26 June

Commenting on the outlook for Tesco, Professor Andre Spicer of Cass Business School said:

"After a new CEO and well-publicised turnaround strategy, some will be asking why Tesco's fortunes continue to look bleak? Has the supermarket giant settled into a gentle decline?

"Unfortunately, history suggests it is very difficult for a firm which once dominated an industry, to continue to succeed indefinitely. When the world changes, big companies often find it hard to keep up. Tesco was designed to succeed in a different world of mass market retailing. The rise of online shopping, budget retailing and a changing demographic profile means the future for massive supermarkets is uncertain. It seems like established retailers are coming to stand still, while challengers slowly build up big new businesses. Transforming the business model of large companies is notoriously difficulty and many CEOs have had their careers ruined while trying.

"There are some basic things Tesco could do to stem the decline. Dave Lewis's back to basics strategy seems reasonable. In the past, the firm put much of its resources into complex pricing structures and tricky bargaining strategies, meaning the firm became disconnected from what customers actually needed. Now it needs to focus on getting back to basics and ensuring there are actually reasons for a customer to walk into a Tesco store.

"Unfortunately making the retailer simple again is a complex task."

23 June

Commenting on the joint announcement made today by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) about the new rules on remuneration, Professor Philip Booth of Cass Business School said:

"There is seemingly no end to the detailed rules and regulations that the Bank of England wish to use to control the behaviour of banks. Some of the rules - such as not allowing variable pay in institutions with taxpayer support - could have perverse effects. The PRA should ask themselves a simply question. Do they yet have in place procedures to ensure that banks can be wound up without taxpayer support? If the answer to that question is 'yes', then further regulation is not needed. If the answer to that question is 'no' then they should fix that problem."

8 June

Commenting on HSBC’s strategy day bing held on 9th June, Professor Andre Spicer of Cass Business School said:

"HSBC’s strategy day could mark the beginning of the end of the universal banking model. For the past three decades, big banks have been convinced the best way to make money is to be all things to all people anywhere in the world. They operated in every part of the banking market simultaneously. This had big advantages - they could use deposits in retail bank to bank roll risky investment banking activities.

"However, following the financial crisis, big cracks began to appear in his model. Governments realised the universal banks were too big to fail, and had to be propped up when they go into trouble. Shareholders are now increasingly realising the banks could be too big to succeed. Because they operate in multiple markets simultaneously, they are often stretching themselves too thinly. Customers, have found the banks too big to trust. In some cases, even large customers were inconsequential to these global behemoths. Regulators have found the banks too big to control. Often their massive size meant no one, including the banks own management, had a clear sense of what was going on across the multiple divisions.

"Now large universal banks are starting to ask whether they have the right business model after all. HSBC is looking at shutting down not just national operations, but also closing business lines. Underneath this is the recognition the bank can't do everything for anyone. Instead, if it is to be trusted, profitable and sustainable it needs to focus on a few markets where it has genuine expertise. Many other large universal banks are going through a similar process.

"A more focused bank may look appealing to investors and regulators. However, to the thousands of staff who are likely to be affected, this focus is unlikely to appeal to staff who will lose their jobs. The UK government is also very nervous about losing HSBC which is one of the country’s biggest tax payers and an important employer. Often these strategic reshuffling can look good on paper, but the real proof comes in the implementation."


4 June

Commenting on Ikea’s plans to spend €1bn on climate change, Bobby Banerjee, Professor of Management at Cass Business School, said:

"Ikea’s plan to spend €1bn on renewable energy is to be welcomed. It is however a small step by the private sector in addressing climate change - given that oil companies are spending billions in expanding their drilling operations. It is also somewhat easier for a corporation like Ikea, which is not publicly listed, to commit funding for renewables.

"The only way to ensure that the private sector will take meaningful action on climate change is to pass binding legislation that requires corporations to reduce their carbon emissions. Voluntary measures, pledge and review systems, standards and the like cannot deliver the outcomes needed to address the urgency of climate change."

3 June

Commenting on Sepp Blatter’s resignation from FIFA, Professor Andre Spicer of Cass Business School said:

"When morally tarnished leaders head for the exit, people think the job is done. In reality, it is only just beginning. The departure of a high profile leader who has overseen ethical failures is often celebrated - people think a change at the top is the most important indication an organisation is changing. In reality, it is only the very first step in what is likely to be an ultra-marathon of ethical improvement. Old leaders are often treated as a scape-goats; by getting rid of them, there is an irrational hope the organisation can get erase all past sins. Sadly, the world is not like that. It is relatively easy to change the tone from the top, but cleaning up the mess in the middle is the hard part.

"Other sectors which have suffered large scale ethical scandals like politics and banking have followed a similar process. Simmering discontent slowly escalated into a baying for blood, and to appease critics, top leaders were fired, and then a new leadership with a cleaner ethical bill of health was brought in. They proceeded to say all the right things - including introducing programmes designed to reprogram the companies’ ethics. However, typically making this kind of change into a reality takes years - and in some cases is impossible. This is due to deeply embedded patterns of behaviour which have been rewarded for years.

"As FIFA seeks to reform itself, it will find a change at the top is only 10% of the solution. The other 90% will take years to achieve - if it can in fact ever be achieved."

6 May

Commenting on the #JeSuisEd social media hashtag, Professor Andre Spicer of Cass Business School said:

"The infamous bacon sandwich pictured was designed to trigger feelings of disgust. When we feel disgusted, we sidestep rational thought and made quick decisions. When someone triggers a feeling of disgust in us, then we tend to judge them as being a bad person, and the bacon sandwich picture played on this perfectly. It encouraged us to judge Miliband's leadership qualities on a gut level reaction rather than through rational assessment. It triggers what psychologists call the halo effect - when you use one characteristic (like being an awkward eater) to judge other characteristics (such as an ability to govern).

"We usually judge leaders on an irrational basis first. One study found that simply showing images of the face of candidates, people could pick out who won and who lost with relatively accuracy. This shows that snap judgements based on images can play a big role in voter behaviour.

"The #JeSuisEd campaign is trying to neutralise these judgements. It is trying to make us laugh about our pre-rational judgements. Like disgust, laughter is a pre-rational response. When we laugh, we are more likely to feel good about something or someone. The #JeSuisEd campaign seems to be doing a good job of neutralising earlier judgements triggered by the bacon sandwich picture."

30 April

Commenting on the losses announced by RBS, Professor Andre Spicer of Cass Business School said:

“The losses announced by RBS today are part of the ongoing cost of bad behaviour at the bank. Much of this loss is down to fines paid for unsavoury activity like mis-selling PPI. On top of this, comes the huge cost of restructuring the bank and moving it out of riskier investment banking activities.

“The bank claims it has learnt its lesson following the financial crisis, but many of fines and legal fees relate to infringements which happened after the crisis. PPI and LIBOR happened as a result of the bank seeking to prop itself up following the crisis. Forex manipulation was taking place after the bank claimed it had learnt it lessons. This leads us to ask whether big banks like RBS are like addicts who say they have learnt from past disasters but go on to do the very same thing again. Managers in large banks have been asking what to do about this? Part of the solution has been to cut back investment banking activity, but the reality is much of this costly bad behaviour took place in retail and commercial banking divisions.

“Banking executives have been forced into radical reform, and the influence seems to be coming from the far right.But getting branch employees on board when there are huge job cuts looming is going to be hard work. Senior managers at RBS have remained optimistic by pointing towards a brighter future, but hope is often the banking executive’s best friend - it allows them to forget the nightmare of past deeds and focus on what can always be pitched as a bright and rosy future. 

“Since the RBS was nationalised in 2008 it has lost the taxpayer £43b. That is as much as the government spends on education every year in the UK. As we head to the ballot boxes, the public need to ask themselves whether this is a price worth paying.”

27 April

Commenting on the magnitude-7.8 Nepal earthquake that could cost between $100 million and $10 billion, Professor Paula Jarzabkowski of Cass Business School said:

“Normally after a disaster like the Nepal earthquake, reinsurance - the insurance of insurance companies - kicks in to help pay claims quickly and get a devastated community back on its feet. 

“Unfortunately developing countries like this are often not well-insured. And for these events that have caused great devastation, there is no capital market sitting behind the losses, ready to pay. 

“New insurance and reinsurance products, such as Insurance Linked Securities like Catastrophe bonds, while untested in such situations as yet, might widen the safety net. They certainly bear further investigation as a financial tool for helping communities recover in the aftermath of such disasters.”

3 February

Commenting on the Greek and Eurozone crises, Professor Thorsten Beck of Cass Business School said:

"The Greek-Troika conflict is roiling markets, boardrooms and cabinet offices around the world. Crises are best solved by recognising losses, allocating them and moving on, so the biggest risk, is that a compromise kicks the can further down the road. As the can rolls on, the scenery becomes politically and socially less attractive - fuelling the rise of political animosities, nationalism, and fringe parties. Greece is a special case but indicative of the core problem - deficient eurozone governance structures that mean societies are stuck with increasing socioeconomic exclusion and political despair. The crisis will continue until the necessary further deepening of eurozone institutional structures is completed."

23 January

Commenting on the impact of the possible takeover of O2 by Hutchison Whampoa, Dr Pawel Bilinski of Cass Business School said:

"The Hutchison's bid for O2 is not surprising considering BT decided to pursue EE. If approved, the deal would create the largest mobile operator in the UK with a 41% market share. Li Ka-shing hopes the deal will have at least two benefits. First, a more concentrated market is likely to push prices of mobile services up, increasing profitability of the combined Three and O2. Second, the estimated cost savings are around £3 billion. Add to that other potential synergy gains and the deal looks really good for Li Ka-shing. Unsurprisingly, Hutchison's shareholders cheered the deal with prices increasing by 3% on the announcement."

Commenting on the potential impact on consumers of the O2 takeover by Hutchison Whampoa, Dr Marius Luedicke, of Cass Business School said:

"This takeover could help Li Ka-shing's firm Hutchison Whampoa in cutting costs as well as raising prices. In Austria, after the most recent reduction of telecom providers prices have gone up. However, such price rises also render the market more attractive for new entrants. In the Austrian case, the new entrant was Hofer telecom, who is now serving the market at the lowest prices, thus putting pressure on the more established providers. Negative effects for consumers therefore are most likely to result when (new) competitors do not get fair and price-regulated access to network capacities that are owned by only a few companies. If access is denied, new entrants cannot compete, competitive forces will be reduced, and prices are likely to rise."

8 January

Commenting on the future of Tesco, Professor Andre Spicer of Cass Business School said:

"It seems Tesco is doing the turn-around two-step: retrench then rebuild. It seems to have pulled off the first part fairly well today. By divesting non-core businesses and cutting costs it has seen a jump in share-price. But it remains to be seen whether the retailer can rebuild itself. Short term measures such as cutting prices might help. But the longer term question is how can Tesco use the things it is really good at, which are unique to the company, to compete in a changed retail landscape.

"In its efforts to restructure, Tesco can learn from the evidence: firms trying to turn themselves around often follow similar strategies. The big difference between these which succeed and those which fail is how well those strategies are actually implemented. Firms which succeed in turning themselves around tend to have a clear and consistent growth strategy which they stick to. Firms which fail tend to flounder around fire-fighting. This means Dave Lewis is going to need to articulate a clear and compelling way in which Tesco can build a future for itself beyond retrenchment.

"Implementing changes at Tesco is going to be challenging. There are many transformations underway at once - they have seen big changes in leadership, they are trying to change the culture, they have cut employee benefits, they have changed operational procedures. On top of all this, they are moving the corporate headquarters. Dave Lewis has the advantage of having a crisis to help drive changes. But so many transformations at once are likely to create significant uncertainty on the part of staff and could create significant risks if not handled correctly.

"Tesco faces a huge challenge to its self-image. No longer is it a giant that dominates nearly every sector. The great existential questions for the retailer will be; who might Tesco be in the future."

18 December

Commenting on the underpricing of the Royal Mail privatization by £180m, Dr Pawel Bilinski of Cass Business School, said:

"Underpricing is not unusual in the IPO market, though a 38% discount is considered large. The cautious pricing at 330p reflected high perceived risk of deal failure. Considering that a substantial proportion of shares were allocated to retail investors and Royal Mail staff, this risk was deemed too high to push for more aggressive pricing."

16 December

Commenting on the findings of the Bank of England stress tests, Professor Andre Spicer of Cass Business School, said:

"Today's Bank of England stress test shows that the UK banking sector is now safer, but far from disaster proof. Two banks - Lloyds and RBS - were found wanting. RBS largely due to its legacy of toxic loans. Lloyds due to its exposure to the UK property market. The Co-Op failed. This is largely due to toxic loans it took on when it merged with Britannia.

"The scenario out lined by the Bank of England is not as extreme as some might thing. A hike in interest rates to 4% would be considered low in previous eras. We have seen unemployment in the double digits before. House prices falling by 35% is extreme, but we must remember that they are currently well above long run averages.

"The Bank of England have identified some routes to making the banks safer - raising more capital and disposing of dodgy assets. These are two important moves. But to ensure banks are really safe requires more than just tricky accounting. The banks need to make sure they don't repeat the mistakes that they had made in the past. Doing this requires them to ensure they move away from a toxic culture of the past and build a safer more customer focused culture.

"In a report released by New City Agenda and Cass Business School last month, we found that the toxic culture In banks meant people were under pressure to sell loans to people they knew they could not afford. In one bank high performing employees were given wads of cash while low performers received cabbages. Inevitably this kind of behaviour incentivised employees to take on toxic loans. All the banks have now taken steps to change this. But real transformation is likely to take a decade. If banks want to avoid falling apart during disaster scenarios, they need to ensure they get their culture right. Under the stress test scenario, banks would be predicted to loose £13b. We found that UK retail banks along lost £38.5bn due to bad behaviour following the financial crisis.

"The banks which fared well had big investment banking arms or big operations outside the UK. What the stress test did not look at is how these institutions might be impacted if things not only went pear-shaped in the UK. The big question is what would happen if things started to fall apart in other regions of the world."

9 December

Commenting on Tesco's recent share plunge, Professor Andre Spicer of Cass Business School says, Tesco's days as a "miserly landlord" are over: 

"Tesco's plummeting share price shows the high cost of unethical behaviour in business. By treating suppliers poorly in the past, Tesco has cost its shareholders dearly. Fortunately Dave Lewis has started to grasp the nettle. He publicly named and shamed illegal behaviour. He has started to restructure where the company makes money. Instead of charging suppliers, the focus is now on consumers. However there are underlying structural issues that will prove harder to tackle. New kinds of competitors, rising food prices, a declining middle class and changing patterns of how we shop all represent a full frontal challenge to Tesco's business model. These factors are beyond the control of the CEO. They will require some careful navigation skills in the future. They also mean Tesco is likely to be a very different business in 10 years. Tesco will be less like a miserly landlord who makes money by renting our space to suppliers at eye watering rates. Instead, Tesco might take a back to basics approach, becoming an obliging shopkeeper supplying customers with an easy, safe and secure supply of life's essentials."

5 December

Commenting on accusations of Premier Foods' 'pay and stay' practices, Professor Andre Spicer of Cass Business School:

"The 'pay and stay' policies at Premier may be legal but it is certainly not ethical. The idea of charging suppliers to work does not stand most people's basic standards of fairness. We usually think if you supply someone with goods, they should pay you - not the other way around. Premier Foods is using business jargon like 'strategic partnerships' to cloud sharp business practices. 'Pay and stay' mirrors practices of supermarkets demanding suppliers pay to have their products on the shelf. Premier Foods seems to be simply pushing the cost of renting space in supermarkets for their brands further down the supply chain. We have known for some time that supermarkets effectively act like landlords who rent of space to suppliers.

"What today's revelations about Premier foods show us is that companies who own popular brands are also acting like greedy landlords too - demanding food suppliers pay to continue to have a route to market through a popular brand. The people who get left with most of the cost for producing are many small and medium sized food manufacturers who actually make the products in the first place. As a result many of these smaller operators feel like they are being taken for a ride by the big brand owners and supermarkets. There could potentially be big knock on effects including product quality, consistency of supply, and undermining the UK manufacturing base.

"Cases like this show that the way our food system works is unsavoury. Making a change might involve new laws which outlaw such unfair practices. But it also will involve the food sector beginning to develop a more fair and sustainable way of selling food. A big part of this will probably involve recognising that dirt cheap food is likely to be a thing of the past."

2 December 

Commenting on Aviva's agreed £5bn takeover of Friends Life, Dr Pawel Bilinski of Cass Business School:

"Increasing competition and regulatory changes are putting pressure on the insurance industry. Aviva attempts to tackle these pressures with an all-stock acquisition of Friends Life. The CEO assumes the deal will generate annual cost savings of £225m - optimistic by market assessment.

"An alternative question is whether Aviva could have delivered higher shareholder return without acquiring Friends Life. The 5% drop in Aviva's shares on 21 November when news of the deal first surfaced hints at the possible answer."

17 November

Commenting on Facebook's plans to extend into a professional network website, Professor Andre Spicer of Cass Business School:

"Facebook at Work is likely to bring some benefits to companies - but not the ones they think. It is unlikely to make employees more productive, but it will help them to be more connected and aware. Social media sites can become a diversion or replacement for work tasks. Some employees spend significant parts of their day on sites like Facebook - sometimes this is because they haven't got enough work to do. Sometimes it is part of their role.

"Social media sites like Facebook help employees to build 'weak ties'. These are people we would talk to infrequently and don't know intimately. These weak ties are often a source of important background information. So by surfing Facebook we get a sense of broad ambient information that helps us understand the wider organisational or social climate. This is important for virtual teams and employees located off site.

"Facebook use at work can also lead to some problems. It makes it easier for employees to accidentally leak sensitive information. It can also be a threat to hierarchy and clash with implicit or explicit chains of command. It can also mean employees spend more time polishing their Facebook profile than actually working. Finally, communication which could easily be dealt with face to face is pushed online - adding another potential source of information overload."

10 November

Commenting on the drop in Serco's share price, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"The drastic drop in Serco's share price shows the potentially astronomical cost of unethical behaviour. By not carrying out its contractual obligations, trust was undermined. The fact it claimed to tag people who had passed away or were in prison hammered home the point in a farcical way.

"Clearly large complex companies which operate in many different industries are difficult to manage. Often senior executives are specialists at negotiating with government and have little or no idea about what is happening on the ground where services are delivered. Outsourcing has driven down costs and often undermined professional or public service ethos which sometimes acted as a buffer against bad behaviour. When staff feel they are under pressure, they are much less likely to do what they ought to. Instead they focus on hitting immediate targets and getting through the day. The result is that they become accomplices in behaviour which could have grave long term consequences.

"Restoring the outsourcer's reputation is going to take time. One of the major ways they can do so is by developing a better understanding of the soft risks associated with their activities. This means having a better understanding of people and culture, not just costs and whether KPIs are achieved. In addition, Serco should ensure employees and service users are able to speak up or challenge bad behaviour before it gets out of hand. This means listening, taking action on what you have heard and then reporting back."

6 November

Commenting on the CMA inquiry into the dominance of British banks, Dr Peter Hahn of Cass Business School, said:

"There is a fairly similar finding globally as to why customers don't switch banks more often. The reason is wrapped up in our culture, the maturity of our economic system, and the design of the banking system dictated by governments and regulators. The CMA faces a tough task in its inquiry. It is hard to imagine a consumer issue that is more misleading or contradictory. There are customers that hate their bank but love their branch; dislike waiting in a queue for something they could do instantly with an app; or have wanted to leave their bank for 20 years but haven't found the time or reason to do so.

"The minimum 18 month timeframe necessary for the review couldn't demonstrate more how complex the issue is. Didn't the Government's Commission on Banking need only 12 months to restructure the entire UK banking system?"

Commenting on the announcement of a full inquiry into UK banks, Professor Thorsten Beck of Cass Business School:

"This inquiry is a welcome contribution to the attempt of pushing banks back to their traditional intermediation role of supporting the real economy. It will be important, however, to look beyond banks and also consider new players in both retail payment and SME finance spaces that are emerging and also contribute to competition. Such new players include new payment platforms as well as peer to peer lending and crowdfunding platforms."

29 October

Commenting on the Federal Reserve's ending of its quantitative easing programme, Professor Philip Booth of Cass Business School:

"The Fed's QE programme has always been dangerous, especially as it involved the purchase of private sector securities.

"It is now over six years since the beginning of the financial crisis and the time for 'emergency' measures has come to an end. I therefore welcome the end to QE and the Fed should divest itself of the private sector credit instruments it holds as quickly as is practical."

28 October

Commenting on the announcement by Lloyds of plans to close 150 branches & cut 9,000 jobs in the next 3 years, Professor Thorsten Beck of Cass Business School:

"One can see the decision by Lloyds from different angles. From the bank's viewpoint, it makes sense to reduce branch footprint and concentrate on more cost-effective alternative delivery channels. I think this is part of a more general trend away from traditional high street banking towards both digital delivery channels and "agency banking" where financial services are not provided in stand-alone bank branches but by non-bank entities, such as post offices, little shops etc. A trend we have seen across Europe and the globe.

"One can also see this as part of a more general retrenchment trend in European banking. As a recent ESRB background paper showed, banking systems across Europe are oversized. While this might refer to wholesale and investment banking, retail banking is also part of the problem.

"Finally, one can look at this from the viewpoint of the overall market place. The UK has had a rather concentrated banking system, partly as a result of consolidation during the crisis. Retrenchment by one large player might give space for other, including new, players to come in. There are exciting new innovations in the financial system, including peer-to-peer lending and non-bank payment service providers. So, I would certainly not be worried about financial service provision in the UK, although a larger share of it might come from non-bank entities in the future."

27 October

Commenting on Formula 1's "unsustainable" business model, Dr Paolo Aversa says it must change or risk damaging the sport:

"Formula 1 is not only a sport and an entertainment circus, but an industry which provides cutting-edge technology to a variety of other sectors, as well employing thousands of people around the world (with a major concentration in UK).

"Acknowledging the industrial and social value of Formula 1 implies that different and more rigorous policies need to be applied in order to make sure that the business model of this industry is not only "fair" but also "reasonably sustainable".

"In every industry, successful companies stay in the market, and less successful ones disappear. However, if we consider that in F1 on average one company goes under every year (which corresponds to around 8% of firms, given such a small population of teams) and that even the successful firms struggle to break-even, we must wonder whether the business model of this industry is actually sustainable.

"In other words, we should ask whether the distribution of wealth is proportionate to a point that allows all the players - both administrators and teams - to get a fair share of the pie and thus achieve a reasonable turnover.

"For years the regulatory body and the teams' representatives have been making public statements regarding their intent to redefine the Concorde Agreement and introduce a budget cap (or equivalent solutions) in order solve this unfair situation. We are more likely have flying cars by the time the gatekeeper of the industry finds a way to sit down and work out a reasonable solution.

In sports which undergo high budget spending (see for example the major American sport series) business models are in place which allow even small teams both remain in the competition and to compete at the top level. These solutions are not only fair, but also enhance the entertainment value of the sport and its visibility, and thus enlarge the returns from media broadcasting and advertising.

"Therefore we have to admit that what F1 lacks is not a set of valuable solutions or blueprints to solve the problem, but simply the will to change. Research shows that in situations where players cannot agree on a reasonable equilibrium, the regulatory intervention of external policy makers can help re-establish optimum solutions - just few weeks ago Prof. Jean Tirole was awarded a Nobel Prize for demonstrating the validity of this type of solution.

"As Formula 1 grew from being a sport to a multi-billion dollar global industry, new responsibilities have emerged for those who "run the show". Still, if those shareholders are not able to agree on a sustainable redefinition of the business model, someone else should do something to guarantee the welfare of the thousands of stakeholders who contribute to its success."

23 October

Two different reactions to Tesco's fall in profit from management academics at Cass Business School. The authors disagree on the role played by the former CEO Terry Leahy.

Dr Amanda Goodall of Cass Business School, said:

"The immediate reaction of shareholders and senior leaders after such a dramatic fall in profits is to demand rapid short-term change. However, if Tesco is going to recover from this crisis, it needs to adopt a longer view. Tesco's previous success was built up over time, with determined strategy from leaders such as the former CEO, Sir Terry Leahy, who understood the business at all levels. If Tesco are to regain trust and profits, leaders need to seek a return to this kind of strategic thinking and not lean towards bounce back solutions aimed at calming shareholders. Although these might seem appealing in the short term, they won't fix the deeper problems and can end up causing more instability over time."

Professor Ajay Bhalla of Cass Business School, said:

"Today's results will be remembered as a momentous event in Tesco's corporate history. At one level this is a clear indication of the holes in the strategy pursued relentlessly by Tesco's former CEO Sir Terry Leahy. Chasing scale in home and then international markets led managers to pay attention to metrics at the corporate level at the expense of a values-based business model. At another level the resignation of Sir Richard Broadbent and the incoming CEO's efforts appear to be authentic attempts to reverse the company's course. Maintaining the current strategy of putting customers at the heart of the business model and promoting values-based leadership will be a long but worthwhile struggle."

Commenting on the Treasury Select Committee report on Co-op, Professor Andre Spicer of Cass Business School:

"According to the Treasury Select Committee report, the two principle culprits for the omnishambles at the co-op bank were the co-op board and management and their advisors in professional service firms. The co-op board lacked financial expertise, with only two members with significant experience in finance. Both these members raised serious concerns about the capacity of the co-op to take on another bank. The management had too many balls in the air at once, and over-estimated their ability to keep them moving. It was trying to create a new IT platform and integrate Britannia. As if these tasks were not hard enough, they decided to add a third major project - integrating over 500 Lloyds branches. All this action meant management were distracted from the issue of increasing capital ratios - which ultimately led to the banks decline. It appeared the co-op's advisors only egged them on - KPMG gave Britannia's toxic loan book a clear bill of health. JP Morgan encouraged the merger as a great way for the firm to build scale. This is like a doctor allowing a person who had just had a heart bypass to run a marathon.

"There are some larger lessons that the banking sector and UK PLC could learn from this report. First, the senior persons regime is a vital safe-guard against incompetence at the top of the organization. Second, firms should think twice before starting something new before they have finished existing projects. UK firms frequently start too many projects at once, and without the sufficient focus on completing one, they all come crashing down. Finally, there needs to be closer look at the role which professional service firms have played in these scandals. Audit firms have systematically given banks clean bills of health only to have these apparently 'healthy' institutions fail months later. Investment banks have encouraged mergers which looked nice on paper but proved to be disastrous on completion."

2 October

Commenting on Wonga's decision to write off £220m in debts, Professor Andre Spicer of Cass Business School:

"Wonga writing off the debt of 330,000 consumers might seem like business insanity, but there is method to the firm's madness. Following waves of negative publicity and unwanted attention from the regulator the firm has decided to rethink its business model. It is becoming clear payday lending premised on usurious interest rates is no longer either legitimate or particularly profitable. Instead of being a rogue, the firm wants to become responsible. Forgiving debts is one drastic way it can mark out this break. The move will not just generate positive publicity, but much of the debt was probably costly to recover. It would have been sold on to debt recovery companies at a huge discount. This means Wonga may not be missing out on much.

"Wonga's move today is akin to debt jubilees in ancient civilizations where on a particular day, rulers would free subjects of their debts. This had the effect of currying favour but also spurring economic activity.

"What remains to be seen is how much Wonga will actually change in the future. For instance, what information will be provided to customers, will their knowledge be checked and what rates of interest will be paid. What happens if new customers don't pay their debts in 30 days? Will debt forgiveness encourage moral hazard on the part of borrowers? Many of these issues are uncertain. But ethical payday lending may remain an oxymoron."

29 September

Comments on news that European authorities have been investigating tax deals between Apple and Ireland, Professor Andre Spicer:

"This will further tarnish Apple's image as a responsible corporate citizen. The news comes on the back of recent concerns about product failures such as 'bend gate' and software failures on the new iPhone. Activists also accuse Apple of becoming a new big brother which tracks everything about our lives including the music we listen to, what we read, and how we communicate. Now the new Apple Watch allows the company to track our vital signs.

"By decreasing its tax liabilities, Apple gives itself a huge advantage over competitors. It is also an increasingly common practice among multinationals like Starbucks and Amazon. These companies have faced backlash from protestors in recent years - Apple could be next in the firing line.

"Last year, Apple made an estimated £10.5b in the UK and paid £11m tax in corporation tax. In 2012, the company paid no corporation tax in the UK. Similar practices are common throughout the world. A US Senate inquiry claimed the company avoided paying US $10b a year. The company effectively pays a global rate of tax of about 2%. The UK corporate tax rate is 21%.

"Due to tax deals like the one it has in Ireland, Apple has built up a gigantic stockpile of cash offshore of $164.5b. This money is effectively trapped off-shore, because if was channelled back to the US, it would need to pay tax. This means the company cannot use this money to innovate, improve service or other things which will build the business. Instead, it has started to use the money to buy other companies (like 'Beat'), but also to buy its own shares back. This inflates the company share price in the short term, but can lead to long term problems. This could indicate Apple has become better at engineering its finances than engineering its products."

25 September

Commenting on the impact for Apple of defects in the iPhone 6, Professor Andre Spicer of Cass Business School:

"Glitches in the new iPhone 6 have undermined Apple's reputation for reliability. Customers have been happy to pay over the odds for well-designed technology that always worked. But online videos of the iPhone bend test and software failures mean people are beginning to question just how reliable Apple's new products are. Now it seems Apple's phones are neither cheap nor well designed.

"One of the reasons Apple has been so successful is its closed technical ecology. This means its products work well together and users are encouraged to buy into a whole Apple universe of the Mac, iPhone, iPad, iTunes and now Apple Watch. This closed universe was acceptable for many users as long as it worked well. However, if glitches begin to appear, users might begin to doubt whether other devices will work perfectly. The company has fixed glitches in the past but recently has extended into ever new markets. The launch of Apple Watch saw the company stepping into the health market. As it continues to try to conquer new markets, Apple could stretch itself too thinly.

"Apple's grand ambitions open the company up to the risk of reputational contagion. Minor failures in one product may have a big impact on the reputation of other devices. The tech titan might lose sight of its core strengths as it tries to operate in the technology, music, publishing, telecommunications and now health and fitness industries all at once. The big danger Apple faces is could become like other huge companies which ends up doing everything and nothing - it risks going down the same road as Nokia".

22 September

Commenting on Tesco's profit overstatement, Professor Ajay Bhalla of Cass Business School:

"The fact that this news emerges from the Tesco's UK business is particularly worrying. Things could not be worse for Tesco's management and shareholders. Not only has the goldilocks era which Terry Leahy presided on for years come to an abrupt halt, but this news is likely to put pressure on Tesco's current efforts to rebuild the business following Clarke's departure. The incoming CEO - Mr. Lewis has a momentous task in hand. Re-building the internal culture and market reputation will be his number one priority but he will have to balance that with paying greater attention to initiatives that put a stop to customer attrition to the German and resurgent UK competitors."

19 September

Commenting on the impact of the Scottish referendum result, Dr Marius Luedicke of Cass Business School said:

"One key question that European leaders confronted with local quests for separation will have to answer is how they can govern local communities and nations in ways that provides citizens with a stronger sense of control over their own fate (logic of identity), while still allowing enough space for international collaborations on which local wealth also depends.

Commenting on the impact of the Scottish referendum result, Professor Roy Batchelor of Cass Business School said:

"The reaction to the vote has changed the economic and political scene in the UK for the longer term. The healthier UK economy and markets raise the possibility that the Bank of England may increase interest rates before next year's May General Election.

"Extra powers had already been promised to the Scottish Parliament. This morning PM David Cameron bowed to pressure from English politicians and public, and announced that similar powers will also be delegated from the UK Parliament to England. Proposals for this are promised before the next General Election, and no doubt the main political parties are hurriedly rewriting their manifestos.

"The Scottish vote was triggered by the election in 2011 of a Scottish National Party government in Scotland, with support from their long-term hard core nationalist supports together with Labour voters disillusioned with the way their party had led the country into recession.

"Looking at the results from yesterday, it is clear that this is still the base of SNP support - the areas they won were relatively poor, deprived, traditionally Labour cities. This should for all political parties highlight the fact that, although the UK economy has recovered steadily, the benefits of growth have not been equally shared, and more needs to be done to support deprived areas not just in Scotland, but in the North of England - something else to look for in the manifestos, as attention switches to next year's vote."

Comments on the results of the Scottish referendum, Professor Philip Booth of Cass Business School said:

"The 'no' vote provides an opportunity for huge fiscal decentralisation and devolution in the UK. But this must not happen in such a way that overall taxes and government spending rise or that Scottish MPs can continue to vote on matters that have no impact on their constituents. Genuine fiscal decentralisation must involve local levels of government deciding what services to provide and those more local levels of government also raising the revenues from their own residents. The evidence suggests that this leads to more efficient government and smaller government."

Comments on the results of the Scottish referendum, Professor Thorsten Beck of Cass Business School said:

"The very clear result provides a degree of certainty, which should calm markets in spite of the ongoing debate about the future (possibly federal) structure of the UK. It will help return investors' focus back on the schedule for rising interest rates. It will certainly come as big relief to the Bank of England, which was facing potential turmoil in financial markets and the UK banking system.

"What might ultimately have swayed Scottish voters was the prospect of gaining formal political independence while at the same time increasing monetary and financial dependence on Westminster and the City."

Comments on the results of the Scottish referendum, Professor Roy Batchelor of Cass Business School said:

"The huge short-term uncertainty around the economic consequences of a break-up have been resolved, and financial markets are breathing a sigh of relief.
Sterling should regain some of the ground lost last week, the FTSE will also rebound as investors move back into shares in companies based in Scotland. The implied volatility in currency and stock options has already halved as markets opened today.

"The reaction to the vote has changed the economic and political scene in the UK for the longer term. The healthier UK economy and markets raise the possibility that the Bank of England may increase interest rates before next year's May General Election."

18 September

Commenting on Apple's delayed launch of their HealthKit fitness app, Professor Andre Spicer, Cass Business School:

"The temporary hick-ups with Apple's HealthKit app masks longer lasting issues: the company's extended reach into the most intimate aspects of our lives. Life tracking software like HealthKit records our most intimate health information. Now we are trusting technology companies with information only our doctor would have access to in the past.

"This creates some significant new opportunities such as up to date tracking of health information, recording life-style issues like moods, sleep and exercise and pre-warnings of health problems. With this new software coupled with Smart Watches, Apple is taking a step into the health industry. This could result in the same kind of disruption we have seen in the music and publishing industries. Some evangelists claim that smart watches and health tracking technology could make regular check-ups with GPs a thing of the past. However, interest in health tracking software is yet to capture the imagination of many smart watches users.

"This new technology introduces significant new dangers. It opens up scope for real-time surveillance of our most intimate information. The vast majority of people will agree to terms and conditions about their health data that they have neither read nor understood completely. It may mean users think they can do without health professionals and start self-diagnosing and self-treating. It may also fuel a narcissistic obsession with tracking and managing our real time health data. Instead of constantly checking emails, obsessive life-loggers will start to compulsively track their vital statistics."

17 September

Commenting on the news that Vodafone, EE and Carphone Warehouse are looking to acquire Phones 4U stores, Professor Andre Spicer said:

"Vodafone and EE have come out as winners. They have eliminated a competitor in retail, gained some plum locations and paid very little in the process. It is unlikely consumers will abandon them as many are locked into contracts and can't be bothered to change providers when their contracts come up. BC Partners also came away with a 30% profit on their investment. The main losers were investors who bought bonds in the company and employees - the great majority of whom will find themselves out of a job.

"The big question government and investors are asking now is whether management of Phones 4U was negligent. The business carried huge supplier risks. It was like a shop only selling three products. If one supplier pulled the plug, you would be left with bare shelves. They clearly down played the risk of losing a critical asset - their relationship with the networks. If this went sour, the whole business would sour too. BC Partners realised this - that is why they effectively got out of the business in September. Phones 4U had few ways it could decrease this risk. There were no alternative suppliers to turned to. The only real options were to bend over backwards to keep the phone networks happy or to diversify their product range so they were less dependent on selling network access. It seems they did neither.

"In the final analysis the risks were carried by employees and bond investors, while the rewards were reaped by private equity and the phone networks. This is typical of many companies in the UK economy where a combination of financiers and big corporations which dominate an industry get the rewards while employees and everyday investors are shouldered with the losses. The case is likely to re-ignite debate about the role of private equity in the economy and lack of competition in many industries like telecommunications."

15 September

Commenting on Phones 4U's announcement that it has gone into administration, Professor Andre Spicer said:

"Phones 4U has been the victim of powerful suppliers, changing technology, savvy consumers and uncertain economics. Following the merger of Orange and T Mobile, there are only four big networks. This means networks can drive a brutal bargain. Retailers like Phones 4U are left at their mercy. Currently the networks are asking how they can take over more of the supply chain so they can reap a greater percentage of the profit created.

"Changing technology means mobile phones are no longer the only game in town. The days of rapid growth in the mobile phone market are gone. Purchases of smart phones actually decreased last year. Now the action is in devices which blur boundaries like tablets and possibly wearables like smart watches. Phones 4U's brand ties it to selling and phones, making it hard to extend into other markets. You wouldn't go into Phones 4U looking for a fashion, fitness of health related item like a smart watch.

"Consumers are no longer scared of smart phones. This means they are less in need of a sales person to walk them through the purchase. Instead, they are likely to be happier buying devices online. This leaves retailers with less space for growth.

"As consumers' savvy has increased, the ability of networks to charge for services has decreased. Consumers increasingly use apps and services like WhatsApp and Skype which allows free calls or messaging. This is leaving networks with a dwindling income stream. One way to make this up is to look for opportunities elsewhere in the value chain - like retailing.

"The demise of Phones 4U may be tragic, but it creates room for new retailers with new ways of thinking about communication devices. Instead of using a model developed when mobile phones were like bricks, there is a real opportunity now for new retails to sell mobile devices that blend communication, computing and even fitness and fashion in new ways."

10 September

Commenting on the departure of Ferrari's long-time chairman, Dr Paolo Aversa of Cass Business School, said:

"If we look at Montezemolo's public life through this lens, we notice how he practically left Ferrari years ago when he turned his "active" leadership into a representative one. In his early days at Ferrari, Montezemolo started his career at the pit-wall, where he applied his extraordinary management qualities to trigger an amazing strategic turnaround for Ferrari as both a car manufacturer and racing team.

"Montezemolo excelled as a manager when applying a very "hands-on" and active leadership. However, in recent years, he changed his leadership style from "active" to "representative" and spread himself too thin through a series of business, political, and social ventures. Rather than applying his skills to the task, he used his successful personal brand to endorse various and mildly-related initiatives. This is a typical sign of hubris and even exceptional performers cannot compensate for the lack of time when they are actively in charge of such an exorbitant number of high-profile activities.

"Winning Formula 1 is far too complicated to be achieved with "representative" leadership, motivational speeches and random show-ups at races. But unfortunately for Montezemolo he might have realised this a little too late."

Commenting on the impact of Apple's new wearable device, Dr Marius Luedicke:

"In the past, Apple has been enormously successful in identifying barriers when it comes to people using computers. The company has relentlessly searched for those moments of annoyance where a process works clumsily and found beautiful hard and software solutions for them.

"Two principles have guided the company. Firstly Apple puts user experience and design first, rather than putting products on the market that can do a lot of things that did not provide a benefit for consumers. Secondly Apple saw their machines as buddies or work partners, not simply as tools. These principles were the reason why the iPad was so beautiful and usable and why the Mac login screen does not print "access denied" when the wrong password is entered, but briefly shakes like a person shaking its head.

"Now, the Apple watch will almost certainly be a market success because it follows these classic Apple principles. It solves the many social and practical problems that come with taking out one's large cellphone in stores, in meetings, and on all sorts of other occasions. It offers a range of fascinating functions that consumers will love using (e.g. getting driving directions through different types of vibration rather than having to look at a screen). The watch, like iPhone and iPad, comes across like yet another consumer/human-centered design that looks fluent and almost organic.

"Lastly, the watch just like the ipad and iphone is yet another platform that will inspire thousands of developers to identify consumer problems and develop solutions that the watch will be able to perform better than other devices.

"Like so many contemporary technological innovations, the new Apple products will have all sorts of intended and unintended consequences. Now that Apple enters consumers' wrists, moments of silence and non-connectedness will become even more rare. Monitoring and storing consumers' bio data can be beneficial for them training their movements, but can also be misused by the health industry. Consumers will find making payments with the watch or iphone 6 even more convenient, but it will also be easier for them to loose track of their credit balance."

Commenting on Apple's attempts to enter the finance and healthcare industries, Professor Andre Spicer said:

"Apple has taken on a number of big industries including finance and healthcare. The Apple Wallet is a first step into the finance sector. It may end up being an mPesa for the developed world. But for this to happen consumers need to start using it. Big players like banks and retailers need to co-operate. The Apple Watch is packed with fitness and health apps which indicate a step into the health sector. Both these moves will bring Apple into new markets dominated by huge players who are subject to complex regulation. Both industries have high cost bases and are under the cosh of constant criticism from politicians and the public. This could make them ripe for new entrants like Apple. Unlike the publishing or entertainment sectors, the health and banking sectors are going to prove far more tricky for Apple to get a foothold in.

"Apple's new product launch raised more questions than gave answers. Cook faced a big leadership challenge - leaders who follow legendary CEOs rarely hold on for long. The launch showed Tim Cook was willing to take a few steps out of shadow Steve Jobs shadow. This was signalled by dropping the 'i' and moving to 'Apple Phone'. But behind the scene, he has been gradually transforming Apple into a more run of the mill company that follows fads and fashions rather than leads. A prime example of this is copying the corporate trend to use share buy-backs to pump up share prices in the short term. This could strangle innovation in the longer term.

"Apple obsessed consumers worked themselves into a frenzy. Tech commentators talked about this as a great disruptive innovation which would overthrow companies in banking, luxury watches and health care. But investor respond was a collective 'meh'. Share price tracked up briefly, it quickly fell. This was because the products launched confirmed expectations, but did not pleasantly surprise. Investors have good reason to be suspicious.

"Investors have good reason to be suspicious. Research at Cass by Alberto Rizzoli and Andre Spicer found that smart watch users did not use devices to read and respond to emails, surf the web, make calls or even use fitness apps. They did use them to keep on top of their information, locate their device quickly and avoid being embraced by a buzzing phone in a social setting. Smart Watches were often just an extension of other devices like tablets. If Apple hopes to make the Apple Watch as ubiquitous as the iPhone, it needs to pay attention to how users actual fit the device into their daily routines."

8 September

Commenting on Apple's new product launch, Professor Ajay Bhalla, Cass Business School:

"There is no surprise that come Tuesday Apple will release its iPhone 6 and announce a wearable device - in effect launching a new product category. Hidden behind these expected launches is an attempt to reinvent the firm beyond a device player. Cook will showcase 'New Apple' as a visionary firm which will be right at the heart of our daily life- serving our needs in the areas ranging from health, in-car entertainment to payment platform.

"Though the vision was likely to have been sketched by Jobs, it is Cook and his team, which rightly deserve the credit of implementing this complex configuration. Alongside setting the foundation of this Apple 3.0, Cook and his team have managed to keep up the frantic pace of Apple's expansion in new markets and managing activist investors. Though competitors are in sight and have launched their kits before the Tuesday event, Apple is likely to reinforce its credentials as the one, which sees beyond the shore and combines hardware and software like nobody else."

Commenting on the fall of the Sterling as Scotland's Yes campaign takes the lead in the polls, Professor Roy Batchelor, Cass Business School:

"Financial markets hate uncertainty, and this quickly gets translated into prices. The probability of Scottish independence has risen this week, and the prospect of years of negotiation over who pays the interest costs of UK debt, and who uses sterling, has spooked the gilts and foreign exchange markets.

"In economic terms this week's events are not damaging to the UK - if anything a mild sterling devaluation, and a postponement of monetary tightening by the Bank of England, will help growth and employment. The risks to the UK are trivial compared to those triggered in Scotland by the likely flight of capital and business talent if the Yes campaign wins."

5 September 

Commenting on the US ruling that BP were 'grossly negligent' during the 2010 Gulf oil spill, Professor Bobby Banerjee of Cass Business School said:

"The recent ruling in a US court that found BP 'grossly negligent' in the 2010 Gulf oil spill has legal, financial and strategic implications for the firm. Not surprisingly the company disagreed with the ruling and will appeal the verdict. Their argument that their act did not meet the high bar for 'gross negligence' is strange given the company had agreed to accept criminal responsibility in 2012.

