Business
The business - Patrick Hosking applauds a barbarian at the Bank
Published 10 March 2003
If Abbey National made so many mistakes with its shareholders' money, why is it that the non-executive directors are still drawing their fees?
''Never apologise, never explain, never resign", goes the modern-day director's mantra. If you want to see the philosophy in action, look no further than the non-executive ranks in the boardroom at Abbey National. The directors have just reported one of the biggest losses in British banking history and halved the dividend.
If you're one of the two million private shareholders given a standard allocation of 100 shares when Abbey National converted from building society to plc in 1989, your £50 dividend cheque is about to shrink to £25. Your nest egg's value, meanwhile, has collapsed from £1,200 to £400 in two years.
Abbey embarked on an ambitious plan to diversify in the 1990s, investing in a string of highfalutin assets such as aircraft leases and junk bonds. At one stage, the fast-expanding treasury department owned more than £80bn of such investments. The bank then decided to go out and buy life assurance companies at the top of the stock-market bubble.
The plan ended in tears. Abbey now intends to abandon its ill-fated treasury operations and return to the core business of personal financial services - in other words, the business Abbey was pursuing as a blameless mutual all those years ago.
To be fair, the old management has been kicked out and the new managers have had the wisdom to say sorry. Curiously