"While the ruling will increase BP's financial liability and negatively impact its share price in the short term, the company can take some comfort from similar disasters faced by other corporations in the past where it was back to business as usual after the initial downturn. Strategically we can expect an increase in CSR noise from the company as they seek to reassure their stakeholders about the company's environmental and safety policies. There will probably be changes in the company's approach to their contractors and hopefully closer monitoring of contractor operations."

4 September

Comment on the challenges facing Tim Cook ahead of Apple's new product announcement, by Professor Andre Spicer of Cass Business School said:

"Tim Cook, the CEO of Apple, faces a triple challenge when he launches a new suite of products on September 9th: convincing the public he can fill the shoes of Steve Jobs, convincing investors that Apple is still an innovation powerhouse, and convincing consumers that smart watches are worth their hard earned money.

"Cook's first challenge is to affirm his leadership of the company. Jobs practically invented the product launch keynote, which is now widely aped by all others in the industry. The presentations were not just about selling a new product, they were also about selling him as a leader. There is a big risk that by following the same format, Cook will look like a pale shadow of his predecessor. Bosses who take over from legendary CEOs find it hard to live up to expectations. To succeed they need to not just copy what their predecessor did, they need to adopt their own style.

"The second big challenge Cook will face is convincing investors that Apple continues to warrant sinking money into. There have been doubts about whether Apple can remain at the forefront of user friendly innovation in highly competitive fields. It seems the company has focused more effort recently on manipulating short term returns through a massive share buy-back scheme. This has effectively diverted cash which could be used for innovation into pumping up the share price. The big risk is this could leave Apple without a stream of new products and services in the future.

"The final challenge Cook faces is convincing consumers that they actually need smart watches and other wearables like an iBand. Research at Cass by Alberto Rizzoli and myself found that smart watch users found the device was useful for keeping on top of information flow, avoiding embarrassment caused by a buzzing smart phone, and accessing a device quickly.

"However it was less useful for dealing with emails, using apps or surfing the web. Most found it ridiculous to make a phone call using a smart watch. We found smart watches are not a replacement for tablets or even smart phones - they are more of a supplement.

"The public is becoming more concerned about who owns and controls the stream of personal data about things like health produced by wearable technology. It seems strange we force prisoners to wear tracking technology, but trendy smart watch users pay for the privilege."

29 August

Commenting on Tesco's profit warning and dividend slash, Professor Andre Spicer of Cass Business School said:

"The dramatic drop in share price following profit warnings today shows that Tesco's new CEO faces a perfect storm. The retailer is stuck in a disappearing middle between budget retail like Aldi and high-end retailers like Waitrose. Going into many Tesco stores is a soul sapping experience. The whole business model is transforming and selling shelf space to desperate suppliers may no longer be good enough.

"The new CEO faces some tough decisions. He could pander to short term pressures of the market and return short term shareholder value through continued cost cutting. But if he wants to build a sustainable business, he needs to focus on refreshing stores, transforming the business model into the online age, and communicating this clearly and consistent with staff and other stakeholders.

"The new CEO faces two big dangers: that continued rounds of brutal cost cutting could cut into corporate muscle rather than corporate fat; and that vacillating between extreme measures which please analysts but mean effort is wasted on delivering change rather than delivering core products and services."

14 August

Commenting on the decline of French and German economies this quarter, Professor Philip Booth of Cass Business School said:

"It is no surprise that the French and German economies are performing poorly. As far as France is concerned, for some years the country has been following policies that seem as if they are designed to discourage growth and employment: it is highly likely that the current abysmal growth and employment trends will continue.

"After important reforms at the beginning of the twenty-first century, Germany is also beginning to make some major policy errors, such as the introduction of a minimum wage. Germany also has long-term structural difficulties that will slow growth over the coming decades.

"Today's news should stop the fascination of our political class with German economic policy. Germany has not, in general, performed better than the UK and is unlikely to do so in the near future."

31 July

Dr Pete Hahn of Cass Business School says the Bank of England's regulatory clampdown may end up creating not curing reckless behaviour.

"With so much attention on the Bank of England's proposed pay claw-back regime, have we missed the consultation paper's most important issue: the focus on personal liability? Indeed, on page 340 (of 395 pages) there is a discussion of how a focus on individual responsibility might lead to reduced collaboration and cooperation in banks.

"While it is appalling that so few who created financial havoc have faced retribution, could this new emphasis on personal liability cure the problem, or create a new one? Will the potential for personal liability encourage some senior managers to avert their gaze to misdemeanours in their firms? Or worse yet, in a crisis, might some potentially culpable decision maker want their personal legal counsel close, leading to delays in critical decisions?

"The difference between brave and reckless business decisions is often time. Had Lloyds TSB not somewhat recklessly jumped in to buy HBOS, the cost to the Exchequer of fully nationalising HBOS would certainly have been far greater."

28 July

Commenting on Bank of England plans to tighten regulation of bankers' pay, Professor Andre Spicer of Cass Business School said:

"The plan to get tough on bankers pay shows that the Bank of England is willing to go beyond soft talk and address hard measures such as pay. The threat of clawing back bankers bonuses will defend the banks but demotivate bankers.

"One of biggest causes of the financial crisis were large bonuses for short term results. This meant bankers would take bets which would pay off in the short term but go bad in the longer term. When this happened bankers would walk away with huge bonuses, while the banks and ultimately the public were left to carry the losses. New measures to be recommended by the Bank of England tomorrow will see rewards being threatened with potential claw back for up to six years. This comes on top of banks already deferring bonuses between three and five years.

"The upside is bankers are likely to be conservative in their decision making. If their own bonus is at stake they are likely to avoid cutting corners and take a longer term perspective. However, the extremely long pay-off period is likely to mean large rewards cease to act as motivators. This is partially down to human psychology: a small reward today is seen as more valuable than a large reward in the future. Bankers will be genuinely concerned that change they have no control over which happened during a long period of time could lead to their bonus being withdrawn. We have to remember that the average shelf-life of many companies is decreasing by the year.

"This could result in unexpected outcomes: if a large bonus stretched out over years is not seen as satisfactory, then bankers might demand more. Another result would be bankers going in search of greener pastures elsewhere in foreign banks or the shadow banking sector. A final result is that banks will need to start thinking in more rounded ways about how they motivate staff. Instead of just relying on pay, they will have to offer more healthy working environments, opportunity for development and allow people to bring their values to work. It could spell an end to the Faustian pact in banking.

"These hard measure will do far more to change the banks than asking bankers to take an oath. Even in very cohesive professions, taking an oath only has limited impact. Research has found that most medics who take an oath say it only had a limited effect on their decision-making. When making tough decisions they are more likely to turn to values in their private life such as religion or experience with a mentor. The main benefit of taking an oath they reported was it made them feel good."

Commenting on the £217m fine for Lloyds Banking Group, Dr Peter Hahn of Cass Business School said:

"Lloyds conduct is appalling and reprehensible. Yet once again the cost falls on the taxpayer rather than the individuals involved. Taxpayers have a right to know who has sullied the reputations of Lloyds, the City of London and the UK as a financial centre. And, more importantly who managed these people?

"Twenty-two individuals were allegedly involved. My guess is the names have been withheld as their repugnant behaviour might amount to unlawful conduct. But such vague disclosure is bad for a City trying to redeem itself. It is only when the individuals are exposed and forced to explain themselves publicly that standards in the City will be raised. This doesn't just apply to the 22 but to some very senior people who chose not to understand these activities either through laziness and incompetence at best, or complicity at the worst.

"Such fines levied against banks seem ever more a type of shareholder tax than a means of deterring or punishing wrongdoing. It would seem every shareholder - and that is us - has a right to know who has caused this expense. And if they have left Lloyds, what are they doing now?"

25 July

Commenting on the RBS share price jump, Dr Pete Hahn of Cass Business School, said:

"It's hard to tell whether the RBS share price jump today is more about relief or optimism. The former is about fewer fines, fewer losses on loans, and fewer costs in a shrinking business and possibly dividends for shareholders.

And there's the rub, owning shares (as opposed to interest bearing debt) should be about optimism and long-term growth in dividends. But from a shrinking business? Few would argue that RBS' retail and corporate bank had efficiencies to be gained and cash flow that might be converted to dividends; yet like most banks, RBS' cost of equity remains stubbornly and appropriately above its ability to provide a return on that equity.

For shareholders, current improvements should mean dividends in the medium term but a recognition that RBS may lack any merit for new investment and delivering any long-term dividend growth - not good. While many large retail banks are getting safer, in some aspects, and we often speak of them in terms of moving toward utility type models, banks take risks, are cyclical, face competition, have new business challengers, and are simply are not utilities. Investors shouldn't get ahead of themselves here."

Commenting on the RBS first-half results, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"The rise in profit at RBS is a man bites dog story. We are used to hearing about big banks disappointing. So it is surprising to see expectations being exceeded.
"The big question now is why RBS has exceeded expectations. Part of it is the skill of senior executives, but a big part is luck. Some factors might be due to the actions of senior executives, such as aggressive cost cutting. The bank has axed 8000 staff in the last year which has cut costs significantly. The other factors are more just luck. For instance, the bank has reduced its impairment losses from £1,881 million to £269 million. This is partially because assets on the bank's balance sheet which looked toxic a year ago look less noxious today. As the wider economic tide has risen, so too has the 'fair value' of these assets. 

"RBS seems to be making progress in making itself a smaller and safer bank. It has increased the amount of tier one capital it holds and got out of many of the riskier operations. What remains to be seen is whether it is transforming itself into a more sustainable bank. The big question is whether the bank can hold on to its customer base with continued aggressive cost cutting, heightened pressure for increased competition in the retail banking sector, and the rise of challengers ranging from peer to peer finance to new high street banks."

21 July

Commenting on Philip Clarke leaving Tesco, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"Clarke has been a dead man working for months. This was mainly because the investor community continually bayed for blood. He had been a steady hand on the rudder. But vocal investors wanted radical transformation instead. The problem is such radical plans sound exciting when announced on a conference call with analysts, but are much more difficult to put into practice. The result is that the majority of radical turnarounds actually end up making matters worse, not better.

"Clarke suffered the same fate as David Moyes. Taking over from a legendary leader is very difficult. The new person in the job is bound to disappoint. This is because stakeholders often have unreasonably high expectations which incoming candidates often fail to live up to. They struggle to get out of the shadow of their heroic predecessor and end up being kicked out the door quickly.

"The new CEO of Tesco is well placed to take on the job. He has significant experience in the industry, is well-known, but is also likely to bring some new insights from Unilever - one of the world's most successful consumer goods firms. The biggest challenges in his inbox will be positioning Tesco in a retailing world where the middle market is disappearing, making the supply chain more sustainable, and ensuring the business model is tuned for an increasingly digital future."

Commenting on the challenges facing the new Tesco CEO, Dr Pete Hahn of Cass Business School, said:

"Tesco's new CEO might make a quick pass by Corporate Finance 101 before taking over his new role. All new finance students learn that ultimately share prices depend not on fending off the competition but on delivering growth. As I walked through my local Tesco convenience store this morning, which over the years has devoted ever more space to alcohol and small packaged products, I couldn't help notice that it is looking more like the off-license and specialty stores it displaced; their margins were high but, of course, they had no growth and died."

15 July

Commenting on today's Cabinet reshuffle and the promotion of some women to senior roles, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, part of City University London says:

"Today's cabinet reshuffle only goes part of the way to addressing the Tory's woman problem. It brings more women to the top table. But it masks a deeper problem - women only make up about 20% of selection for Parliamentary seats. This means there is a shallow stream of new female talent coming into the party. This could be addressed through greater transparency about the number if women elected, quotas, stamping out direct and indirect discrimination in selection and introducing more flexible working practices in politics. These are all things the corporate sector has made great strides in addressing. Maybe it is time politicians do as well.

"The big question now is how will this create a more diverse cabinet perform. Evidence from studies of diverse groups suggest it is likely to have more conflict, take longer to come to a decision, but come up with better solutions. Also we should expect members of the cabinet being less satisfied with the group process. Research in the corporate sector suggests that more diversity at the top will result in better performance on objective measures, but performance will be seen more negatively on subjective criteria. So with more women in cabinet the quality of policy is likely to be better, but the quality of media coverage is likely to be worse.

"Life is likely to be tough for the women in cabinet. Evidence from the US Senate suggests powerful men tend to speak more, while powerful women speak less. When powerful women do speak out, they are often punished with negative audience ratings. Life is going to get tough if any new women cabinet members get angry. Angry men tend to be seen in a positive light, and their anger is blamed on the situation. In contrast, angry women are seen negative, and their anger is blamed on them."

14 July

Commenting ahead of tomorrow's anticipated Cabinet re-shuffle, which could see a number of women promoted, Jo Silvester, Professor of Organisational Psychology says:

"My feeling is that his (Cameron's) primary rationale is to appeal to voters ahead of the 2015 election, both because the party has been very poor at promoting women internally (although they would argue that given the numbers they've done their best), but more importantly because there's so few new PCs who are women.

"Mathew Parris' opinion article in the Times (5th July) is spot on. Although he appears to be saying that women don't act in the same way as men, the more important point he makes is that stereotypes about what constitutes a good political leader both within the party and amongst the public are handicapping women. Political parties therefore need to do much more to challenge stereotypes internally among members and by telling the public what really constitutes good political leadership - something they've been very reluctant to do."

20 June

Dr Peter Hahn of Cass Business School comments on TSB's stock market prospectus:

"Imagine you live along the M1 and your great aunt has bought you the world's safest car. Designed for use in flood prone areas, it carries a 60st PVC raft in the boot and needs expensive tyres adding another 20st. The car burns a ridiculous amount of petrol, you have to fill it every day and it can't keep up with traffic. Most drivers heading from Leeds to London might consider ditching the raft and more fuel efficient tyres - i.e. less is more, but if you're from TSB would you add fuel capacity while picking up some passengers and asking them to contribute to the price of fuel? The prospectus is 320 pages, but I wonder if the message could be clearer?"

19 June

Dr Peter Grant, Lecturer in Voluntary Sector Management at Cass Business School, comments on the controversy surrounding the world cup:

In Brazil there have been significant protests against the cost of the World Cup and the controversy over awarding the 2022 tournament shows no sign of abating. The debates concentrate on two aspects: finance and governance.

The financial question is whether countries make an overall profit from major events. The key issue is that when decisions ‎are taken by a small group opportunities for corruption are far greater than when a much larger group take part. Until FIFA grasp the nettle over internal governance, significant problems will remain. One catalyst for change may well be the reaction of major sponsors Adidas, Visa and Sony

On governance, the key point is the increasing 'mismatch' between how international sports organisations interpret ethical behaviour and how their international business sponsors view it. Companies are increasingly developing ethical business practices and promoting their adoption of the same whereas bodies like FIFA are still many years behind them.

In the first week of the World Cup we've seen some sparkling football but also continuing protests by many Brazilians. Live rounds have reportedly been fired and an American flag burned though these incidents have received little coverage on the sports channels.

22 April

Commenting on David Moyes being sacked as Manchester United manager, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"Longstanding leaders like Alex Ferguson are idealised once they step down. They cast a long shadow over the organisation which makes it almost impossible for their successor to excel. In such situations, new leaders are constantly compared to their predecessors - and they invariably don't measure up. This often means they lose the confidence of core stakeholders. Staff, in this case the club's star players, are not inspired to put in the effort and shareholders don't have the confidence to back costly investments. This can mean once high performing organisations rapidly loose their edge.

"To right this failing course of action, firms often go looking for yet another new leader. This can create a rapid churn of leaders, all of whom have new ideas, and many of whom fail to live up to expectations. The result can often be a vicious spiral - the failure on the part of one leader triggering the search for a saviour who then over promises and under-delivers. In these cases, the firm spends more time searching for new leaders, bedding them in, and getting rid of them than actually delivering results. To get out of this spiral firms need to get rid of their idealised images of past leaders, stick with new leaders for longer, and focus more on delivery than swapping top management. To hang on, leaders need to show they can deliver some results, respect the legacy of past leaders but also be willing to step out of the shadow of their predecessor."

18 March

Commenting on Sainsbury's first fall in sales in nine years, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"Like other large supermarket chains, Sainsbury's finds itself stuck in the middle. And this is a not a nice place to be. It sits between more upmarket stores like Waitrose and down-market competitors like Aldi and Lidl. The middle ground is shrinking due a perfect storm of increasing global food prices, more polarised incomes and increases in the broader cost of living, such as housing and electricity. This means many previously solid mid-market consumers find themselves searching for bargains in down-market stores. At the other end of the scale, up-market consumers have become increasingly obsessed with local sourcing, authenticity and other ideas fed to them by celebrity chefs. Sainsbury's has long been an icon for middle England. But catering to this disappearing middle may prove to be a risky business model in the future.

"We need to remember that the supermarket is a product of the post-war era. Companies like Sainsbury's have perfected this model over decades. But if the world changes, we might see supermarkets becoming less relevant. To some extent this is already happening with the rise of internet retailing and smaller convenience store formats. But the really big challenges like a declining middle class, increasing food prices, the changing design of cities and distrust of industrialised food will create entirely new ways of buying and selling food. This could leave the supermarket, and companies like Sainsbury's, in the dust."

11 March

Commenting on Euan Sutherland's resignation from the Co-operative Group, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"Euan Sutherland's resignation is the product of stand-off between democracy and managerialism. Sutherland wanted to introduce typical managerial reforms such as restructuring, selling off parts of the firm's portfolio of businesses, and streamlining governance procedures. This would have made the Co-op look very similar to more mainstream businesses. Traditionalists in the group want to preserve the values of democratic decision making, and the slow and often unwieldy processes this entails. It is difficult to see how you can reconcile these two very different visions for the future of the Co-op.

"The conflict over the CEOs pay-package bought the clash of these two values to a head. By tendering his resignation, Sutherland was laying down the gauntlet to those who were questioning his more managerial approach. Sutherland declared the Co-op to be ungovernable, but it is really only ungovernable according to standards of a traditional corporation. Despite attempts to reform the group, the Co-op is not a traditional corporation. Sutherland should have accepted that one standard of good governance does not apply to all organisations.

"The news comes on top of a series of other disasters for the Co-op Group. While Sutherland's resignation is likely to make some members of the co-operative movement happy, it will further undermine the Group's reputation. This means stakeholders are going to get even more jittery. It will also make finding a new candidate for the job difficult. A faltering Co-op is bad news for the UK economy as a whole. It is a significant player in many sectors such as retail, funeral care and banking. It also offers an alternative business model to many mainstream firms."

10 March

Commenting on Co-op plans to boost executive pay, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"The debate over the CEOs pay packet is a strategic crossroads for the Co-op group. The move has inflamed controversy because it represents a choice over whether the group wants to look like a corporation or a co-operative. Many fear that if the group decides to support the CEO's pay package, it represents one step further down the road of operating like a large corporation. This means the group will become more dominated by well remunerated professional managers. It is most likely they will see best practice coming from the corporate sector. This could lead to increased efficiencies. But it will also undermine many of the distinctive features of the group. This could make the co-op indistinguishable from Tesco.

"Awarding CEOs large pay-packets for lacklustre performance has become the norm. This is due to 'the lake woebegone effect'. This effect is named after a long running American Radio series (similar to the Archers) about a town where everyone thinks they are above average. Organisations increasingly want to think their CEO is above average, and to prove it they dole out large pay packets. The result has been a ratcheting up of CEO pay as organizations compete to pay an ever increasing going rate. This process has been helped along by remunerations consultants who share 'best practice' between organizations. The result is pay goes up across the board. This might be justified if it is linked to performance. But research suggests that CEO pay typically goes up irrespective of performance. The picture we are left with is CEOs are 'rent seekers' who receive money for occupying a position rather than producing results. This situation is all the more galling given the ongoing stagnation of most other employees wages in the past two decades."

27 February

Commenting on the new RBS structure, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"Getting back to good old banking is a good idea. Making it a reality is going to be much harder. Simplifying the firm into three divisions, getting rid of complex businesses, and focusing on consumers should get to the root of past problems. This should please politicians. But years of poor performance will make the public who are the majority shareholder nervous. People are likely to start asking whether continuing to loose billions operating a bank is the best use of taxpayers money.

"Delivering a simple structure is a very complex task. There are some big stumbling blocks for implementing the new strategy. One big stumbling block is that aggressively cutting costs will alienate employees, which damages customer service quality. Another stumbling block is the entrenched interests and complex systems of large organisations. A final stumbling block is that turning around a 'toxic' culture is likely to take years. Many staff members are punch drunk after years of battering by politicians, the press and their own management. Changing the culture with added pressures of cost cutting is likely to be difficult. This is vital if the bank is really interested in rebuilding customer service.

"The bank finds itself trapped by industry conventions for paying bonuses to bankers, even when the company is losing money. If there ever was a case for rethinking how bankers are rewarded this is it. Most regulators and researchers agree that cash bonuses for short term performance were a major driver of the financial crisis. We also know banks only pay bonuses because their competitors do. There are some banks (such as Svenska Handelsbanken) which don't pay bonuses. Such banks came out of the crisis unscathed. This reminds us there are alternatives out there, it is just most banks are unwilling to consider them."

5 February

Cass's Dr David Henderson comments on Microsoft's new CEO:

Will a technical CEO calm feelings of uncertainty? Well maybe. As Microsoft names Satya Nadella as its new CEO it takes part in a growing trend to place individuals with more technically-oriented backgrounds into the top office in tech firms. Jim Cook (Apple), Marissa Mayer (Yahoo), Ginni Rometty (IBM), Dick Costolo (Twitter), and Brian Kzanich (Intel) are just some examples of individuals with a technical background emerging as major business leaders in their fields. In times of economic and internal-organizational uncertainty, as in the case of Microsoft, social scientific research tells us that individuals are more likely to gravitate toward leaders who are perceived as experts as opposed to generalists. It should be no surprise then that, in the tech sector, we are seeing movement away from awarding CEOships to individuals with pure business backgrounds to those with educational and work experiences that are more technically driven.

29 January

The manner of Justin King's departure from Sainsbury's shows a new sensitivity to the image of greedy fat cat bosses, says Professor Andre Spicer:

"Justin King is leaving at about the right time. CEOs who step down too early or too late have a negative effect on company performance after they leave. His departure will create some uncertainty among investors, reflected in the wobbly share price. It might also create a sense of loss among some employees. Given King has been in post for some time, he may cast a shadow over his successor. Mike Coupe faces a tough challenge of navigating between trying to live up to King's legacy or trying to create a break. Either task is going to be tough.

"The decision to go in-house for a new CEO is an excellent idea. It might not give some analysts the scent of fresh blood they might hope for, but it will mean he has a detailed knowledge of internal problems and opportunities within the firm. The appointment signals a wise gradual approach rather than a radical rupture. Too often outside appointments boost share prices in the short term, but implement generic strategies which do not fit their new company, damaging performance in the long term.

"King's decision to shun various post position perks shows a new sensitivity among senior leaders to the image of greedy fat cat bosses. It signals recognition that excessive executive perks have soured many members of the public, who also shop in his company's stores and own company shares."

28 January

Commenting on Apple's share price 'plunge', Cass Professor of Global Innovation Management Ajay Bhalla, comments:

"Apple is facing dual pressure: to maintain sales and earnings growth and to come up with a new product category. Though earnings continue to grow, sales are under pressure because of the lackluster performance of iPhone 5c. This is the product category which Apple invented under pressure from its investors and tech pundits, and the company is now feeling the pinch as sales of the upmarket 5s continue to outpace the cheaper model. The second trigger, which caused Apple shares to free fall earlier today, is the pressure to invent a new product category. So far, Apple has resisted the temptation of releasing a half-cooked product. The clamor around iwatch is disappearing and there is uncertainty around what the new category will be. Once operating in Apple's shadow, Google has had a fantastic run with its acquisitions in past eighteen months and investors may be wondering why Apple missed opportunities such as Nest."

15 January

Andre Spicer, Professor of Organisational Behaviour at Cass Business School, considers the possible consequences of changes in bankers' remuneration:

"If the financial crisis taught us anything it is this: paying bankers large bonuses for short term performance is a recipe for disaster. It incentivises very risky behaviour, undermines performance, destroys shareholder value, and creates systemic problems the tax payer is forced to cover. A common argument is that banks need to pay large bonuses to attract the best talent - however, in the lead up to the financial crisis, this war for talent pushed bonuses to an unreasonable level which increased risk profiles, and undermined bank performance. The only people who benefited were a small elite of bankers. A rise in bankers' bonuses was a major factor in increased wage inequity in the lead up to the financial crisis.

"Fortunately regulators and banks have learned some lessons from the crisis and changed the way they reward their employees. Increasingly they reward for not just financial performance, but look at other non-financial metrics. This should encourage bankers to look beyond the immediate bottom line. In addition, they also reward for performance over the longer term. They also lock up rewards in share options. This should encourage a longer term orientation.

"Changes in remuneration could lead to some unintended consequences. Locking up bonuses over a long time period could mean they cease to become a motivator. This is because a £1 cash bonus today is valued higher than £2 share option bonus in a few years' time. Declining bonuses could also push some bankers who favour quick rewards for risky behaviour into the shadow banking system. This might create problems at the murky margins of the market which regulators have difficulty penetrating. Finally, the ongoing controversy over bonuses is likely to further alienate many senior bankers - who already feel like they have been waiting a few years to be paid for their work.

"As remuneration changes in the banking sector, it is important that banks look at other ways of motivating staff. Many working in the financial sector find it very insecure and unsatisfying, but are willing to trade this for high pay. As the job becomes less lucrative, banks need to find ways to make jobs more stable and more satisfying for employees. This might involve changing the culture or addressing issues around work life balance."

14 January

Commenting on JP Morgan's profit fall, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"Today's fall in profit shows the significant cost of unethical behaviour. The bank's misadventures have cost shareholders in the short term through fines and legal fees. But the real cost may be in longer term loss of trust and increased burden of regulatory oversight. JP Morgan has gone some ways to counter this by focusing on increasing its risk and compliance monitoring. But it remains to be seen whether it can overhaul a broader culture which puts pressure on employees to deliver short term results. It also remains to be seen whether large universal banks like JP Morgan will be able to keep up the large rates of returns that shareholders had become accustomed. Regulatory pressure, cutting back lucrative yet risky parts of the business, declining returns at the investment bank and competitors with new business models could mean that large banks like JP Morgan have lower rates of returns to shareholders in the future.

"Declines in profits and coupled with changes in regulations could also leave many bankers who are used to big bonuses feeling a bit hard done by. This feeling will probably be compounded by recent changes to regulation which mean compensation is distributed as shares or options, often over a longer time period. Research tells us that when rewards are delayed, then they cease to be motivating. A dollar in cash today is seen as being worth far more than two dollars of share options tomorrow. In some cases, disgruntled bankers might go looking for more lucrative opportunities in the shadow banking sector where there is less regulation around pay."

9 January

Commenting on the dire results for UK high street retailers, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"Big retailers like M&S, Tesco and Morrisons have fallen prey to four big mistakes: copying the competition, ignoring basic consumer psychology, resting on their laurels and not making enough of their retail foot print.

"The big retailers which announced disappointing results today find themselves caught in a disappearing middle - between higher end retailers like John Lewis and discounters like Aldi. They have largely reacted by trying to copy the competition - for instance discounting products because others have, or offering product lines which don't match their core image.

"They have also ignored basic consumer psychology by discounting in the lead up to Christmas. One of the basic rules of consumer behaviour is that people are willing to pay far more before Christmas than afterwards. This is partially due to what psychologists call hyperbolic discounting - the willingness to pay more now than to have to wait and pay less later. By copying competitors and discounting too quickly, the retailers were not able to take advantage of this very profitable quirk of consumer psychology.

"The big companies have been resting on their laurels. This means while they are trying to change things around the fringe, they may have overlooked the reason that customers go to them in the first place - for good value in the case of Tesco or for quality in the case of M&S.

"Finally, these retailers have not made enough out of their large chain of stores. Successful retailers like John Lewis use their stores not just as a space to shift goods, but as a place which communicates their core messages and reinforces their values. This means consumers can go there for information and to look at goods, and then order online. In contrast, going into the average Tesco is a depressing experience most people avoid if they can."

7th January 2014

Commenting on the news that Intel will no longer use 'conflict minerals' in their new chips, Dr Sinéad Roden, Senior Lecturer in Operations and Supply Management at Cass Business School says:

"The recent announcement by Intel to avoid minerals mined in conflict zones should be applauded but it is surely not before time. As global pressure increases, this is a positive sign that Intel is responding to the pressure, (levelled at this industry as well as the automotive and other manufacturing industries), to act on the issue of conflict minerals present in their supply chains and subsequently, their products.

"Intel have had to spend considerable time to understand the complexity, reach and connectedness of their global supply chains. Delivering on this vow is no mean feat as rather than dealing directly with mines, technology companies like Intel source parts from its suppliers that may only buy the minerals after they have been mined. Intel will now have to map their supply chains from end to end, ensuring a high degree of familiarity with the sourcing practices of all their suppliers.

"A greater level of supply chain transparency and visibility is necessary - for Intel, the complexity and size of their supply chain has undoubtedly made it difficult to determine exactly where minerals originated from. Supply chain due diligence and verification processes are required to ensure that conditions are being met and suppliers are compliant. Cleaning up the supply chain in this way is not instantaneous - it is going to take time to examine the supply chain and identify the weak points. Intel is unlikely to be successful in its endeavors without the support and buy-in from its supply chain."

12 December

Bank bail-ins could create some surprising outcomes, says Andre Spicer, Professor of Organisational Behaviour at Cass Business School.

"Bail-ins will save money for the taxpayer if a bank fails. But a bail-in of a bank could create unexpected consequences. Marginal banks will find it more difficult to raise money, making their failure more likely. If one bank is bailed out, it is likely to have a contagious effect on other banks with bail-ins spreading between banks. This is because banks are a large holder of other banks' bonds. Such contagion would further undermine investor trust in banks. Bank bonds would be seen as a risky investment. Because of their concerns, it is likely bondholders will more closely monitor their investments and put the same kind of pressure on banks that shareholders do. Such pressure will probably involve bondholders requiring banks to adopt increasingly similar governance structures. This could create a banking monoculture where banks increasingly resemble large commercial institutions. This would be a big threat to government and mutually owned banks.

"Bail-ins might not be the magic cure all for bank failure. Bail-ins should come with a health warning. This regulatory medicine has hidden side effects - they could undermine already weak banks, trigger bail outs in other banks, make bond holders more nervous and interfering, and eventually create a banking monoculture."

10 December

Commenting on the Volker Rule, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"The partial separation of client services from proprietary trading is a vital step towards addressing structural tensions which caused some of the worst behaviour leading up the financial crisis. However the exemptions will inevitably create unforeseen loopholes which some banks will exploit.

"The exemption of market making parts of banks from proprietary trading makes sense on paper. But in practice, the central position of banks as market makers gives them significantly more information about the market than other players. It is uncertain whether they will restrain themselves from using this information to make gains from proprietary trading.

The requirement to report annually on compliance should keep issues of culture, responsibility and ethics on the agenda of senior executives. But it could create ceremonial reporting, where senior executives use all the right words to impress the regulators, but don't grasp the difficult internal issues in their organizations.

"The lack of personal accountability for CEOs is understandable. Banks are such large and complex organizations that the senior executives have very little idea of what is going on, and little scope to control it. Tone from the top is not created by ticking boxes. It is created by genuine commitment to a set of values and willingness by leaders to face up to tough issues. Introducing a personal accountability clause would have pushed most senior executives to dramatically simplify their institutions and introduce onerous control systems. This may have made banks safer but also more cumbersome and less profitable. Attaching personal accountability to the role would have also made the position a dangerous prospect for potential candidates."

5 December

Commenting on George Osborne's plans to raise the state pension age, Director of the Pensions Institute, Professor David Blake of Cass Business School, said:

"This is an inevitable consequence of the increase in life expectancy which is still continuing with no apparent sign of slowing down. Young people starting work today will not get the state pension until they are in their early 70s. But because healthy life expectancy is also increasing, being in your early 70s in 50 years' time will be like being in your early 60s today. This should not be regarded as a big deal."

4 December

Professor Andre Spicer comments on the European Commission's fining of eight banks for forming illegal cartels to rig benchmark interest rates:

"The large fines levied on many banks today are not the only cost they will have to bear. Today's fines will continue to undermine the reputation of the big banks. It will mean customers will be even more wary of them, regulators will continue to be over-bearing. Investors will be concerned about what other costly scandals are yet to come out. Customers, investors and most bank employees will feel they continue to be held to ransom by a small number of traders.

The irony of these fines is that many of the large banks are doing their best to move on. They have implemented costly new risk systems, dropped some of the most complex parts of their business, and started large scale culture change projects. Inevitably, many senior banks will be asking when the sector will stop being vilified. In all likelihood the allegations of market fixing will keep coming, and trust in the banks will keep falling.

The allegations that banks were colluding together to fix interest rates underlines the fact that the problem is not just the culture of individual banks, but a culture which cuts across financial institutions. This means one or two banks changing their culture is necessary, but not sufficient. Making a real change will mean changing the culture in particular markets which cut across different institutions. Regulation is part of the solution, but building a more ethical and sustainable approach in the sector as a whole is vital."

2 December

Britain Follows France -  Dr Pete Hahn comments on Lloyds Bank's choice of chairman

"Many different banking models. Which country's will end up as the one to copy?

Despite global banks and global banking efforts, banking is inherently local or at best national. Unlike many of the UK's largest banks pre-crisis, France's banks had rather limited investment banking businesses tied to their large retail banks - and that investment banking business is largely centered in London.

Undoubtedly UK banks are heading in the French direction due to a mix of economics, regulation, and perhaps some common sense, but it is in the realm of governance that the UK's banks are truly following the French model. The proposed chairman at Lloyds Banking Group (PM's Office) joins the chairmen at Barclays (Treasury), Royal Bank of Scotland (UKFI), and Santander UK (Treasury) as government insiders. The route to the top at French banks has long been through their government - we're just a bit late. Would anyone have predicted in these EU hostile times that the UK's banking system would take its lead from Paris? The big question is the next chair at HSBC - UK Government or Chinese?"

25 November

Commenting on allegations that RBS deliberately drove small business customers to collapse for its own gain, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"The review suggests business lending at RBS was like an A&E ward being used as an organ harvesting operation. It alleges distressed businesses were pushed into special measures, then put under additional pressure. When they went into receivership, they were carved up for a profit.

"One of the big drivers of this approach seemed to be a lack of an ethic of care on the part of the bank. When relationship managers went out of their way to stay in touch with businesses going through hard times, they were punished. This careless approach was backed up with incentives which seemed to encourage pushing businesses into administration.

"The report recommends developing better redress processes, getting rid of conflicts of interest, and increasing competition in the banking sector. But it is also vital that RBS develops a culture which encourages of an ethic of care towards clients. This needs to be backed up with an appropriate incentive structure. The new CEO seems to be taking some steps in this direction. In addition, the government might consider measures which promote regional banking. Smaller regional or co-operative banks are good at encouraging sustainable growth of SMEs.

"How Tomlinson came to his conclusions is not made completely clear in the report. It appears he mainly focused on informants who would give him horror stories. This means the sample is probably biased towards less than positive findings. However, evidence from other inquires by journalists seems to support the general thrust of the report."

18 November

Commenting on allegations of drug use by the former chair of the Co-Op bank, Professor of Organisational Behaviour at Cass Business School, Andre Spicer, said:

"The weekend's allegations about Paul Flowers suggest he was uniquely unqualified to chair the Co-Op Bank. He had big deficits of financial literacy and moral judgement. This is damning for the leader of an ethical bank. His financial literacy was thrown into doubt by his inability to answer basic financial questions during a parliamentary inquiry. His moral judgement is questioned by allegations he attempted to purchase cocaine, which many of the bank's stakeholders will see as beyond the ethical pale.

"These allegations pose big questions about how Flowers was appointed. The board and regulators seemed to be more interested in experience chairing charities and political capital than knowledge of banking. This was a big mistake. A chair who lacks knowledge of a sector often does not ask the tough questions which allow firms to avoid big mistakes.

"The allegations will taint the entire bank. Customers will ask if they want to trust their money with an institution overseen by a person with such obvious shortcomings. Rebuilding the bank's image will require clear signs of financial acumen as well as ethical commitment. This means ensuring senior appointments have deep knowledge of the financial sector and that the bank actually delivers on its ethical promises."

4 November

Commenting on the Co-operative job cuts, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"The announcement today of the rescue package for the Co-op group reminds us of the perils which lie ahead. With hedge-funds at the wheel, the bank will become more ruthlessly commercial. Cutting 1000 jobs at the same time as you launch an ethics policy is quite a contradiction. It is likely to alienate many of the bank's customers. The result could be customers leaving. Fortunately for the co-op bank, most bank customers are lazy - only changing banks every couple of decades. Maintaining the bank's ethical culture in the face of job cuts and public vilification is going to be hard. It is likely many staff will feel disheartened and ask themselves if this is what they signed up for. These changes could open up opportunities for other Co-op banks, but also for newer forms of collective financing such as crowd funding

"The commercialisation of Co-op is bad news for the wider economy. Co-op banks tend to be more efficient. They also push their commercial rivals to be more efficient. Co-operatives offer customers a choice of business models. They also tend to be good at supporting local lending and economic growth. All these benefits of co-operative banks are likely to dry up as the Co-op starts to operate more like a mainstream bank.

"We are likely to see more cases like the Co-op in the future. It is the first example of a bank-in - a way of dealing with failed banks which means the taxpayer does not need to foot the clean-up bill - as happened with RBS. The upside of such deals is that the banks keep their doors open and the public is not landed with a huge bill. The downside is that bond holders can find themselves as unwilling owners of a brittle bank."

1 November

Commenting on RBS avoiding being split into "good" and "bad" banks, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"The decision to create an internal bad bank and delay privatization will mean senior managers are not distracted with complex restructuring and the bank is not sold off for a bargain basement price which would lose the tax payers billions. Keeping RBS in public hands for a period may not be such a bad thing. Publicly owned banks tend to be more efficient, and they also force their private sector competitors to be more efficient too. Sadly, there is little evidence that publicly owned banks are better at lending to individuals and SMEs.

"RBS is going to face a tough task getting its house together. It must increase the capital it holds on its balance sheet. But it is caught in a bind between falling profits and rising costs. The bank is backing out of highly lucrative areas like investment banking and focusing on less profitable sectors like retail banking. Also there are some big costs on the horizon such as huge potential fines for manipulating the global currency markets. There are also likely to be big hidden costs which come with planned restructuring. Plans to cut staff could also lead to worse service, driving customers to jump ship.

"The new CEO seems to be taking tough decisions such as cleaning up the banks balance sheet, refocusing on retail and SME and restructuring the business. But if the bank hopes to avoid the kind of ethical problems which have dogged it in the past, it is vital that rebuilding a more prudent and responsible culture is part of the change agenda. Changing the organisational structure, developing new IT systems and laying off staff is unlikely to address the factors which caused this mess in the first place. It could actually make matters worse."

25 October

Commenting on the resignation of the Serco CEO, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"The resignation of the Serco CEO is no surprise. Changing the company's culture in three months was an impossible task. Organisational cultures take years to change, not a few weeks. While the Serco boss made the decision to step down, behind the scenes he may have become a scapegoat to show the firm's government paymasters it is willing to change. Typically, CEOs at companies that face a scandal are often pushed out to clear the air. This tends to lead to some short-term confusion, but pays off in terms of an increase in corporate performance. But in some cases it can be a fatal distraction where companies feel they have addressed the big issues by changing the leader. Often a new leader is important to set the tone from the top. But the hard work is to change the wider organisation.

"When selecting a new CEO, it is important the board picks someone who embodies the culture of honest public service that Serco should have. The new CEO needs to make clear that ethics are a priority. They need to be given time and support by the board to get these ethics into the organisation's bloodstream. To start they need to focus on a few pressing issues rather than grandiose changes. This might involve giving fairer conditions to workers, helping to rebuild an ethos of public service, getting rid of unreasonable targets and ensure people can speak out when they see things going wrong."

25 October

Commenting on Twitter's IPO, Professor Meziane Lasfer of Cass Business School, said:

"Twitter's modest price range for its IPO is a clever marketing strategy. The company's real intent is to attract investor attention and sooth the nerves of any who remain wary after Facebook's IPO flop. Investors can expect the price to jump to between $23 and $24, representing about a quarter of the company, by the end of the roadshow.

"In reality, Twitter is a riskier bet than Facebook. The company has fewer users than the social networking site and has only just figured out how to monetise the platform. With widening losses and a far from solid business model, Twitter will have to work hard to persuade investors that it is a worthwhile bet. For this reason, it is starting at a lower valuation in the hope that the demand will be high. On the 6th November, we are likely to see the price increase and the number of shares offered to reach about 15% of the shares outstanding."

23 October

Commenting on the launch of the new iPad and iPad mini, Ajay Bhalla, Professor of Global Innovation Management at Cass Business School, said:

"Every time Apple launch revamped products, the company's Executives face the same fundamental question: When your products are being imitated left, right and centre, how do you stay ahead of the imitators?

"Apple created a new product category by launching iPad in 2010, not only rejuvenating the stagnant mobile computing industry, but also jump-starting a growing software ecosystem which had been confined to smartphone devices.

"While the first wave of tablets from Samsung, HP and Blackberry were no cause of concern to Apple, the second and the current wave of emboldened competitors pose a serious challenge. However, the iPad Air, retina enabled iPad Mini and new OSX software demonstrate what a formidable innovation engine Steve Jobs and his successor Tim Cook have created.

"OSX Mavericks will create an even tighter coupling between Apple devices, as it is being launched as a free upgrade. Apple's refreshed products will keep consumers and investors happy for some time before they start debating what's next."

23 October

Commenting on Rabobank facing a near $1bn fine for the alleged manipulation of Libor, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"It may seem like Groundhog Day with another big bank being fined for allegedly manipulating Libor. But the near £1b fine levelled against Rabobank deserves attention. The fine is huge - about three times the size of fines levelled against UK banks caught fiddling the rate. This is a sign regulators around the world are no longer toothless tigers.

"The fine reminds us that the driver of bad behaviour was trader culture, not just greedy shareholders. Unlike the other big banks fined for Libor, Rabobank is a Co-op. This means its traders were not being pushed by the same kind of capitalist discipline to show huge returns. Rather they were being fuelled by a culture shared by traders across the industry which encouraged them to win at any cost.

"Rabobank has already taken drastic action. It has stopped paying bonuses. This will surely not be popular among many traders. But severing the roots of unethical practices will not just require change in one organisation. It will need a change across the whole industry."

21 October

Commenting on hedge funds gaining control of the Co-operative Bank, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"It is unlikely that the Co-op will maintain its ethical approach in the long run. History suggests that once a mutual bank is privatised it drops the focus on doing good to focus on doing well for shareholders. Many ex-mutuals became some of the worst offenders in the lead up to the financial crisis. Previously co-operatively owned banks like Northern Rock and Bradford and Bingley were dominated by a hard driving sales culture. They had loan books stuffed with dodgy loans. All this was due to the over-riding search for shareholder returns.

"Private control of the Co-op will also have other outcomes. The number of staff the Co-op employs is likely to drop as management search for efficiencies. Staff who remain are likely to find themselves loaded down with various restructuring efforts. Despite assurances by the new owners, the Co-op is likely to have a more commercially focused culture. One thing which is unlikely to change is the amount of giving the bank is engaged in. Philanthropy is usually the same before and after de-mutualisation.

"The decline of mutual ownership of the Co-op will also have an impact on the whole banking sector. It will result in a decline in the diversity of business models and in the investment products available. Also de-mutualisation leads to a decline in efficiency and competitiveness of the banking sector as a whole. So the co-op going private could mean we all have less choice between less efficient and competitive banks."

4 October

Commenting on new FCA plans for regulating payday lenders, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"The regulations announced by the FCA on payday lenders only get to first base. The regulations do not address the usurious rates of interest charged. Nor do they ask whether the industry should exist at all. This is surprising because Australia and other European countries have put a cap on interest rates. Most states in US have effectively banned payday lenders. The industry claims such measures will push borrowers into the illegal market. But this claim is far from certain for the mass of borrowers who would never consider going to a loan shark. A ban would probably push the majority of lenders to explore more ethical alternatives like community credit co-ops.

"One of the recommendations is to ensure payday lenders do more comprehensive affordability checks. This measure is unlikely to improve the quality of lending decisions as firms like Wonga already have incredibly advanced credit scoring systems. However adding an additional delay is likely to make borrowers think again and explore a wider range of cheaper and more ethical options.

"The other issue covered in the FCA report today is the regulation of other parts of the rapidly growing shadow banking sector. The report points out alternative financial providers will be subjected to some of the same oversight that the now weigh on the mainstream banks. This means some law and order will be bought to sectors of the financial industry which are currently like the Wild West. This might be unappealing to operators, but it will help to ensure that financial disasters don't fester in this sector. Mainstream banks will also be pleased with the level playing field this starts to introduce."

2 October

Commenting on Apple overtaking Coca-Cola as the world's most valuable brand, Vince Mitchell, Professor of Consumer Marketing at Cass Business School, said:

"This is surprising because Coca-Cola has given us years of pure branding genius. However, the brand has found it difficult to extend the pleasure it brings to consumer's lives beyond the narrow drinks category and the degree of innovation within this category has been incremental.

"In contrast, Apple has matched Coca-Cola's marvellous marketing, while at the same time making radical jumps from PCs, to phones, to iPods and tablets, as well as innovating within these categories.'

"The results also are in part a reflection of the Interbrand methodology for calculating brand value which gives weight not only to how strong the brand is, but also how much it has been exploited, and Apple has exploited their brand in more and better ways."

1 October

Commenting on the news Apple now outstrips Coca-Cola in terms of brand value, Ajay Bhalla, Professor of Global Innovation Management at Cass said:

"Apple is the brand of today. Apple's products are intertwined with the way we live our modern life. Synonymous with quality and design, they represent not only usability but also status for consumers. There is no other brand which comes close to Apple, which has successfully emerged from under the shadows of its founder, Steve Jobs.

"Apple executives have been very careful in showing a genuineness in responding to the negative publicity surrounding its suppliers in China. Consumers also tend to receive a personal response from CEO when Apple products fall short of their expectations.

"Maintaining the core of a brand is difficult when companies grow at rapid pace. So far, Apple has retained its brand aura by staying close to what it knows works. It remains to be seen how the Apple brand will fare as it enters new market segments next year."

23 September

Commenting on the revelation that Blackberry bought a new corporate jet while slashing its workforce, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"The revelation that Blackberry took delivery of a corporate jet this year has rightly shocked many. It suggests executives splashed out on perks as their market share red-lined, their share price tanked and the firm was planning to layoff over half the workforce. The actual cost of the jet is relatively small compared to the huge loss announced last week. But the really heavy cost will be to the firm's image, especially that of its senior management. It screams Blackberry is more interested in comfortable executive travel than getting the company in order. The jet may be the last nail in the coffin of this once mighty company.

"The question that remains to be answered is why did Blackberry buy the jet? Some suggest the decision was made in better times. Others point out it will help its overstressed executives use their time in the most efficient way. Perhaps the most generous interpretation is that the new jet was needed in the global mission to downsize the work force and seek out potential buyers for company. But to most the decision looks like evidence that the executive team were not focusing on crucial issues such as restoring innovation and the brand. Instead they seemed more interested in enjoying a comfortable ride as the company crashed.

"The revelation throws light on the wider issue of corporate jet ownership. Corporate jets were once the preserve of senior executives at only the largest companies. Now they are widely seen as a standard part of any CEO package. Proponents suggest this is a good idea because it makes the best use of precious executive time and energy. Some also argue it is a relatively good way to incentivise CEOs. However, recent evidence points out corporate jets might not be so great. They tend to be more prevalent when owners are not closely monitoring a firm. Also, it seems if the CEO has golf club memberships far from the headquarters, then use of the executive jet skyrockets. Corporate aircraft don't serve a company's environment credentials well either."

20 September

Commenting on why the iPhone 5c is priced much higher than the market anticipated, Ajay Bhalla, Professor of Global Innovation Management at Cass Business School, says:

"Both iPhone 5c and 5s go on sale today priced as premium smartphones. While analysts and commentators were expecting 5c to be the cheaper of the two thereby boosting Apple revenues in emerging markets, particularly in China, Cook and his team surprised the market by pricing 5c as a near premium product.

"While pundits may argue otherwise, this is a smart move. It is the premium priced Samsung which is the serious competitor. Think for a moment, why has Apple been so successful in leapfrogging the competition for several years. Think, why you would buy an Apple iPhone. Several reasons in combination, not in isolation, dictate the consumer choices and Apple knows that very well.

"By pricing 5c as premium product, Apple is solidifying its status as a firm which is not willing to sacrifice quality or commoditise its offering."

19 September

Commenting on JP Morgan's $920m fine, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"JP Morgan's mammoth fine hammers home the cost of bad behaviour. It reminds banks that they desperately need to change their ways or risk taking a huge hit not only their bottom line, but also their reputation. With its recent profits, the bank can afford the fine. But the damage to its reputation could be more costly in the long term.

"The London Whale affair was the product of a toxic cocktail of complex products, confused systems, a weak risk function and overwhelming pressure to deliver results. It was not due to bad individuals, it was due to a bad system. Addressing these root causes will require large banks to simplify their business, improve the quality of their risk monitoring systems, and make the compliance function an integral part of the business.

"The CEO of JP Morgan has indicated the bank has already started this process. But simply investing in more systems and risk officers is unlikely to be enough. Other action needs to be taken to avoid such costly mistakes in the future. The bank needs to develop a culture which is more concerned with prudence than excessive risk taking. It is also vital that when staff see something going wrong they have the space to speak out."

17 September

Banks are travelling into unchartered territory as the UK economic recovery gathers pace, says Dr Peter Hahn of Cass Business School.

"All banks should experience better performance if the UK economy performs well; done right, with asset values firming up and business failures declining, loan defaults will decline and bank income could sparkle. If interest rates rise, banks' traditional skills in upping borrowing rates quicker than savings rates will likely further increase success. But this time is very different.

"Most modern UK busts and booms were due to industrial cycles and housing bubbles often tied to political interest rate adjustments. Wasn't our last bust about too much debt? We all know that it's still there. However, banking has also changed in some very subtle ways. When Northern Rock went bust only £2k of savings had full government insurance guarantees, now £85k is insured and it covers almost all consumer bank deposits. This homogenisation of bank liabilities and the Financial Conduct Authority's look at deposit gimmicks suggest a very different savings/funding market could evolve.

But homogenisation has gone further. Global regulation used to lack discrimination on mortgage risk - the good and bad largely treated equally, but today's sophistication standardises mortgage risk in tiny risk baskets also commoditising the asset side of retail banking. Furthermore, the EU is diving ever deeper into interchange and other opaque consumer bank fees that are often the gravy of many banks profitability.

"Banks and the economy are often a highly correlated bet in the short term, but shareholders need to focus on the long term and that outlook is a lot cloudier than our current recovery aspirations."

16 September

Andre Spicer, Professor of Organisational Behaviour, commenting on the question of who will succeed Ben Bernanke as the chair of the US Federal Reserve, following Larry Summers' decision to pull out of the running:

"The decision of who to appoint as chair of the Fed is more about signalling than skills. The appointment of senior leaders is often largely symbolic. Appointments are used as a statement about what the institution stands for or where it is heading. Summers was too closely associated with the financial crisis. Other candidates could be used to signal a fresh start in financial regulation. Although little may change in the actual decisions made, the symbolic gesture could be important for market watchers. Furthermore, a female chair would be an important signal of the growing power of women in the economy.

When appointing senior leaders, it is important to remember that signalling isn't everything. Often the symbolic value and charismatic qualities of a candidate are over-valued while their industry and institutional knowledge is downplayed. But it is often this deep knowledge of the core task of the organization that makes for a successful leader over the long term. 

It is also vital to recognize that decisions about leadership may not be as important as we sometimes think. Actually, over-emphasising leadership can be counter productive. One recent experimental study suggests that groups with no leader who were asked to set central bank policy performed better than groups with an assigned leader. This raises the question whether the Fed may be better off with no chair - or at least chair who encourages relatively equal participation in decision making."

4 September

The real cost of mis-selling interest rate hedging swaps will be to banks' reputations, says Andre Spicer, Professor of Organisational Behaviour.

"The banks are under the regulatory cosh to compensate small businesses for mis-selling interest rate hedging swaps. These products were overly complex that were not needed by most small businesses. It was like selling a Stradivarius to a kid learning the violin. The way they were sold was also dodgy. Sales people at the bank often aggressively pushed the products onto unwitting consumers to make their targets. This was driven by a culture which valued selling over prudent advice.

"Addressing this is proving to be a costly exercise. Paying out the claims will be a significant cost. Processing the claims will also be a burden. The banks have already hired an army of staff to deal with the claims. But the real costs are likely to be the damage it does to the banks reputations. Mitigating the damage will require the banks to deal with the claims as a quickly as possible. But it will also require the banks to show they are serious about changing the aggressive sales culture which created these kind of problems in the first place. A cheque in the hands of wronged clients is good. Sincere cultural changes to make sure it won't happen again are better."

3 September

Microsoft's smart purchase of Nokia will see it gain a stronger foothold in emerging markets says Ajay Bhalla, Professor of Global Innovation Management at Cass Business School

"The sale of Nokia's mobile unit to Microsoft for a trivial sum of 3.79 billion euros is great news for Microsoft shareholders. It is not yet clear how Nokia's board arrived at this valuation. But contrast this with Microsoft's purchase of Skype for $8.5bn in 2011; this appears to be a great bargain for Ballmer. Not only will Microsoft get access to Nokia's impressive intellectual assets for small change, it will also get access to Nokia's well-established infrastructure and competencies in emerging markets - where it continues to retain an impressive market share. Nokia has also poured billions into its handset business and has been showing signs of genuine turnaround. For Nokia, it is a day of soul searching. Why did Nokia fail to come up with a two-sided platform? Rather than utilizing its in-house R&D to develop one, why did it go with Elop's decision to ditch it completely. Reinvention is said to be in Nokia's blood. One can only hope Nokia's board makes the right bets beyond networking and infrastructure markets."

3 September

Microsoft's tie up with Nokia raises personal data concerns for consumers says Andre Spicer, Professor of Organisational Behaviour at Cass Business School

"The announcement that Nokia will sell its mobile phone division to Microsoft has raised eyebrows around the world. The decision might look good on paper - Nokia can exit a business in a downward spiral, and Microsoft can compete head to head with Apple. But the real outcomes are likely to be far less attractive. The deal is likely to kill innovation at the phones' divisions and undermine longer term value for Microsoft shareholders. 

"So if the consequences are so bad, why is the deal going through? Research suggests big acquisitions have more to do with the delusions and self-interest of top management than cold hard business decisions. CEOs who over-estimate their abilities tend to go on buying sprees. They tend to think they can easily integrate acquired companies, merge the cultures and exploit overlaps between the companies. This is very rarely the case. There might be a short term bump in share price. But what usually happens in the long term is that firm performance dips and the share price goes down. But the CEO gains - their rewards usually go up - irrespective of what happens with the company.

"An added worry is what this deal will mean for consumers. Despite all the talk of how competitive the mobile business is, it is actually a market dominated by a few players. The integration of hardware and software has meant a small handful companies like Apple, Google and now Microsoft are in all our pockets. They mediate how we communicate with each other. This presents big concerns about who owns, controls and watches over our personal data. After all, many of these companies are not just funky tech companies, they are also consumer surveillance companies."

21 August

Commenting on the news that a summer intern at Bank of America Merrill Lynch was found dead in his apartment after seemingly working three consecutive nights, Professor Andre Spicer, Cass Business School says:

"The tragic death of a summer Intern at Bank of America's London office has thrown light on the extreme hours culture. Extreme hours are less about getting things done and more about showing commitment.

"The real reasons are cultural. All-nighters are seen as a rite of passage. They shows an intern is willing to push themselves beyond any reasonable limits at work. Long hours are part of the normal practice in many large professional service firms. But extreme hours are often reinforced by interns themselves who celebrate stories of heroic individuals who repeatedly work through the night.

"This case reminds us that large firms need to ask themselves just how productive and healthy long hours actually are. If large firms hope to be sustainable and attractive to employees, they need to tackle the extreme hours culture."

15 August

Yesterday, authorities in New York announced they were pursuing fraud charges against two individuals at JP Morgan who managed the rogue trader known as the London Whale. Cass Business School Professor of Organisational Behaviour Andre Spicer comments:

These documents remind us that the £6 billion loss created in 2012 was not just the work of one deluded or evil individual. It was the work of a series of people all trying to deliver their numbers, preserve their power base and protect their reputation. The documents filed in New York allege that blame lays with two managers of the rogue trader who were trying to cover up irregularities in their division and hit their quarterly objectives. They also point to control systems that were 'neither independent nor rigorous'. But beyond this, there appeared to be a wider culture within the bank that required employees to hit profit targets, no matter how they did it. This meant that looking good on paper became more important than doing good in practice.

These revelations are part of a longer string of rogue trading scandals which have revealed the fault often laid not at the feet of a single bad individual, but a whole system which could encourage otherwise good people to do bad things. The broader culture and system that each rogue trader worked required constant delivery on tough targets, encouraged extreme risk taking, and provided few meaningful circuit breakers which allowed people to question activities. Also the complexities of modern banking make it possible for these trades to be covered up until it is too late. 

Ensuring this kind of rogue trading does not happen in the future will be difficult. As history has repeatedly shown, where there is a market, there is also likely to be a rogue. However, the big institutions can take some steps. They are already strengthening their risk and compliance departments. They can also begin to foster a culture that encourages responsibility and safety over extreme risk taking. They also might reconsider the ever-escalating numerical targets people are managed by. They need HR systems which ensures staff are rewarded for rigor as well as riskiness and staff are not strung out and operating on only a few hours sleep. We know this leads to flawed decision-making and potentially fatal mistakes. Finally it is vital banks put in place circuit breakers such as no fault reporting policies. These are the kinds of measures that have been in place in other industries for years.

14 August

'Blackberry's Strategic Options - Competing for the Bronze Medal' - Professor Feng Li discussing the news that Blackberry may be sold.

Blackberry formed a special board committee to explore its strategic options, which could ultimately result in a sale. The committee will also examine whether strategic partnerships or joint ventures could help speed up adoption of its new BlackBerry 10 operating system.

Despite its problems, Blackberry is still popular with governments and large businesses around the world for their robust security features. Its new Blackberry 10 smartphones and operating system released earlier this year received positive reviews. However, the uptake has been slow, primarily limited to its existing high end customers upgrading their old phones. Many of its lower end customers are in developing countries with older Blackberry devices, and they are still unable to benefit from the new operating system due to its demand on hardware. 

Blackberry built its success on the need of enterprise customers for control and security, but both Google and iPhone have made their operating systems more secure and business friendly. The prolonged delays in releasing the Blackberry 10 meant that some of its existing customers lost patience and switched to other phones.

Despite its strong technology and operation system, Blackberry cannot compete with iPhone or Android for apps due to the much smaller size of the blackberry platform and its developer community. This has significantly limited user experience that is critical for success in the smartphone market. General IT trends such as 'consumerisation of corporate IT' and 'bring your own devices (BYOD)' further eroded Blackberry's competitive advantages. 

Blackberry is still a valuable company, and it is not short of suitors with complementary assets or deep pockets, or both. Potential partners, from Amazon to HTC and Lenovo, together with some heavyweight PE and pension funds, could bring new strategic capabilities and new resources to the table.

Regardless what the committee might recommend, however, Blackberry's dramatic decline is unlikely to be reversed anytime soon. It has lost so much market share since its peak in 2010 that it will be extremely difficult to challenge the dominance of the mighty duopoly of Apple's iPhone or Google's Android operating systems in the foreseeable future.

As a niche player, Blackberry is likely to survive, but in a winner-takes-all digital economy, the best it can hope for is to compete for the bronze medal while waiting for new opportunities to emerge. Retaining the third place is not easy, as competition is likely to be extremely fierce from many powerful players around the world. Failing to hold onto the third place would result in the migration of developers to other platforms, which would spell the end of Blackberry as we know it.

7 August

Commenting on the issuance of forward guidance by Mark Carney, Cass Business School's Professor Philip Booth says:

"This is the most dangerous development in UK monetary policy since the late 1980's. Monetary policy should be designed to ensure that we have stable prices. The level of unemployment is mainly determined by a range of factors such a labour market regulation, the benefits system, tax rates and so on. To try to use monetary policy to reduce unemployment when inflation is already above target is playing with fire and could lead us down the road that we followed in the 1970's. This move also calls into question the independence of the Monetary Policy Committee and the Bank of England's ability to fulfil its statutory duties."

2 August

Commenting on the appointment of Ross McEwan as the new CEO of RBS, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, says:

"Mr McEwan clearly has an excellent portfolio of skills in managing retailing banking as well as other financial operations. But his real strength appears to lie in leading organisational change initiatives. His appointment is about signalling the strategic direction of the bank. CEO appointments are often used to send a clear message to stakeholders where the firm is going. If there have been troubles in the past, a big change in the kind of CEO appointed often pays dividends. For this reason, McEwan's lack of obvious ties with the investment banking driven culture of the past is a big advantage.

"The other important move in McEwan's appointment is his relatively modest remuneration package. Typically there has been what is known as a 'Lake Wobegon effect' effect in the banking industry where all players think they are 'above average', (named after a long running American radio drama about a village where everyone is above average.) To indicate that they were above average, banks tended to pay high salaries to senior executives. As each bank competed to show how excellent it was by paying high salaries, it led to a spiralling salary costs in the whole industry. The decision to pay McEwan a £1million salary with no bonus for the first few years represents a decisive break with this irrational practice.

"As McEwan takes up the reins at RBS these symbolic things will slowly become less important. He will be faced with big tasks of leading a large, complex and highly visible organisation. Immediate challenges will include managing a wide range of very different people from highly-strung investment bankers to more staid retail bankers. He will also face continued pressures from the government to get the bank into shape for privatisation. But it is vital these issues don't distract him from the other real strategic issues such as the coming digital revolution in banking and the need to make large banks safer, responsible and sustainable."

1 August

Lloyds' might have returned to profit but there are clouds building on the horizon, says Andre Spicer, Professor of Organisational Behaviour at Cass Business School.

Today's announcement of £2.1b half-year profits is an important step towards the re-privatisation of Lloyds' 39% stake owned by the taxpayer. This is a good news story for the government, but it could distract from longer-term issues such as the bank's continued exposure to PPI fines, the need to sell off 632 branches, increasing customer complaints and looming revolutions in the banking industry.

The plan to re-privatise the bank is given a positive spin by some creative accounting. The state's book value of Lloyds' shares are 61p, but the government actually paid 73.6p for each share. The remaining 12.3p per share - £3.4b in total - has been written off by the government. This is a big loss which cash strapped taxpayers will find hard to bare.

Clearly Lloyds is in a strong position to be moved back into the private sector. It is close to a price where the taxpayer will break even. It has a professional banking culture, a respected CEO, and a good share of the retail banking market. The bank has also made significant progress on restructuring and strengthened its balance sheet.

However, there remain some significant clouds on the horizons. The bank faces continued exposure to PPI costs (which could rise), it must increase its capital ratios and sell off 632 branches to comply with European Competition Commission directives. But the bank also needs to address increasingly disgruntled customers - the financial ombudsman service has reported a 274% increase of complaints against the bank.

There is some evidence of in-fighting at the top of the bank triggered by the CEO bringing in many ex-Santander employees. Big banks like Lloyds also face some tough long-term issues, such as building a more ethical corporate culture and the looming digital revolution in banking. It is vital that reprivatisation does not distract Lloyds' attention from the big questions.

25 July

Commenting on the news that, according to the Most Rev Justin Welby, the Church plans to expand credit unions as an alternative to payday lenders, Professor Paul Palmer, Cass Business School Associate Dean for Ethics, Sustainability and Engagement, said:

In 2006 there was an opportunity for a responsible lending index that could have resolved the issues around payday lending. The commercial lenders rejected this proposal and the then government failed to do anything. All credit to the Archbishop for taking on this issue in a practical way, responsible banks and city institutions should be looking to aid this initiative.

Cass Professor of Organisational Behaviour Andre Spicer said:

"The announcement by the Archbishop of Canterbury that he wants to help support credit co-ops to take on pay day lenders addresses an important tension in the government's new banking policies. The recent report produced by the Parliamentary Committee on Banking Standards contained an important paradox.

"It pointed out banks need to become safer. This means holding more capital and having larger risk functions. This can only be done by large banks. The cost is often lending to more risky clients - like individuals and small businesses. This often pushes these risky borrowers into the arms of pay day lenders. Welby's proposal to support credit co-ops will help to create more credible alternatives to pay day lenders.

"The Church's move to support credit-op is not as radical as it might seem. There is a long history of religions supporting financial innovation. For instance, the Quakers played a vital role in establishing the modern banking system in the UK.

"Similarly, many religious communities help to finance small businesses. Islamic institutions have helped to build the thriving sector of Islamic finance. Even during the occupy protests, we saw St Paul's becoming a hot-bed for debate about the future of finance and the creation of alternatives. This reminds us that faith groups can be just as important as entrepreneurs for creating financial innovation. "

The author is expressing his own views, not those of the School.

The Royal baby will boost sales for Brand Britain, says Professor of Consumer Marketing at Cass Business School, Vince Mitchell.

"Marketers are often desperate to rejuvenate their brands and bring something new to the market. In this context, Baby George is a natural refresh for Brand Britannia. Brands are constantly attempting to build an emotional connection with their audiences.

"The universal response evoked by the new prince will provide a boost for the Royal family's brand and lead to spill over benefits for Brand Britannia. Baby George is a dream for the UK, bringing many of the things marketers contrive to do - brand rejuvenation, brand extension, brand connection and brand awareness - all wrapped up in one bundle.

"The increased focus of attention on Brand Britain is likely to lead to an uplift for British retailers operating overseas."

22 July

Cass Business School Professor of Organisational Behaviour Andre Spicer comments on the Competition Commission's recommendation that companies ask their auditors to re-tender every five years:

"It is hoped this will increase competition in the industry as well as the quality of the audits. However, it is uncertain this recommendation will achieve either.

"The recommendation that firms re-tender every five years might increase competition - but only among a very small group of large global auditors. Given the size and complexity of the tendering process, medium sized firms are unlikely to get a look in. Instead of competition, the big four will divide the spoils between them. The result is that the audit industry will continue to be an oligopoly rather than an open market.

"It is also uncertain whether the quality of the audits will improve. The company audit committees who employ the auditor will continue to be packed with alumni from the big four. This will probably mean the job will often go to those with the best connections and not necessarily those who are going to give the most objective view of the company. A beauty contest among the big four every five years might keep the sales pitches sharp, but it is less likely to mean the shareholders will get a more objective and accurate view of the company's accounts."

4 July

Commenting ahead of Mark Carney's first meeting with the Monetary Policy Committee, Professor David Henderson, leadership expert at Cass Business School, says:

"Today, Mark Carney will have his first opportunity to prove if he deserves public trust when he holds his meeting with the Monetary Policy Committee. But has he already crafted an image that may have set him up to fail? From his bold summary of England as a country in "crisis", to the triumphant photos of his first steps in the Bank of England Building, Mark Carney has crafted an image of our next heroic leader entering onto the battlefield.

"This creates a set of unrealistic expectations that can diminish our trust in a leader if they are not met. To keep this from happening, Mark will need to offer a realistic and manageable set of expectations for his leadership. Setting himself up to be our next hero only places him on a pedestal from which he has ample room to fall. His meeting on Thursday will expose whether he will deliver a message that will begin to tone down this image into something more realistic-something that we can trust."

26 June

Commenting ahead of The Chancellor's spending review today, Professor Philip Booth says:

"The Chancellor of the Exchequer should announce cuts in government spending and use the savings to reduce borrowing and taxation. Reductions in taxation will have a much greater impact on growth than if the government uses spending reductions to increase infrastructure investment.

"George Osborne made a significant mistake by increasing taxation in the early years of the Tory parliament and then was too timid when it came to spending cuts. The much discussed "cuts" are largely cuts in projected increases in spending. He now has an opportunity to correct that error."

18 June

Commenting on the Parliamentary Banking Standards Report, Peter Fleming, Professor of Business and Society at Cass Business School says:

"Changing Banking Culture - Easier Said Than Done?

"Culture is essential to reforming the current woes of the banking sector. But what exactly is it? As the Parliamentary Banking Standards Report emphasised today, business culture is much more than the codes and values we announce. It is above all behaviour. And how do you change that? 

"The first step is identifying the problem. In this case, it is not that financial institutions lack ethical codes about responsibility and societal betterment. Large banks are replete with words about responsibility and ethics. No, the real issue is closing the gap that has emerged between the words and the underlying everyday activity of traders and analysts. This gap might be closed in three ways. 

"First, intolerance towards questionable business practice. A massive amount of evidence tells us that once a minor deviation is condoned, it tends to snowball and become 'normalised' in the organisation. 

"Second, an environment of transparency and openness is vital. We generally act in accordance with the rules if we feel that our behavior is visible to others, especially those we respect - such as a mentor or leader. 

"The third change moment involves the use of positive examples that illustrate how doing things differently is good for personal esteem and the organization. Society reinforces this when the results enrich everyone else. Promote cases of talent that succeed in that direction, rather than risky and reckless cultures that hurt the firm in the long run.
"Organisational culture is not about what we say - but what we do together. How things happen on a daily basis. Codes are very important guidelines, but most of us tend to 'do' things that impact us in concrete terms. Change measures need to engage with problems everyone is experiencing in relation to banking today. Only then can social confidence and prosperity be rebuilt."

Commenting on the Parliamentary Commission on Banking Standards report, Professor Andre Spicer, Cass Business school says:

"The recommendations of the banking standards commission are important step toward making the UK banking sector more sustainable. The report recommends sweeping changes in the way that bankers are regulated, rewarded, the way they operate, and the way they deal with criticism. These changes include both the velvet glove of culture change as well as the iron fist of changes to regulations, rewards and punishment.

"If adopted, these recommendations will represent a significant change for UK banks. They would become simpler, more conservative and more sustainable institutions, with an eye on longer term benefits rather than short term risks.

"In order to achieve this, they would need to significantly change their business models to move them out of risky and lucrative markets. While this is has the upside of making banks safer, it is also likely mean they will have lower rates of returns.

"This means that the days of hyper-profitable banks are probably long gone. Perhaps the most striking implication for banks is that they would no longer have safety net of a government bail. This is likely to make the banks more risk averse.

"The changes would have big implications for customers as well. They would no longer be subject to pushy sales techniques from their banks. The service is likely to become more professional and more cautious. The days of clueless 'call centre banking' might be numbered. The report also recommends greater oversight of the so-called 'shadow baking sector'. This will mean alternatives like peer to peer lending might come under the purview of the regulator.

"The longer term outcomes of these recommendations are likely to be more sustainable, safer, but less profitable sector. One unintended consequence may be the continued concentration of the business into the larger banks. It will also likely lead to important changes to the banking profession.

"Instead of being an occupation filled with risk addicts, we are likely to see a more thoughtful and prudent character take hold. But perhaps the biggest change is what society expect from banks. Instead of seeing them as cynical, self-serving institutions, the public will once again expect banks to more prudent institutions that cautiously allocate capital to productive use. This would represent a return to the basics of banking.

"What remains uncertain is exactly how much will and commitment there is to implementing this report. Among the politicians this will require genuine courage and vision. Among the banks, it will require attention and focus on delivering these changes over a longer time period. For the bankers, it will require a willingness to change how they think about their job and themselves in quite significant ways."

17 June

Cass Business School's Dr Peter Hahn comments on the Co-op Bank's rescue deal:

"The Co-op...something new? In May 2009, the Samsonite luggage company was facing an imminent default. Samsonite's owner CVC, also the owner of a number of other businesses and with the resources to increase its investment, agreed to increase its equity investment in Samsonite if creditors, i.e. their debt providers, would exchange some of their debt for equity.

"The creditors (Royal Bank of Scotland) studied their other options, including whether to simply foreclose and takeover Samsonite, and decided to exchange for shares. The Samsonite model is frequent practice in the corporate world and particularly in private equity but definitely very recent to banking.

"Such arrangements are made easiest when equity holders and creditors are few and equity owners can commit to further investment. Few substantial banks have such shareholders and, unlike RBS' role in Samsonite, bank bondholders might start to wonder first who represents them in difficult situations and second reflect on the risks inherent in bank bonds."

Commenting on the news that the Co-op is set to unveil a £1.5 billion bail in, Andre Spicer, Professor of Organisational Behaviour at Cass Business School says:

"Today's £1.5 billion bail in of the Co-op group might be a good short term solution which helps to keep the bank afloat, but it could create longer term problems for the bank and the UK finance sector as a whole.

"The bail in represents a profound change in the business model of the Co-op bank - from being an institution owned by members, to a bank which has shareholders. This change is likely to clash with the co-operative ethos of the bank and, in the longer term, this might undermine what has made the Co-op attractive to its staff and customers.

"The bail in also represents a longer term challenge for the UK banking sector. This is because the Co-op will adopt a business model which resembles the mainstream banks, meaning there will be fewer business models in the banking sector. This is problematic because most healthy banking sectors have a wide variety of business models within them. Currently the UK banking sector seems to be heading in exactly the opposite direction."

10 June

Commenting on the NSA whistleblower Edward Snowden case, Stefan Stern, Visiting Professor in management practice at Cass Business School, comments:

"Something has gone wrong when an employee feels the need to blow the whistle. Maybe there is genuine wrong-doing that a colleague feels compelled to expose. Perhaps a legitimate grievance has not been dealt with properly, leading someone to go public with their concerns. Or maybe an irresponsible and unprofessional person just wants to be - briefly - famous.

"Managers need to put systems in place to deal with those latter two examples, perhaps though the use of an external service provider or ombudsman. Potential whistleblowers should be listened to. They can be a safety valve for your business. The key thing is to remove the need for whistleblowing in the first place.

"It can take guts to go public in this way. No matter how annoying it may be for business leaders, or politicians and officials, whistleblowing is often a sign that something that should have been dealt with simply hasn't been. Prevention is a lot better than a cure."

Andre Spicer, Professor of Organisational Behaviour at Cass Business School says:

The case of Edward Snowden, the NSA whistleblower, is a stark reminder of the big challenge that whistleblowers pose to contemporary governments and corporations. Increasingly insecure employees, who are motivated by doing the right thing, have very little commitment to their organisations. This makes them more likely to speak up when they see something happening which conflicts with their values. And they are aware their voice can have potentially catastrophic impacts on their organisations. This happens for a range of reasons:

First, it shows us that policies that are perceived as morally bankrupt by individual employees will often not be tolerated for long. Many employers today look for workplaces where they not only gain a paycheck and can use their skills, but they are able to be true to their values. Clearly Mr Snowden did not find a chance to do this at the NSA.

Second, blowing the whistle on organisations has never been easier. In the past employees use to leave the organisation of their own accord or be escorted from the building by security guards. Today, they simply pass on information to journalists or even distribute lethal information about the organisation using social media.

Third, employees have very little commitment to their organisations. This is largely because of the rise of flexible employment relationships and outsourcing. This means companies show little commitment to the employee over the long term in terms of employment security and progression. It should come as no surprise that employees respond by showing little commitment to their employer. Short term contracts and outsourcing, means workers are not willing to bite their lip and remain silent as they might have done in the past.

Finally, employees know the large impact their voice can have. Most whistle blowers like Mr Snowden are well aware of the grave personal consequences of speaking up. But they also know it is likely to have significant impact on the organisation and industry as whole. As organisations increasingly trade on their image, one really bad news story can be enough to irreparable tarnish an organization. This can bring the organisation down or force significant changes in senior leadership or policies.

6 June

Commenting on IKEA founder handing control of the business to his son, Professor Ajay Bhalla of Cass Business School, said:

"IKEA, the family-controlled Swedish retailer, has achieved a smooth transition from the founder, Ingvar Kampard, to his son, Mathias Kampard. It demonstrates (a) how long-term vision promoted by family control can help build a focused business, and (b) the importance of professionalization in family business. Family ownership comes with responsibility and many family businesses can learn from IKEA's success. IKEA's long term prosperity is directly connected to the founder's cultural practices, which promote excessive bureaucracy and relentless efficiencies. This is embodied by Kampard himself who, for instance, is known to travel economy class and drives an old Volvo. These cultural practices have also discouraged unrelated diversification pursued by some of IKEA's competitors, many of who have been forced to turn their focus back towards their core business."

3 June

Commenting on the idea of sponsorship of the London Underground, Vince Mitchell, Professor of Consumer Marketing at Cass Business School says:

'The tube, its lines and its stations are iconic, with a long history, making it part of the UK's cultural heritage. Tampering with its names would not only remove the nostalgic connection, but also the comforting familiarity.'

'My main problem with this idea is where it might lead to; changing street names and areas to reduce council tax? Renaming lakes to reduce water rates? Sponsored hospitals to reduce our health costs? There is an economic argument for all of these, but would it turn the UK into one big trade fair? Great for companies maybe, but not great for tourism.'

'As a concession to the idea, I can see how new tube lines, which have no history, might be put on the open market for sponsorship to reflect London's reputation as a place of progressive commerce as well as ancient history.'

30 May

Commenting on plans by Switzerland to relax bank secrecy laws, Dr Pete Hahn of Cass Business School, said:

"The Swiss invented and later grew to dominate off-shore private banking based on three benefits other centres could only partially offer: country stability, secrecy and tax advantages. While these advantages have diminished, Swiss bankers may not be too concerned just yet. The so-called Swiss Finish, requiring Swiss banks to maintain virtually double the capital base reserve for losses compared to Basel III requirements, might end up being their new competitive advantage in a market that is likely to remain more concerned about wealth preservation than performance."

17 May

As Honda announces its return to Formula 1 as engine supplier to the 2015 McLaren team, Dr Paolo Aversa, Cass Business School, says:

"Enzo Ferrari once affirmed that he did not sell cars, but engines. He threw in the car for free since something has to hold the engines. This might sound a bit extreme, but somehow proves that engines have always been a paramount component in car performance, especially when it comes to motor racing.

"F1 history shows that Honda's success in engine supplying was definitely not replicated in team management, as these are activities that require a completely different set of technical as well as soft skills.

However, being a world leading car manufacturer, Honda cannot stay out of the huge technological revolution that F1 is pushing, whose outcomes of hybrid and - more in general - efficient engines have started to be applied in the automobile industry.

"Looking at balance sheets, F1 racing might not look as a very profitable business, but the returns in research and development provide a source of competitive advantage for all the firms who are able to transfer the innovations to other industries.

"Since both McLaren and Honda have a stake in the car market, it would be interesting to see whether this alliance will be replicated in the automobile industry too, and how this will influence their race strategies."

Commenting on Morrisons home delivery deal with Ocado, Ajay Bhalla, Professor of Global Innovation at Cass Business School, said:

"While Tesco, Sainsbury's and then Asda ploughed resources into their online operations, Morrisons fell asleep at the wheel and woke up a single-channel bricks and mortar retailer. Morrisons has paid a heavy price for their inertia.

"Once a promising retailer with a unique value proposition, it's slip-up has resulted in a loss of market share and a 7% fall in pre-tax profits. Rather than building an online operation, Morrisons veered off the mainstream trajectory and bought the online retailer, Kiddicare, for £70m in 2011, citing its state of the art distribution centre as a valuable capability.

"However, the deal with Ocado is a step in the right direction. It should at least allow Morrisons' investors to breathe a temporary sigh of relief. But Morrisons still has catching up to do.

"It has a long-term horizon and a loyal customer base but that is not sufficient. The Ocado deal will help stem the defection of customers who have reduced their visits to stores and now use alternative retailers.

"But it remains to be seen: (a) how aggressive Morrisons will need to be in order to attract new customers, and (b) how Ocado will help Morrisons build the scale and cover the geographic footprint which its competitors comfortably traverse."

16 May

Google's launch of All Access music has caught Apple off guard, says Ajay Bhalla, Professor of Global Innovation at Cass Business School.

"Google's launch of subscription music service is a harsh reminder of the platform war, which is rapidly disrupting multiple industries from music to movies to publishing.

"Think of Google 5 years ago and the Google of today. Google of 2010 struggled to match Apple's speed of innovation in build a closed ecosystem from iOS platform to iTunes to mobile devices. It placed bets on projects such as Google Books, which consumed colossal resources and failed to pay off.

"Today's Google demonstrates the appetite of a hot start-up. The announcement of 'All Access' music subscription priced at $7.99 per month has caught Apple off-guard which has been trying hard to take the iRadio off ground.

"It is now making direct entry into Apple's territory. While launching All access, it also launched quietly launched 'Hangouts' a new unified messaging service that is designed to work on Android, iOS, and the web.

"Today's Google is smarter and understands the fusion of content and platform. Furthermore, while pushing Android, it has also placed bets on pilot projects such as Google Glass or Google TV while it works behind the scenes to reignite YouTube.

"But it is today's announcement, which signals how Google is thinking, and if I were Apple, I would be looking through the kaleidoscope closely to doubling the pace of projects that would help re-establish the Apple magic."

8 May

Commenting on Sir Alex Ferguson's retirement as manager of Manchester United, Cass Business School academics express their thoughts both on him as a leader and the effect it will have on the organisation.

Professor of Organisational Behaviour, Andre Spicer says:

"The retirement of great leaders like Sir Alex Ferguson usually results in great uncertainty for organisations, and tough challengers for the leaders' successors. Typically, the retiring leader casts a shadow over the whole organisation for many years. Losing is a great leader is like enduring a death. Typically followers experience feeling of profound loss and emptiness - similar to when you lose a family member. They also idealise the achievements of the leader, and the more negative part of their tenure airbrushed out of the picture. The result is it becomes impossible for a successor to fill the old leaders shoes. Often they try by simply imitating what the great leader had done in the past or pushing through radical change to signal a break from the past. Often these two strategies are bound to fail. Instead a new leader needs to accept the old leaders legacy but at the same time slowly and steadily build their own style."

Visiting Professor Robert Phillips says:

"All great leaders know when to go. I think his leadership is defined by his incredible competitive spirit, his vision, his absolute protection of his charges and his longevity of tenure. Business and political leaders have much to learn from Sir Alex, in particular his fearlessness in making courageous decisions"

Leadership expert Dr Amanda Goodall says:

"Alex Ferguson's success can be attributed to many things. But one important influence will be his own playing career. In his Harvard speech in December 2012, Ferguson said: "You think you are a better player than they are, and they think they are a better manager than you" . It's often forgotten that Ferguson averaged a goal every two games that he played. That earns a lot of respect from big ego players. All leaders need to be credible."

Commenting on Sir Alex Ferguson's retirement as manager of Manchester United, Professor of Transformational Leadership at Cass Business School, Chris Roebuck says:

"Like wines great leaders can pass their sell by date.....the question is when is that, and who decides? Business, politics and history are littered with leaders who stayed too long and fell from grace. Often great leaders fit a specific situation well, but then as times change, they aren't right for the job - Winston Churchill is a case in point.

"Experience, credibility, and knowledge count for much, but unless this is up-to-date and appropriate all of that is worthless. This is exactly the issue that the Queen has faced and dealt with over 60 years reasonably successfully. But for a football club manager, do times change? Is running a football team much different now from 20 years ago; football is still football, or is it?"

7 May

Commenting on the FTSE 100 climbing to a five year high, Professor of Finance at Cass Business School, Meziane Lasfer has some concerns…

"My overall impression is that the market is too overvalued and there is no fundamental reason for the recent increase in share prices given the gloomy economic conditions. Investors need to be very careful in coming to the market.

"Firms need to consider the fact that the market is likely to be overvalued and, thus, they should refrain from making investment and financing decisions based solely on the performance of their stock price.

"In particular, they need to compute properly their cost of capital and incorporate the risks that the economy will not recover. This will result in a higher cost of capital and a rejection of a number of marginal projects which may lead firms to financial distress if the economic trends worsen."

3 May

Commenting on Eric Schmidt's claim that YouTube has overtaken TV, Professor of Consumer Marketing, Vince Mitchell says:

"The on-demand, user generated, diverse and brief nature of the videos on YouTube make it an complementary, rather than a rival, medium to TV.

"Just like there is a different needs for cinema films, versus TV, there is also a different need for TV versus YouTube. Although we have some TV programmes on YouTube, and some YouTube programmes on TV, they will continue to serve different needs."

Commenting on the news that RBS will be 'ready to privatise in a year', Dr Peter Hahn of Cass Business School says:

"HM Treasury hasn't sold a share in RBS or Lloyds yet and the discussion is already focused on how much taxpayers are going to lose on these 'investments'. More ridiculous are the criticisms related to how well the US made out of saving its banks and related share sales. Regardless of the forms taken, neither country 'invested'; these were the costs of shoring up their banking systems - had they been 'investing' for returns every advisor on Wall Street or in the City would have suggested Brazilian banks at the time.

HM Treasury should be looking at every penny received as found money - German WestLB needed rescuing and it is being shut down. The US certainly has profited on sales of bank shares, but it's too easy to forget the big beasts of the US bailout were the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation and the fact that virtually all housing finance in America is now underpinned by Uncle Sam. Ultimately, it was easier to restructure banking in America with Fannie and Freddie unintentionally pre-set as 'bad banks' - perhaps the speed of getting to good and bad banks is the ultimate recovery lesson we have learnt from this crisis."

30 April

Responding to the idea that new Solvency II rules are weaker than Britain's existing regulation for the insurance industry, Dr Andreas Tsanakas, Cass Business School says:

"I find this plainly misleading. If the new rules were weaker, they would not be as troublesome to implement! In fact the new rules are much stronger than the current UK regime (called ICAS), in respect of the standard they set for internal processes, systems and governance. The quantitative capital requirements under Solvency II abide by a somewhat different technical principle than ICAS, in the way that long term liabilities are dealt with. For some risks, this means that Solvency II will indeed produce lower capital requirements. But this is not to say that the Solvency II regime is overall weaker - it is different.

"It is true that the cost of Solvency II implementation is very high. A great deal of money is being spent on staff and systems in order to move towards compliance with Solvency II requirements. There are certainly positive aspects to this, as preparation for Solvency II is already raising the standards for risk management across the UK insurance industry. However, the concern that the cost of implementation may outweigh the business benefit is justified. If resources and attention are diverted into compliance activities, this can be at the cost of entrepreneurial activity, product innovation etc."

Commenting on Andrew Bailey's attack on the Solvency II regulations, Professor of Risk Management at Cass Business School, Philip Booth says:

"Head of the PRA, Andrew Bailey, is right to say that the EU should think again about the EU insurance regulation proposals known as Solvency II. Indeed, there is little justification for centralising regulation at EU level - a process that has proven incredibly expensive and is years behind schedule.

"However, if regulation is repatriated to the UK, it is important that insurers are not required to hold so much capital that insurance companies never fail. Both at national and international level, we are trying to regulate risk out of the financial system with very damaging consequences."

24 April

Commenting on the collapse of Lloyds Banking Group's sale of more than 600 branches to the Co-Op, Professor Andre Spicer says:

The decision of the to pull out the deal to buy over 600 banks might be good for the co-op, but it is likely to be bad for the UK retail banking sector.

The deal promised to introduce desperately needed diversity of business models in the sector. Healthy banking systems have a mix of business models including co-operatives, private sector banks as well as even publicly backed banks.

One of the big problems in the UK banking system in the last two decades was the abandonment of co-op models through de-mutualisation and the adoption of aggressive business models solely focused on rapid growth and shareholder value. This created some of the worst disasters in the sector such as HBOS and Northern Rock.

As Lloyds rebuild itself, it is worthwhile for the whole banking sector to consider alternative business models. Simply selling off shares in Lloyds will risk creating another challenger to the big banks willing to take big risks. This may mean we do not learn any of the lessons of the past five years.

'£514m to transform Barclays' culture' Professor Andre Spicer

Today Barclays' first quarter results revealed £514 million will be set aside to transform the way the bank operates. This follows calls in the recent Saltz review for a wide ranging transformation of the Bank's culture. An important plank of this involves rebuilding trust and integrity in the institution. Senior management are betting that transforming the bank's culture will be able to shrug off past excesses and become a trusted institution again.

Rebuilding the culture will be difficult. Large scale cultural transformations are notoriously difficult. They can signal to external stakeholders that an organisation is serious about doing something. This can make the organisation look good and rebuild stakeholder's trust in the organisation. But the impact of culture change inside an organisation is often less positive.

Existing cultures are almost impossible to weed out. New cultures are often only adopted at a surface level. And the change process can come at huge costs like job losses and unsettling change. This breeds staff anxiety, cynicism and disengagement.

To make the most of the significant investment Barclays is making in culture change, it is vital to ensure it goes beyond job losses, press releases and quick and dirty culture change programmes. The bank needs to develop a focused and consistent culture change programme that actually harnesses the values and concerns of employees in the bank.

17 April

Commenting on Tesco pulling out of the US, and its drop in profits, Ajay Bhalla, Professor of Global Innovation Management at Cass Business School, said:

"The falling star of Tesco in the US is a harsh reminder that scale is not the recipe for sustainable value creation. Tesco has focused on developing capabilities across its value chain which fit with its scale driven business model.

"For years, Tesco managers paid attention to perfecting the mix of supplier driven cost efficiencies with low prices. While pursuing that mix, Tesco managers celebrated year-on-year growth and with much confidence ventured into the US market forgetting that the American retail landscape is a different ball game.

"While Tesco paid attention to making its US venture work, the UK retail market evolved quickly. Customer service and quality gained the upper hand over low pricing, and Waitrose and Sainsbury's emerged as the preferable destination for the growing middle-class segment.

"Tesco's exit from the US is a reminder for managers of the dangers of going blindly for scale and cost leaders, the wheels of which are difficult to reverse if you need to change course to becoming a retailer known for first-class customer experience."

12 April

Commenting on JAB's bid for D.E Master Blenders 1753, Deputy Director of the M&A Research Centre at Cass Business School, Anna Faelten, says:

"The offer by JAB (Joh. A. Benckiser) for Master Blenders 1753 is not that surprising, in the sense that spin-offs often result in takeovers for one of the parties post demerger.

"The spin-off of Master Blenders 1753 by Sara Lee last year meant that potential suitors only interested in the coffee and tea business of Master Blenders 1753 now had a stand-alone asset to consider and simultaneously a market value was established, which should ease negotiations between sellers and buyers.

"The discussed offer price of €12.75 per share represents a premium of more than 50% on the share price of Master Blenders 1753 in the week after the spin-off was completed."

11 April

Commenting on the Post Office's decision to offer current accounts, Dr Peter Hahn of Cass Business School, says:

"With most people having access to free in-credit current accounts today and transactions continuing to migrate on-line, it is hard to see how the Post Office is going to differentiate itself in an already crowded field."

10 April

Commenting on reports retailers in the UK are rationing sales of powdered baby milk because of a surge in demand in China, Mohan Sodhi, Professor of Operations and Supply Chain Management at Cass Business School, said:

"It is difficult to imagine the restrictions on powdered baby milk in the UK are occurring because western manufacturers are rationing supplies to British retailers and consumers.

"A cross-manufacturer shortage, despite the manufacturers having separate supply chains, coupled with the fact that Chinese demand did not grow suddenly in 2013 from a scare in 2008, means the reasons lie elsewhere, not in supply or demand."

5 April

Commenting on the launch of Facebook's "home" software for Android phones, Clive Holtham, Professor of Information Management at Cass Business School said:

"There was originally speculation that Facebook might be creating its own fully branded Android Phone, but this is a much more restricted proposal.

"Facebook has several objectives in this launch, but underpinning them all is the need for social media organisations to capture as much data from the personal activities of phone users as possible.

"They exploit this data to create revenues for themselves, ultimately funded via the price phone users pay for goods and services. Google of course has perfected this model.

"The small print involved in using mobile phone apps and search engines is very small. At the moment the public overall seems willing to trade its confidential information for free apps or free search.

"However, a time may well come where the balance shifts. In the case of a Facebook front-end, you are potentially giving away a vast amount of data on the whole of your daily digital personal activity.

"This is the point where some users might begin to wonder why they are not in fact being paid for providing such a rich set of data. Others users will realise that almost all the benefits of this front-end actually accrue to Facebook.

"So they will live with the one extra click involved in getting to Facebook via an app."

Facebook has created a brand new product category with the launch of its "home" software, says Ajay Bhalla, Professor of Global Innovation at Cass Business School.

"By bolting on its platform on Android, Facebook has just created a new product category in this market.

"Not only will this propel customer numbers for Facebook, it also boosts the attraction of Facebook for developers who so far have developed applications for both platforms. Likewise it encourages Facebook to promote itself as a full-service mobile platform with an unmatched social network to advertisers.

"It also raises questions on the wisdom of creating open mobile platforms. If Facebook is going to squeeze the value from the platform then why devote efforts to develop and enhance the open platform?

"For Google, which created Android as an open platform, this questions over its efforts to put resources into the mobile hardware market and the premium it paid for the acquisition of Motorola.

"It yet remains to be seen what the implications would be for Google, but for now Apple's closed platform model appears to be the winner."

Please note these are the views of the author and do not necessarily reflect those of the School.

"HBOS failure a case of dumb and dumber." Professor Andre Spicer, Cass Business School.

"Today's Parliamentary committee report on the failure of HBOS reveals a widespread culture of stupidity in the bank. It finds the bank was run by people with little knowledge or experience of complex banks.

"From 2001 onwards, HBOS grew by going into some of the riskiest parts of the market such as lending to property developers. It also expanded its investment banking and international banking divisions. This created unacceptable risks that were ignored. Senior management bought in senior staff with little experience of the banking sector who were unwilling or unable to question the bank's increasingly complex activities. 

"When internal criticism from seasoned banking professionals did appear, it was routinely ignored. Even questions from external bodies such as regulators were ignored or evaded. This created a colossal self-delusion of the risks the bank faced which seemed to go from the top to the bottom of the organisation.

"What is so striking about this culture of stupidity was that it only intensified as the financial crisis took off in 2007. Up to the bank's failure in late 2008, HBOS actually accelerated its risky lending practices. Its competitors were doing just the opposite. As things became even more perilous, senior management remained attached to the belief they were engaging in conservative banking practices. 

"The people who ran the bank clearly did not have low IQs. The real problem was they worked in a culture that encouraged them not to fully use their intelligence. It was safer to focus on the good news, rather than ask more difficult questions. The result was £20.5 Billion banking failure which the taxpayer is still picking up the bill for today."

4 April

Professor Andre Spicer, Cass Business School explains what went wrong at HBOS:

"When HBOS was formed following the merger of the Halifax and the Bank of Scotland, it sought to set itself up as an aggressive competitor to the Big Four UK based banks. The status anxiety of being the new boy in town meant it tried to project a slightly rebellious image as an aggressive entrepreneurial bank.

"It also invested heavily in an inherently risky business model, largely based on a rapid expansion of mortgage lending and provision of financing to property developers. This was all underpinned by an aggressive sales culture.

"Inherent throughout the bank was a widespread culture that encouraged and re-enforced functional stupidity within the bank. This meant the bank focused on headlines rather than underlying processes, encouraged a widespread lack of critical reflection by staff, ignored repeated warnings from parties inside and outside the bank, and maintained a strong self-belief in its business model despite mounting facts to the contrary.

"The result was a very shaky business model founded on faulty assumptions that were exposed once the financial environment changed.

"When people did repeatedly raise concerns about risks and questionable business practices at the bank, they were either ignored or brutally punished. External parties such as the Financial Services Authority, the media and even analysts in other banks repeatedly raised concerns about risky practices within HBOS. The rough justice meted out to critics often meant that other employees with concerns thought twice before raising their voice."

3 April

Commenting on the Salz review into Barclays' reputational problems, Cass Business School Professor of Organisational Behaviour, Andre Spicer, says:

"Underlying Salzs' recommendations there seems to be a suggestion of a profound change. It involves a shift from a high risk, high rewards culture, towards a much more staid model based on prudence and professionalism. Furthermore, there is a recognition that banks need to focus not only on technical issues, such as credit and market risk, but also softer issues such as leadership, conduct and reputation.

"The review recommends building a more coherent and cohesive culture across the group, giving further strength to the HR function, changes to corporate governance, and changes to bonuses. Some of these reforms, such as changes to pay structures or corporate governance, will be relatively easy to put in place.

"What will be much more difficult is the culture change program. Changing corporate culture is difficult and it takes time. Integrating a corporate culture in such a diverse organization is even harder. Indeed, many culture change programmes tend to just produce surface compliance among some and deep cynicism among others.

"One surprising detail in the report is the apparent unwillingness of junior staff to escalating problems to senior managers. There seemed to be a common assumption that senior staff don't want to know about problems. This resulted in a upwards ignorance management on the part of junior staff who were careful to protect their seniors from potentially negative information.

"Moving beyond surface level change will require a longer term commitment on the part of senior management."

"Taxpayer owned RBS shouldn't just be given away, thought should be invested into a taxpayer profit-sharing structure and restricting conversion to a PLC." Dr Pete Hahn, Cass Business School.

"Six buyers are supposedly suiting up for RBS' Rainbow assets: 318 branches and, perhaps critically for the UK, 40 SME business centres (over 5% market share). Bidding prices are unlikely to be pretty, though at least there is more competition than last time around - only one bid received. Yet have we missed a trick?

"I wonder if this isn't a once in a lifetime opportunity to set up a mutual with an SME core competence. These do exist in other countries. The government has identified SME funding as critical, while criticising that we're too reliant on banks that aren't delivering for SME's. Would creating a new, mutually owned, SME capable bank provide a more aggressive SME lender? I hope not. But it might provide less of a political lightening rod and it might develop a different service model. It would certainly provide diversification of provision.

"Those expected to bid on the RBS Rainbow assets will likely be focused on how they can consolidate other consumer assets and build yet another 1000 branch bank. Can we do better? Taxpayer owned RBS shouldn't just be given away, thought should be invested into a taxpayer profit-sharing structure and restricting conversion to a PLC."

26 March

The Cyprus bail out deepens the crisis of confidence in eurozone leaders, says Dr Robert Davies of Cass Business School:

"There is a real danger in seeing the eurozone crisis as purely an economic crisis where, in turn, only economic solutions are required. The underlying problem is not an economic one. A crisis of legitimacy has now been created within Europe. We have a crisis of confidence in the abilities of national leaders and the financial markets to extract the average man and woman in the street from the lingering grip of the Great Recession - a prolonged economic downturn that we were told could never happen.

"Rather than restoring confidence, the medicine dispensed to Cyprus over the weekend will only deepen this crisis of legitimacy. If this is the template for future bailouts, then a wave of fear and uncertainty could spread amongst those that have done just what they were told to do - save not spend what they didn't have. It may well also be regarded as a solution that was imposed without due democratic consultation.

"It is worth remembering that the youth of Europe may face a two decade long struggle to find work. If the old guard cannot provide credible solutions - who will they turn to?"

Commenting on the Government's proposals for the NHS, David Welbourn, Visiting Professor in the Practice of Health Systems Management at Cass Business School says:

"There is no doubt that the NHS's emphasis on compassion is very high profile, but there is a question mark in my mind about whether focusing on trainee nurses is a smoke screen - it will be 4 years before this policy will have any effect.

"The more pressing question is what are we doing about those already in post? Leaders need to be more aware of what is happening on a day-to-day basis - spending more time both setting the tone and culture of what is expected, spending time with staff nurses, increasing time coaching and observing. They need to recognise that the job of caring is emotionally and physically draining.

"Leaders need to support and equip staff to deal with these pressures, and the current environment of fear and blame hinders rather than helps. A statutory duty of candour and a threat of criminal action does nothing other than add to the fear and mistrust, when what is required is to build greater trust and genuine openness.

"Hearing what Jeremy Hunt has just said, we should welcome his comment that what went wrong at Mid Staffs was not typical of the NHS, and that in responding to it, the system must not crush the decency of most people in the NHS."

Commenting on the news that Yahoo have purchased the app 'Summly' for an undisclosed fee, Professor Of Global Innovation Management, Ajay Bhalla, questions if the deal is too little too late for Yahoo:

"Yahoo's purchase of Summly is a signal of intent too late. For years, Yahoo was the undisputed leader in the internet search market. It failed to reinvent itself in the fast moving platform market, which Google now dominates.

"Yahoo's CEO, Melissa Mayer well knows that and she is attempting to remake Yahoo at many levels. Fixing the culture is a good start, but transformation from a one-sided market player to two-sided market platform is not going to be easy for Yahoo.

"The firm needs to relay to the market what it is about and where it is heading; at this point, it is not clear what will Yahoo look like 5 years from now."

Commenting on the government's proposals that nurses will have to spend a year working as healthcare assistants, Professor Dean Fathers, Director of the Centre for Health Enterprise at Cass Business School says:

"The need for care and compassion within the health system is essential. This suggestion provides a pragmatic solution, enabling individuals entering the care system to self-assess whether they truly hold the values of the NHS and subscribe to the vocation they are entering.

"It also allows the NHS to assess the individual's suitability, by observing their relationship with patients, before they invest heavily in their individual clinical development."

21 March

Commenting on the 2013 budget, Jane Reoch, Investment Director for Cass Business School's Peter Cullum Centre for Entrepreneurship, said:

"This is a promising budget for small businesses. The cut in Employers NI is welcomed, albeit one year out. Hiring new staff is often a borderline decision for SMEs, and this could help tip the balance.

"The continuation of SEIS should help more start-up ventures, similar to those backed by the Cass Entrepreneurship Fund. This means more UK businesses being funded from the ground up.

"The extension of Enterprise Capital Funds and the Angel Co-Fund is also good news. These provide a vital lifeline for many companies in the sub-£2m investment space."

7 March

Commenting on Mervyn King's suggestion that RBS should be split up, Professor of Organisational Behaviour, Andre Spicer, Cass Business School says:

"The restructuring of RBS into a 'good bank' and a 'bad bank' will come at a significant cost to the taxpayer. There are hard costs of writing off bad loans. But there are also many hidden soft costs. These include the costs of restructuring, the loss of reputation, declining staff motivation and diversion of managers' efforts. There may also be wider social costs such as a decline of employment in the banking sector, contraction of availability of banking services and an wider loss of public trust in the already maligned banking system.

"The big assumption behind King's recommendation is that 'the lessons of history show very clearly that it is not a good idea to have banks in the public sector for very long'. However, the evidence on public ownership of banks is far less black and white than King suggests. The performance of publicly owned banks is often similar to that of their private sector cousins. Public banks are usually more efficient but less profitable than their private counterparts. The presence of some publicly owned banks in the economy can actually have benefits like increasing public trust in financial institutions - particularly following wide spread uncertainty. There are many examples of long standing public banks throughout the world that play an important role in the banking eco-system. To insist that banks must always be in the private sector is to make decisions based on ideology rather than facts. Historically, most financial systems have had a mixture of public, private and not for profit players."

Please note these are the views of the author and do not necessarily reflect those of the School.

4 March

Commenting on the Swiss vote for tough executive pay curbs, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"It is important to remember that only a few decades ago executives were paid around tens of times what lower level employees were paid. Now they are routinely paid hundreds of times what lower level employees receive. And this is not because executives have become hundreds of times more productive.

"The referendum mirrors a trend away from seeing US models of executive remuneration as the gold standard. It is important to remember that Europe historically has had much lower levels of executive pay that the US. And this has not completely hamstrung the ability of European companies to attract talented executives. Typically European companies have grown their own talent rather than bought it on the open market at inflated prices.

"The results of the referendum will force companies to begin to use a range of alternatives to super sized pay packets when designing executive bonuses. This may be a good thing as much of the research suggests that people doing complex tasks actually perform worse when they are offered extrinsic rewards such as large bonuses."

28 February

Commenting on the EU cap on bankers' bonuses, Dr Pete Hahn of Cass Business School, said:

"Prescriptive legislation in banking often results in unintended consequences. Since bonuses became part of the legal and regulatory agenda in 2009-10, many of the highly paid at global banks have seen their salaries triple, and this in a global downturn.

What could we see if we have a couple of good years? Remuneration consultants must already be working on flexible salaries and fixed bonus pay plans. But seriously, much of banking and economics are cyclical and the basis of bonuses was to address cyclicality. Certainly, bonus payments lost that purpose and need to be reoriented.

Yet, the current proposal appears aimed at ludicrously legislating the economic cycle and creating ever higher fixed salaries and perks for those leading the largest banks. Those worried about Europe's growth might think about how high fixed pay packages with limited upside might influence senior bankers to increase risk taking or not."

Commenting on EU caps on bankers' bonuses, Professor of Organisational Behaviour at Cass Business School, Andre Spicer, said:

"The new EU curbs on bankers' bonuses will force banks to rethink how they motivate their star performers. For some time banks have relied on super-sized bonuses to attract and retain star performers. Now bonuses are to be capped at two times salary.

"This could be good news for banks as most of the research suggests large cash bonuses are a very poor way to reward complex tasks. In fact, large immediate cash rewards can actually mean people perform worse. Cutting back on large bonuses could see better decisions being made.

"Some of the alternatives to large bonuses will include longer term incentives which are linked to performance of the institution over five or 10 years. It might include soft incentives such as better working hours, more supportive work environments, more opportunities for self-actualisation and more interesting design of jobs. This could lead to workplaces where bankers are no longer willing to put up with 364 days of stressful work and one good day when bonuses are paid. This will mean banking is likely to be a more attractive job for a wider range of people.

"The cap on bonuses will also mean that banks need to rethink their business models. Until now banks have relied on a few stars in small units of investment banking to make significant chunks of the bank's profit. Now banks will need to think about ways of harnessing the talent of the vast majority of their employees who don't receive giant bonuses. This could see the large banks returning to older style banking. But it could also see star performers moving to smaller financial institutions outside the banks, such as private equity or hedge funds."

25 February

Commenting on Moody's downgrading the UK one notch from AAA to Aa1, Chris Wagstaff of Cass Business School, said:

"For pension funds the big question is what, if any, effect this will have on gilt yields and therefore scheme funding ratios.

"For starters 10 year yield gilt yields have already risen about 0.4% (in line with most other AA+/Aa1 government bond yields) since the start of the year to around 2.2%. The UK fiscal debt and deficit remain stubbornly high given the distinct lack of economic growth and the poor medium-term growth outlook, as articulated in the most recent Bank of England Quarterly Inflation Report. Indeed, UK GDP is still 3% below its peak of 1Q08 and a triple dip recession looks a distinct possibility when the 1Q13 growth numbers are published towards the end of April. (Moody's also noted the UK government's reduced capacity to deal with another financial crisis).

"As to where gilt yields go to from here, recent history may prove instructive. When the US was downgraded to AA+ by S&P in August 2011, somewhat paradoxically US Treasury yields tumbled as investors made a beeline for perceived safe G7-ex Japanese and Italian government bonds. Indeed, US bond yields remain below their pre-downgrade levels. When France was downgraded last November by Moody's (and then by S&P in January), 10 year OAT yields initially jumped 0.1% but within a fortnight similarly tumbled to below their pre-downgrade level. Currently, they trade just above that of UK gilts, despite French economic prospects being worse than the UK's.

"So where does this leave scheme funding ratios? Most UK DB pension schemes have benefited from the recent up tick of gilt yields, given that the overwhelming majority have hedged considerably less than 100% of their interest rate risk. They have also benefited from the recent surge in equity markets although the past week has seen a tempering of recent gains. Of course, if gilt yields are to ever mean revert to their long-run averages and equity markets are to return to a more sustainable path, what pension funds need to see is a resumption of economic growth. The problem is that both the public and private sector are de-leveraging and failing to invest meaningfully in productive growth enhancing projects."

22 February

'Commenting on the news that the Competition Commission will rap the Big Four over the independence of audits, Professor Andre Spicer, Cass Business School says:'

"If the Competition Commission was serious about improving the independence of audits, it would have recommended significant changes to the composition of audit committees (with more emphasis on investors and other stakeholders), or even considered more radical solutions such as dual auditing or even an independent public body to perform, or at least check, audits."

"Today the Competition Commission will announce measures to ensure the independence of company audits. This comes as a reaction to widespread concern that auditors operate in the interests of people who appoint them, and not in the interests of shareholders. An investigation by the Commission found that firms keep the same auditors for many years.

This was seen as an anti-competitive move. To cut down on this practice, the Commission recommended that audit committees be reappointed every 5-7 years. There is a hope this will increase the independence of auditors. The key questions are whether it will work?

"The solution the Audit Investigation Group came up with appears to be designed to show that they are doing something about a serious problem, while keeping the large auditors happy.

Simply tendering for new auditors every 5-7 years does not automatically mean a change in auditors . Nor does it guarantee more independence. It is likely that audit committees in large firms will continue to appoint people they know through corporate alumni networks. This means chairs of audit committees will appoint the teams from companies they once worked for.

"Research suggests this is a double edged sword. On the one hand, appointing from the Alumni network can bring down the costs of audit and make the process function more smoothly. On the other hand, it is likely to compromise the independence of the audit.

"If the Competition Commission was serious about improving the independence of audits, it would have recommended significant changes to the composition of audit committees (with more emphasis on investors and other stakeholders), or even considered more radical solutions such as dual auditing or even an independent public body to perform, or at least check, audits."

21 February

Cass Business School Professor of Consumer Marketing Vince Mitchell comments on the news that Nike has suspended its contract with Oscar Pistorius:

Swift, decisive action on the part of a brand sponsor can help to reduce negative impact on the brand, whilst indecision on such events conveys a lack of conviction about what the brand stands for. In this case, there is a particularly good reason for Nike to sever the association sooner rather than later given the connection between their slogan 'just do it' and what Pistorius is alleged to have 'just done'.

(Authors are expressing their own views, not those of the School.)

12 February

Commenting on the news that LSE are changing the rules for IPO's to encourage tech floats, Jane Reoch, Investment Director at the Cass Entrepreneurship Fund said:

"The sentiment behind this initiative is laudable. To make it work from a practical perspective, however, the market will need both liquidity and buy-in from the UK tech community."

Professor of Organizational Behaviour Andre Spicer comments on Barclays decision to cut 3,700 jobs in a restructure:

Barclays announcement is about image, not profit.

"The strategy set out by Barclays' CEO today is not about profit. It's about rebuilding the legitimacy of the bank. He is trying to win back the trust of investors, regulators and the broader public.

To do this he has made some significant changes including refocusing the business and punishing the investment bankers. By cutting back the investment banking division, it appears Barclays is willing to kill the golden goose which has produced a significant chunk of its profits in the past.

This move is a gamble. It will inevitably lead to lower rates of profit in the future. It is also built on a move into an already crowded sector of the market - wealth management. It comes with significant collateral damage - 1,900 people will go in retail banking.

The strategy relies on a long and difficult process of culture change within the bank. While culture change may be sorely needed, actually delivering it will prove to be a very difficult task.

To some this move might seem crazy. But is a strategy which is less about increasing profits and more about rebuilding the tarnished image of the bank."

(Authors are expressing their own views, not those of the School.)

11 February

Dr Peter Hahn of Cass Business School comments on the news that 'smaller banks say rules curb lending……'

"The question raised today is whether smaller banks are at a disadvantage when compared to larger banks as the former are generally required to hold a greater reserve of capital against loans.

Perhaps the correct question is whether it is the larger banks who have a disputable or controversial advantage by being allowed to hold smaller reserves against loans due to their sophisticated modelling skills.

In 2010 a number of European banks facing capital shortfalls on EU wide stress tests miraculously found that adjusting their sophisticated models eliminated their capital shortfalls. Have we really gained more trust in models since then?"

Authors are expressing their own views, not those of the School

06 February

Commenting ahead of the publication of the Francis report later today, David Welbourn, Visiting Professor in the Practice of Health Systems Management at The Centre for Health Enterprise (CHE), Cass Business School, City University London says:

"The horror of the circumstances leading to the Francis enquiry demand urgent action. We understand the temptation to impose punitive controls on a system that demonstrably failed to understand its core purpose.

But the danger of such populist intervention is that it will exacerbate the very cultural flaws that created the hole into which Mid Staffordshire Hospitals Trust fell. At its heart, there is only one sure-fire way forwards. 

"The solution must lie in reinforcing the statutory duty Board directors already have. Their duty is first to do no harm, but then to inspire everyone in their organisation to do great things using the resources available to them to maximum effect.

This is hard and difficult stuff. We need people of courage to step forward and lead the way. For too long, we have prevented leaders from making the right decisions at the right time, conditioning them to look over their shoulder to the heavy handed interference of the army of regulators, government departments and politicians."

Cass Business School's Dr Nick Motson comments on the release of details of a £390m settlement between RBS and global regulators:

'Libor Wars III - Revenge of the Sith

This is the third such bank settlement in the long running LIBOR saga, following on from Barclays (The Phantom Menace) and UBS (Attack of the Clones), unfortunately for the other banks that are still under investigation and yet to settle, it is unlikely that episode IV will bring 'A New Hope'.

The LIBOR saga is far from over, with fines totalling £1.6bn ($2.5bn) already and many banks left to settle, perhaps the only people looking forward to healthy bonuses this year will be the regulators as they appear to have the force on their side

So what is different about the RBS settlement and the previous two cases? On the surface it seems there is much similarity to what we have seen before:

* the scale of the fines, which were widely leaked beforehand, comes as no surprise and though slightly higher than Barclays, substantially lower than UBS

* The salacious email, telephone & instant messaging conversations between traders are once again reproduced in embarrassing detail for all to see, though the offers of champagne in the Barclays settlement seem to have been replaced with offers of steak & sushi rolls, so perhaps there is some austerity being felt by bankers after all

* Once again there is evidence that this was not the actions of a single trader at one bank but rather that the practice was widespread

However there are some differences that are worth highlighting

* the CFTC specifically highlight the collusion with inter-dealer brokers both in the setting of LIBOR & also the use of "wash trades" to compensate them. It is probably a fair assumption that highlighting this is no accident and at some time in the future we will see the large inter-dealer brokers under further regulatory scrutiny

* RBS senior management have clearly learned from the fallout following the Barclays settlement and are at pains to point out that realise how serious the problem was and are determined not only to punish those responsible but also make sure something like this can never happen again

* The fact that RBS is over 81% owned by the UK government makes the issue of who pays the fines a political hot potato. Though it is not clear to me why shareholders in other banks should be any more happy about paying such fines, it does seem that RBS are keen to ensure that the reduction in future bonuses and claw back of historical bonuses should cover £300m of the fines rather than the shareholders being penalised

* Finally the resignation of John Hourican (head of RBS's investment banking arm since 2008) might be seen by some as a sacrificial lamb. I feel some sympathy for Mr Hourican who in the words of RBS "had no involvement in or knowledge of the misconduct" and is now approximately £4m worse off. He was being paid £700,000 per year to take responsibility for an incredibly complex organisation and his achievements in streamlining the business have been startling, however there is evidence of manipulation of LIBOR as recently as 2010 so he has to accept some responsibility which he has done, and by resigning he has done the honourable thing'

(Authors are expressing their own views, not those of the School

05 February

Responding to the news that Abu Dhabi's Etihad Airways, sponsor of Manchester City Football Club, has tripled its full-year profits, Joseph Lampel, Professor of Strategy and Innovation at Cass Business School, comments:

"It is not difficult to see why Etihad Airlines is doing so well.

Etihad has access to low cost capital that allows the company to buy modern fuel efficient aircraft. This gives them an advantage over airlines that have older less fuel efficient aircraft. Their access to relatively inexpensive fuel in the gulf reinforces this cost advantage.

In addition, Etihad can offer very attractive employment terms to its staff, including tax-free pay, accommodation, education allowance, holiday packages, and discounts on hotels and restaurants. These benefits mean that Etihad can have its pick of expats with good experience who are willing to relocate to the Gulf. Needless to say, Etihad is not unionised, and reserves the right to dismiss employees if they do not measure up to their standards.

The Gulf is increasingly becoming a stop-over of choice for the growing volume of passengers who are flying to and from Asia.

With these advantages it would be surprising if Etihad did not do well."

(Authors are expressing their own views, not those of the School.)

30 January

Commenting on the launch of the Blackberry 10 today, Professor of Global Innovation Management, Ajay Bhalla says:

"We all know RIM was the undisputed leader for many years before Apple spoiled the party. With its subscription service offering, it built revenue streams which were envy of its competitors. Cloaked in its success, RIM managers dismissed Apple's iPhone as a competitor. When they realised the costs of their inertia, it was too late.

"Half-hearted attempts to compete by launching Playbook and App store were dismissed by developers and customers. Ultimately, RIM failed to realise that it was operating in a platform market.

"In all honesty, RIM has worked hard on building this new platform. It has the buy-in of both the developers and mobile networks but what about the users? Will they come on board, and if so why?"

Professor Bhalla is expressing his own views, not those of the School.

29 January

Commenting on the news that Caisse, Canada's largest pensions company, plans to buy $10billion of property to boost returns, Chris Wagstaff, Visiting Fellow at Cass Business School says:

Since 1991, the average UK defined benefit (DB) pension scheme's allocation to property has been in single digits, in stark contrast to its popularity in the 1970s and 1980s when it was considered to be an ideal hedge against inflation.

Moreover, until recently most DB pension schemes typically viewed property as a lowly correlating asset with a risk/return profile somewhere between equities and bonds, which, in addition to a yield which has averaged around 7% per annum over the longer term, added a useful dimension to the strategic asset mix.

However, post-crisis with risk management at the top of most pension scheme agendas, and with traditional de-risking assets such as gilts yielding meagre returns, pension schemes are increasingly turning their attention to the liability-matching qualities of non-core property assets such as social housing, long-lease real estate and ground rents. With predictable long-term, and usually inflation-linked, income streams, strong covenants and attractive liquidity premier that compensate the investor for their illiquid nature, these assets offer more attractive yields than bonds of a similar risk profile. Indeed, in the final quarter of 2012, property proved to be three times more popular than infrastructure debt as the pension scheme de-risking asset of choice.

With gilts yields unlikely to rise by any meaningful extent anytime soon, there is good reason to believe that non-core property investment will continue to strike a chord with those UK pension schemes who, in de-risking mode, seek to more efficiently match their assets to their liabilities.

18 January

Commenting on the news that Barclays boss Anthony Jenkins has told staff to sign up to an ethical code or quit Jean-Pascal Gond, Professor of Corporate Social Responsibility comments:

"Although circulating such a statement is a good step to initiate the cultural changes needed to address the legitimacy challenges currently faced by the bank industry, we also know from social psychology that situational factors shape people's behavior as much-if not more-than espoused values.

Bringing values into being through the whole corporation means rethinking all incentives systems and redesigning human resource management processes. Barclays has here a great opportunity to play a leading role."

André Spicer, Professor of Organisational Behaviour comments:

"Codes of conduct are an important first step. But if they are not supported by broader changes in individual values, organizational culture, reward systems and broader institutions they can be little more than an ethical smokescreen.

So when does a code of ethics become more than just window dressing? First it must be supported by the individuals within the firm. Ensuring a closer link between personal and organizational values is often a longer and more difficult process.

Second, a code of ethics needs to be supported by the broader culture of the organization. This means ensuring that the wider values which are informally reinforced and celebrated within the organization match with the code of ethics.

Third, a code of ethics should be supported by the broader rewards system. Typically codes of ethics have been ignored in the financial sector as they are large disconnected from the rewards systems which drives people's behaviour. It is important a clearer linkage is created between the two.

Finally, a code of ethics should be supported by broader institutions within the industry. If the ethical values of a company don't match the broader rules of the game, then they can become an anathema."

15 January

Commenting on the news that Blockbuster has gone into administration, Professor Ajay Bhalla, Cass Business School says:

"Blockbuster entering into administration is yet another harsh reminder of the fast changing retail environment. The company, like HMV, failed to transform its business model early enough. When it did, it found a fundamentally altered competitive landscape where the platform model had destroyed the traditional retail one.

 "Firms like Blockbuster failed to face up to the enormity of the change and altered their business model on the fringes (e.g. selling second hand products), rather than coming up with an innovative offering. It is shocking that the board and executive management failed to make bold choices."

5 January

HMV's fate was sealed in the late 1990s, says Ajay Bhalla, Professor of Global Innovation Management at Cass Business School.

"While the likes of iTunes and Amazon were emerging in the US, British retailers dismissed the online world as fanciful. Not only did HMV fail to wake up to the reality of the shifting retail landscape from high-street to online in the late 1990s, it also failed to transform its business model when new players entered the market. 

"While relying on the high-street to generate its cash flow, it never made a serious attempt in generating new revenue streams. For instance, it failed to strike partnerships with emerging platform providers, and made no attempt to challenge its status quo. 

"HMV's demise should serve as a wake-up call for the remaining UK high street retailers, many of whom continue to rely on Amazon to revive their fortunes."

11 January

Commenting on reports the EU competition chief will force Google to change the way it presents search results in Europe, or face antitrust charges for "diverting traffic" to its own services, Professor Ajay Bhalla of Cass Business School, said:

"Brussels' tough stance on Google relative to the US is not surprising. Whereas US celebrates big business success, Europe has long preferred to taper down the 'winner takes all' ambitions."

"The reality of platform markets where firms like Google, Microsoft and other software giants operate is that if you do not have winner takes all ambitions, you are unlikely to succeed in the market. Hence, firms like Google have to constantly work on renewing their business model to both preserve and extend their market foothold."

"While this delivers results for Google's core business, it naturally means enveloping other markets and discouraging genuine competitive dynamics. While Brussels may get some temporary reprieve, the decision is unlikely to temper the ambitions of Google."

11 January

Commenting on the US warning Britain against leaving the EU, Professor Philip Booth of Cass Business School, says:

"The US Assistant Secretary of State argues that the US wishes to see an "outward looking EU with Britain in it". This raises the problem that such an option might not be on the table. The European Union is currently obsessed with its own problems, the solutions to which it regards as further centralisation and regulation harmonised at the EU level. Indeed, in many respects, the US is going the same way as the EU - unsustainable spending and borrowing; ever-increasing regulation; and a lukewarm attitude to free-trade.

"If Britain is unable to change the direction of the EU, it might have to be accepted that an outward-looking trading nation may see its future outside the organisation."

20 December

Commenting on Sir Alex Ferguson's lecture to student's at Harvard, Dr Amanda Goodall, Cass Business School says:

"Alex Ferguson's success can be attributed to many things. But one important influence will be his own playing career. In his Harvard speech Ferguson said: "You think you are a better player than they are, and they think they are a better manager than you" . It's often forgotten that Ferguson averaged a goal every two games that he played. That earns a lot of respect from big ego players. All leaders need to be credible."

19 December

"Capitalists and consumers flex their financial muscle," Professor Andre Spicer, Cass Business School

"The private equity firm Cerberus has announced that it will divest its stake in the Freedom group - the largest manufacturer of hunting rifles in the US. This move followed pressure put on the Cerberus board by one of its key investors - the California State Teacher's retirement system.

"This move demonstrates again the willingness of shareholders to use their financial muscle to address recent issues. Some see financial pressure as the next option in the gun control debate, given the difficulty of forcing any meaningful change to gun laws in the US through legislation. We might expect to see further divestment in firms manufacturing and selling guns. This sudden activism on the part of investors is not just due to altruistic motives. The share price of gun manufacturers like Smith and Wesson have dipped significantly following the shootings.

"It is likely that we will see investor activism being followed by consumer pressure. For instance, mass market retailers like Walmart, which is the largest retail of firearms in the US, may come under consumer pressure to drop guns as part of their product mix. Interestingly, Walmart had previously stopped selling guns due to pressure from consumer groups. However, in recent years they have reintroduced firearms and ammunition into some stores in a bid to attract male customers.

"Investor activism coupled with consumer pressure has proved a potent force for changing industries in the past. For instance consumer and investor activism played a large role in changing attitudes to the tobacco industry long before governments created the kind of anti-smoking legislation which is so wide spread today."

19 December

"User uprising at Instagram is a warning of things to come for social media companies," Professor Andre Spicer, Cass Business School.

"Social media companies are caught in a double bind between increasingly militant users and unsustainable business models. This week Instagram's user-uprising shows the difficulty of navigating these apparently opposing pressures.

"This uprising is a stark reminder to social media companies of the power of their consumers and means a darling of the social media world can become a demon overnight. Such rapid shifts can see highly valued companies become junk in very short space of time.

"This puts social media companies in a tricky situation. On the one hand they are increasingly hemmed in by increasingly militant users. On the other hand many of these companies are still searching for revenue streams that will make their business model sustainable. Finding this balance is going to be a central challenge. Currently Instagram is exploring 'appropriate' forms of advertising. While this may be more acceptable to many users, it is unlikely to make the underlying problem go away.

"Another way forward might be to generate business models that allow both the content producers and Instagram to share revenues that the company is able to generate out of users content. This model will have the advantage of settling the broader issue about ownership of user generated content. It will also have the benefit of attracting the best content producers such as professional photographers who may see Instagram as a potential income source."

14 December

Commenting on S&P's decision to downgrade the UK's outlook to negative, Professor Philip Booth, Cass Business School says:

"Radical policy changes needed to stabilise long-term fiscal position

"The chances of a UK credit downgrade next year must be "fifty-fifty". The event of a downgrade itself would not be catastrophic. However, it would reflect deep underlying long-term fiscal problems.

"Not only are we adding to the national debt very rapidly each year of this parliament, in addition there are strong fiscal headwinds from an ageing population. These are shared with other developed countries - including the US - and it is difficult to see how we can avoid a fiscal meltdown or long-term economic stagnation without radical policy reform."

13 December

Commenting on the news that Bumi plc has turned to its top public relations man Nick von Schirnding to fill the gap left after CEO Nalin Rathod resigned, Stefan Stern, Visiting Professor in management practice at Cass Business School comments:

"And then there were two. In October John Fallon, a former comms guy, was appointed CEO at Pearson in succession to Marjorie Scardino. Now the troubled miner Bumi has asked its group comms and investor relations chief Nick von Schirnding to step up to the top job. If anyone was still in any doubt about the need for CEOs to be effective communicators, this "mini-trend" should help convince them that communications matter more than ever.

"CEOs (especially of public companies) have to face outwards at least as much as they look inwards. It is an ambassadorial job. And with such a high proportion of the shareholder register being traded at (high) speed, a single communications slip could prove costly.

"There is no mystery as to why certain business leaders have positive PR profiles. They see communicating as a key task. The build it in to their diary. They respond to media requests. And they realise that being out there is usually beneficial for their business.

"Of course there is a day job back in the office, with spreadsheets, data, meetings and management to be done. But there is a communications job to be done too. For good communicators who can lead and manage well and know their way round a balance sheet, opportunity knocks."

13 December

Commenting on an Ofcom survey which has found internet shopping is more popular in the UK than in any other major country, Vince Mitchell, Professor of Consumer Marketing at Cass Business School, said:

"The UK is not only one of the most technically advanced societies, but also one of the most competitive for consumer goods companies. These firms are therefore ahead in getting consumers to interact with their brand and getting more data from their customers means they can give more targeted information back to them in the form of offers, news and cross promotions.

"Consumers' hunger for data is a reflection of two factors. First, consumers are finding the convenience of shopping around while sitting around irresistible. This need for browsing and seeing what's out there was previously confined to the odd window shopping trip per week, now it's once per day on your laptop or mobile. Second, consumers are now used to interacting with brands and each other more and some of this 'need to know' was previously unfulfilled. Now, brands and people are much more open and interactive about themselves and their lives."

10 December

On the news that Standard Chartered will pay more than $300m to settle charges it violated US sanctions on Iran, Burma, Libya and Sudan, Professor Andre Spicer of Cass Business School comments:

"The sanctions levied by US authorities on Standard Chartered are about two interrelated issues. On one hand the fine is part of the characteristically aggressive pursuit of US foreign policy - the US is using its financial regulators to punish its foes (and those who do business with them). On the other hand the fines are part of broader trend of financial regulators throughout the world seeking to enforce more responsible behaviour on banks.

"The ruling will mean that UK based banks think more carefully about doing business with rogue regimes in the future. Indeed it could bring into sharper focus how our banking in the City of London may be connected with human rights violations in other parts of the world."

7 December

Commenting on Deutsche Bank risk reporting issue, Dr Pete Hahn, Cass Business School says:

"Is the purported Deutsche Bank risk reporting issue, and the Bundesbank knowledge of it, like saying 'rogue trading is OK as long as the trader makes money in the end?'

"Deutsche Bank seems to have managed its way out, but what if it had not? What if had got rapidly worse? Would the 'oops' come at $13bn, $14bn or would we wait to $25bn? Did someone lose track of materiality? After all, this was supposedly about trading or marketable assets and not how much a loan is worth."

3 December

Commenting ahead of George Osborne's announcement on company tax avoidance, Andre Spicer, Professor of Organisational Behaviour at Cass Business School says:

"Demands for corporate social responsibility have moved from marginal issues (like recycling) to issues that are core to the business (like taxation). Consumers have become increasingly wise to just how little large companies pay in taxes.

"It will not be surprising if we soon see measures to address concern over corporate taxes. One example might be coverage of tax in the annual report. We may even see some companies using 'fair taxed' label in a similar way to the 'fair trade' we are already familiar with."

29 November

Virtual pop-up stores are set to become one of the hottest retail trends this Christmas, according to Vince Mitchell, Professor of Consumer Marketing at Cass Business School.

Leading brands such as Walmart and Mattel have launched a series of posters displaying virtual shelves stacked with images of life-sized products. Using their mobile phones, consumers scan QR codes next to the products, pay for their purchase and have it delivered to their door.

"While the Christmas market was probably the earliest example of the retail phenomenon we now know as the 'pop-up store', big brands are taking the concept one step further and bringing the shop direct to consumers," said Professor Mitchell. "Why do you even need the cost of a pop-up store if all you need is a poster, linked QR codes and a mobile?"

"Being able to put posters in every conceivable location that a target customer may come across, from subways to bus shelters and coffee shops to train stations, helps brands to dramatically increase reach and boost sales, all for the cost of a poster. This comes at a time when 44% of consumers are this year planning to do their Christmas shopping online and have their gifts delivered to their doors.

"Stores like this are perfect for Christmas time when it's all about the return on investment on space and speed of movement in store to drive up seasonal sales. Tesco did it in South Korea and Walmart have launched their first virtual toy store in the US. Watch out for a poster shop near you."

28 November

BP ban - Punishment or culture change? Two opposing views from Cass Business School academics...

Professor of Strategy Joe Lampel says:

"The temporary ban is certainly a blow to BP but the damage it will inflict on the company is limited for two main reasons. First, the ban is temporary and affects mostly future contracts. Second, it comes at the end of a complex process during which BP has settled most of the claims against it. Therefore this suspension should be seen as an additional penalty rather than a pressure tactic that the US government often uses when it wants to force firms to concede liability. We do not know how long the ban will last, but I suspect that it will be lifted after a sufficient grace period has passed. BP has been working hard to repair its reputation and I suspect that it will do whatever it takes to satisfy regulators that it now meets all the necessary standards."

Professor of Organisational Behaviour Andre Spicer says:

"The decision to temporarily ban BP from US federal government contracts is an striking example of national governments using their weight to ensure large corporations behave responsibly . Until recently, sustainability and corporate social responsibility had largely been voluntary activities undertaken by good corporate citizens. But today's ruling shows that national governments now expect responsibility to be a central part of how large companies do business. Energy companies have become increasingly aware that the price of access to valuable resources across the global is responsible and sustainable behaviour.

"Today's announcement is also a reminder these rules might be unequally applied. The US federal government does not seem as willing to use its weight to pressurise domestic companies involved in the Deep Water Horizon disaster, such as Halliburton, into more responsible behaviour.

"The suspension of Federal contracts may be part of a trend for governments around the world as they become more willing to push companies to build responsibility into their business. For instance, in the UK we are seeing the government considering new policies and legislation to ensure more ethical behaviour by the media and banking industry. Governments showing more teeth in the face of irresponsible business behaviour may force other large companies to ensure they build a broader culture of responsibility into their core business. But government intervention will never be enough. Companies need to take responsibility for ensuring that values like sustainability and ethics are central to their core business.

"BP has already learnt some painful lessons from the Deep Water Horizon incident. The company is taking steps to ensure corporate social responsibility is more central to its business. This increased emphasis on ethics and responsibility at BP could be the silver lining of this crisis."

28 November

Commenting on French President Francois Hollande saying he would discuss nationalising one of the ArcelorMittal plants, Andre Spicer, Professor of Organisational Behaviour at Cass Business School, said:

"The demand by the French President for ArecelorMittal to maintain jobs in France might seem like a piece of retro-industrial political right out of the 1970s. However, it is actually part of the wider trend of governments playing a stronger role in their national economies. In the last few years, we have seen states throughout the world directly intervening to preserve jobs in 'strategic' industries. For instance, the UK government pumped billions of dollars into the financial sector to maintain jobs in the City. In the US, the government continues to lavish funds on the 'strategically important' defence industry. In fast growing markets like China and Brazil, the state continues to be a key player. So instead of being hopelessly out of step, Hollande may just be moving with the global fashion."

22 November

Commenting on how a US judge's decision to force Apple and HTC to reveal details of a patent-sharing deal could hand an advantage to Samsung, Dr Hans Frankort, Lecturer in Strategy at Cass Business School says:

"The US court order forcing Apple to disclose details of its patent-sharing deal with HTC appears surprising because it could give Samsung a crucial edge in future negotiations to address the very intellectual property disputes with Apple that it got reprimanded for in August. Samsung owes more than 1 billion US dollars in damages to Apple as a penalty for infringing on certain Apple patents, yet the court seems to have given it a helping hand in its attempt to out-compete its rival.

"From a strategy perspective, we tend to believe that firms should focus on product differentiation, they should accentuate how they are different. But Samsung seems to focus on imitating Apple's products and technologies, and this court order does little to stop it from doing so. The court order may thus turn out to reward the very imitative practices that are unlikely to drive innovation in the marketplace."

21 November

Commenting on the Chelsea's sacking of Roberto Di Matteo, Visiting Professor Chris Roebuck, a leadership expert at Cass Business School in London, said:

"The overnight sacking of Chelsea manager Roberto Di Matteo demonstrates, not decisive leadership, but knee jerk authoritarianism. From a leadership perspective, this sacking is highly questionable. Yes, in the world of football, as in business, sometimes things don't go the way we want, but a short-term view of life can end up being counterproductive to both long-term performance and revenue generation. Given the performance Di Matteo has delivered and the chance a "bad patch" was always on the cards, a more tolerant approach would have made common sense. This unplanned departure now leaves the club rudderless at a critical time and presents a significant challenge in finding a new successor. Who would accept such a role with the chance of being sacked in the middle of the night? This event just goes to confirm the significant dangers of command and control leadership."

19 November

Commenting on the Jaguar Land Rover China deal, Mohan Sodhi, Professor of Operations and Supply Chain Management at Cass Business School, says:

"With every other car manufacturer producing in China, Jaguar's deal may not seem surprising. Yet the deal is not without risks. Jaguar's surge under Tata Motors ownership is quite possibly about the 'Britishness' of the car, something that Ratan Tata would have recognized as an asset when Tata acquired Jaguar from Ford. A 'British' car made in China is therefore a possible risk for business. And how do you sell a 'British' car, made in China, in neighbouring India? Mitigating this risk however is the fact that China's manufacturing is no longer connected with cheap and poor quality goods.

"This is also the first time the company will be producing outside the UK, so there are issues of how quality will be maintained across two locations. This risk is mitigated perhaps by Tata's own experience but it still remains a significant one."

19 November 

Commenting on the Jaguar Land Rover China deal, Ajay Bhalla, Professor of Global Innovation Management, Cass Business School, says:

"The Jaguar Land Rover China announcement serves a dual purpose. First it opens new growth horizons for JLR in a turbo charged economy. Sales this year are up 80 percent and with new models in the pipeline; this is just the beginning of the remaking of an iconic brand.

"While the China JV hub will serve the local and adjacent markets, the UK will continue to supply to developed markets in Europe and US. In the mid-term, JLR may well announce similar capital investments in US too.

"Secondly, this announcement will put JLR in the driving seat in its future negotiations with the UK government. Right now the UK government is signalling its commitment to promoting British manufacturing and JLR has benefitted from that in the form of grants.

"But the UK's record of guarding its manufacturing is patchy. This is the first time in JLR's history that a truly global presence is possible and the UK business environment needs to be stable for that vision to be accomplished."

19 November

Commenting on the Financial Stability Board's push for tighter rules on shadow banking, Dr Pete Hahn from Cass Business School, said:

"The menacing name 'shadow banking' should be replaced with the less ominous but more explicit term 'non-bank creditors'. Non-bank creditors that smell, feel, and sound like banks but aren't in name are clearly the problem; while non-bank creditors that do not, and are not linked to the banking system, surely offer us a welcome reduced dependence on banks."

15 November

EU must redouble efforts to restore fiscal responsibility and break up the euro zone says Philip Booth Professor of Insurance and Risk Management at Cass Business School:

"Today's news that the eurozone is in recession will be met by a chorus of voices suggesting that the most highly indebted governments must spend and borrow more. This is entirely the wrong response and also ignores the most important policy options.

"Firstly, the euro is flawed as a currency area. Preparations must be made for an orderly exit of a number of countries.

"In addition, the EU has long-term structural problems which must be addressed. Only 20% of 60-64 year olds work in most southern EU countries. This is a symptom of high government spending, taxes and regulation that are at the root of the EU's problems. Growth will not return unless there is radical structural reform."

15 November

Responding to the FSA's letter to banks warning that bonus pay must reflect scandals, Visiting Professor Chris Roebuck of Cass Business School, said:

"The pressure on banks to "curb bonuses" to reflect the mis-selling and market manipulation scandals is understandable - but there is a deeply disturbing sting in the tail.

"Bankers involved in wrongdoing should be severely penalised, that's common sense. But the idea that all bonuses should be reduced is a new departure for the FSA, and indeed any regulator. Are we really saying that if you did a perfectly legal and professional job all year, and made money for your organisation, that your pay should be slashed because someone else did something wrong?

"No doubt the banks will be in for a rough time this bonus round. In the current mood almost any bonus is deemed unacceptable despite the fact that the concept of performance related pay is key to business success. Why pay people in the hope of them delivering performance rather than paying them after they have done it and in proportion to the quantity and quality of delivery? Note the quality element; that was the banks' problem, paying out on quantity alone in the past. But making everyone suffer if a few people have done something wrong is neither equitable nor good business practice."

7 November

Could Europe's new regulations on the disclosure of the short positions of hedge funds be detrimental to the stocks in question? Dr Nick Motson, Cass Business School, gives his reaction to today's disclosures on the short positions taken by leading hedge funds on retail stocks.

"Europe's new reporting requirement is obviously extremely unpopular with hedge fund managers and perhaps the effect of the disclosures could be detrimental to the stocks in question.

"Previously hedge funds have been required by the SEC to file a quarterly 13F report which disclosed their long equity positions and despite the fact that this information was disclosed with a significant lag, these filings are closely watched and indices of the most widely held stocks have been produced. Critics have argued that as the 13F filings only contain long positions they can be misleading because these long position might be simply hedges against other short positions.

"The danger with the new disclosures are two-fold. Firstly for hedge fund managers they are at risk of others attempting to replicate their positions, however one would assume that they could choose to keep their positions under the reporting limits to avoid this. Secondly if the short position disclosures become as closely watched as the 13F filings (which judging by today's press reports is entirely possible) then they could become self-fulfilling and disclosure of a short position by a major hedge fund could lead to a fall in the target company's share price.

"The fact that hedge funds are short retail stocks hardly comes as a surprise considering that in the last week we saw the collapse of Comet into administration and yesterday a fall in profits at Marks & Spencer. More interesting is this morning's performance of the shares in companies listed as major short positions such as Ocado (OCDO.l), Home Retail Group (HOME.L) and Marks & Spencer (MKS.L) which have all fallen despite the fact the FTSE100 index is up just over half a percent."

6 November

Commenting on the drop in Apple's share of the global tablet market, Professor Ajay Bhalla, of Cass Business School, said: 

"While Apple's drop in market share is worrying, it still remains the darling of the markets. It has a tightly-knitted operating system and multi-device strategy and has not had to think about discounting or refreshing its pricing - it is selling iPhones and iPads as fast it can make them. One explanation for the drop is that the market is also expanding with new consumers in emerging markets who are lapping up the cheaper alternatives. Still Cook and his team cannot rest on their laurels - they have entered a new competitive arena and this time around the players are as smart as Apple is."

30 October

Commenting on Apple's shake-up of senior management, Ajay Bhalla, Professor of Global Innovation Management at Cass Business School, said:

"This is the first serious management shakeup at Apple. Apple is no longer in the comfort zone it was a year ago. The euphoria surrounding the iPhone5 is fizzing away. With Google on the offensive - launching Nexus 4 and 10 at half the price of Apple products - Apple has just found itself in a tight spot.

"How long can Apple command premium pricing for its devices? This depends on the perfection of iOS on its devices, and on being a lead innovator in customer experience. Tim Cook simply cannot afford to let Apple's magical image disintegrate in the market. With Google and Samsung on the offensive along with Microsoft's determination to reinvent itself as a hardware provider, it may yet be time for Apple to think of new categories and new customer experience."

23 October

Commenting on the EU debates on quotas for women on boards, Lynne Berry, Senior Visiting Fellow at Cass Business School, says:

"As the EU debates whether to impose quotas for the number of women on company boards, the UK has something to celebrate. Since March this year 30 out of 62 non-executive appointments have been women. The threat of quotas and the effective campaign by the 30% Club is beginning to pay off.
"However, at executive level there is little movement - the number of women CEOs and CFOs is still despairingly small. At the very least we need to be looking at targets with a timetable, keeping the pressure on and making it clear that things must change.

"Women bring greater diversity, and diversity brings the potential for creative thinking and problem solving - pretty vital for European economies. Looked at this way, it makes sense to find women for UK Boards who have achieved great success in global brands and led change management programmes in tough times. Some of these women can be found in the voluntary sector.

"As Cass's recent programme for top women from the voluntary sector has shown, their successes in growing huge enterprises, keeping to mission and delivering great results could add to the diversity of Boards and the success of British companies. Encouraging diversity of thinking is the real target for British business."

22 October

Commenting on Rosneft's deal with TNK-BP, Dr Andrey Golubov, a finance lecturer at Cass Business School, said:

"This deal is in line with the Russian government's strategy of reversing the privatisation of oil & gas resources which took place in the 1990s. This move further cements Rosneft's position as the largest oil producer in the country and puts it on par with global giants such as ExxonMobil.

"It is somewhat surprising that the Russian state is allowing BP to become the second largest shareholder in the combined firm with almost a 20% stake. I see this is a positive development as BP's influence may improve corporate governance standards at the firm and ultimately reduce the corporate governance discount when it comes to the stock market valuation of the company. BP's presence may also mean that the combined firm will have to start paying out more in dividends - again a positive development for minority shareholders."

19 October

Commenting on Google's third quarter results, Professor of Global Innovation Management at Cass Business School, Ajay Bhalla said:

"Looking at Google's third quarter figures, it is obvious that Google is going through a transition. The firm is smartly re-inventing itself - shifting its focus from search, to other segments such as mobile devices.

"While the search cash cow continues to pay, the costs of shifting the revenue mix are depressing the income. The results indicate that Google executives are busy trying to avoid the mistakes made by Microsoft as it became increasingly reliant on handful of products.

"Consider the hefty premium Google paid for Motorola and its willingness to enter into bidding war and co-opt with competitors to acquire intellectual property in patent markets. The results thus indicate the premium Google is willing to pay in shifting its strategy from defensive to offensive in search for new revenue streams. It is not going to be easy: for instance, the challenge to develop a formidable mobile ecosystem to compete against Apple will require both resource diversion and shift in strategy."

17 October

Commenting on the shock change at the top of Citigroup, Douglas Board, Senior Visiting Fellow at Cass Business School, said:

"Vikram Pandit's sudden resignation as CEO of Citigroup raises the question, 'If installing his successor Michael Corbat doesn't represent a significant change in strategy for Citigroup, why has the CEO and not the COO been the one to depart?'

"It seems Citigroup want to do more of the same and better, a remit that falls firmly at the feet of the President and COO, so why wasn't John Havens - who was apparently planning to retire at year-end anyway - the one to go?

"This leads to questions concerning 'pair' selections. Pandit and Havens have been a duo for some time. Perhaps Citigroup Chairman Michael O'Neill demanded Havens' head and Pandit stood by his partner. Whether or not that's right, the broader issue is that both management theory (on leadership and selection) and employment law over-focus on leadership as about individuals, when it's rarely a one-person game."

15 October

Commenting on the take over of surplus RBS branches, Pete Hahn, Cass Business School said:

"Governments across the Europe and the US have witnessed quite a bit of conglomerate bank break-up including the sale of finance companies and foreign subsidiaries and the entire shuttering of some businesses, but few likely appreciated the complexity involved in splitting operating retail businesses. Tie those to a changing economic environment, uncertain business model & profitability economics for retail banking under new regulations, and consumer edginess on long-term transitions and you have RBS-Santander. Like that old Sedaka song, RBS is finding out that 'breakin' up is hard to do'. Whilst RBS appears continues to offer assurances of certainty to customer base many are probably wondering whether it is time to find their own new bank before RBS does."

15 October

Responding to news emerging from the IMF annual meeting that Ben Bernanke has been criticised for US monetary easing policy, Professor Roy Batchelor, Cass Business School says:

Who is right, Bernanke or Lagarde?

Quantitative easing by the Fed pushes down the yields on US assets. The question is whether that makes investors move funds away from the US towards higher yielding emerging market investments, and whether such capital movements are "volatile" and liable to be reversed at short notice.

It's a matter of how you interpret evidence from past capital movements into emerging markets. I don't think we are in the same situation as the mid-1990s, when a lot of speculative capital flowed into the then very new emerging markets with no regard for fundamentals. When bad news hit, this caused rapid capital outflows and the currency collapses of 1997-8 in Thailand, Indonesia etc.

Investors in emerging markets are nowadays much more aware of fundamentals, and there are good reasons to be relatively optimistic about some emerging economies. On the other hand the fundamentals for the US still look shaky given slow growth, high unemployment, and no clear plan to eliminate the budget deficit. The looming election makes it very unlikely that any party will propose tax increases or defence cuts.

So I'm with Bernanke here. He is doing what he can - but monetary policy on its own can't fix the US economy. 

10 October

The FSA is playing a risky game by relaxing capital requirement and liquidity rules for the biggest UK banks, says Dr Enrique Schroth of Cass Business School:

"The FSA's decision to relax capital requirements for UK banks reacts to legitimate concerns that banks may currently be holding too much capital and, as a consequence, harming economic activity by lending too little.

"This unprecedented move confirms that banking regulators see the urge to undo the procyclical effects of Basel II risk-based capital requirements. The key to understanding the effects of this policy is in trying to anticipate what the FSA will do after the recession? If the FSA is expected to continue with its countercyclical interventions as a rule, and tighten the capital requirements during the next boom, then lending may not increase much today: expecting tighter requirements tomorrow, banks would remain cautious today as future defaults could be relatively more costly. Therefore, this policy could reduce the volatility caused by the credit cycle, but not kick start lending today as much as expected.

"On the other hand, the incentives of banks to screen loan quality could decrease significantly if banks expect the FSA to relax capital requirements during recessions but leave them intact during booms. Lending may increase, but at the expense of higher default probabilities, and more severe recessions in the future.

"In summary, with its recent intervention, the FSA has opened the possibility of intervening via temporary changes to capital requirements to smoothen the procyclical feedback effects of credit on the business cycle. But the real problem is not so much the use of risk-based capital targets per se, as opposed to the way default probabilities and credit ratings are measured. Basel III prescribes conservation buffers that address that issue, but they will only come in full force in 2019. Until then, banks will naturally start making forecasts of the FSA's reactions, and the FSA will have to develop a reputation of sticking to rules set in stone or acting discretionally. Is the FSA ready to play that game?"

9 October

Commenting on the news that Barclays is to buy ING Direct UK, Pete Hahn, Cass Business School said:

"From the headlines, it appears an almost irresistible deal for Barclays. ING was not large or broad enough in activity to attract a substantial foreign interest, if any brave souls were there. And with the other PLC banks divided between unable to consider at any price or shying away from a bigger UK footprint negotiations may have been pretty one-sided; at least one can certainly assume that Barclays had time for its due diligence and was very thorough about it."

9 October

Commenting on the report in the FT that the vast alumni networks of the Big Four auditors could be stifling competition, Professor Andre Spicer said:

"The Alumni club exists. After all, the big four's best marketing tool are their ex-employees. One of the reasons they take on so many juniors is to be able to later plant them in client firms. They go to great lengths to keep in touch with their ex-employees. In fact they are far better at managing their alumni network than most Universities.

"Clients contracting auditors from their old firm can have benefits - it can build trust, develop smooth working relationships, and drive efficiency. But it can also generate some fatal problems: collusion, misplaced faith, and group think. The result can be auditors neglecting their roles as independent professionals in order to maintain established relationships with clients - which after all there bread and butter. Having said this, reforming the system is difficult. Large corporations need large auditors - and there are now only a handful.

"Perhaps it could be time to consider radical changes to the way corporate audits are performed. One options would be to build a culture which emphasises professionalism rather building up billable hours. More radical options would be to split up the auditing cartel held by the big four or even moving auditing responsibilities to an independent public body."

2 October

Commenting on warnings the government's "Big Society" is at risk unless ministers help voluntary organisations raise finance, Professor Cathy Pharoah of Cass Business School, said:

"It is important that charities' finance needs are also assessed as government responds to the beleaguered small and medium-enterprise sector. Charities, and individual social entrepreneurs, are often treated as the poor cousins of the SME sector, so any new finance facility targeted at SMEs, such as a new state bank, needs to ensure that it also has the relevant expertise to assess the business cases of the non-profit sector, and provide loan finance to social enterprises or charities which want relatively simple accessible finance to expand a range of operations. If it is difficult for SME to access finance, it is likely to be even harder for the voluntary organisations. Without equal access to finance it will be difficult for the charity sector to compete for public welfare provision contracts, and expand its role. This is not a gap which Big Society Capital can necessarily fulfil, because BSC is a specialised facility, not in competition with mainstream finance providers, and aimed at stimulating growth in relatively new social ventures which aim at both social and financial returns."

2 October

Commenting on proposals by the Liikanen review that banks should pay bonuses in debt, Dr Peter Hahn of Cass Business School, said:

"Remuneration in banks has not been an easy situation to solve and many of the simple solutions create complex unintended consequences, demonstrating why flexibility and institution-specific solutions remain important. Imagine the management team at a bank with a lot of remuneration-debt piled up responding to the government's call to lend more into an uncertain economic recovery. "Sorry, we're not up for any new risks (until after we retire).""

2 October

Commenting on AstraZeneca's move to suspend share buybacks, Professor Scott Moeller, Director of the M&A Research Centre at Cass Business School, said:

"By opting to suspend share buybacks, AstraZeneca's new chief executive, Pascal Soriot, has made a smart move that not only strengthens the company's hand for acquisitions but is also likely to keep shareholders happy. 

"Research by Cass Business School found that - from a shareholder's perspective - acquisitions are the most profitable way to spend excess corporate cash.

"Buybacks reap early benefits, generating average shareholder returns amounting to 7% after 24 months. However, the strategy of spending on M&A generates even higher returns, equal to 11% realised in the third year after the strategy has been implemented.

"The findings suggest that companies which are able to seize profitable investment opportunities quickly through engaging in acquisitions outperform companies which choose to follow alternative options, such as capital expenditure, dividend payments or paying down debt."

1 October

Commenting on the Xstrata deal, Anna Faelten, Deputy Director of the M&A Research Centre at Cass Business School, said:

"The announcement from Xstrata that its board is recommending Glencore's latest merger offer will send a sigh of relief through the City. The latest M&A Tracker, an Ernst & Young/Cass Business School quarterly report on M&A activity, shows that not only are fewer deals being announced, but transaction conversion rates - the likelihood of a deal completing once it has been announced - are also at their lowest point since Q1 2010. Currently, the conversion rate for public bids is a mere 39%, i.e. only 39% of all of the announced bids for public targets in the last nine months have completed. This can be compared to a corresponding figure of 51% a year ago. Increased shareholder activism has caused several large-scale transactions to fail in the post-Lehman period and this new voting structure, which gives Xstrata's shareholders more options, including the possibility to 'opt out' on voting of the much debated retention payouts, is a way to placate them."

28 September

Commenting on the overhaul of the Libor interbank lending rate, Dr Sonia Falconieri of Cass Business School, said:

"Beyond the increased monitoring and oversight of the LIBOR, the two main changes to the actual setting process, namely dropping those currencies and maturities with a low volume of transactions, are heading in the right direction to make the LIBOR representative of the effective inter-bank market activity.

"It is also good that the LIBOR will finally be supported by transaction data and that more account in this respect will be required from the submitting banks.

"I believe that a key feature to get to a reliable rate will be to ensure that large panels participate to the submission.
Overall, the report makes a number of very sensible adjustments to the overall LIBOR system which, if correctly implemented, should effectively reduce the scope for traders manipulation and restore confidence among market participants. One wonders why this has been done only now."

20 September

Commenting on the auto-enrolment to pension schemes for up to 600,000 employees in the UK's largest firms, Zaki Khorasanee, Senior Lecturer in Actuarial Science at Cass Business School said:

"This is a necessary step to plug the gap in pension provision for those who do not belong to a workplace scheme, currently over 50% of the UK workforce. Relying on a state pension expected to be around 30% of average earnings will not be a viable option for most people. The auto-enrolment system is expected to combat the apathy and fatalism many people exhibit when thinking about retirement planning. It will be interesting to see how many workers choose to exercise their opt-out option."

12 September

Commenting on the proposals from Brussels for a banking union, Dr Enrique Schroth, Cass Business School said:

"A banking union could provide a clear, unified framework to solve conflicts between the lenders, shareholders and local regulators of distressed banks. The cases of many Icelandic banks, as well as Fortis, show that the distorted incentives of local regulators, or the lack of coordination between sovereign regulators and foreign creditors created more uncertainty and unnecessarily delayed the process. 

"As lenders to EU banks, UK banks are likely to benefit from such a framework because the Eurozone banking regulator may internalize their interests, whereas local regulators may have incentives to neglect them. Additionally, more predictable interventions during financial crisis would improve pricing efficiency, decreasing, for example, the risks of the marking-to-market mechanism. 

"But being the most diversified in the EU, UK banks could get the least benefit from the liquidity guarantees provided by the European regulator while still being hurt from the implied moral hazard risks. Unfortunately, little is known about the relative size of these costs and benefits. What we do know is that systemic crises are extremely costly, and any mechanism aiming at avoiding runs, and solving cross-border insolvencies quickly is worth serious consideration."

5 September

Commenting on Tesco's acquisition of digital book retail platform Mobcast, Professor Vince Mitchell says:

"Tesco, has made its third significant digital acquisition in just over a year as Britain's biggest supermarket chain seems set for a full-scale confrontation with US online giant Amazon.

"Supermarkets have made huge profits by moving into books, DVDs and CDs in the last decade, and are anxious to maintain that revenue now that sales of physical goods are falling in favour of digital versions. For example, Amazon sells 114 ebooks for every 100 hardback and paperback books it sells through the web.

"Sales of electronic books have rocketed since Amazon's Kindle devices and Apple's iPad tablet hit the market. The U.K. Publishers Association reported in its May press release that digital sales grew by 54%. ebooks, audio book downloads and online subscriptions accounted for 8% of the total invoiced value of sales of books in 2011, up from 5% in 2010. Consumer e-book sales are now equivalent to 6% of consumer physical book sales by value whilst 13% of academic and professional book revenues came from digital products.

"However, until now, Tesco did not yet have a big presence in e-books, despite from a physical point of view, being one of the largest book retailers in Britain, but Mobcast will help to change that.

"Mobcast is a digital book retail platform that has a catalogue of more than 130,000 books which can be bought and read on smartphones, tablets and selected eReaders. Buying Mobcast gives Tesco a ready-made eBooks operation, as the 5-year-old company already has agreements with all the major publishers, along with mobile network operators, equipment manufacturers and retailers.

"It also enables the supermarket to offer bundled deals, such as someone buying a book in store and then getting a digital copy via Mobcast. Tesco introduced a similar system with DVDs using Blinkbox.

"Entering the digital books, music and movie markets is about more than sales for Tesco as these are high passion, high engagement categories where it's more possible to build strong relationships with customers.

"In addition, we know that long-term winners in retail are more likely to be retailers that combined physical and digital stores, known as multi-channel, rather than online-only stores.

"With this in mind, Tesco bought internet radio service WE7 in June and digital movie streaming service Blinkbox, a rival to Amazon's LoveFilm, last year and WE7, a UK based music streaming site which allows users to create personalised radio stations. The acquisitions further strengthen and expand Tesco's digital entertainment offering.

"Additionally, Mobcast offers a cloud-based service that lets customers build up an eBook library collection without being locked-in to one single device. Reading your book on the device you choose gives flexibility and a great value-add to Mobcast's offering. Storing the book in the cloud gives the device flexibility customers want.

"With Amazon's current hold of the e-book and e-book reader market it will be interesting to see if the cloud portability offered by Mobcast will start to part readers from their Kindle, or will Kindle's screen clarity and ease of use keep its customers loyal. 

"Tesco's announcement can also be seen as competitive response since last week Sainsbury's signed a deal with Rovi Corporation to provide a new digital video service for its microsite Sainsbury's Entertainment. In June, Sainsbury's also entered the digital book market, buying HMV's majority stake in e-book business Anobii and digital books venture aNobii in June, whilst Morrisons acquired online retailer Kiddicare last year."

31 August

Commenting on Sharp's credit rating being downgraded to 'junk' Professor of Global Innovation Management, Ajay Bhalla at Cass Business School says:

"The downgrading of Sharp's credit rating to 'junk' should serve stark reminder to both policy makers and executives of multinationals in Western countries of the seismic shift underway.

"Sharp like Japan at one point was recognized for both innovation and its manufacturing prowess. Similar to other Japanese giants, it diversified into unrelated industries, relying on its internal funding structure to grow. Unconditional cooperation and support from suppliers enabled it to prosper in good times and avoid tough decisions in difficult times. Coupled with this were its dependability on internal labour market, and little focus on emerging markets. As many of its competitors worked relentlessly to develop a focused strategy, and re-oriented themselves towards growth markets, Sharp was too sluggish.

"For Western policy makers, this serves as a reminder of what happened to yesterday's technology giants such as Marconi, Kodak or Motorola, and what they can do now to stimulate innovation at country level. Firms must have home-based advantage. To do this policy makers must work in a concerted fashion across departments to create a country configuration, which is serious about developing their nation's human capital, easing bureaucracy and developing scientific and technological infrastructure central to boost the fortunes of specialist technology and manufacturing led growth."

28 August

Damage to Samsung from Apple's court room victory will only be short-lived, says Ajay Bhalla, Professor of Global Innovation at Cass Business School.

"Apple might get to celebrate the jury's verdict that Samsung wilfully copied elements of its product design and user interface but any advantage is only likely to be short-lived.

"Samsung has already established itself as the only competitor in multiple mobile product categories from iPad to iPhone. In the process, it has shed its image as a low cost OEM contractor and is fast emerging as a firm where 'innovation actually happens'. From its OEM heritage, and as a leading supplier to the likes of Sony and Apple, it has learnt how to weave innovation in design with marketing. The firm is not only acutely focused on process improvement and cost efficiencies but is now making concerted efforts across the group to make innovation its bread and butter, and yes it is winning in most of the consumer segments.

"For customers, the courtroom battle is positive news. Any temporary reprieve Apple may get in the U.S. market is likely to boost the presence of yesterday's heavyweight - Nokia, which is betting on forthcoming Windows 8 to distinguish itself in the Apple and Android dominated market.

"In sum, the end result of Apple-Samsung saga is likely to heat up the innovation wars even further. The likes of Apple and Samsung are already focused on this next phase of consumer revolution, and don't forget Google. We are yet to see its best."

21 August

"The logic is ill-thought and has been floated at an early stage without attention to detail, risking an idea which may actually have merit ", Professor Ajay Bhalla comments on the NHS's plans to expand into international markets.

"The idea that high profile NHS hospitals will expand into international markets has lot of merit. Without any doubt, NHS is a widely revered institution holding great brand equity and respect across the globe. In theory, the trusts under the umbrella of NHS Global will plough the revenues generated from private patients in the UK into establishing world-class hospitals in international markets. The profits from these international affiliates will then flow back into the NHS corporate located in the UK.

"However, in practice not only the logic is ill-thought but has been floated at an early stage without attention to detail risking an idea which may actually have merit. There are several reasons why that is the case. First, entering global markets requires unremitting attention from the top and commitment to devote not only financial resources but also scarce resources such as top performing consultants and administrators with technological and process know-how.

"Second, entering global markets requires knowledge of local terrain and the capability to form partnerships with top-tier local players (e.g. Fortis or Apollo in India) who themselves have global ambitions. Moorfields Eye Hospital may have succeeded in Greenfield Dubai, but is likely to encounter different playing field if it targeted any of the emerging markets. Hence location choice along with the mode of entry becomes a key driver for success in local markets.

"Third, entering global markets is no game for faint-hearted public institutions who are much more prone to public criticism than deep-pocket shareholding institutions with diversified portfolios. Success in global markets does not come easy and failures are part of learning and long-term commitment to internationalize."

21 August

Professor Vince Mitchell, Cass Business School believes Ofcom's decision to approve a 4G application from Everything Everywhere will mean 'higher prices and less choice'.

"There is very little money in telephony and texts which have become commodified, the value is now in movie and gaming downloads for mobile companies.

"Giving one major mobile player access to 4G to enable access to this market a whole 6 months before other market players, which is a long time in the world of technology, will mean EE will have first mover advantages with developing these products, it will allow them to capture more of the technological innovators who tend to spend more on technology. Importantly for customers however, the monopoly on 4G will inevitably mean higher prices for customers and no effective choice of provider."

21 August

Associate Dean for Ethics, Sustainability and Engagement Professor Paul Palmer, Cass Business School questions the ethics of the Travelodge CVA:

"When a business like Travelodge has gone into a Company Voluntary Arrangement (CVA) the question that is raised is what are they up to? - And from an ethical business perspective who are the victims? The Travelodge issue raises a number of interesting points that the company press release fails to answer.

"First there are clearly two victims - the bank shareholders who lent them the money and have now had to write off the loan. Secondly the British taxpayer - which depending on the banks, might also mean one and the same. Companies with high levels of debt effectively pay no corporation tax. So a well run company with little debt pays tax, while a company that has been able to gear itself so highly and sees all its profits go into paying interest, avoids tax.

"There is also the interesting anomaly of the UK commercial property sector that has only upwards rent reviews. It would seem that one of the reasons why Travelodge is going into a CVA is to be able to renegotiate its rents downwards.

"On the upside the company says that no one will lose their jobs and they will be seeking to move on the properties they no longer need.

The Travelodge issue raises the following questions - Will the Directors who have allowed the company to get into such trouble and the bankers who lent them the money to get into such trouble be held accountable by the two victims I have outlined? The short answer is NO which is why Corporate Britain increasingly finds itself mistrusted."

21 August

The Government has to commit to long term investment in both grassroots and elite sport if there is to be a long term sporting legacy from London 2012, according to Peter Grant, Senior Fellow in Grantmaking at Cass Business School.

"This means building more high quality facilities but, even more important, financial assistance for sports clubs and volunteers. Here lies the issue. Many of these facilities are run by local authorities whose funding is being reduced and sports clubs face increasing costs with few direct tax benefits.

"Detailed studies of previous Games, especially the four held between 1996 and 2008, have concluded that none brought significant economic gains for the host cities nor did any increase in sports participation occur. Unless there is cross-party support for long term investment in sport the legacy of the London Games may be nothing more than the memory of an excellent two week party."

25 July

Commenting on the short-selling bans introduced in Spain and Italy, Professor Ian Marsh of Cass Business School, says:

"As expected, Spanish and Italian regulators have reintroduced bans on short selling. Regulators around the world have brought in similar bans in recent years, usually in response to plunging stock prices. The only problem is, bans on short selling don't seem to help, at least not for long.

"By removing the pessimistic investor from the market you might think the balance tilts in favour of the optimists and prices should increase (or at least stop falling). Most evidence suggests instead that apart from some hard to verify bounces on the day of the announcement, prices of stocks supposedly protected by the ban continue to move much in line with how they would have without the ban. Why? Because it isn't really the actions of pessimistic short sellers that drive the market down. It is news about the quite awful condition of the companies and economies that cause prices to drop. When almost every piece of news about Spanish banks is bad share prices in those banks will fall, whether shorts are actively trading or not.

"So why do regulators continue to introduce these bans? Maybe it is simply because they have to be seen to do something and short sellers have such a bad reputation they are popular targets.

"Unfortunately bans on short selling are costly as well as useless. Excluding investors wishing to take short positions from the market - and this would include neutral funds that short one stock but buy another to hedge, as well as aggressive shorts - liquidity in the market is reduced. Reduced liquidity increases the cost of trading for everyone in the market, whether a buyer or a seller. And lower trading volumes make it harder for markets to do their key job of pricing assets accurately. Everyone knows the pessimists have been excluded and so markets have to guess where prices ought to be without the benefit of the information contained in the trades of the short sellers."

13 July 

Commenting on the Bank of England's new Funding for Lending scheme Professor Philip Booth, Cass Business School says:

"It is a curious aspect of government policy that banks are being saddled with much higher capital and liquidity requirements in order to ensure that the taxpayer is not exposed to the risks of banks making bad lending decisions, yet the Funding for Lending Scheme is going to load the risk of private sector bank lending directly on the taxpayer.

"The government and Bank of England are directly trying to compensate with this policy for the damaging effects of their other policies that have restricted bank lending to the private sector. More and more government intervention designed to undo the effects of previous government interventions seems to be the hallmark of policy in this area. It is a throwback to the mid 1970s".

13 July

Commenting on Moody's decision to downgrade Italy, Senior Lecturer in Finance,  Sonia Falconieri, Cass Business School says:

"Moody's decision to downgrade Italy seems very inappropriate timing given the upcoming government bond auction and raises questions on the conduct of these agencies and their strong influence on financial markets. We would have liked to see the same diligence shown in monitoring the Eurozone crisis applied to banks before and during the financial crisis.

"This said, Moody's decision sadly indicates a general lack of confidence in the ability of the EU to effectively tackle the crisis. It is not only the Italian political instability: true, elections are getting close and we very well know that similar economic contingencies amplify political instability with the risk of a very dangerous spiral. However, Monti has still quite some time to bring the country back on track by persevering with the structural reforms. But then we are still left with a very big question mark on the situation in Spain and Greece and a high risk of contagion."

11 July

Reacting to today's White Paper on social care reform from Cass Business School, Professor of Statistics, Les Mayhew says:

"We are pleased that the recommendations in today's White Paper contain a more practical and measured approach to the problem of reforming social care in England. This is a step in the right direction and echoes some of the findings of our own research. We are also pleased that no decision is being made on the life time care cost cap. We propose a different system of graduated support for people in different wealth bands - a system that is simpler to implement and fairer to families, individuals and the tax payer.

Our research welcomes any proposal to provide practical support to unpaid carers without whom the social care system would collapse. State support is still required for the poor and vulnerable and our proposal is designed to avoid cliff edges in terms of personal contributions to care costs. We are concerned that everybody should be incentivised to make provision for their future care and we hope that the government will consider our proposals for 'long term care bonds' to help the poorer in society, flexible style pension annuities that take account of personal social care requirements, and a bigger role for equity release."

11 July

Reacting to today's White Paper on social care reform from Cass Business School, Dr Robert Warwick, Senior Visiting Fellow, Associate Director, Centre for Health Enterprise says:

"The one thing that the Dilnot Commission stressed last year was that the current funding system was 'in urgent need of reform: it is hard to understand, often unfair and unsustainable'. In choosing some recommendations and deferring others, particularly the cap on what people have to pay, the question is: have these fundamental problems been addressed? I think the answer to that is no, or at best partial. Only a fully integrated whole system approach that gives assurance to those who need care, those who need to plan for care and the financial sector who can provide appropriate products can deliver the benefits society needs."

3 July

Commenting on Bob Diamond's resignation, Dr Peter Grant, expert in ethical business practices, Cass Business School says:

"The question a lot of people are asking is 'how do we get bankers to act more ethically?' when the more pertinent one is 'how do we get them to stop acting unethically?' This raises the question of perverse incentives. It is basic human nature that when someone has an incentive to do a thing that may involve unethical actions they will do it unless there is a strong reason not to. Therefore the real problem is offering bankers huge bonuses to produce profits in the first place. The counter-argument is 'if you don't offer these bonuses then the best people will go abroad'. I have yet to see any convincing evidence that this is actually the case. I can find no academic basis for such statements or for a very strong correlation between bonuses and company performance."

3 July

Commenting on Bob Diamond's resignation, Dr Pete Hahn, Cass Business school says:

"Even before the financial crisis, rumours flowed that something wasn't quite right with Barclays Capital. "How could it work where so many commercial banks had failed" and "Barclays takes too much risk" were frequently heard around the City and most often sounded like jealousy. As the financial crisis arrived and others fell, the rumours ramped up to 'Barclays is hiding its' and 'Barclays is using accounting tricks to hide". While the warts and all on LIBOR are plain to see, isn't it ironic that the fall of the man who built it all is based on poor governance and not poor risk-taking?

"This story is sadly much bigger than Bob Diamond. Corporate governance is about the board setting the standard and we're going to see that weak controls and morals weren't unique to Barclays. Cleaning up the City is likely to mean dragging up a lot more dirt on board malfeasance and membership back a number of years. In many cases these people are gone, but for the City to be cleaned up they can't be allowed to keep their reputations.

"And we should not forget about the governance of LIBOR; those who oversaw and didn't speak up on the flaws of this outdated and amateurish measure for the last decade have a lot to answer about an accident that was waiting to happen and repeatedly did. Its not just Bob."

29 June

Commenting on the news that the Eurozone has agreed to recapitalise struggling banks, Dr Pete Hahn, Cass Business School said:

"The Eurozone agreement on bank assistance last evening will have much more of an effect on Britain than anyone can even dream about today. It means big choices that Downing Street is probably already late in grasping.

"The biggest of these may see the foreign bank community in London, the real City and the one that isn't backed by UK government deposit insurance or received UK bail-outs, having to pick up and leave for Paris or Frankfurt.

"Of course, we may have the choice of being seen as becoming the backstop for these banks, in addition to our own 5-6 times GDP banking sector, as our option. For those thinking we can just say good luck to our Continental cousins, it ain't so easy; hard choices that will be very challenging to explain to the electorate are on their way."

28 June

Commenting on the news that Barclays has been fined a total of £291million by three regulators on both sides of the Atlantic for repeatedly manipulating key prices at the heart of the financial system, Dr Peter Hahn, Lecturer in Finance, Cass Business School, comments:

'This is a stain on the City of London, a stain that is likely to spread, and one that may not be removable. It's about the suspended morals of a few damaging the prospects of an industry. Most sadly and inexcusably to me, these people have jeopardised my students' career aspirations.

Nothing short of overwhelming disclosure and identifying those connected with this scandal can be of help in cleaning up the City of London's image. Only the City can clean itself up; I hope they don't turn to another 'good citizen' PR exercise.'

26 June

Commenting on Microsoft's purchase of Yammer, Professor Ajay Bhalla of Cass Business School, said:

"Microsoft's purchase of Yammer is yet another clear sign that the software giant is stuck in a rut: it is failing to spot new market trends from within and is relying on acquisitions to cultivate options which may give it the next hit. 

"Despite colossal resources it allocates to research and development, no new product category has emerged from the firm, which gave us hit products such as Windows and the X-box. The firm has failed to establish a serious presence in several markets, which are vital for securing growth. This is particularly the case in mobile platforms where Apple and Android have stolen the march and search engines where Google is not letting Bing make any dent. 

"In order to move beyond the few stars it has in its product portfolio, Microsoft executives have been on an acquisitions spree. Yammer's purchase may yet be another delicate attempt to revive its fortunes. Microsoft executives should know better: in this business, you need to innovate from within, and that requires a cultural shift."

25 June

Commenting on the news that Natwest have still to resolve their technical problems, ManMohan Sodhi, Professor of Supply Chain Management at Cass Business School said:

"The surprise regarding Natwest's problem is not that there was a software glitch but rather that Natwest has been caught so unprepared on multiple fronts: communicating with customers, responding to the problem, being able to recover and not having any clear policy on how to compensate customers if at all.

"Banking as a sector is the biggest consumer of IT and the need for speed as well as various governments' need or desire to track all transactions imply that the monetary supply chain will grow even more dependent on technology. This makes it all the more important that banks and other institutions 'upgrade' their capability to respond to disruptions in line with their increasing dependence on technology."

21 June

Commenting on Moody's expected downgrade of British banks, Dr Pete Hahn from Cass Business School, said:

"Banks and governments, governments and banks; investors are finding it ever more difficult to tell them apart. Yet, the rating agencies are doing their best to point out that government support may not be what it used to be. The rating agencies' high ratings were overly generous and largely correct on the level of government support for banks pre-crisis and it seems likely they will overshoot the other way in the current turmoil. The tragedy is that, as a result of the weaker ratings, market capacity is now likely to be further reduced due to collateralisation demands on banks. Businesses need to find alternatives."

21 June

Commenting on calls to use the eurozone's bailout fund to buy distressed sovereign bonds on the open market to ease the strain on Spain and Italy, Dr Gianluca Fusai from Cass Business School said:

"Markets ask for credibility. In the US, this should be achieved thanks to the FED opting to extend Operation Twist.

"In Europe, with Spanish 10-year bond yields now above 7 percent for the first time, policy makers urgently need to send a similar message. By intervening on the open market, politicians can transmit a clear signal of their intent to keep the euro alive.

"But Europe's leaders must understand that purely theoretical discussions, without action, will still lead to a downward spiral."

15 June

Commenting on George Osborne's £100bn plan to beat the 'debt storm', Professor Philip Booth of Cass Business School, said:

"The government has got itself into a terrible muddle over this crucial policy area. On the one hand, it is imposing huge liquidity and capital requirements on banks to reduce the potential cost to the taxpayer of bank failure. The FSA is also increasingly regulating financial product markets to reduce the flow of funds to borrowers. On the other hand, the government is bringing in a series of schemes to subsidise and guarantee lending through the same commercial banks whose lending is being restricted. Emergency measures to deal with liquidity crises are one thing. However, with regard to the fundamental policy issue, the left hand of the Treasury does not seem to know what the right hand is doing."

13 June

Commenting on the shareholder revolt being faced by advertising group WPP over executive pay, Vince Mitchell, Professor of Consumer Marketing at Cass Business School, said:

"WPP has made some good strategic decisions in the past, not least to see the future of integrated marketing communications which provides customers with a seamless connection to a company whether via mobile, internet, traditional advertising or in store. To achieve this, Sorrell has pulled together some of the best media planners, buyers, social media, mobile, creative and PR agencies and made WPP the largest advertising and marketing agency in the world by value.

"He has also made wise decisions to focus on faster growing markets which still have room for market share growth which advertising can fuel such as, China, India, Latin America and the Middle East, all of which now account for about 30 per cent of WPP's business. Finally, by creating a world-wide presence of more than 2,400 offices in 100 countries WPP can provide deep-pocketed multinational companies with a one-stop shop for their communication needs.

"However, whether this means he is worth a 60 per cent pay rise is a moot point. Ironically, for a marketing agency used to listening and influencing customers, Sorrell seems to have missed the point that his customers - the shareholders in this case - don't think he's worth the money. This is perhaps a marketing 101 lesson Sorrell should have learned by now, since it is the second time WPP shareholders have revolted over executive pay."

13 June

Commenting ahead of George Osborne's speech at Mansion House, Dr Peter Hahn from Cass Business School, said:

"One of the great Vickers/ICB/Basel III conundrums is that rapidly increasing capital requirements for commercial banking provides a strong incentive for these banks to expand their investment banking activities. UK banking groups should become keener than ever to sell more products to their borrowers that won't use their balance sheets (risk management advice) and risk they can sell off. Of course the alternative is higher priced credit and perhaps less of it."

23 May

Was the Facebook IPO fair play? Did the investors get the necessary information to build a full risk spectrum? Professor Ajay Bhalla explains:

"Yes, the lead underwriters made a killing from the IPO. Yes, we need to ask these questions, but frankly investors who may have been short-changed do not have to look that far back in history to have seen this coming. In particular, the trouble with the Facebook stock reminds one of the dot.com IPO boom primarily led by web retailers. Recall companies such as Pets.com, Boo.com or Webvan, which at one time was worth $1.2 billion and then flopped.

"This time it is social networks- Facebook commands the position at the pinnacle, and others such as Linkedin complete the growing social network IPO ecology. The similarities between the build up and the information disseminated to investors in retail IPO's and network IPO's has largely been ignored.

"In building their case, retail IPOs argued that once the users were locked in they would be sticky and spend most of their lifetime and wallet with them. This time the social network IPOs have argued for network lock-in effects and advertising dollars. The demise of AOL and rise of Facebook offers lessons that are hard to ignore: (a) commanding a gateway position to the web is neither easy nor sufficient to long-term success. Dethroning Google will require serious good luck. (b) Business models evolve rapidly. New entrants emerge rapidly and users are fickle. Experimentation is vital. Acquisitions may give a temporary reprieve but are no mantra for user lock in.

"With early stage Valley investors already scouting for the next Facebook, the 'biggest IPO in history' may well already be yesterday's story."

18 May

Commenting on the long-term value of the Facebook IPO, Ajay Bhalla, Professor of Global Innovation Management at Cass Business School says:

"With its IPO priced in excess of $100bn, Facebook has no doubt been extremely successful in capturing the investor mood at right time. However, investors cannot bank on the current undisputed position it commands in the social network world. The ability of Facebook to reinvent itself will depend not just on having sticky customer base but also on its capacity to introduce new products. For that it may have to maintain the acquisition spree and introduce a different culture than the one is prides itself in. It will also require different set of management competencies than the one it has nurtured for so long."

16 May

Commenting on the news that UK unemployment figures have fallen by 45,000, Professor Philip Booth, Cass Business School says:

The fall in unemployment is welcome. However, growth is more or less absent from the economy which suggests that productivity growth continues to be lamentable.

 Though problems within the banking sector and the paralysis within the Eurozone are clearly making life very difficult for British businesses, instead of governments increasing regulation on business through, for example, the temporary workers' directive, the imposition of the National Employers' Savings Trust scheme and, as announced in the Queen's speech, changes to maternity leave, the government should be doing everything it can to reduce regulation. This is essential if growth, productivity and employment are to undergo the pattern of rapid increases that we have seen after previous recessions.

15 May

Commenting on the situation in Spain and why the European Stability Mechanism (ESM)  must be able to bail out the Spanish Banks, Max Bruche, Cass Business School said:

Spain is circling the drain, and on the surface, the problem is that markets are worried about Spanish government debt spiralling out of control. The underlying problem, though, is the dire economic situation in Spain and the lack of growth, which in turn has a lot to do with the state of the Spanish banking system.

Before the crisis, Spanish banks gave more loans than they could finance with their own deposits, and so turned to money markets for extra funding. In time, Spanish banks became dependent on such funding. However, for a while now markets have been reluctant to lend to Spanish banks because of worries that some of them are sitting on large undisclosed losses --- since the market does not know which banks are sitting on losses, it does not want to lend to any banks. The ECB has stepped in as a supplier of funding to avert an immediate catastrophe, but the underlying issue has not been resolved.

The Bank of Spain has tried to tackle the problem by encouraging banks to merge. The thoughts behind this are first, that mergers do not produce large costs for the Spanish taxpayers, second, that many Spanish banks are below optimal scale anyway, and third, that if you can coerce a healthy bank to merge with a sick bank, you hopefully get a bank out that is not too sick. However, the reality has been that when you coerce two banks of dubious quality to merge, you often just get one larger bank of dubious quality. The strategy has not worked.

The government is now trying to tackle the problem by forcing banks to increase provisions, and forcing them to make repossessed assets more visible in the balance sheet, but without requiring a valuation at market prices (see e.g. the Royal Decree 18/2012 of May 11, 2012). Although these measures do not impose direct costs on the Spanish taxpayer, they are unlikely to do much for transparency (for an excellent discussion, see the post by Tano Santos of Columbia Business School in the Spanish blog Nada es Gratis).

We should face the fact that any real solution is likely to cost money. For example, the most direct solution would be an asset buyback in which Spanish banks can sell bad assets at subsidized prices to a "bad bank," which then winds down these assets. The prices need to be subsidized because otherwise the banks will just hang on to the bad assets in order to avoid crystalising losses. Since prices need to be subsidized, the scheme will cost money. On the upside, bad assets would come out into the open and would be dealt with, and transparency would be improved. The hope would be that restoring the credibility of the Spanish banking system would help Spain to return to growth, which would allow the Spanish government to balance its budget.

We should also face the fact that the Spanish government does not have the money that such a solution would require. But the EU does: It could use the funds of the European Stability Mechanism funds to bail out Spanish banks. Yes, this would imply more bank bailouts on the shoulder of the (European) taxpayer, which is patently unfair. But what is the alternative - palliative measures (which also cost money), followed by an eventual Spanish death spiral, and a possible collapse of the Eurozone?

09 May

Commenting on the Queen's State Opening of Parliament Speech and the government's plans for banking regulation reform, Visiting Professor of Banking at Cass Business School, Giorgio Questa said:

"Clearly a move towards a Vickers-like regulation.

"Like in all regulatory activity the devil is in the details.

"In principle this approach is the most intelligent one. It embeds the universally accepted principle that risk-taking must factor in the risk appetite of the investors. One cannot use moneys deposited in a checking account to engage in risk taking. This principle has been enshrined in asset management regulation for several decades.

"Knee-jerk reactions by some bankers are often destitute of careful analysis."

08 May 

Commenting on the Spanish government's policy reversal on bank bail-outs, Dr Max Bruche, Cass Business School said:

"Bankia's problems illustrate the failure of the policy of the Bank of Spain to fix the Spanish banking system by encouraging mergers.

"The underlying problem is that some banks are probably sitting on large real estate losses, whereas others aren't, and nobody knows who is who. When you combine a bank which is maybe concealing losses with a bank which is not, chances are that you simply produce a larger bank that is maybe concealing losses. This does not solve the problem.

"I understand why the Spanish government would prefer not to use public money to fund a bad bank scheme. But the alternative to such a scheme is, at best, a Japanese-style "lost decade of growth."

04 May

Commenting ahead of the results of the French General Election and what the outcome could mean for the economic outlook of the Eurozone, Professor Philip Booth said:

"From before the time of Frederic Bastiat, the French political class have struggled to come to terms with economic reality. However, the likely winner of the French Presidential election, Francois Hollande, is likely to get a reality check pretty rapidly after his election. 

"France has a national debt that is high and rising; unemployment of around 10% of the workforce; government spending of 56% of national income; and a shadow economy of around one sixth of the size of the official economy.

"More government spending, taxation and debt will not create jobs and growth. Hollande has precisely the wrong strategy for the result he wishes to bring about. A 75% tax rate and cuts in retirement age are the kinds of policy for long-term stagnation in an economy with pitifully low employment rates.

"Furthermore, Hollande's election could destabilise the euro. The eurozone is already suffering from huge uncertainty. Hollande's election would add to the feeling that there is not even any agreement on what the policy should be - never mind on its implementation.

"Is there any hope from a Hollande victory? There is, just. Many left-leaning governments in recent years have, in fact, managed to bring about beneficial reforms when reality has hit home. Secondly, a Hollande victory might lay bare the inconsistencies in the eurozone and lead to radical action more rapidly than a Sarkozy re-election. Furthermore, Sarkozy has hardly proven a friend of the radical reforms that the EU needs, especially in his latter days. As such, the French electorate do not really have a choice and, insofar as they do, it is between socialists from different parties."

26 April

Can poor GDP figures be blamed on the Government's approach to tackling debt? Professor Joseph Lampel, explains why the government's strategy is increasingly risky:

Strategy is a balance between staying the course and responding to changing circumstances. For the moment, the government is intent on staying the course in spite of changing circumstances. This does not mean that their strategy is wrong, but that it is now more risky than it was a year ago. However, if GDP figures grow increasingly worse in the next two quarters, they will have to rethink their strategy. Fortunately for Osbourne he has the Bank of England as a valuable ally. Further quantitative easing may reduce the pressure to deviate from the original austerity targets.

24 April

Commenting on today's report criticising the government's lack of strategy, Professor Jospeh Lampel said:

The label 'national strategy' has strong resonance, but its substance in the context of the report being issued by the public administration committee is unclear.

The twentieth century has many examples of countries that pursued national strategies under the guise of central planning. It is doubtful whether the committee proposal is recommending central planning for the United Kingdom. Looking the language of the report, it is more likely that the committee is drawing a parallel with corporate strategy. Corporations, however, can vary greatly in terms of size and diversity. The right corporate strategy is therefore not simply taking a standard model and adapting it to specific organisations. Different types of corporations will have very different kinds of strategy. The same can be said of countries.

If such a thing as 'national strategy' is possible (not to mention desirable), the first thing that must be determined is what does a 'national strategy' mean for a country such as the United Kingdom. Hopefully, this is something that will become clear in the near future.

20 April

Commenting on shareholder activism at Citi and Barclays, Dr Pete Hahn from Cass Business School, said:

"Shareholder efforts, or perhaps visibility, related to banking on both sides of the Atlantic are long overdue. The timing of this week's activism as new European legislation and regulation on pay is in discussion might even go some way to demonstrating that shareholders can be counted to control management and reduce the need for further rules. Yet, whilst I think boards and managements welcome more engagement from shareholders it is hard to judge any real power shift to investors from a limited number of actions. Shareholder engagement must be judged over a number of years, but some changes are a foot. My guess is that many large corporations will be flagging likely pay arrangements long before next year's award season."

20 April

Commenting on calls by City regulators for companies and bankers to share takeover plans more freely with investors, Anna Faelten, Deputy Director at the M&A Research Centre, Cass Business School, said:

"Based on findings from our recent study on the effects of investors' regional expertise on the success of cross-border M&A, we suggest that management which recognises the benefit of effective two-way communication with investors before embarking on M&A deals are more likely to succeed with their deal strategies. Specifically, the analysis shows that the likelihood of both deal completion and long-term deal success through time depends upon management learning from and getting the support of key institutional investors."

20 April

"Bailing out Greece, Ireland and Portugal is one thing. Bailing out Italy and Spain, the eurozone's third and fourth largest economies is another." 

Senior Lecturer in Banking at Cass Business School, Manthos Delis, outlines his thoughts on why a bailout for Spain and Italy is unlikely:

"There are three reasons I am very sceptical that such a development will take place. First, having witnessed the experience of the other problematic countries, governments in Italy and Spain are proceeding faster with austerity measures, which might prove to be a sufficient safety net.

"Second, and especially concerning Spain, the problems did not originate from inadequate management of public finances as in Greece, but rather from current account imbalances. For a number, primarily institutions-related reasons, this is a problem that can be dealt with more easily with appropriate economic policies.

"Third, these countries are simply too big to be bailed out and a liquidity tank of this size does not exist at present. Thus, the probability of a collapse of the euro zone might be proportional to the probability of bailing these countries out with euro-area funds. Having said that, however, I must stress that neo-liberal policies will not by themselves provide solutions to the problems faced by Italy and Spain. Associated policies aiming to enhance growth in these countries seem to be imperative for the reduction of public deficits, the improvement of sentiment and the overall downsizing of financial and economic risk."

19 April

Commenting on News Corp's decision to strip all foreign holders of its B shares of half of their voting rights, Professor Ajay Bhalla, an expert in family business from Cass Business School, said:

"News Corp's decision to shred the voting rights of all foreign holders of its B class shares is a pre-emptive strike aimed at preserving Murdoch family's ownership of its crown jewels. While the family will retain its voting rights at 39.7 per cent of the total, the biggest loser will be Prince Al Waleed bin Talal, whose voting rights will be halved from 7 per cent to 3.5 per cent. The pressure from the Leveson enquiry in UK is hardly abating and the forthcoming Department of Justice inquiry is likely to push voting B class shareholders into the spotlight and test their allegiance to the Murdoch family - a price which may not be worth paying for both the family and block holders, such as the Saudi Prince. This decision enables the family to distribute the voting rights and avoid any sense of collusion while working on forming new alliances with B class shareholders during these testing times."

13 April

Commenting on the declining fortunes of technology giants Sony and Nokia, Ajay Bhalla, Professor of Global Innovation Management at Cass Business School, said:

"Struggling Sony and Nokia, both regarded as eternal, made dire announcements this week which beg the question: What is the payback from allocating substantial resources to innovative projects? Both firms have poured billions of dollars into R&D and churned out new products at a much faster rate than their competitors. While Sony introduced ground breaking products from Walkman to Playstation, Nokia introduced touch screen phones long before iPhone made its humble market entry in 2007. 

"The obvious answer to the payback question is that firms who allocate substantial resources to innovation can boost their performance many times over. So why have both Sony and Nokia failed to capitalize on their investments? Why do they have no 'star' products left in their portfolio? Is it the way their R&D is organised? Is it that both firms competed in multiple product categories and lost focus, both internally and externally as they experienced unprecedented growth? Or is it that both turned their attention towards fast growing emerging markets, and in the process lost focus in building a next generation firm? 

"Nokia measured its success in market share in countries such as India where it was for long an undisputed leader, and could afford to ignore Apple, which had focused on US and selected European countries. Today it is losing its bread and butter in both emerging and developed markets as consumers shift to Android or iOS devices. Sony, on the other hand, has seen its suppliers such as Samsung emerging as its top competitors in key segments such as television. Both the giants are now awake but the Ice Age melt down may have already begun."

13 April

Commenting on Google's unusual stock spilt Professor Meziane Lasfer at Cass Business School said:

"The decision of Google to split its shares by creating non-voting shares is a clear violation of the one share one vote practice and a dent in the firm's corporate governance image. This decision appears to be clearly driven by the desire of the founders to strengthen their voting rights and to reduce shareholder activism. A major question raised by this case is how can the founders Larry Page and Sergey Brin can get away with it? The answer is because Google is generating very good returns. In general shareholders raise their concerns only when firms are under performing. When they do well, anything goes!"

12 April

Commenting on the news that BlackRock is to start a bond trading platform allowing investors to bypass investment banks, Dr Andrey Golubov said:

"Fixed-income trading traditionally was a very lucrative part of securities business, and comprised a substantial part of investment banking profits. As the worlds largest asset manager, BlackRock manages huge amounts of fixed income assets. It is therefore natural that they want to develop their own trading system as the cost savings there can be substantial. Given that trading costs can significantly reduce investment returns, this move could ultimately improve net returns for the clients and thereby strengthen BlackRock's competitive position."

12 April

'The government needs to clarify its whole thinking on philanthropy' - Professor Cathy Pharoah, Cass Business School:

"Government is now challenged not only to redress the threat to giving posed by its cap on tax relief, but to clarify its whole thinking on tax incentives and philanthropy. Far from being the saviour of Big Society and future public welfare, philanthropic activity has increasingly been called into question. The Budget's clumsy approach has opened a Pandora's box of confused issues. Charitable tax reliefs have been shown in various negative lights as tax avoidance, inadequately regulated and diverted to non-charitable causes, unnecessarily costly for their return in economic terms, and contributing to unfairness in tax policy terms.

 Government willingness to increase the 'price' of giving for those caught by the tax relief cap risks undermining public faith in the generosity of donors who might reduce their giving, and the value of the charitable services they might support. Every new pronouncement has seen policy wade deeper into the mud, with the tax relief cap an increasingly blunt tool for addressing separate issues of policy, regulation and tax incentive effects on which no systematic evidence has been put forward. 

The uncertainties of how the cap will work in practice, the new complexities for the Gift Aid scheme which government has been trying to streamline, and the general cloud hanging over philanthropy are all likely to reduce current and future levels of giving. Government has played a huge own goal. It must now seize this opportunity not only to sort out the ambiguities of current proposals on a tax relief cap, but to develop a positive tax incentive framework which will restore public faith in philanthropy, and encourage its growth in ways that meet social needs today.

5 April

In response to the news that new European rules have jeopardised UK companies' access to venture capital, Jane Reoch, Investment Manager, The Cass Entrepreneurship Fund says:

"The EU restrictions on VCTs are an unhelpful indicator to investors, particularly at a time when the UK government has set out to encourage small business funding.

"Start-up companies should be protected by both the new seed EIS relief, and the fact those investment rounds are unlikely to reach the £2m cap. The restrictions, however, could well affect the small-mid sized firms. These companies have also been seriously impacted by access to finance in recent years"

4 April

Tensions between social and economic returns will challenge Big Society Capital fund, says Professor Cathy Pharoah, from Cass Business School's Centre for Charity Giving and Philanthropy:

"Big Society Capital, launched today, represents the most ambitious attempt so far to stimulate the growth of social enterprise. Though its capitalization is tiny compared with mainstream players, its funds of £600 million are significant to a small and still embryonic sector. But BSC will face the same fundamental challenge as other top-down initiatives in the history of social investment, namely how to deal with the tensions between social and economic returns. 

"As a private sector body, all-be-it with a 'locked-in' social mission, BSC has to maintain long-term sustainability, and although its role is only to support other finance intermediaries who will carry frontline risk, ultimately there will be a bias towards safe lending. BSC will attract investors who want market rates of return while doing some social good, and its funding will go to projects with good track records in attracting substantial contracts from government or funds from the Big Lottery. 

"It will not be able to help small innovative social projects dealing with high needs and high risk clients or service areas where social returns may be high and economic returns low. Its main value may be less in stimulating a new form of investment or asset class, but as a lever for re-configuring mainstream public welfare provision through helping new providers enter the market."

3 April

Professor Ajay Bhalla, an expert in family-owned businesses at Cass Business School, said James Murdoch's resignation marks a shift towards the family taking a backseat in managing News Corporation.

"James Murdoch's resignation as chairman of BSKYB should come as no surprise. At this point, James Murdoch has first and foremost an obligation to preserve the Murdoch family's wealth and reputation.

"Family objectives for wealth, status and power for present and future generations play a vital role in family-owned firms. However, this varies depending on the type of family firm. There are two types of family firms which are publicly owned. One where the family not only has the controlling stake but is also deeply involved in managing the business. The other is where the family may or may not have the controlling stake but is not involved in the business.

"So far the Murdoch's have opted to be in the first category. What we are seeing now is a shift towards the Murdoch family taking a back seat in managing the businesses, and becoming the second type of family firm. In the current situation, the family has to maximize its wealth which has been tied in the businesses it controls. In the near future, we are likely to see the family opting for private rather public ownership - all in the name of family and the next generation."

2 April

The recession, cuts in government spending and rising costs have caused huge job losses in the voluntary sector. Commenting on today's story in the Financial Times. Professor Cathy Pharoah from Cass Business School said:

"For the many young and self-employed people hoping for new opportunities in the non-profit sector as public and private sectors contract, recent figures showing financial pressure and job cuts in the charity sector is particularly depressing news. The data underlines the fragile ecology of the charity sector's finances, which have always been dependent on trends in the major aspects of the UK economy.

"Government is hoping that specialised new forms of 'social lending', such as through Big Society Capital, will stimulate non-profit sector growth and open up new opportunities. This will be a hard card to play at a time when income from public sector contracts is shrinking, removing a major source of the collateral that would underpin debt finance. It is also hoping that major philanthropists will come forward to underwrite the risks of social enterprise growth in the charity sector, which is why the proposed cap on tax reliefs to the rich poses a particularly unwelcome new threat to the sector's income base.

"Inevitably the funding base of the charity sector will be subject to reconfiguration over the next few years as different organisations win or lose in the current funding environment. This is a small sector, and if we want the non-profit sector to provide an answer for the many young people entering the job market, its funding base will have to be more stable than is suggested by current indicators."

21 March

A 'ten steps forward, nine steps back budget', says Philip Booth, Professor of Insurance and Risk Management at Cass Business School said:

"If no economic activity were choked off by the 50p tax rate, or if no avoidance took place then a cut in the top tax rate would cost £3bn. The fact that this cut will cost only £100m is a sign that the 50p rate is having serious effects on rich and poor alike. If there is such a strong case for reducing the 50p tax rate to 45p, then surely it should be reduced all the way back to down 40p.

"The increase in Stamp Duty is highly regrettable and a further unnecessary cost that will be imposed on the property market. However, the news regarding corporation tax was welcome - especially the signal that it may be aligned with the income tax rate in the future.

"Overall, this was a "ten steps forward, nine steps back" Budget - which, by the standards of recent years, is pretty good."

21 March

Cutting corporation tax alone won't help the UK to compete, says Ajay Bhalla, Professor of Global Innovation Management at Cass Business School.

"Is Britain competing to be a hub for Global HQs or one where foreign and local firms conduct their high-end operations? When it comes to Britain as a preferred choice for foreign direct investment, it now competes head on with countries which only five years ago were not regarded as serious investment locations. By lowering the corporate tax, Britain is attempting to send a signal that it remains investor friendly.

"However, any euphoria around the announcement is likely to be short lived. Both emerging and developed economies against which Britain competes are hungry for business and will follow suit by lowering their corporate tax thresholds. For example, Germany attracted roughly double the FDI in 2010 than in 2007 and Ontario in Canada is fast emerging as an investment location for bio-tech industry having already successfully cloned multiple clusters.

"Britain needs to offer a concerted value package for firms betting their investment on the UK. To be ready for business means introducing multiple initiatives in tandem. That is, however, not the case. Recent initiatives such as changes in immigration policy or lack of progress in loosening the bureaucratic regime stifles entrepreneurship. Britain continues to be stuck in the middle. We need a concerted effort to re-build our competitiveness in industries where we continue to demonstrate potential. In that sense, the offer of help for the video-gaming industry is to be welcomed but there are other industries, such engineering, which need urgent attention - particularly in terms of skill sets and unlocking the financial channels, which are starving the growth of high-end businesses."

20 March

Commenting on the government's plans to target small businesses with 'credit easing', Professor Philip Booth said:

"Credit easing is a scheme ridden with contradictions that will make very little difference to British business.

"The government is currently raising the cost of banking by imposing onerous capital requirements and structural changes on banks to ensure that they are less likely to receive government bailouts in the future. At the same time the government is subsidising banks' loans to small businesses using a method that is unlikely to increase the volume of small business lending.

"One of the major causes of the financial crash was the US government underwriting mortgage borrowing. This government is repeating that mistake with small business borrowing. By subsidising one particular approach to lending - that is lending financed through wholesale markets - the government is also subsidising a specific model of banking which is the very model that failed Northern Rock.

"The paradox at the heart of this scheme is that, if it remains small, it will do little good. On the other hand, if it grows large, it will hugely increase risks in the banking system and to taxpayers."

19 March

Commenting on the news that the government plans to nationalise the assets of the Royal Mail pension fund Professor Philip Booth, Cass Business School said:

"The government's decision to nationalise the assets of the Royal Mail pension fund whilst taking on all future liabilities is short-sighted and dangerous. The assets will be used immediately to reduce the government's debt whilst the liabilities - made up of future pensions to workers - will no longer be funded and will have to be met by future generations of taxpayers. The liabilities will be hidden from the government's accounts.

"According to the government's own figures, the liabilities are £10bn greater than the assets which stand at £28bn. However, if valued properly, the liabilities would probably be well over £20bn more than the assets. Government accounts will show a reduction in the government's national debt of £28bn whereas, in reality, the national debt will be increasing by over £20bn.

"Although the government claims that it will not be spending the £28bn raised from taking over the assets because it will be used to reduce its borrowing, future governments are less likely to feel so constrained. The government would not allow a private sector company to get away with such shoddy - indeed, underhand - accounting practices."

19 March

Commenting ahead of this week's Budget, Professor Philip Booth from Cass Business School, said;

"As far as tax and spending are concerned, the big issues ahead of the budget have already been settled. A little room for manoeuvre may be created by lower-than-expected government borrowing. It is to be hoped that the government will abolish the 50 pence tax rate but it would be disappointing if new taxes were introduced to finance this.

"There may well be major announcements on liberalisation and privatisation in the budget - for example Sunday shopping, planning and road privatisation. Welcome though such announcements might be, these are not matters for the Chancellor of the Exchequer. It is an indication of the paralysis within the coalition and the undue media attention on the annual budget that these measures will be announced by George Osborne and that they have not been announced at the soonest possible moment by the minister concerned.

"The key objectives for the budget should be lower taxes and simpler taxes. For this objective to be met, new areas must be found to reduce government spending from its historically exceptionally high level of 50% of national income."

14 March

Commenting on the UK chancellor's plans to launch an "Osborne bond", Professor Philip Booth of Cass Business School, said:

"It is the responsibility of the government to fund its borrowing as cheaply as possible. It is therefore right to consider issuing very-long-dated bonds, but a more urgent matter is to increase the issue of index-linked bonds.

"Currently index-linked bond yields are negative - in other words, as Milton Friedman once put it, investors are paying the government for the dubious privilege of lending it their money. Inexplicably, the last government reduced the issue of index-linked bonds. This decision should be reversed and the government should fund much more of its debt through index-linked bonds. That way, investors will be more confident that the government will not use inflation to reduce its borrowing obligations and the government will be able to fund its debt very, very cheaply."

5 March

Future Chelsea managers may suffer the same fate as Andre Villas-Boas due to an "embarrassment of riches", says Head of the Faculty of Management at Cass Business School, Professor Cliff Oswick.

"Somewhat paradoxically the failure of Villas-Boas at Chelsea may be due to "an embarrassment of riches". Having the unrivalled spending power that can be provided by Abramovich can be a real burden. Beyond the obvious pressures caused by a significant weight of expectation, it also means that in managerial terms the focus is on the 'management of resources' rather than the 'management of people'. In effect, AVB found himself in a situation where he was managing players as commodities (i.e. a buy, sell and substitute mentality). For other managers, who don't have so many superstars or the unlimited spending power available to Abramovich, the focus is on managing with the limited resources at hand i.e. working with the players you have. In the latter situation the managerial emphasis is upon morale, motivation and development rather than acquisitions. In short, Villas-Boas' may have done better with fewer resources."

22 February

Commenting on the surging popularity of Pinterest, Vince Mitchell, Professor of Consumer Marketing at Cass Business School, said:

"What's great about Pinterest is that, unlike Facebook, it's more anonymous. It doesn't have the privacy issues of your friends and family seeing posts about you, or your private details being used for target marketing purposes. In a way, it's similar to an online bazaar, where a small trader can show their wares, giving it the same feel as walking round an interesting market to see what's new.

"Pinterest is at it's best for product categories which have high involvement or as least have some users who are highly involved. That's why pins of food, fashion, funny things and famous people work. It'll work less well for low involvement products.

"At the moment, the balance of personal loves and professional sellers feels right, but this could change if companies begin to target it as the next big thing which inevitably risks spoiling the social nature of the site."

16 February

Dr Nick Motson comments on the investigation into LIBOR, as it gathers pace:

It would be difficult to overstate the importance of the London Interbank Offered Rate (LIBOR). It is used as a benchmark for corporate loans, bonds and derivatives and it's estimated that in excess of $300 trillion of derivatives and more than $10 trillion of loans are tied to it. LIBOR is calculated on a daily basis for 10 different currencies and for 15 different maturities of between 1 day and 1 year. In theory it should represent the cost of borrowing unsecured funds in the money market. For each currency the LIBORs are determined by a panel of between 7 and 18 banks, for example LIBOR for Sterling is set by a panel of 16 banks. At 11am each of the banks submit their LIBORs and the BBA removes the highest 4, the lowest 4 and then takes an average of the remaining 8.

Initially it was suggested that the investigation was centred on whether banks kept LIBOR artificially low during the financial crisis in order to ease any concerns about their own financial health. If this was indeed the case then in order to achieve this there must have been collusion amongst the banks because any bank who submitted a lower LIBOR than everybody else in the panel would be omitted from the average calculation as outlined above. It is also difficult to ascertain exactly who the winners and losers would be and also whether the banks would actually benefit because it would reduce the interest they received on any loans that were tied to LIBOR but at the same time they would have to borrow money at a higher rate in the markets.

However it was reported yesterday that regulators are investigating whether the banks attempted to manipulate LIBOR in order to benefit their own derivative trading desks, if this is found to be the case then it is much more serious because it is clear who the winners and losers are. If you consider that a change of just 0.01% in 6 month Sterling LIBOR would make a difference of £5,000 on a deal of £100,000,000, considering the size of the market the implications are huge.

14 February

Commenting on Moody's placing the UK on negative outlook, Professor Philip Booth from Cass Business School, said:

"The downgrade threat from Moody's should come as no surprise. Whilst Moody's are correct to cite the difficulties in the eurozone as a potential threat to the stability of government finances, many of the problems facing the UK government are home grown. Public spending continues to rise and the Office for Budget Responsibility has shown that there are huge pressures forthcoming from the effects of ageing populations due to increased health, long-term care and pensions costs. Furthermore, the pressures on business coming in the form of increased regulation - including in the vital banking sector - are suppressing growth. All these things mean that the UK's top-notch credit rating is deservedly on a knife-edge."

13 February

Commenting on the £1billion shortfall by the UK banks in delivering Project Merlin, Ajay Bhalla, Professor of Global Innovation at Cass Business School said:

Implementing Project Merlin was never going to be easy. The government needs to have a multi-pronged approach to lifting the fortune of small businesses in the United Kingdom. Easing credit conditions is only part of this jigsaw. You cannot expect banks to shift their risk structures just to meet the target.

To complete the jigsaw the policy makers need to support a 'can do' attitude, and move away from piecemeal policies, such as providing £1 million to boost the fortunes of the high street. That 'can do' attitude will require working fast on delivering the promise made by the Business Secretary on reducing the layers of bureaucratic blocks which have added nothing but cost base for small businesses.

9 February

Professor Keith Cuthbertson of Cass Business School responds to David Cameron's comments on the positive impact of women in company boardrooms, by calling for a quota system:

Currently in the UK about 10% of company directors, 9% of high court judges, 14% of university Vice Chancellors and one member of the Supreme Court are women. Yet there are lots of women out there who score highly on educational levels and general work experience. What's going on? Why is the representation of women on boards so low?

Lord Davies in his recent report provides a major reason for this. Over 50% of board appointments are via personal friendships, only 4% have formal interviews and only 1% are advertised. Competitive entrance, as for example in the UK civil service is thought to provide a fair and efficient way of appointing quality people - contrast this with the UK companies' approach to board appointments.

Lord Davies and presumably Mr Cameron reject quotas partly on the grounds of tokenism - a woman will feel inferior to the men if she is appointed under a quota system - even if she had to beat say 15 other well qualified women candidates for the post. This would be true if the talent pool of women was small. But with an average board size of 15 you only need 1,500 qualified women today, in the whole of the UK (let alone the world) to have 100% women on the boards of all the FTSE100 companies.

Cameron is not being bold enough. By not setting quotas for women on boards, he keeps the Catch 22 situation going - boards can always say to women, we can't appoint you to our board because you have no boardroom experience.

Another reason why quotas are important is that they get us to a critical mass. With more women on boards, they can act as mentors for future potential women members and push for measures to remove the glass ceiling on internal promotions to high level posts.

Cameron is right to say that this is about "quality not just equality". The evidence is that more women on boards result in a better performance for firms - where the women have the same education and experience as the men. Quotas in Norway resulted in a rise in "women on board" to 40% over 2002 to 2009. Even in Norway a change in the law and legislative fines were needed to finally achieve the quota. Cameron's usual warm words of encouragement to UK women on this matter will do nothing to break-the-ice with his Nordic hosts. Instead he should learn from them and introduce quotas.

2 February

Responding to the launch of Facebook's IPO process, and the decision by Mark Zuckerberg and his allies to retain an iron grip on the company, Professor of Global Innovation at Cass Business School, Ajay Bhalla, said:

"Research shows that when founder-led firms go for IPO listing they often carry 'founder premium', especially when the founder opts for maintaining control rather than diluting it.

"This means that by maintaining control Zuckerberg sends a clear signal to stakeholders, investors and customers that the company will retain a consistent strategic focus.

"Zuckerberg is following in the footsteps of charismatic founders such as Jobs, Gates, Brin and Page who, by retaining control, were able to direct their vision without much interference from other majority shareholders.

"As the firm continues to evolve from being a network player to one which can make in-roads into diverse segments, such as mobility and enterprise, Zuckerberg's control over the firm will continue to generate interest and send reputation signals which are likely to generate greater shareholder wealth than would otherwise be the case."

30 January

Commenting on plans by French President Nicholas Sarkozy to introduce a 0.1 per cent tax on financial transactions from August, Professor Philip Booth of Cass Business School, said:

"By introducing a transactions tax, President Sarkozy hopes to make the financial sector pay for the damage caused by the crisis and repair the hole in French government finances. He will achieve neither objective. The EU and member states are already taking action - much of which is appropriate - to ensure that, in the future, banks that make bad business decisions are wound up safely and do not impose burdens on the taxpayer. Transactions taxes on the other hand are arbitrary and the burden of the tax is likely to be placed on the users of financial products - those who have mortgages, need foreign exchange cover for business transactions, and so on. In fact, the likely result of a transactions tax in France is that business will move elsewhere and economic recession in France will be entrenched. It is, indeed, incredible that one of the world's most over-taxed and over-regulated developed economies should be imposing more taxation as part of a so-called recovery package."

30 January

Responding to the news that RBS CEO Stephen Hester has turned down his controversial bonus, Veronica Hope-Hailey, Professor of Strategic Human Resource Management at Cass Business School comments:

"The decision of the new CEO of RBS to decline his bonus should be welcomed as a step along the path to restoring employee and public trust in both banks as employers and senior bankers as individuals.

We know that people assess trustworthiness using several criteria. The first is Ability - is this person sufficiently competent to do his job? There is every evidence that Stephen Hester is doing a good job of improving performance at RBS. However to restore the trust of the public, who are also RBS' shareholders and customers, ability is a necessary but insufficient criteria.

Two other leadership attributes must be demonstrably visible to employees and society at large in order to restore trust. One is Benevolence. A trustworthy leader has to demonstrate a concern for people beyond his immediate concern. Do they have a sense of their responsibility towards broader society? If he had taken this bonus Stephen Hester ran a high risk of being seen as entirely "self serving" to the average member of the British public trying to battle with the consequences of his predecessor's decisions.

Another leadership attribute which creates a sense of trustworthiness is Integrity: does a leader appear to operate with some kind of moral code which resonates with those constituencies they serve, in this case their employees, their customers and the general public as shareholders. The public and RBS employees are in a questioning mood. They are asking how can it be morally right for the leader of one of the culprit organisations to be offered such a high bonus at the same time as critical public services and jobs are being cut to balance government budgets following the bank's bail out.

From what I have read about Stephen Hester there is every evidence to suggest he is a deeply moral and honourable individual and this probably accounts for his excellent and wise decision to decline the bonus.

However the recent record of many other senior bankers is causing society to hold leaders to account in these two areas of benevolence and integrity. Any CEO or member of a bank remuneration committee who cannot grasp this is out of touch with the current mood of the British public.

Based on my current research on trust repair across all sectors I can assure senior leaders of this. To seem unconcerned about the need to demonstrate both benevolence and integrity is a dangerous place to be, especially given the fact that the great British public owns some of these financial institutions and also constitutes a large proportion of their customer base."

25 January

Responding to comments by Martin Wheatley, Head of the Financial Conduct Authority (FCA), who said regulators should ban potentially dangerous products to protect consumers from themselves, Professor Gulnur Muradoglu of Cass Business School's Behavioural Finance Working Group, said:

"The emphasis on an active rather than a passive role in consumer protection in financial markets is extremely progressive. This takes the UK one step ahead of the US and Europe.

"Many of the triggers of the 2008 financial crisis were behavioural. The underestimation of risk by almost everyone in the economy was behavioural, as was the optimism, greed and herding of investors. These are all part of human nature, and will not change. Therefore a new regulatory stance is needed that will help to make investors, especially those on low income and the elderly, less vulnerable not only to others' biases but also to their own."

25 January

Commenting on the release of the latest GDP figures that show the economy contracted by 0.2% in the three months to December, Professor Philip Booth from Cass Business School, said:

"It is not surprising that the latest economic growth figures are grim given the headwinds from the eurozone. However, this should not tempt the government to change track on deficit reduction. There is no evidence that increasing government borrowing will increase economic growth. Indeed, if anything, part of the setback in growth has been caused by the necessary reversal of the irresponsible government borrowing in the immediate post-crash period.

"Whilst the government cannot solve the eurozone crisis, it can radically deregulate the UK economy to create the best possible conditions for economic growth. The government must press ahead with planning reform and begin to deregulate the British labour market. In this area, the government has been moving in precisely the wrong direction and it must change course."

18 January

Commenting on the battle for tougher regulation of the Bank of England, Bob Garratt, Visiting Professor at Cass Business School said:

The publication of contrasting models for the future governance of the Bank of England shows from the Bank's proposal a classic example of a Chief Executive wanting the future oversight by their board of directors to be as weak as possible. The Bank is one of our oldest companies and comes under the Companies Act. Given its national importance It should be a model of effective corporate governance. It is not. The 2006 Companies Act stresses the supremacy of the board of directors, in this case The Court, and their role in balancing their challenge of both driving the Bank forward in turbulent times and of ensuring the prudent control of its own organisation.

This is what the Governor's proposals seem designed to negate. He diminishes the role of the Court by proposing that the Court should oversee only the Bank's pay and internal management; and that the proposed Oversight Sub-Committee (note the "sub") should monitor only the Monetary Policy Committee's "processes not policy". What chutzpah! It is the similar to being put in the dock for murdering one's parents and then entering a plea for mercy because you are now an orphan.

The Bank has failed in its present governance and now, as it receives even more powers, seems keen to do the same again. It has had two main committees neither of which has worked well due to bad design and execution and because neither were controlled by the Board. The one that has had massive publicity, The Monetary Policy Committee, has been the ground for warring macro-economists yet it does not even report to the Court but to the Treasury and will remain so. The other, now the Financial Policy Committee, suffered neglect and lack of oversight by the Court and the Governor until 2008 and the Western Financial Crisis. This is why we had no suitable financial stability instruments available as the crisis hit and had to invent Quantitative Easing rapidly.

The alternative proposal by the Treasury Select Committee is somewhat better as it is designed to ensure that there will be at least a Supervisory Board which reviews the work of the Court and its committees. However, there is no need to set up a more complex two-tier structure if the Bank followed the company law and the regulatory codes by acting as a unitary board of which the UK has some four hundred years of experience.

13 January

Commenting on Tesco's sales figures and how the board may look to shake things up at the supermarket chain, Ajay Bhalla, Professor of Global Innovation Management at Cass Business School said:

Pursuing the allure of growth is tightly knitted to Tesco's existence. Such is this pursuit that when it revised it Vision document mid 2011, it made growth as central plank of its strategy. Growth has its costs and may not necessarily generate returns. No longer does the mantra - Bigger is better - hold true. Results from Tesco's competitors - Sainsburys to Waitrose and Morrisons - have demonstrated that 'Big Price Drop' had little impact. Reversing the growth track is what Tesco executives may do next and this will require revisiting the vision. I am sure some serious introspection is already underway in Tesco's boardroom and this time the board may opt to decode the growth DNA in favour of better health and longevity.

12 January

Commenting on the 'unhealthy correlation' between the building of skyscrapers and subsequent financial crashes, Tony Key, Professor of Real Estate Economics at Cass Business School said:

On an anecdotal basis, it's easy to make a list of many of the tallest and most famous office towers that were completed in economic and property market slumps: in New York the Chrysler Building and Empire State Building (known at the time as the Empty State Building) in 1930-31, the Twin Towers in 1970-71; in Chicago, the Sears (now Willis) Tower, Aon Building and John Hancock Tower were all completed in the early 1970s. In London, the Natwest (now 42) Tower was finished in 1980, Canary Wharf in the early 1990s, the most recent set of big towers (Bishopsgate, Ropemaker Place) in the late 2010s. Of course, it would be easy of find quite a lot of counter examples of big buildings completed into booms: the Heron Tower, for example, completed in 2011 did catch an upturn in the London office rental cycle.

"The coincidence of large volumes of building with economic downturns is a natural tendency of the property cycle. It takes a lot of finance and confidence to put up mega-projects, both of which are most abundant in economic booms. It takes several years - say 2 to 4 - to put them up. If the economic cycle tends to run 2-3 years from peaks to troughs, too often building started at peaks will be finished in troughs. The phenomenon is not confined to big towers - at applies to the total volume of construction.

"So while it makes an eye-catching story to focus on the towers, if I were worried about (say) India I'd be looking at the total volume of buildings not just skyscrapers. If I wanted to worry, I'd note that the next set of office towers likely to be built in London will be completed 2013-2014. But on the other hand, they've also been started at a fairly low point in the economic cycle. You might argue that developers have learned from the history, and this time are trying to second-guess it. If the economic cycle doesn't turn out to be quite like history - for instance we just don't get much of a pick up in London financial services - they'll be wrong again, but for a different reason.

11 January

Commenting on whether plans for the high speed rail network is the best use of government funds, Professor of Operations and Supply Chain Management, ManMohan Sodhi said:

In every slump, in every recession, governments seek to invest in mega projects. This serves two purposes: One is simply money being pumped into the economy along with jobs to (hopefully) revive the economy and get it going. The second, more important, is to let loose the Keynesian animal spirits to lift the sagging consumer confidence and thus revive the economy. Of course, the projects may or may not make sense economically, but, what price would one put to revising animal spirits?

Yes, this investment will create jobs but are there alternatives that can create jobs? Some might make the case for giving loans to small businesses, and indeed the government has pondered such an idea given the major banks' reluctance to funding small businesses. What about improving the badly rundown infrastructure whether in the north or in the south? Also, given austerity measures, can we really train people being let go into construction workers for high speed rail?

Perhaps we could consider required investments now and worry about optional ones later?

10 January

Commenting on the proposal for a European Tobin Tax, Professor Gulnur Muradoglu, said:

"The weakness of a Tobin Tax is that it assumes the high volume of transactions in the financial markets are partly to blame for the economic crisis, and that a tax will help to reduce the number of transactions. Neither of these presumptions are true. What is really needed is the introduction of regulation to ensure complex financial instruments are represented transparently in balance sheets. If liabilities embedded in complex instruments that are classified as assets are not transparent, there is no hope for a reduction in the probability of another crisis."

9 January

Commenting on David Cameron's 'promises of powers to limit executives pay' Dr Pete Hahn, Cass Business School, said:

Outrage at out-sized remuneration is much more about the lack of discipline for those approving absurd awards than those getting the awards. What is the downside for corporate remuneration committees that overpay? In a world of distant and fragmented shareholders with large governments attempting to offer autonomy, the reality is that no-one oversees the overseers. It is the incentives or lack thereof at corporate and public sector boards that have created these problems and an industry of highly paid and equally vested interest consultants that is sure to keep it going.

19 December

Commenting on George Osbourne's response to the Vicker's report, Philip Booth, Professor of Insurance and Risk Management said:

"There is a clear lack of decisiveness about how to approach the problem of banking regulation from the government. On the one hand, welcome action has been taken to ensure that depositors are treated preferentially in the event of a bank failure and to ensure that banks can be wound up in an orderly fashion. On the other hand, the government wants banks to hold much more capital to ensure that they very, very rarely fail. Discouraging failure so strongly also militates against the government's other objective of promoting a dynamic market with healthy competition from new entrants because it prevents the established banks from failing and exiting the market.

"The ring fencing of EEA deposit business is a clumsy mechanism that would not have made any difference to the banking crash of 2008. A more imaginative approach would have been to give the Bank of England a primary legal responsibility to ensure that banks could be wound up safely in the event of failure and also to give the Bank of England the power to impose structural change if and only if it was necessary to do so."

12 December

Commenting on the Gates Foundation investment in the Aureos health fund, Professor of Charity Funding at Cass Business School, Cathy Pharoah, said:

"The Gates Foundation investment in the Aureos health fund is an excellent example of how commercial and philanthropic investment can be brought together to achieve sustainable social change in a developing country. This is a programme-related investment (PRI) of philanthropic assets in a developing country where growth areas can promise high social and economic returns. Health in Africa has attracted high levels of government aid in recent years. PRI are generally regarded as potentially generating greater benefits than more traditional grant-making, but they carry higher risks because they often involve innovative projects in organisations with little track record. Although this investment aims at an impact that goes well beyond what can be achieved with traditional philanthropic grant-making, with assets exceeding $34 billion, the Gates Foundation can afford to take some risks. With total combined assets of £26 billion in the UK, if the giant healthcare foundation the Wellcome Trust is excluded, only a few foundations in the UK have dipped their toe in the water of social investment. The Aureos fund has a strong track record of investing heavily in management to deal with the higher risks of social investment in developing countries."

12 December

Commenting on the FSA's report on RBS, Professor Bob Garratt, Visiting Professor in Corporate Governance at Cass Business School said:

The long overdue Report does fill in many of the gaps which have been rightly questioned by the public over the last four years. However, it does not deal in sufficient depth with the key issue of how do we better avoid this happening again? It fails to tackle the issue of director and senior executive liability. There are two significant issues:

First, neither the BIS under Vince Cable nor the FSA and its lawyers are inclined to take action. The BIS is responsible for the roll-out of the seemingly powerful 2006 Companies Act. Of "the Seven Non-Exhaustive Duties" for Directors cited in this Act, three are directly applicable to RBS. The odd thing is that according to the Report and the Government's lawyers no-one can be seen as accountable and liable. This is patent nonsense and leads to the question in relation to corporate governance and board effectiveness So what use are the FSA, BIS and FRC then?

Second, structurally the regulatory oversight mechanism for governance and director effectiveness in the UK is weak. They have no clout, no resources and no political backing. Hence they have no blood on their sword to make other directors take notice.

7 December

Commenting on the news that China will be switching its export focus to emerging markets Professor of International Finance, Kate Phylaktis, said:

For China to reduce its exports to the west and increase its imports from the west can be a good development as it will reduce the external imbalances with the west. However, trying to keep the same rate of growth of total exports by increasing exports to the other emerging markets might prove more of a challenge than it anticipates. The longer the global financial turmoil lasts with its negative impact on the developed countries, the higher the possibilities that emerging markets will also be affected. China should be trying instead to boost domestic consumption and maintain the high rate of economic growth that it has been based up to now on exports and investment.

1 December

Responding to the news that central banks have slashed borrowing rates, Manthos Delis, banking expert at Cass Business School said:

Rate cuts are welcome as they are likely to offer a short-term solution to liquidity problems. However, this effect is likely to be so "short-term" that it will soon vanish, perhaps in a week's time, if it is not associated with long-run commitment to enhancement of liquidity by the ECB, treaty changes to promote low public deficits and simultaneous introduction of a eurobond scheme for countries that accept and enforce treaty changes.

29 November

Commenting on George Osbourne's autumn statement Professor Philip Booth said:

The facts have changed but the policies have not. Despite the deterioration in the economic outlook, the government is not reducing its spending further, therefore putting more of a burden on the private sector of the economy through higher government borrowing and further delays to meaningful tax cuts. Furthermore, the up-rating of benefits whilst real wages are falling further sharpens the disincentive effects of our dysfunctional benefits system. This, together with other unnecessary spending announcements, suggests that the government wishes to "coast" rather than address the difficult challenges that the world economy is throwing at it.

29 November

Commenting on the news that Toyota may consider moving away from Japan for some parts of its production and speculating where they may go, Professor of Supply Chain Management at Cass Business School, Mohan Sodhi says:

Japanese manufacturers, while loyal to their suppliers, were essentially goaded into making their supplier base more global after the earthquake and its economic aftermath. The same applied, although to a much lesser extent, this year with the floods in many regions in Thailand. Currencies can move up and down but Japan also has a demographic issue, more acute than any other part in the world, of an ageing population. The demand is also slowly but inevitably moving to developing countries, be they in South America or in Asia.

Still, it is hard to imagine that business will come to the Eurozone, especially in the near future - the demographic population problem is here as well, and the problems with the euro and the Eurozone also appear to be long-term. Nor is there any attraction of growing demand. As regards North America, there are also Japanese auto plants and production can move in and out depending on currency movements.

28 November

Responding to the news that George Osbourne is expected to announce the government's plans to underwrite £20bn in loans to small businesses - Professor Mohan Sodhi, Cass Business School said:

The Chancellor's move is welcome in all quarters: by not only the small businesses it supports directly but also the larger companies these businesses supply as well as by the banks.

However, a better and long-term solution lies in supply-chain finance, which UK banks took global lead and are now turning out to be too timid. The idea is simple in concept: rather than give loans to a company - whether small or large - the bank essentially gives credit to the supply chain. In practical terms, the bank gives loans to a small company against the supplies it has made to a larger company with a much better credit rating.

The interest rate for the small business against the invoices (and there are many variants) can then be much lower, essentially that of the larger company, plus some extra points to cover costs and increase the profit.

In preliminary research conducted by Cass Business School, it appears the hurdles against doing this are logistical and technical rather than fundamental. The Chancellor can push the banks, the accounting firms and large corporates to remove or lower these hurdles - this would be a long-term win not only for UK companies but also for UK banks without using any of the taxpayers' money.

25 November

Responding to the news that India is to open its $450bn retail sector to foreign supermarkets, granting access for the first time to companies including Walmart, Carrefour and Tesco, Ajay Bhalla, Professor of Global Innovation Management at Cass comments:

"The real question is not if welcoming supermarket giants with open arms will transform the Indian retail sector, but in what form the transformation will take place. Undoubtedly it will release capital in the sector but more than that it will inject both managerial expertise and cutting edge processes in various parts of the value chain, specifically the supply chain. India's growing middle class will welcome innovation in the customer experience. At another level, however, it will throw the many home grown operators into disarray. Individual retail operators will be priced out and unable to match the discounts offered by large retailers. The micro-credit schemes these retailers offer to the bottom of pyramid customers may bring in some respite but not for long."

21 November

Responding to reports directors in the Cayman Islands are sitting on multiple boards, Professor Meziane Lasfer of Cass Business School, said:

"Reports that some non-executive hedge fund directors in the Cayman Islands are sitting on more than 100 boards each is a concerning revelation for investors. By holding so many jobs, it is a fantasy for any director to think they can perform their fundamental duty of protecting investor interests.

"Firstly, the directors are unable to accomplish the crucial monitoring role they should play in ensuring funds are performing well and generating good returns for investors. Secondly, the directors cannot properly fulfil the duty they have to advise managers on the fund's investment decisions.

"These activities can only be accomplished by being present and active at the board meetings. Empirical evidence shows that companies hold, on average, 11 meetings per year. If each of the meetings lasts one day, non-executive directors can attend only about 33 meetings a year, assuming that these board meetings do not clash. If they sit on 100 boards, they will have to miss 67 meetings, begging the question why these directors are being paid for doing nothing.

"All of this results in a weak and inefficient board, in which managers have a free-ride in decision-making and risk-taking, and investors are left worryingly exposed."

15 November

Commenting on the Financial Services Authority (FSA)'s introduction of compulsory recordings of staff mobile 'phone conversations, Professor Meziane Lasfer said:

The FSA's implementation of new rules introducing the compulsory recording of trading staff mobile 'phone conversations will have little effect on the practise of insider trading. People are not so stupid as to discuss insider information on work telephones, mobile or fixed line, nor are they likely to have these conversations on personal telephones. Most information is swapped in direct conversation.

The loophole in monitoring insider trading lies in the patterns of trade prior to new announcements in the market. If the FSA truly wants to regulate insider trading it needs to concentrate its efforts on identifying irregular trade patterns leaning toward a net buy in a company prior to a news announcement.

15 November

Responding to the news that yields on Spanish government bonds has risen to over 6%, Visiting Lecturer Guy Fraser Sampson said:

Spain faces an election in the next few days in which a conservative government is felt likely to be elected. This may make it more likely that the government will be able to persuade the electorate to implement the proposed austerity measures.

The Spanish economy seems to be flat-lining according to some recent estimates, perhaps with no further growth this year. Unemployment of 21.5% and youth unemployment of 46% are hardly signs of health.

Spain has over $640B of debt, which equates to 67% of GDP. Hardly in Italy's territory of 120% of GDP, but Spanish bond yields rose above the magic 6% figure today, and Spain needs to get another, larger, bond issue away in the coming weeks. One leading European bank has now said that Spain "is on the radar screen" of default alongside Italy. Should Spain default then this could have serious knock-on effects. They owe over $235B to French and German banks, and the former are already heavily exposed to Italy.

A further problem, not publicly acknowledged is that the "Fondo", Spain's national reserve pension fund, has well over 90% of its assets invested in Spanish government bonds. Thus, its risks and assets are pointing in the same direction, rather than hedging each other. Sovereign default could trigger a major collapse in the value of pension and/or social security funds just when they are most needed.

15 November

Responding to Bank of England figures which show the UK's big five high street lenders are almost £1bn short on their commitment to make £76bn of loans available to SMEs this year under Project Merlin, Ajay Bhalla, Professor of Global Innovation Management at Cass, said:

"Intermittent messages from policy makers promising support and a half-hearted approach by banks to lending to SMEs is doing little to help the UK's declining population of SMEs. Successive governments failed to provide adequate support to UK manufacturing and now we see SMEs under attack. Today's news that banks are falling short of targets to lend under the Project Merlin agreement is symptomatic of the uphill task Britain faces in injecting and sustaining entrepreneurship. Britain has already sleep-walked into an economy with two types of businesses: Tesco and financial services. CEOs of large firms not only have access to alternative financing options when faced with a liquidity crunch, but also a hotline to ministers. British SMEs have little in the way of such luxuries. If Britain is serious about injecting competitiveness into its economy, it has to get serious about implementing policies which will help create thriving Mittelstand in every region of Britain."

10 November

Commenting on the eurozone debt crisis, Professor Philip Booth from Cass Business School, said:

"It was always likely that the Italian debt situation would make recent negotiations regarding the eurozone bailout irrelevant. Italian government debt will just about be manageable if the government rapidly deregulates its economy so that economic growth increases. This solution is well within the reach of the government in theory, but the practice of Italian politics makes it more difficult to achieve. The alternative has to be an orderly right-down of debt in both the public and private sectors. The attempt to repackage debt and have already indebted states provide guarantees will fail."

10 November

Responding to HSBC's predictions of 'severe headwinds' as a result of the Eurozone crisis, Manthos Delis, senior lecturer in Banking at Cass said:

"I feel that the Eurozone economic crisis with escalating spreads of weaker countries will not see a quick resolution, as the associated political crisis exacerbates uncertainty and increases risk premia.

Today, a second recession within five years seems highly likely and further threatens the already weakened financial sector. Having said that, however, I feel it is unlikely that groups like the HSBC will leave a market like the UK one. In contrast, as losses emerge, it is likely to see a separation of commercial and investment banking, which comes with well-known benefits and shortcomings."

9 November

Commenting on the news that Vodafone's Chief Executive has stated that Vodafone is changing from a 'European company' to 'an emerging markets' company, Ajay Bhalla, Professor of Global Innovation Management at Cass said:

"Most CEOs know the reality that the future of their firm rests in Emerging Markets. A cursory look at the financial statements will tell you that while many European firms have substantial asset bases in the developed world, the return on these asset bases is shrinking. On the contrary, be that Tesco or VW, the returns from Emerging Markets and forecasts are so tempting that CEO's are beginning to question the logic of maintaining the HQ function in Europe. Over the past two years, top management of many British firms, such as HSBC or Barclays have debated the question: What does it mean to be a British firm? Some like HSBC decided to re-locate the top management in Hong Kong. Others like Cisco have taken the decision to balance their board composition. At some point soon, when institutional regimes in Emerging economies gain parity with developed world, the balance will tilt. Questions will be asked as to why should a firm operating in global market retain a European HQ? It is very likely that we may soon see emergence of dual structures, where firms maintain handful of functions in Europe while shifting the core functions to locations where they earn their living."

8 November

Commenting on the news that China is for the first time to give formal backing to moves by British banks to turn the City into an offshore trading centre for the renminbi, Professor Kate Phylaktis Professor of International Finance and Director, Emerging Markets Group (EMG) at Cass said:

 Bearing in mind the increasing importance of China in the world Economy and world trade, UK should not miss the opportunity to facilitate renminbi transactions and maintain its key role in FX transactions. The use of the renminbi, or Chinese yuan in international trade is projected to increase in the future for the following reasons. First, the Chinese economy has been growing fast and will match the US GDP by 2020 as predicted by Goldman Sachs in 2010. This is due to a combination of China continuing to have a healthy 9-10% rate of economic growth, while the US and the developed countries have been growing below trend. Secondly, recent developments of the U.S. and the euro-zone, the quantitative easing monetary policies and the level of indebtedness all had an adverse impact against investors' long- term confidence over the two currencies. It has shown that the international monetary system cannot continue to be based on the dollar and the Euro. The renminbi, as a sovereign currency, has the greatest potential to become the third international currency.

China's central bank indicated the country was pushing forward with the internationalization of the renminbi step by step. On June 19, the central bank decided to proceed further with the reform of the renminbi exchange rate to add flexibility to the renminbi exchange rate. Days later, it decided to expand a trial program for settling trade deals in the renminbi to most of the country. For the renminbi to become an international currency, China will need to continue implementing effective macroeconomic policies in the next several decades to promote and strengthen international confidence in its currency. Finally, the renminbi should become fully convertible and China needs eventually to remove all capital controls.

2 November

Commenting on the Eurozone and the deepening crisis in Greece, visiting lecturer Guy Fraser-Sampson said:

The Greek cabinet has voted to back the PM's move, but a referendum will apparently require a two thirds vote in the Greek Parliament. This seems actually to have been a very astute move by Papandreou, since anybody opposing the idea of a referendum can be accused of obstructing the democratic process. Rather than analysing the possible outcomes, however, other Eurozone governments would do better to analyse his reasons.

If the Greek government had been confident of pushing through even some of the proposed austerity measures, then surely they would have done so. Calling for a referendum is a tacit admission that the Greek electorate will not accept them. In this case it seems strange that the Eurozone should be intensifying their efforts to bail Greece out rather than pulling back and reviewing the situation afresh. It is a classic example of how politics will always trump economics in the short run.

2 November

Today's pension deal is unfair for the next generation of taxpayers, says Professor Philip Booth from Cass Business School.

"Danny Alexander has suggested that the public sector pensions deal announced today was a "deal for a generation". It may be a good deal for the current generation of public sector workers - especially those near retirement - but it is certainly not a good deal for the next generation of taxpayers."

"The government has improved its offer to trades unions in such a way that all the increase in costs are deferred until after the coalition has left office. The government should not be adding to implicit public sector debt, it should be trying to deal with the problem.

"Unfortunately, the government has put itself in a position where it can be held to ransom by the trades unions because it has decided to centralise these negotiations. A better outcome could have been obtained by ensuring that public sector employers and employees paid the full cost of their sector pension arrangements out of overall budgets set by the Treasury. Different parts of the public sector could then have chosen different pensions arrangements to suit local conditions."

2 November

Responding to the Archbishop of Canterbury's call for a 'Robin Hood tax', Professor Ian Marsh from Cass Business School, said:

"Tobin taxes were originally proposed as a way of slowing the pace of financial transactions with the aim of reducing volatility. The tax is more costly for frequent traders looking to profit from small price movements but is small enough to be immaterial for long-term investors. The more contentious element of the logic is that these high frequency traders were responsible for excessive volatility in markets and by driving them out, financial asset prices would be less likely to make unjustified movements.

"All the evidence, however, suggests that Tobin taxes are either avoided (and so are useless) or where unavoidable are actually detrimental to volatility. Short-term traders who are by definition hardest hit by Tobin taxes do contribute to the efficient working of financial markets. Removing them will make shares, bonds and currencies more volatile.

"So a Robin Hood tax on financial transactions is not likely to be costless - it will have detrimental effects on how well our financial markets operate.

"There has been a public outcry over whole of society paying for the errors and irresponsibility of bankers. The funds raised by a Tobin tax might go to more deserving causes than bailing out banks, but a Tobin tax will also mean the whole of society (or at least that large proportion of society that has investments through savings or pensions) will again be paying.

"The Archbishop's statement calls for a change in banking practices. This crisis was not brought about by traders or speculators, be they long-terms or short-term. It was brought about by bad lending and poor risk management, coupled with poor incentive structures in banks. A Tobin Tax will not change those at all."

31 October

Commenting on the German Finance minister's backing of a financial transaction tax, Professor Philip Booth from Cass Business School said:

"In the midst of a eurozone sovereign debt crisis - caused largely by government profligacy - it is not surprising, but it is regrettable, that the German Finance Minister should call for more financial regulation and a transaction tax. There is no evidence that a transaction tax would achieve its desired objectives but much evidence that it would be highly damaging to liquidity, raise costs for end consumers in financial markets and damage economic growth. Indeed, even the EU's own estimates suggest this. 

There is no case for regulating hedge funds as the German Finance Minister suggests. The banking crisis arose in the regulated sector. Those banks and other financial institutions that operated outside the regulated sector did not cause problems. All the hedge funds that have got into trouble have been dealt with in an orderly fashion. The EU should focus on ensuring that banks that can get into trouble can fail in an orderly fashion."

28 October

Commenting on a report which shows that directors of the largest British companies saw their earnings jump by 49 percent in the last financial year, Dr Peter Hahn from Cass Business School, said:

"We've been complaining about senior executive pay at large public companies for almost two decades. The solutions are always the same, more power to the remuneration committee, more complex reward plans, and, most of all, more pay consultants. Isn't it time to say, formulaic complexity designed by possibly conflicted consultants is the problem? Is the answer much simpler? How about going back to discretion, trusting the board at year end to evaluate whether management hit the plan or not and then determine the reward sans all the consultants. It could make boards more accountable, CEOs less focused on gaming short term results, and might reward longer term shareholders with really increasing value. Of course, board directors would have to understand the businesses they oversee and that might be asking too much."

27 October

The agreement reached by the EU leaders today does not get close to resolving the eurozone's difficulties, says Professor Philip Booth from Cass Business School.

"Though an agreement has been made to recapitalise the banks in case default spreads beyond Greece, it is likely that some of that capital will be provided by the already heavily-indebted governments that are the cause of the problem.

"Furthermore, the agreement to expand the bailout mechanism is still vague. It is possible that huge upfront guarantees by EU governments have been avoided but only at the expense of loading even bigger burdens onto EU governments should there be a default in the future.

"This is a high-risk strategy for the EU members states. If Italy undergoes radical reform to raise its growth rate, the eurozone might just contain this crisis to Greece. However, if Italy does not undertake reform, the crisis will simply get worse."

24 October

Commenting on plans by Ryanair's chief executive, Michael O'Leary, to buy up to 300 new aircraft and boost passenger numbers to 130m in the next decade, Professor Joseph Lampel of Cass Business School, said:

"One of history's enduring mysteries is why Napoleon invaded Russia. He had an empire, all the pomp and circumstance of an imperial court, and the all round title of military genius. And yet he could not resist the lure of complete domination of the European continent. He had plenty of victories, but what he wanted was total victory. 

"One gets the same feeling reading the news release about Michael O'Leary's ambition to acquire 300 aircraft from Russian or Chinese manufacturers if he cannot get them from Boeing and Airbus. The goal is to grow Ryanair to 130 million passengers, which would make the airline the largest in Europe, and one of the largest in Europe

"What is the rationale for this audacious expansion? It seems that Michael O'Leary is convinced that the economic recession will lead to mass defection from other airlines to Ryanair. What this assumption seemingly ignores is that the cost of air travel is a smaller proportion of the total cost of travel. The cost of being there is usually much greater of the cost of getting there. The recession is therefore likely to reduce air travel primarily because fewer people can afford to spend their hard earned cash on hotels, restaurants, and other travel pleasures.

"Is O'Leary unaware of this basic economic reality? This is hard to say. What is clear is that he sees the current economic crisis as an opportunity to push aggressively forward where other airlines fear to tread. The risk he runs is that an extraordinary success story will come apart. It is not only that this expansion will stress Ryanair's organizational capacity and constrained terminal availability to the limit, but there are also other forces lurking in the background ready to take on O'Leary if he stumbles. There are shareholders who are told that they can expect much lower dividends during the expansion, and there are also O'Leary's many critics who have always felt that he cuts too many corners.

"Perhaps he should take a lesson from Napoleon. When told by his advisers that the winters in Russia were exceptionally long and cold he insisted that they were misinformed. The winters in Moscow, he told them, were no colder than Paris, just a bit longer. He lived to find out that reality can bite."

21 October

Commenting on EU internal market commissioner Michel Barnier's indication that credit rating agencies could be banned from downgrading countries in the eurozone's bailout scheme, Cass Business School's Professor of Insurance and Risk Management Dr Philip Booth comments:

"EU Commissioner Michel Barnier has suggested that, in certain circumstances, ratings agencies may be prevented from downgrading the debt of EU countries. Although ratings agencies have been raised upon a pedestal by the use of their ratings for regulatory purposes, thus grossly distorting the market, the EU should remember what the basic function of a ratings agency is.

Ratings agencies simply give opinions on the creditworthiness of borrowers. This suggestion would lead to the EU effectively banning the publication of such opinions if they are negative. This will have undesirable consequences for the liquidity of EU government debt and, ultimately, for the cost of borrowing. However, perhaps the most pernicious aspect of this proposal is the suggestion that a negative opinion on the creditworthiness of a government that has imposed huge debt obligations on its citizens will be prohibited.

This would make governments less accountable to the people and is an inhibition on freedom of speech. A ratings agency simply brings bad news - or expresses a negative opinion - on an underlying reality. This would be a classic case of shooting the messenger."

21 October

Commenting on EU internal market commissioner Michel Barnier's indication that credit rating agencies could be banned from downgrading countries in the eurozone's bailout scheme, Cass Business School's Dr Pete Hahn comments:

"It is hard to say whether banning Chicken Little from saying "The sky is falling" would have given her more credibility, but it would've certainly suggested to the other hens that someone was interested in hiding something. Banning the rating agencies from expressing their opinion will undoubtedly force them to withdraw their ratings; it is hard to imagine that such an event would have any other effect than inciting a sell-off. Have we forgotten that many investors are prohibited from owning un-rated securities?"

20 October

Commenting on the introduction of new EU rules on insider trading introduced today, Meziane Lasfer, Professor of Finance at Cass Business school said:

The new EU measures - MIFID II (Markets in Financial Instruments Directive) and Market Abuse and Criminal Sanctions - are to be welcome as they are likely to increase market cleanness and to make investing attractive to small shareholders who are unlikely to get any private information. The directives are also timely given the high volatility in market prices and the likely mispricing of companies that might results. Although some trading on insider information might increase the level of efficiency in the financial markets, it is likely to benefit only some traders and there is no strong evidence that other investors will benefit from such transactions.

However, the directives need to explicitly give power and responsibility to the regulators. There is also a need to encourage these regulators to empower themselves with strong human capital to allow them to analyse fully the trades and to detect any trading on private information. In particular, the fines suggested should be reinvested by the regulators in modern technology and expertise that will allow them to do their job much more efficiently.

19 October

Commenting on the EU decision to ban naked sovereign credit default swaps, Professor of Finance at Cass Business School, Ian Marsh, said:

"This ban is based on the accusation that speculating a country will default through trading in credit default swaps actually raises the likelihood of default by increasing the cost of borrowing for the targeted country. There is probably some truth in this accusation, although regulators are taking a risk as there is not much hard evidence to back up their view.

"Banning speculators from buying insurance while allowing hedgers to do so actually favours the people who made the initial mistake - the banks who lent the money - while harming the speculators who pointed out the problem.

"There are parallels with the short sales bans briefly introduced in 2008/09. Then, bank share prices were falling and regulators banned the selling of shares that the seller didn't actually own. These bans were rapidly reversed in most countries as they did not help to stabilise bank share prices. Instead, the short sales bans simply made trading shares by those who did own them less easy and more expensive.

"I expect the same will apply to credit derivatives markets. Banning the speculators will not be costless. Excluding by law a whole bunch of buyers of credit insurance will very likely also reduce the supply of insurance. Legitimate hedgers will then find it harder to get insurance or to reduce their cover should they judge that the situation has improved sufficiently. And I expect that like the short sales bans, this ban on naked buying of credit insurance will also be quickly reversed.

"EU politicians are talking to two audiences as they impose reforms and regulations. The first is their electorate where they want to be seen to be doing something about the crisis. Banning naked CDS writing will seem like a good thing to most of the population. Their other audience is the financial markets who will, I suspect, see this as another instance of the authorities blaming the wrong people and imposing the wrong policies."

17 October

Commenting on the possible downgrading of France by the ratings agencies, Professor Philip Booth, said:

"The possible downgrading of France by the ratings agencies shows how unsustainable the consensus approach to dealing with the EU debt problem is. The guaranteeing of the debts of Greece, Italy, Ireland, Spain and Portugal by the European Financial Stability Facility and the ECB would effectively mean that the EU as a whole is underwriting the borrowing of a number of its members. It is staggering that 30% of the guarantees are being underwritten by the very countries that may have to be bailed out. A further 14% would be underwritten by France. If the EU governments bail out the weaker members or recapitalise their banking systems if there is default, this will lead the debt burden to mount further. This approach will then bring more countries into danger - who will be left to bail those countries out?

"A different approach entirely must be taken that recognises bad debts for what they are and ensures an orderly restructuring with losses being taken by those who have invested in government debt. In the short term that would lead to huge instability but the EU looks likely to take a gamble that, if it goes wrong, will lead the debt crisis to spread further and drag on longer. "

17 October

André Spicer, Professor of Organisational Behaviour at Cass Business School, argues that the City of London should engage with Occupy London protestors:

This morning thousands of city workers will stream by the hundreds of protestors who are camped out on the steps of St Paul's Cathedral. The bankers will probably not give these protestors a second thought. But they are making a grave mistake. If the banks are to find a way out of the current mire they find themselves in, they must listen to dissenting voices - no matter how challenging they might seem.

Engaging with protestors is an important way that banks could begin to bridge the global governance gap in the financial sector. Currently there is a major gap between the reach and impact of the global financial sector and our ability to govern it. Existing institutions like the IMF and the Banks of England are certainly important. But the missing part of the puzzle is the voice of civil society. Engaging with the protestors is an important first step in giving civil society groups a role in governing the financial system.

Engaging with protestors will help the City and financial institutions to address the serious crisis of legitimacy they face today. Public trust in the financial sector is at an all time low. Public dismay might seem to be irrelevant to the global financial elite, but it is not. The central asset of any bank is not the assets on its balance sheet, but people's trust in the bank. Maintaining trust is not just about prudent investments and clever marketing. It also requires banks to show that they can really listen and respond to the demands of the wider public.

The final reason that the banks should take the protestors seriously is that they are missing out on a vital opportunity for innovation. We all know that innovation is the crucial motor of economic development but often innovation comes from the margins. Some of the demands of the protestors include ecological sustainability, equality, and an increasingly democratic financial system. These demands could provide financiers with some serious food for thought. Green money? Feminised finance? Open source equities?

If the City shows some willingness to engage with the protestors, then the protestors also have to be willing to repay the favour. The protestors do not seem to be clear about exactly how they would like the financial sector to be reformed. Nor do they understand many of the technical and pragmatic issues associated with reforming the financial sector. It is unlikely this dialogue would be easy. But it could be a step towards addressing some of the dangers that currently menace the global economic system.

13 October

Commenting on Fitch downgrading RBS and Lloyds, Manthos Delis from Cass Business School, said:

"With the turmoil in the eurozone and increasing concerns of an economic slowdown, systemic risk today is higher than it was a few months ago. Thus, clearly, the banking business has become more risky itself and the actions taken by Moody's and Fitch seem well-justified. Let us remember that we all judged rating agencies for not delivering in 2007-2008.

"There is always a possibility that a forecast becomes self-fulfilling and spreads to the economy. We must understand that a downgrade by one basis point should not imply grave danger for British banks, but it should be taken as a wake up call for action."

11 October

Responding to the Health and Social Care Bill's second reading in the House of Lords, Dr Robert Warwick and Prof David Welbourn, Associate Director and Visiting Professor respectively at Cass Business School's Centre for Better Managed Health and Social Care, comment:

The health and social care bill has gained considerable attention, most sitting at one or other end of a polarised debate, often showing limited understanding of either the NHS or this entire sector of our economy.

One thing is for certain, going back is not an option. Too much has already changed for that to happen. The debate must focus on securing a sustainable future for health services:
* Better at adopting innovation
* All elements of the system drive together towards best possible outcomes for available resources
* Ensuring that we continue to drive up the health of the nation, whilst also reducing the unacceptable inequity - both in terms of health (mortality /morbidity), but also in access to quality care when needed.

Many improvements have been made, but uncertainty remains. The bill continues to focus heavily on structural issues, leaving questions unanswered about roles, responsibilities and effective governance. Such ambiguities include:
* Detail of how Clinical Commissioning Groups (CCG) will be held to account
* How Monitor will promote the integration of services whilst deterring anti-competitive behaviours
* How the NHS Commissioning Board (NCB) process will work to evaluate and strengthen CCG Boards.

Current indications are that the NCB will continue conflating its important role to determine what needs to be done, with interference in how things should be done. If CCGs are to drive innovation, improvement and best possible outcomes, then they must feel a real sense of ownership.

Much commentary focuses on these individual issues, but the real risk lies in the unknown cumulative effect of how these interact. Current debates tend towards passionate defence of the ingrained vested interests and silo working which have proven time and again to prevent progress. What we need is an open-minded focus on how to achieve successful transition to a new shape. The health system is too big and complex, to be susceptible to management by central diktat. We need more emphasis on applying the best management science to understand how such a complex beast can be steered to achieve the desired outcomes, by using the right incentives.

We welcome the increased attention on integration, but success in tackling quality and efficiency, requires incentives to be aligned with outcomes throughout the whole system. GPs manage 90% of patient encounters, and need to retain identity as primary care providers, properly integrated with all other aspects of community and hospital care. There is a real danger that concentrating on developing their role as commissioners will prevent opportunity for better integration of provision. That GPs will be subject to conflicts is clear in recent stories, and the solution to place commissioning responsibility for primary care in the NCB makes a mockery of localism - surely primary care most needs a local commissioning flavour.

Achieving the right balance here demands that Health and Wellbeing boards are strong enough to direct the NCB and robust enough to hold them to account. Health and Wellbeing Boards bring the different cultures of NHS and local authorities directly together. Success of these boards is pivotal to the future. It is essential that they are rapidly gain maturity to deal with difficult issues robustly, demanding significant organisational development to face up to and overcome these often ingrained cultural differences and tensions. We see no attempts being made to nurture the new relationships on which success can be assured.

The Lord's second reading has much to discuss and shape, but its biggest challenge will be to avoid the polarisation and misunderstanding which has shaped debate to date. There are important matters to be understood, which will make a real and important difference.

5 October

Commenting on the struggling Franco-Belgian bank Dexia, Senior Lecturer at Cass Business School, Manthos Delis, said:

"Fears about the debt crisis re-feeding similar problems into the banking sector, as the original subprime crisis did, are not far from reality. Evidently, the holdings by Dexia of sovereign debt in Greek, Italian, Portuguese, Spanish and Irish government total 21 billion euro. This compares unfavourably with regulatory Tier 1 capital of 14.4 billion euro and is leading to severe problems for the bank's holding company in accessing market funding.

"There are a number of potential solutions to the situation Dexia finds itself in. The most likely option involves taking all the toxic bonds, creating another institution and trying to sell them off in pieces. Another move could be to inject capital in Dexia by partial nationalisation. The advantage of this is that it solves the market problem, but the disadvantage is that it transfers the problem to national deficit which is already high. Other measures could involve breaking up the bank to minimise the systemic effects, although guarantees might still be needed to cover losses of the really problematic parts of the business. Less likely solutions include selling Dexia to another bank - but no one wants toxic bonds - and bankruptcy, which the government will avoid over fear of a new systemic crisis."

30 September

Commenting on UBS's decision to hire a headhunting firm in their search for a new CEO, Dr Peter Hahn from Cass Business School, said:

"Today's news that UBS's board has hired Egon Zehnder for a CEO search offers, or perhaps demands, a new turn in bank corporate governance. Ordinarily, most troubled institutions searching for a new CEO would want the to-be-hired to get his or her feet under the desk for some time and recommend a strategy. For the sake of UBS's employees, customers, clients, regulators and a good deal of market certainty, perhaps UBS's board should first come up with a clear strategy and then hire a CEO to make it work. Just imagine how much easier it would be to identify the right candidate, stem short-term conflicts on strategy between management and board and determine how the new CEO could be measured and paid. Need I go on? If the board isn't up to the task, perhaps it should be replaced before hiring the new CEO."

September 29

Commenting on the latest report from Ernst & Young suggesting that Greek default is inevitable, Professor Philip Booth of Cass Business School says:

"Greek default has been inevitable for some time. However, the important point about this report is that it suggests that there is a high chance of the eurozone slipping back into recession. If this happens there is a real likelihood of further sovereign defaults and the European Financial Stability Fund may then be in danger of being unable to meet its obligations. According to the proposals currently being discussed within the EU, the burden will then fall to the ECB.

A recession and further sovereign defaults would lay bare the inadequacies of this mechanism of parcelling up EU sovereign debts into packages that are ultimately partially guaranteed by the very countries in danger of defaulting! The consequences for the ECB could be disastrous."

September 28

Commenting ahead of the anticipated release of Amazon's tablet computer, Professor Ajay Bhalla from Cass Business School, said:

"At this stage, it is incorrect to assume that Amazon tablet will be a true rival to Apple iPad. Apple's rapid ascent to solidify its ecosystem and complementary applications is likely to soften the competition for a long-time. Consider Apps such as FaceTime, which enable users to call between Mac powered devices while at the same time locking-in users, are hard to imitate for rivals - be they Samsung or Amazon. Recall BBM which rapidly boosted RIM's growth in the smartphone market. While RIM failed to cross pollinate the success of BBM by upgrading its user experience and launching multiple devices, Apple has moved fast to replicate the same user experience across Mac and iOS devices. Can Amazon do what Apple has done? Has it got the focus Apple has?"

September 27

Responding to EU proposals to overhaul the business model of the Big Four accounting firms, Professor Ajay Bhalla from Cass Business School, said:

"On one level, the idea that break-up of audit and consultancy services would cultivate better financial reporting and at the same time encourage competition is appealing. Look a little deeper, you begin to wonder if the EU is ten years late post the Enron crisis in coming up with this bill.

Furthermore, you also need to consider the hidden costs of enforcing this at multiple levels. First, the idea that smaller firms coming onboard would encourage better transparency is ill conceived. Aiming to feed their growth appetite, they are more likely to act as dance partners with their clients than the Big Four. Second, how can EU regulators monitor that the forced spin-off of audit and advisory units will not result in conflict of interests.

Finally, during difficult economic times, EU regulators need to reflect more on sending signals which demonstrate their will to boost competitiveness of the European economy than creating Chinese walls that reinforce managerial inertia towards boosting investment in EU or the benefits of locating HQs in EU countries."

September 26

Commenting on the latest rumoured solutions being drawn up to deal with the debt crisis in the eurozone, Professor Philip Booth, said:

"The IMF and the EU still has not woken up to the realities of the sovereign debt situation. Simply developing new means for pan-European institutions to borrow more money or parcelling up the debts into packages that are ultimately passed round to other countries or to the ECB is not a solution.

"It is to be welcomed that the EU and the IMF have eventually understood the realities of the Greek situation, but they are a long way from appreciating that the sovereign debt crisis more generally cannot be solved by printing more money or inventing clever financial instruments in ever-more opaque institutions. Ultimately, investors will have to bear real losses because countries have borrowed money that they cannot repay. The IMF and the EU should be considering how to manage this problem in an orderly fashion. "

September 16

Dr Peter Hahn says the UBS incident raises worrying questions over the reliability of financial information across the board.

"UBS' sad news about its loss and apparent control failure has been a godsend for re-igniting attention on banking reform. However, this misfortune's greater and largely overlooked message is about the challenge of understanding risk information today and particularly bank balance sheets.

"It wasn't that long ago that triple-A rated sub-prime mortgage securities were 'rock-solid', sovereign debt was not only loss-proof but provided liquidity and commercial real estate loans were 'secured' or backed by 'real assets'.

"Much of today's debate about splitting this and that and applying more rules misses the point that the information we are using may be becoming ever more unreliable. Think this is all about investment banking? How about all those US mortgage loans on homes which had grossly overstated professional valuations just before the bust? How feasible is it that 'new retail' banks won't own government securities?

"Faster communications, faster perceptions of changing risks, faster money movements, increased global interconnectivity, political weakness and volatile markets all add up to big questions on the reliability of financial information across the board. Not very encouraging for investing in banks."

September 16

The fog is starting to clear about what really happened at UBS, but that still doesn't make the story any better for UBS or other investment banks, says Visiting Professor Chris Roebuck.

"It very much looks like the trader was getting into deeper and deep trouble over a number of days, the facebook message "Need a miracle" suggests a relatively junior individual trapped in a vain attempt to recover something that had gone badly wrong. He was effectively following in the path of Nick Leeson and others who have tried to trade themselves out of a hole, by the "double or quits" tactic and ended up making bigger and bigger holes for themselves. 

"The check systems in banks are much tighter since Leeson and the financial crisis, including computer enforced trading limits, real time overview of trading activity by risk managers and other systems. The other problem is that yet again this was trading in complex financial products not good old simple shares. These ETFs are flavour of the month, well until yesterday, but they are not as tightly controlled as other areas, they are difficult to understand and can have very significant positive or negative results quickly. Effectively easy to win large amounts but equally easy to lose them.
So this case poses some major questions: 

1. Why did he not come clean early on and speak to his boss ? Probably due to the macho "I must be perfect" culture of the trading floor which, in itself, creates risk.
2. Why did the systems not spot this before it got totally out of control ? This is a key question the risk systems managers must answer - but he must have found a way round the systems to get this far into debt.
3. Should these complex products be banned? This is a view expressed by even some in the City. They may a lot of money for banks if they work well, but many ask if they actually add any value to the market other than to make more money for those banks, given the risk they obviously pose.
4. How can we make these parts of banks less risky? The events at UBS show that even with tight control systems and computers watching everyone it is still possible for an individual, even for motives that aren't essentially criminal, to do things they shouldn't. 

"The answer to all of the above is about having the right culture where people don't even think of doing things wrong so the systems don't have to stop it before it gets serious. That's a much cheaper and safer way to work. Lets hope the banks find the "moral compass" they appear to have lost and shareholders, and indeed Chief Risk Officers, may sleep sounder in their beds."

15 September

The UBS incident will speed up the implementation of the Vickers report but the reforms won't prevent further episodes of rogue trading, according to Dr Sonia Falconieri.

"The timing of yet another episode of rogue trading is fortunate in a sense as it will hopefully accelerate the implementation of the Vickers regulation because it leaves the banking lobby with very poor arguments against the need for ringfencing and separation of activities. While the separation of investment and commercial banking will prevent this kind of episode from impacting on depositors, it will not prevent further incidents from happening. Compensation packages with excessive bonuses and unrealistic targets are the reasons for excessive risk taking among traders ,particularly at a moment of high financial instability that makes difficult to achieve the required targets. This together with a loose internal control system makes investment banks vulnerable to rogue trading."

15 September

Commenting on UBS uncovering unauthorised trading in its investment bank which has led to an estimated loss of $2bn, Visiting Professor, Chris Roebuck, said:

"The news that a trader at UBS has been able to blow £1.3bn is a staggering demonstration that all the clever systems that the banks now have, especially after the financial crisis, still cannot stop a determined individual getting round them if they want to. This is a frightening level of wrongdoing in a bank that was held up as the world class example of good risk management before the crisis. It will yet again confirm to the majority of shareholders who are Swiss that investment banking is not "proper" banking as private banking is and that it is, just as Vince Cables says, "casino" banking. After the investment bank brought low the conservative Swiss bank in the crisis and now this disaster the Swiss shareholders will be fuming, the blue touch paper will already be burning this morning in Zurich and Geneva. 

"What it also emphasises is that stopping this sort of event is not about only the control systems, its about the leaders of the bank setting out a moral compass to staff about what is right and what is wrong so that everyone knows which is which. This ensures that bad behaviour is stopped before it starts, not just caught by control systems when it is happening. This requires a change of culture and a clear example from the top. It also prevents those embarrassing moments when someone does something that isn't illegal but which doesn't look good on the front page of the FT, which regulation wont prevent."

14 September

Responding to the news regarding the M&B offer from Joe Lewis, Sonia Falconieri, Lecturer in Finance at Cass Business School has the following comments:

This is a textbook case of a takeover battle with the bidder already having a large stake in the target firm. Toeholds are common practice in takeovers and with Lewis' large stake in the company he clearly exerts a strong influence on the board, but this is what large shareholders do. All parties involved are doing what they are expected to do: Lewis is trying to close the deal at the cheapest possible price while M&B board has correctly advised shareholders to reject the current offer because there is certainly room for further negotiations and for a better offer. The market seems to value positively the takeover which suggests again that there is a good chance that Lewis will succeed. I believe the only uncertainty really is the position of Elpida in all this. If they sell the whole process might end quite quickly, but somehow I do not see this coming, not now at the current offer.

14 September

Responding to the news that private company Circle has bid for Epsom hospital, Dr Robert Warwick, Associate Director, the Centre for Better Managed Health and Social Care at Cass Business School and City University has the following comments:

To some extent the argument about privatization is a distraction as long as the aims are achieved that the health service is free at the point of delivery. If we pay less attention to the privatization debate it allows us to become more focused on how services are to be run and how for the benefit of the patient.

If Circle were to sustainably achieve their claim of delivering "productivity improvements to the NHS of 13% a year" in a complex environment this would be an impressive win for patients and the taxpayers alike. If this were to move forward we must all be confident on how the success or otherwise is to be measured and how lessons are to be learnt. This must include quantitative evaluations such as use of resources, activity carried out and finance; but must also include patient experience, the views of staff, safety and long term outcomes.

In this important debate we must also avoid sound bites of a single percentage figures to describe the care we give patients. There is a lot to be learned from new innovative ways of things and it is learning that we must be open to.

12 September

Commenting on the reforms set out in the Vickers commission final report, Professor Philip Booth from Cass Business School, said:

"The ICB report smacks of an elegantly worked-out solution to problems that other bodies are addressing much more effectively.

"The IBC is right to seek ways to ensure that taxpayers do not bear the cost of banks' failures. However, recent parliamentary legislation, together with developments at EU level and arising from the FSA, will deal with these problems in a way that will be much more effective than that proposed by the IBC. The key to banking reform must be resolution procedures to ensure that failed banks can be wound up. The IBC proposals for the general ring-fencing of retail and investment banking operations do not contribute to achieving this objective though it would be reasonable to give the Bank of England powers to require ring-fencing in a particular bank that did not have a credible resolution plan.

"During the US Glass-Steagall regime, there were huge failures in the separated investment and retail banking sectors that led to government rescues and the development of the "too-big-to-fail" mentality. Indeed, the events of the recent crash were precipitated by separate failures in the retail and investment banking sectors. Artificial separation will not make either the retail or the investment banking sectors safer and we do not want a retail banking sector that is so heavily capitalised that no bank ever fails.

"The IBC report was disappointing in other respects. It discusses at length the adverse affects of tax discrimination against equity finance but makes no recommendations other than for more regulation of banks' equity capital.

"The government appears to welcome this report. It should also respond by immediately abolishing the bank levy, the explicit justification for which is the costs that bank failure can impose on taxpayers. If the government really has confidence that the IBC's proposals will address that problem then the bank levy should have no future."

12 September

Responding to the final report from the ICB on banking reforms, Dr Pete Hahn, Lecturer in Finance, said:

Imagine the government appointed five good and laudable citizens to provide an independent review of the healthcare system. All achievers, a retired top brain surgeon, a long ago manager of the largest hospital, a well-known critic of the system, an advocate for patients, and lastly they were lead by a well-known academic that had prior connections to government. Even those with the highest of expectations would hope for them to provide 'Blue Sky' thinking like 1) if we started from scratch, this would be the health system we want to have, 2) or we've searched the globe and these are the best healthcare systems we found and that we can learn from, or something like that with suggestions about what laws might have to be changed, what costs and benefits might be achieved, etc. Their report could be debated publicly, doctors, nurses, patients, and those responsible for costs could scrutinise and decisions be made after risks were clearly determined.

But imagine if they came up with a detailed plan to change the system, these five good people without extraordinary current insight and experience into the workings of the vast healthcare system. Would anyone take them seriously? What if they insisted that their plan be acted on immediately? Would that aid or hurt credibility?

Coming back to the banking system, since 2007 the regulatory world has changed dramatically, stalwart sovereign credits have become new risks, the old risks haven't gone away, the market has changed its long-term view of providing equity to banks, and technology on the way could substantial hit bank profits - I just wonder if we're still trying to fix yesterday's problem?

8 September

Commenting ahead of the Independent Commission on Banking's report, Visiting Professor of Transformational Leadership, Chris Roebuck, said:

"The current drama over the Independent Commission on Banking's (ICB) report seems to have created selective amnesia on the part of politicians and some media. The ICB's interim report said clearly that investment banks were no more likely to fail than retail ones and that the ring fencing would not make individual banks any safer, just reduce the risk of one collapse leading to another. However, many people are repeating the same inaccurate mantra that these proposals will stop retail banks being damaged by the risky casino investment banks that caused all the problems. Strange, I seem to recall that the only British bank that actually collapsed, Northern Rock, was a retail bank and those that needed bailing out were primarily retail banks both of which had recently indulged in ill-advised acquisitions.

"It seems the ICB will recommend the ring-fencing of retail banks. This was not unexpected however it is likely that they will also recommend that legislation is initiated at once to layout how this is to work to remove uncertainty. The ICB will suggest that the changes come in over time as there will be some element of increased cost, primarily due to increased capital requirements, and getting back to some level of sanity on these from the mad level of 2% tolerated pre-crisis makes sense. However, if the markets view the legislation rather than the implementation as making those banks a riskier investment then the cost of capital to these banks would increase and, therefore, the cost at which they lend to us and small businesses would increase. Big companies are okay, they get special rates, which the CBI doesn't mention much.

"The banks are being made safer by the Basel III proposals but the degree to which the ICB recommendations are an unnecessary response to a political more than an economic issue is still open to debate.  But then again like bankers' bonuses, even if it's more about politicians being seen to do something, and even if what they do has little or no effect on the main problem, they still have to do it to keep up their image. Rearranging deckchairs on the Titanic comes to mind."

8 September

Responding to the news that Transport Secretary Philip Hammond has admitted the government has the legal right to launch a new bidding contest for the ThamesLink contract, Professor ManMohan Sodhi, Professor of Operation and Supply Chain Management has the following comments:

The government is handling this rather badly and look incoherent. Unravelling the tendering process already completed is possible but highly unlikely, and not just because of the EU context, Siemens being from Germany. Moreover, the results might still be the same, given the objectives, unless Siemens were to pull out of the tendering process, which is also unlikely. Changing the objectives will also be difficult.

The only solution out of this would be to have Siemens take over the Derby plant from Bombardier and do part or all of the production there. After all, Bombardier wants to close the plant so they should be willing to sell it for £1.

5 September

Responding to the news that bosses of Britain's top 100 companies saw their pay increase by an average of £1.3m last year, the biggest increase for nine years, Anh Tran, Lecturer in Finance at Cass Business School said:

The top executive pay-for-performance puzzle has been identified for two decades. Although there is definitely room to improve how we construct an appropriate pay package for our executives or the role of remuneration committees, overall the current scheme seems to work effectively. Even in the financial industry, compensation is already structured rationally and provides rewards only for creating long term shareholder value. Normally, share-based incentives cannot be liquidated for a few years from the award date due to vesting restrictions and other reasons. As a result, we should not focus on short term events that are not representative of the big picture in an attempt to reform our policies. Empirical research so far has not found any evidence that excessive executive compensation resulted in the recent crisis, or that its cutback would effectively prevent one in the future. Boardroom pay should not be among the list of today's economic challenges.

1 September

Responding to the news that Tesco are to withdraw their business from Japan, Professor Ajay Bhalla, Professor of Global Innovation Management at Cass Business School, said:

Firms pursuing replication of standardised global business models often get a thrashing when it comes to getting a foothold in Japan. Tesco has been fairly successful in emerging economies, particularly in China, where not only it was a first mover in super-market space; it also established scale rapidly to meet the super charged appetite for consumer goods amongst the fast growing middle class. Transferring that success to Japan and US in particular has been an uphill battle for Tesco. In particular, Tesco has had little innovative offerings to woo consumers in these markets which are not only highly mature with established innovative retail giants such as 7-11, but also incredibly complex to do business. Business in Japan is driven by tightly knitted keiretsus and it is about time Tesco realised that not all developed or emerging economies can fit to its 'Tesco in a Box' approach.

31 August

Responding to Manchester United's decision to use a two-tier share structure, Meziane Lasfer, Professor of Finance at Cass Business School, said:

"Manchester United's plans to use a two-tier share structure to minimise the influence of outside shareholders should send a warning to any serious investors. Studies have shown that companies whose managers own more than 30 per cent of shares significantly underperform in the market. With so much power, managers act in their own self-interest, making investments that generate wealth for their own pockets, rather than maximising value for shareholders. The share structure will also allow the owners to keep control of the company, preventing the market from correcting poor performance by thwarting any takeover attempt. Given the club's huge amount of debt, and the cash already being bled from it by the Glazers, this deal would never normally come to market. But with the club's global status and huge fan base, particularly in Asia, the Glazers are banking on attracting investors who are more interested in the brand than the balance sheet."

26 August

Responding to the decision by European countries to extend the ban on short-selling, Dr Richard Payne, a finance academic at Cass Business School, said:

"The rationale for extending the ban on short-selling is far from clear. Prices of financial stocks have continued to drop and have underperformed broad market indices. This is true for countries which have introduced bans and for countries which have not.

"Bans on short sales are harmful for liquidity, they increase volatility and impede the flow of information, especially negative information, into prices. In short, all the evidence suggests that banning short sales in a stock makes trading more risky and more costly for everyone, buyers and sellers alike.

"We can only conclude that the real motivations for the bans are political. They convince the public that steps are being taken to rid markets of manipulative speculators (who may not actually exist) and deflect attention away from the failures of European politicians to come up with convincing plans to solve macroeconomic problems. It is this uncertainty about fundamental economic issues that is behind recent volatility in the financial markets."

25 August

Commenting on the resignation of Steve Jobs as CEO of Apple, Visiting Professor in Transformational Leadership at Cass Business School, Chris Roebuck, said:

"The move of Steve Jobs from CEO to Chairman within Apple demonstrates the leadership challenges that organisations face when the original entrepreneur and corporate inspiration has to leave or take a back seat.

"In many organisations this happens much sooner than it has at Apple, as with Sir Stelios Haji-Ioannou the entrepreneur behind the budget airline, EasyJet. But it is always a highly challenging time for the organisation which must maintain the inspiration, innovation and entrepreneurial attitude of the originator. This special element is often what sets the organisation apart from the competition and keeps it ahead of them.

"The departure of these individuals is a shock to the system. In the case of Apple, having Steve Jobs still present as Chairman is helpful, provided that the Chairman and CEO relationship is effective and that he does not start to take executive decisions as a quasi "senior CEO". This is often the problem when a strong CEO, especially one who established the business, moves into the Chairman's seat.

"What Jobs has demonstrated though is that an entrepreneur can become a great corporate leader if they can use their entrepreneurial skills in the corporate context as well as in creating and growing the organisation. Sadly such talent is rare but Job has shown how powerful it can be when it is present. He should be an example to both entrepreneurs and corporate leaders alike."

10 August

Responding to the announcement that the US Federal reserve has pledged to keep interest rates low for two years to boost growth, Giovanni Cespa, Reader in Finance at Cass Business School said:

The issue here seems really whether monetary policy has any grip left on the economy. Even before the FED's decision, the US curve at the 7-10 years horizon signalled that yields were close to zero if not negative, meaning that the time value of money at these maturities is nil.

If real interest rates were the only driver of investment decisions, this should have encouraged entrepreneurs to jump onto profitable investment opportunities. However, if you looked at stock market indicators they did not signal this, as stocks were sinking. This suggests that expectations (driven by a number of concerns - e.g., the situation in the EU) are probably the driving force behind investment decisions.

The idea here is that you should be unwilling to invest if you anticipate a prolonged recession, since this means that demand in the future will be low. Expectations, however, are really hard to manage, and possibly fiscal policy (public intervention) could have a role here. However, budget concerns impede this (there is an ongoing debate over whether these concerns are mostly ideology driven or based on hard evidence).

So, the FED seems to be trying to pursue a policy whereby it reassures investors that it will stick to a low interest rate, hoping this will move their expectations. In this sense, if we look at yesterday's market reaction, this announcement seems to have obtained some impact. The question is whether, with the high volatility we have experienced in this period, yesterday's reaction is just an episode or rather the signal of a turning point.

2 August

Responding to reports more than 2000 charities across England could see their funding cut or completely withdrawn by local councils, Professor Cathy Pharoah, said:

"This information provides early warning that voluntary organisations are not immune from spending cuts, in spite of the importance of building Big Society capacity to meet social needs. Research shows that welfare provision in needs amongst young people, families and domestic violence, and disability is particularly dependent on statutory support. Finding alternative support from philanthropy and giving will be very challenging, and hardest in deprived areas which lack the wealthy populations who tend to give the most. Government must find out what local strategies are in place to help voluntary organisations find alternative support, and we need to know how decisions about cuts are being made at the local level. Local authorities need to monitor the impact of cuts on the people most in need."

2 August

Responding to electronics manufacturer Foxconn's plans to have 1 million robots in its China factories by 2013, Professor ManMohan Sodhi, Professor of Operations and Supply Chain Management at Cass Business School said:

There are three reasons underlying this. First, Foxconn has been in a tight spot since the suicides of workers, and not only because of the threefold increase in salary that followed within a few months of the suicides becoming a public issue. These are pressures on the supply side. Second, on the demand side, manufacturing requirements of customers like Apple, whether it is iPad 2 or iPhone 5, are becoming much more stringent. Arguably, at some point, only a robot could consistently manufacture the kind of tolerances and the high quality needed. As such, simply moving to a cheaper location in mainland China or even Vietnam may not be possible and going to further automation may be the only way out for the company. (I am touring different plants in India, and despite the supposed availability of cheap labour, in sophisticated plants, there is much use of robots for this reason.) Third, there is a trend of major Chinese contract manufacturers seeking to move up the value chain to be able to add more value to the final product and to extract more profits from their original equipment manufacturers (OEM) and their own facilities. The use of robots can help Foxconn achieve both goals.

27 July

Responding to UK banking job cuts, Peter Hahn, lecturer in bank strategy and management at Cass Business School, said:

"UBS's plan to narrow its focus is more about changes in the equity market than any other factor, including regulation. Investors long underestimated banking risks and underpriced the cost of capital for banks, encouraging a grossly oversized banking industry taking too many risks. Today, the pendulum has swung the other way encouraging banks to hunker down to what they do best. For the largest banks, this is new territory. Until now, only the biggest risk takers saw the big rewards. Undoubtedly, most managers who grew up in the pre-crisis era lack the skills for the new world; some will learn quickly that focus on productivity and competitive advantage are the new watchwords in banking while others try to hang on for a market comeback. Watch for equity investors to start demanding better explanations at the all-things-for-all banks in the near future - even those banks that came out somewhat unscathed from the crisis are likely to come under the spotlight."

25 July

Responding to the US debt crisis, Professor Philip Booth from Cass Business School, said:

"It is easy to swipe at the Republicans in the US Congress whom Vince Cable has described as "nutters". However, he should surely be aware from the events in the eurozone that countries cannot continually pile up more and more debt. Like the UK, the US is also on a slow growth trajectory after enormous increases in government spending in the early twenty-first century. Responding to the deficit, as the UK has, by raising taxes would simply lower growth further. It is quite reasonable for the recently elected Congress to want to reduce both spending and taxation in the long term. It is grossly irresponsible to ignore the effects of tax increases on economic growth."

14 July

Reacting to press articles on News Corp, Professor Ajay Bhalla of Cass Business School discusses whether the structures of family business governance fail stakeholders:

"News Corp is in the news and so are family businesses. It has been suggested that News Corp is all about family and that it has failed to create value for its stakeholders. This also raises questions about the ownership structure of family firms.

The evidence points to the contrary. First, research has shown that family ownership creates long term value. Consider research by Belén Villalonga of Harvard who studied Fortune 500 family controlled firms during 1994-2000, and found that family ownership creates value, especially when the founder serves as CEO of the family firm or as Chairman with a hired CEO.

Andersen and Reeb look at family firms listed on S&P 500 and find that family firms outperform non-family firms. Likewise Benjamin Maury from Swedish School of Economics examined how family-controlled firms perform in relation to firms with nonfamily controlling shareholders in Western Europe. Drawing evidence from a sample of 1672 firms, he showed active family control is associated with higher profitability compared to nonfamily firms, whereas passive family control does not affect profitability.

Second, the ownership structure, which creates a wedge between owners and minority shareholders, is not an exception in the west. Similar ownership structures are found across the world. These structures serve well in an investor environment, which increasingly looks towards short-term gains, and managers strive to secure yearly performance bonuses. Dow Jones would still be a family controlled firm if Bancroft's had paid attention to the ownership structure. Consider Washington Post, which has survived as it experienced temporary dips in its performance. We just need to look at who is driving the growth in Asia and Latin America. You will see that family businesses are largely viewed not as parasites but paragons. When you have no worry about legacy you are going to leave, why as a CEO would you bother. After all, it is about this year's bonus ... isn't it?"

11 July

Responding to fears eurozone debt contagion may have spread to Italy, Professor Philip Booth from Cass Business School, said:

"It is not inevitable that the EU debt crisis spreads to Italy but the long-run economic fundamentals there are poor. Economic growth is very slow and will not improve unless there is radical economic reform - which looks unlikely. As such, the debt burden is unlikely to fall and, if the Italian government cannot service the debt, the EU will discover what has been clear all along: we cannot simply repackage bad debts in the hope that they will go away. Sovereign default in the eurozone will become a reality that cannot be ignored. Unlike with Greece, there are no pockets deep enough in which to hide Italian bad debt."

8 July

Commenting on Jean-Claude Trichet's pledge that the European Central Bank will continue to accept Portuguese bonds, Professor Philip Booth from Cass Business School, said:

"In calling for there to be no default at any costs, the ECB is burying its head in the sand. By continuing to purchase low-grade government bonds from the private sector, the ECB is implicitly bailing out the private sector and may bankrupt itself. Indeed, the issue of sovereign default has become an important eurozone issue precisely because of this very policy of ECB purchase of poorly-rated sovereign debt. If it were not for the behaviour of the ECB, the sovereign debt crisis would be a much simpler issue that could be resolved between the nations themselves and their creditors."

4 July

Directors of City University London's Centre for Better Managed Health and Social Care, based at Cass Business School, respond to the publication of Andrew Dilnot's independent Commission on the Funding of Care and Support:

Dr Robert Warwick, Associate Director of the Centre, comments: "The Publication of Andrew Dilnot's independent Commission on the Funding of Care and Support is to be welcomed. This has been a difficult task with few short term political benefits and raises issues that have, to date, been put into the "too difficult" pile. This may well colour the agenda and how the coalition will handle the debate. However, we hope that won't be the case - Dilnot raised too many important issues and does so in a way that offers pragmatic solutions not to be ignored.

Dilnot's report rightly points to a playing field that is both uneven and difficult to understand with the myth that the NHS will pick up the pieces if things go wrong.
So the agenda is clear:

  • It provides clarity as to what is expected, from both the individual and state
  • With clarity will come confidence that will be needed for people to make appropriate provision for their old age
  • The call to both the individual and Government that the total spend will need to increase (over the next 20 years the percentage of GDP on this will rise from 1.2 - 1.9).

If achieved this should give us a care and support system that England can be proud of. However, to deliver, this equal attention must be placed on the providers. The clarity and confidence felt by the taxpayer and individual must be equally shared with the providers. Achieving this will be critical for long term funds and planning and to attract the best people to innovate for the future. This can best be achieved with an appropriate balance of safeguards and the freedom to develop new ways of providing care - a balance that we have yet to see."

The Centre's Associate Director Dr David Welbourn states: "The Government should be bold and seize the opportunity presented by this report to begin repositioning the relationship between each individual and the State, creating a better balance between rights and responsibilities in a transformed Big Society.


In the months to come it will be the debate on detail that will become important, for example:

  • How the burden can be appropriately shared amongst the richest and poorest members of society and if a more graduated approach is needed, whether the form of means test will stifle incentives to save for old age.
  • The practicalities of "metering" the different spells of care the individual will require throughout their life, and
  • The impact dementia and other illnesses will have on lengthening spells in care. 

Decisions on the future will not be easy, for example the apparent contradiction between Dilnot and the current debate on the future of housing benefit raised by Iain Duncan Smith highlights the difficulties ahead. That said, appreciating this and accepting that pragmatism may be required will be a preferable alternative to ignoring the issue until it is too late."

1 July

In response to the news today regarding Lloyd's decision to cut 15,000 jobs, Veronica Hope-Hailey, Professor of Strategic Human Resource Management at Cass Business School has the following comments:

The news today that Lloyd's is to cut 15,000 jobs is a situation that most people will find regretful. There are many different stakeholders impacted by such an event and this decision will impact both those staying and those going. We have to ask ourselves what the impact of this decision will be on those made redundant and their levels of engagement and trust with future employers.

One thing we do know is that those who are staying in the bank, the survivors of the downsizing, will watch very carefully to see how Lloyds TSB handle the downsizing process. They will watch to see how just and fair the procedures are that determine who is going, how much redundancy payment they will receive and how much help they are given in terms of finding another job.

They will also watch whether the senior and middle managers dealing with this redundancy process treat people with dignity and honour their contribution to the bank. This perception of the justice and fairness of the employer will determine, in part, the level of engagement and trust going forwards and their subsequent performance.

For those leaving the bank, their experience of this process will go forward with them to their new employment and will affect their willingness to trust again, to fully engage. So it is crucially important for the bank to handle this well.

Lastly, senior managers in banks have taken a huge bashing in terms of the public's perceptions of their integrity, their benevolence and their ability to manage well. This announcement means that these senior people have a chance to redeem themselves in the eyes of their employees and the general public in the way they choose to handle these severe job cuts.

27 June

In response to the news today regarding The Bank for International Settlements criticism of the Bank of England regarding its position on interest rates, Professor Philip Booth of Cass Business School has the following comments:

"The Bank for International Settlements is right to point to the dangers of continuing to hold interest rates low in the face of continued high inflation. The Bank of England cannot resolve the problems of slow growth by taking its eye off the ball of inflation. There is also a danger, as it points out, that asset markets have been artificially inflated by low interest rates and quantitative easing and that this may create an action replay of some of the problems that led to the crash.

"However, it has to be said that, despite high inflation, monetary growth remains sluggish in the UK so whether to raise rates now is a difficult call. But, if rates are not raised and inflation remains high, there is a danger of very high interest rates in the medium term."

20 June

Responding to Greece's debt crisis, Dr Pete Hahn, from Cass Business School, says a solution might be found in the 1980s 'Brady Bond' structures:

"Everyone new to bank risk learns the old adage 'lend 1000 and you have an investment, lend 1000,000,000 and you have a partner', but Greece is starting to demonstrate that if you lend a 100 billion and you have a family member (at least for the EU). Indeed, the resolution of Greece's problems are so little about Greece and so much about how a Greek default might affect other EU periphery states and the EU's banks. Solving Greece's debt problem ultimately requires EU leaders to confess that 'we have found the problem and it is us'. Sovereign defaults aren't new, they're always messy, and the common currency adds a new dimension. However, those trying to come up with solutions could do worse than to study the 'Brady Bond' structures used for defaulting countries in the 1980s to get the current situation towards resolution. At this point, the critical issue is to avoid more stagnation or a freeze in the financial sector and particularly amongst banks. The old Bradys were designed to maintain liquidity in the banking sector for such intractable situations as we have today."

10 June

Cass Business School Professor of Global Innovation Management Ajay Bhalla comments on Prada's listing on the Hong Kong market and the booming Chinese appetite for luxury goods:

Professor Bhalla says: The unusual combination of Prada's high-profile private fashion show attended by the who's who of Greater China and its listing on the Hong Kong's market this week is no co-incidence. Recently, firms such as L'Occitane - a French cosmetics and perfumery retailer - have also followed the same route. It explains the answer to the question many firms overlook: How strategically intimate are you to the vital stakeholders in your business?

Visit a Prada, Burberry or Hermès store in London and you will find the answer. Many customers loosening their purse strings will be visitors from emerging markets. Contrast this with China where double-digit growth in the luxury goods market has long been fuelled by locals rather than visitors. This in turn has spurred the investment activity in the luxury goods market.

The rise of Burberry and the Chinese consumer goes hand in hand with the decision by luxury firms, such as Prada or L'Occitane to list on the Hong Kong market rather than NYSE or LSE. Investors are likely to be more attuned to the growth potential, not just of the retailers, but also the value potential for trading partners and infrastructure providers. The shift in strategic ecosystem is natural and Prada's listing will not only confirm this but may also pave the path for many other retailers to follow. However, the followers should exercise caution. Prada calls Asia its growth epicentre and has been carefully making strategic investments. For firms which haven't exercised strategic intimacy in the local markets, the expectation that the investors will embrace them with similar affection is futile.

07 June

Professor Joseph Lampel has the following comments to make on the launch of Apple's iCloud service:

"The introduction of iCloud works towards creating a total Apple environment for devices that are now operated separately. To the extent that consumers purchase Apple products, they will be induced to enter this environment. This in turn will give Apple a shot at creating dominance in the industry, or at least dominance in the upper end of the market.

"The security issue will deter some people from migrating to this environment, especially in the light of the problems Sony and Nintendo have had. From Apple's point of view, however, what matters most are lead users such as business people who feel that the convenience of iCloud may compensate for the security risks. Apple will have undoubtedly invested in protective measures, given the potential damage that a security breach would do to the reputation of the firm."

27 May

Responding to reports the IMF may not release the next payment in Greece's bail-out package, Professor Philip Booth of Cass Business School, said:

"The IMF is absolutely right to refuse a payment to Greece if conditions have not been met and it is crucial that the EU should not step in and lend to Greece instead. The more the EU rescues member governments, the closer we get to a centralised transfer union. The EU should allow Greece and the IMF to deal with their problems bilaterally. If this means Greek default, so be it. There will be consequences of that because of the foolish way in which the ECB has managed its operations but we cannot avoid those consequences by shuffling money between failing debtors."

Professor Booth also responded to the details emerging from the leak of the Basel III legislation:

"We are falling into the same trap as before the crash by developing complex overlapping banking regulation which will simply distort economic behaviour in ways people do not understand. The Dodd-Frank Act in the US was 2,319 pages long, the EU interpretation of the Basel Rules will be over 500 pages long and we probably have about 1,000,000 paragraphs of home-grown regulation in the UK. This is not the way to deal with the regulation of the banking sector and it is not surprising that conflicts between different interpretations of regulation happen."

With banks and the Treasury facing calls to give details of how bosses' pay is to be linked to small business lending Visiting Professor at Cass Business School, Chris Roebuck, comments:

"The questions posed about what exactly are the requirements of Project Merlin in relation to SME lending and bank executives pay are important for a number for reasons. Are we entering a period when Government is allowed to intervene in the private sector and determine directors' objectives on the basis of public good or macro economic policy, rather than the directors' legal obligation to act in the best interests of the company? That poses significant questions about the duties and obligations of company directors. The whole point of employing directors is that they act in the best interests of the company, that's what shareholders want. Would you like to invest your life savings in an organisation where the directors might well reduce your monthly investment income in retirement to meet various current Government targets?

"So if, as some propose, bank directors have bonuses linked to taking action that could potentially harm the profitability of the bank, eg by lending to higher risk SMEs to meet targets, is that the best route for SME funding? And what of the banks that have taken no money from the Government and have no Government shareholders? Why should they wish to take on this? Asking for clarity around what the Project Merlin requirements are is perfectly sensible, but if the required transparency reveals that directors do not have to make SME lending their top priority and can still be paid bonuses if the targets aren't met, no one should be surprised. In the real world we can't expect commercial organisations to operate on the principle of delivering a social benefit or deliver macro economic policy, that's why they are called "commercial", if they did so they would be called "public sector". We need to think more carefully about who and how entrepreneurs and SMEs can be nurtured and supported as the current system is clearly not working."

26 May

In the wake of the news that Christine Lagarde has emerged as the front-runner to be head of the IMF, Cass academic Philip Booth has the following comment:

"It is not at all unreasonable for rapidly growing middle-income countries to object to an EU head of the IMF. Most of the problems that the IMF has to deal with right now originate from the profligate behaviour of EU governments - although Christine Legarde is probably amongst the least tarnished of potential EU candidates. Furthermore non-EU countries could well feel that there is a conflict of interest when the IMF is negotiating bail-outs with the EU when the IMF has a European at its head."

16 May

Responding to a report from the High Pay Commission which found the gap between top executive pay in the private sector and that of the general public is widening rapidly, Visiting Professor at Cass Business School, Chris Roebuck, said:

"It is nice to see that the hype that has been constantly peddled out by senior executives to justify their pay has yet again been exposed for what it is. The current senior executive pay levels are not an indicator of either value or performance in many cases but more an indicator or weak and ineffective remuneration committees or NEDs. Either that or it's as a result of exceptionally easy objectives that present no real challenge and thus are unlikely to drive good corporate performance.

"It is quite clear that for a number for years the gap between the pay of staff and some executives has been growing, logically if this was a reflection of the performance of the organisation in relation to its peers it might be justified but often it doesn't reflect performance, in fact in some cases pay has gone up whilst performance has gone down. With a multiple of 145 times average top executive pay to staff pay in the FTSE 100, significantly more in financial services but only a multiple of about 15 in the public sector are we really saying that a private sector Chief Executive is at least a 7 times better leader and has 7 times more responsibility than a major hospital Chief Executive?

"In the end the overpayment is bad for the companies concerned as it sets up a presumption on the part of the executive team that they will get big rewards for little effort. That is the opposite of what is needed, top level rewards for top level delivery makes sense but what we have now does not. The rule should be clear, unless you exceed the performance of peer organisations no bonus gets paid, if you perform less well than they do you get a pay cut. That's the real world that top executives expect staff to live in inside their organisations so why shouldn't they live in it as well?"

4 May

Responding to the release of Glencore's IPO prospectus, Michael Tamvakis, Professor of Commodity Economics and Finance at Cass Business School, said:

"Today saw the publication of the IPO prospectus for Glencore, one of the world's top two commodity trading houses. The event is significant for a number of reasons. For Glencore, it's an opportunity to raise capital directly from the stock markets to invest in further expansion projects, which will consolidate its position not just as an intermediary trader, but an industrial concern taking more control of the commodity supply chain between raw materials producers and final consumers. For the commodities industry, it's significant because it's only the second such attempt from one of its companies to be publicly listed, but also because such a big company decided to do so. For the broader business sector, it gives a rare glimpse in the workings of a commodity house and it is evident that Glencore, despite its considerable size is relatively little known to the general public. It will be interesting to see how high Glencore's shares will trade post-IPO, given that a number of very big investors have sought allocation of large share blocks and are committed not to sell them for at least six months. Such companies include sovereign investment funds, financial institutions, hedge and private equity funds and several more institutional investors."

27 April

The price of gold, which has doubled since 2008, is a sign that the financial tsunami which emanated from the US in 2008 is on its way back, according to Professor Gulnur Muradoglu from Cass Business School, an expert on Behavioural Finance:

"Countries in the world economy were hit by the crisis according to the strength of their relationship with the US. Thus, the sequence was, the UK first, Europe next and the rest of the world after that. Now the wave is coming back from the world back to the US. Greece, Ireland, the riots in North African countries are a consequence of the second wave form the world heading back to the US. In this context the increase in gold prices must be interpreted as a sign that the crisis of 2008 is far from over.

"The rise in the price of gold, and silver, is a consequence of an ever devaluing US dollar. With the initial shock of the crisis the pound and euro devalued relative to dollar as they were hit by the crisis. Now that the crisis is coming back to the US from the rest of the world the true value of USD is finally reflected via devaluation. "Gold is in limited supply and thus a good hedge against all sorts of uncertainty and inflation. The expectation for the US is now high inflation. Liquidity was injected at the time of the first shock and it was helpful in controlling the crisis then but with increased money supply and slow economic activity inflation is inevitable."

26 April

Responding to reports that a fall in City bonuses has been negated by a pay rise for workers in the Square Mile, Visiting Professor Chris Roebuck from Cass Business School, said:

"The banks are doing exactly what the Government told them to do, reduce bonuses. But the banks won't reduce total remuneration as any bank that did so would be out of line with the market and loose its top performers to competitors in London. We keep forgetting that there are about 21 major overseas banks in London who have no obligation at all to do what the British Government says. They will set pay levels at what they think is appropriate for the global banking market not just the City of London. Thus the UK banks have to follow suit or their people just walk across the road to an overseas bank.

"The politicians have painted themselves into a corner by constantly saying that bonuses are the cause of all the problems in the banking sector, they are not, it's just an easy sound bite that they have used for years and its coming back to haunt them. Bonuses are inherently safer than base pay for everyone, the former is pay for performance delivered, the latter pay in the hope of delivery. Total compensation is the real issue for organisations, regulators and shareholders - do senior executives get too much of the corporate cake for the benefits they deliver? Why should senior banking leaders get, pro rata compared to the average pay in their sector, nearly twice as much as those in other sectors and up to 10 times as much as those in the public sector? Are they really that much better as leaders ? Or are they just in an industry where pay has got out of control over a number of years?"

11 April

Commenting on the ICB report released today, Dr Pete Hahn from Cass Business School, said:

"Perhaps the fact banks are leading the FTSE 100 today is the best interpretation of the ICB report - the market believes nothing is likely to happen soon, if at all.

"Ultimately, reviewing banking is about two factors. Firstly, as a modest size country, how much of the banking system can we back? We have to choose which parts we like and value most. Framing the question as commercial verses investment banking is more about choosing which parts we think we benefit from, rather than the risk side of each. "Secondly, in the low growth highly consolidated retail SME market competition appears managed. On this point, lack of clarity can often be an industry strategy."

7 April

In response to Portugal's government seeking a 70 billion Euro bailout, Professor Philip Booth of Cass Business School said Portugal should be allowed to default.

"The EU should stop parcelling up the debt of member states and sending it round and round in circles through complex bailout mechanisms. The central institutions of the EU should not interfere in the debt markets of individual member states and Portugal should be allowed to default. Following that, the Portuguese economy needs urgent reform to ensure long-term economic growth, lower government spending and lower taxation."

6 April

In response to the government's decision to use tax increases to achieve more than 20% of its planned reduction in borrowing, Professor Philip Booth of Cass Business School said:

"Today, some of those tax increases take effect. Given the already high levels of tax in the UK, the government should have avoided tax increases altogether as they will damage economic growth.

"Whilst the raising of the basic tax threshold is of course welcome, it is only being achieved by partially drawing more and more people into higher rates of tax. Higher rate tax is no longer targeted at the rich. This, combined with the VAT increases and national insurance changes, will damage incentives and growth.

"The UK needs radically lower public spending at less than 30% of national income (instead currently around half) so that we can have very much lower tax rates. The economic growth that would result would ensure that we were all better off."

1 April

With the salary and bonus packages of Antonio Horta-Osario and Tidjane Thiam receiving prominent attention in the past few days, Chris Roebuck, Honorary Visiting Professor in Transformational Leadership at Cass Business School, questions whether the targets being set for these leaders are too easy:

"As we continue to see remuneration packages in the millions whilst doctors and nurses are being made redundant the public is becoming more annoyed about what they see as excess in corporate pay. Why should a CEO, banker or footballer earn more in one year than a nurse or soldier fighting in Afghanistan earns in a lifetime is their question; but the response that "it's the market rate" doesn't cut any ice with the public. That maybe an economic and commercial justification but in the eyes of the public it isn't a moral one and that's what counts. These packages are viewed as immoral at a time when the public are being told that everyone has to share the pain of the recession.

"Yes at the moment the global market for corporate leaders, bankers or other scarce talent demands these packages but that doesn't make it right. The assumption an unfettered market is always right often leads to a crisis due to market excess. Further the market doesn't determine the outputs required of these leaders to earn the rewards, that's set by the organisation.

"Given the size and frequency of these significant payouts both shareholders and regulators could well be asking if the targets set for these leaders to get big bonuses aren't too easy to achieve. Achieving a significant bonus should be the exception not the rule. Also some in the corporate world their view of the balance between rewarding shareholders and themselves seems to have moved a little too far to the latter. Some corporate leaders need to start thinking up some good reasons why their pay is both moral and a fair distribution compared to shareholders pretty quickly."

24 March

Following yesterday's Budget announcement, Cathy Pharoah, Professor of Charity Funding and Co-Director of the Research Centre for Charitable Giving and Philanthropy Research at Cass Business School, said:

"The Budget's provisions for charities were welcome, sensible and elegant. They will not change the level of giving overnight, but they send important signals in the right direction. In allowing a tax break for small gifts up to a total of £5000 without the administrative hassle of accurate records on donors' identity and tax status, government has redressed the long-standing inequality in Gift Aid which resulted in community giving amongst the least well-off missing out on tax relief. It underlines government's commitment to the Big Society.

"The 10% discount on inheritance tax for those who leave 10% of their estates to charity is a very neat measure. Government is right to see wealth and estates as a rich source for new giving at a time when people may be reluctant to give away more of their current income. A 10% level has the potential to raise the level of charitable bequests which currently are worth about 6% of estate value. And the establishment of a norm has the added value of making it easier for financial advisers and families to discuss the delicate matter of charitable bequeathing.

"Making the most of the tax-break might encourage more estate planning. Where charitable bequests are residual, donors do not always know what their value will be; to make use of the 10% donors will have to be clearer about their intended donation. The measure even has the potential to release some extra money in the short-term if donors revise their wills to take advantage of it, and help redress the 3.5% fall in legacy income to charities which resulted from the recession."

23 March

In light of the Italian government's move to provide takeover protection for companies it considers to be strategic assets Professor Scott Moeller, Director of the M&A Research at Cass, said:

"This move continues a recent trend in Europe to provide greater protections for target companies. We saw a similar consternation in the UK in the wake of Kraft's takeover of Cadbury and which has resulted in the proposed revisions to the Takeover Code, announced in greater detail earlier this week.

"It is unfortunate that the Italians are following the French rather than the French (and the Italians) providing greater openness. Some of the sectors identified as 'strategic' are anything but that, in today's linked economies of Continental Europe. Protecting strategic assets can have its place but within the eurozone there's also a need for greater efficiency which is often the result of mergers and acquisitions."

10 March

Criticising the Bank of England's decision to hold interest rates, Professor Philip Booth from Cass Business School, said:

"The decision to hold rates is a mistake. The Bank of England's mandate is to target CPI inflation. Inflation has been persistently above target and the Bank of England has always blamed temporary factors - this is becoming untenable. Furthermore, the Bank of England's forecasts have persistently under-estimated inflation. With interest rates 3.5% below the rate of inflation, there is a real danger that the Bank of England will lose credibility. If this happens, it will become very difficult to reduce inflation again as wage settlements and the interest rates at which the government has to borrow creep up.

"Slow growth is not an excuse for holding interest rates. The causes of slow growth are complex but are likely to include the various supply shocks the economy has suffered from the financial crisis, the huge growth in government spending and regulation and the rise in oil prices. We cannot deal with these problems by holding interest rates low."

Directors of City University London's Centre for Better Managed Health and Social Care, based at Cass Business School, respond to the publication of Andrew Dilnot's independent Commission on the Funding of Care and Support:

"The ICB report smacks of an elegantly worked-out solution to problems that other bodies are addressing much more effectively.

"The IBC is right to seek ways to ensure that taxpayers do not bear the cost of banks' failures. However, recent parliamentary legislation, together with developments at EU level and arising from the FSA, will deal with these problems in a way that will be much more effective than that proposed by the IBC. The key to banking reform must be resolution procedures to ensure that failed banks can be wound up. The IBC proposals for the general ring-fencing of retail and investment banking operations do not contribute to achieving this objective though it would be reasonable to give the Bank of England powers to require ring-fencing in a particular bank that did not have a credible resolution plan.

"During the US Glass-Steagall regime, there were huge failures in the separated investment and retail banking sectors that led to government rescues and the development of the "too-big-to-fail" mentality. Indeed, the events of the recent crash were precipitated by separate failures in the retail and investment banking sectors. Artificial separation will not make either the retail or the investment banking sectors safer and we do not want a retail banking sector that is so heavily capitalised that no bank ever fails.

"The IBC report was disappointing in other respects. It discusses at length the adverse affects of tax discrimination against equity finance but makes no recommendations other than for more regulation of banks' equity capital.

"The government appears to welcome this report. It should also respond by immediately abolishing the bank levy, the explicit justification for which is the costs that bank failure can impose on taxpayers. If the government really has confidence that the IBC's proposals will address that problem then the bank levy should have no future."

The UBS rogue trader will speed up the implementation of the Vickers report, but the reforms won't prevent further episodes of rogue trading, according to Dr Sonia Falconieri from the Faculty of Finance at Cass Business School.

"The timing of yet another episode of rogue trading is fortunate in a sense as it will hopefully accelerate the implementation of the Vickers regulation because it leaves the banking lobby with very poor arguments against the need for ringfencing and separation of activities. While the separation of investment and commercial banking will prevent this kind of episode from impacting on depositors, it will not prevent further incidents from happening. Compensation packages with excessive bonuses and unrealistic targets are the reasons for excessive risk taking among traders ,particularly at a moment of high financial instability that makes difficult to achieve the required targets. This together with a loose internal control system makes investment banks vulnerable to rogue trading."

Dr Pete Hahn says the UBS incident raises worrying questions over the reliability of financial information across the board.

"UBS' sad news about its loss and apparent control failure has been a godsend for re-igniting attention on banking reform. However, this misfortune's greater and largely overlooked message is about the challenge of understanding risk information today and particularly bank balance sheets.

"It wasn't that long ago that triple-A rated sub-prime mortgage securities were 'rock-solid', sovereign debt was not only loss-proof but provided liquidity and commercial real estate loans were 'secured' or backed by 'real assets'.

"Much of today's debate about splitting this and that and applying more rules misses the point that the information we are using may be becoming ever more unreliable. Think this is all about investment banking? How about all those US mortgage loans on homes which had grossly overstated professional valuations just before the bust? How feasible is it that 'new retail' banks won't own government securities?

"Faster communications, faster perceptions of changing risks, faster money movements, increased global interconnectivity, political weakness and volatile markets all add up to big questions on the reliability of financial information across the board. Not very encouraging for investing in banks."

Commenting ahead of the anticipated release of Amazon's tablet computer, Professor Ajay Bhalla from Cass Business School, said:

Commenting on the news that Vodafone's Chief Executive has stated that Vodafone is changing from a 'European company' to 'an emerging markets' company, Ajay Bhalla, Professor of Global Innovation Management at Cass Business School said:

Spain faces an election in the next few days in which a conservative government is felt likely to be elected. This may make it more likely that the government will be able to persuade the electorate to implement the proposed austerity measures.

The Spanish economy seems to be flat-lining according to some recent estimates, perhaps with no further growth this year. Unemployment of 21.5% and youth unemployment of 46% are hardly signs of health.

Spain has over $640B of debt, which equates to 67% of GDP. Hardly in Italy's territory of 120% of GDP, but Spanish bond yields rose above the magic 6% figure today, and Spain needs to get another, larger, bond issue away in the coming weeks. One leading European bank has now said that Spain "is on the radar screen" of default alongside Italy. Should Spain default then this could have serious knock-on effects. They owe over $235B to French and German banks, and the former are already heavily exposed to Italy.

A further problem, not publicly acknowledged is that the "Fondo", Spain's national reserve pension fund, has well over 90% of its assets invested in Spanish government bonds. Thus, its risks and assets are pointing in the same direction, rather than hedging each other. Sovereign default could trigger a major collapse in the value of pension and/or social security funds just when they are most needed.

Spain faces an election in the next few days in which a conservative government is felt likely to be elected. This may make it more likely that the government will be able to persuade the electorate to implement the proposed austerity measures.

The Spanish economy seems to be flat-lining according to some recent estimates, perhaps with no further growth this year. Unemployment of 21.5% and youth unemployment of 46% are hardly signs of health.

Spain has over $640B of debt, which equates to 67% of GDP. Hardly in Italy's territory of 120% of GDP, but Spanish bond yields rose above the magic 6% figure today, and Spain needs to get another, larger, bond issue away in the coming weeks. One leading European bank has now said that Spain "is on the radar screen" of default alongside Italy. Should Spain default then this could have serious knock-on effects. They owe over $235B to French and German banks, and the former are already heavily exposed to Italy.

A further problem, not publicly acknowledged is that the "Fondo", Spain's national reserve pension fund, has well over 90% of its assets invested in Spanish government bonds. Thus, its risks and assets are pointing in the same direction, rather than hedging each other. Sovereign default could trigger a major collapse in the value of pension and/or social security funds just when they are most needed.

Commenting on the news that Toyota may consider moving away from Japan for some parts of its production and speculating where they may go, Professor of Supply Chain Management at Cass Business School, Mohan Sodhi says:

Pursuing the allure of growth is tightly knitted to Tesco's existence. Such is this pursuit that when it revised it Vision document mid 2011, it made growth as central plank of its strategy. Growth has its costs and may not necessarily generate returns. No longer does the mantra 'Bigger is better' hold true. Results from Tesco's competitors - from Sainsburys to Waitrose and Morrisons - have demonstrated that 'Big Price Drop' had little impact. Reversing the growth track is what Tesco executives may do next and this will require revisiting the vision. I am sure some serious introspection is already underway in Tesco's boardroom and this time the board may opt to decode the growth DNA in favour of better health and longevity.

Responding to comments by Martin Wheatley, Head of the Financial Conduct Authority (FCA), who said regulators should ban potentially dangerous products to protect consumers from themselves, Professor Gulnur Muradoglu of Cass Business School's Behavioural Finance Working Group, said:

"The emphasis on an active rather than a passive role in consumer protection in financial markets is extremely progressive. This takes the UK one step ahead of the US and Europe.

"Many of the triggers of the 2008 financial crisis were behavioural. The underestimation of risk by almost everyone in the economy was behavioural, as was the optimism, greed and herding of investors. These are all part of human nature, and will not change. Therefore a new regulatory stance is needed that will help to make investors, especially those on low income and the elderly, less vulnerable not only to others' biases but also to their own."

"While the likes of iTunes and Amazon were emerging in the US, British retailers dismissed the online world as fanciful. Not only did HMV fail to wake up to the reality of the shifting retail landscape from high-street to online in the late 1990s, it also failed to transform its business model when new players entered the market.
"While relying on the high-street to generate its cash flow, it never made a serious attempt in generating new revenue streams. For instance, it failed to strike partnerships with emerging platform providers, and made no attempt to challenge its status quo.

"HMV's demise should serve as a wake-up call for the remaining UK high street retailers, many of whom continue to rely on Amazon to revive their fortunes."

Google's launch of subscription music service is a harsh reminder of the platform war, which is rapidly disrupting multiple industries from music to movies to publishing. Think of Google 5 years ago and the Google of today. Google of 2010 struggled to match Apple's speed of innovation in build a closed ecosystem from iOS platform to iTunes to mobile devices. It placed bets on projects such as Google Books, which consumed colossal resources and failed to pay off. Today's Google demonstrates the appetite of a hot start-up. The announcement of 'All Access' music subscription priced at $7.99 per month has caught Apple off-guard which has been trying hard to take the iRadio off ground. It is now making direct entry into Apple's territory. While launching All access, it also launched quietly launched 'Hangouts' a new unified messaging service that is designed to work on Android, iOS, and the web. Today's Google is smarter and understands the fusion of content and platform. Furthermore, while pushing Android, it has also placed bets on pilot projects such as Google Glass or Google TV while it works behind the scenes to reignite YouTube. But it is today's announcement, which signals how Google is thinking, and if I were Apple, I would be looking through the kaleidoscope closely to doubling the pace of projects that would help re-establish the Apple magic.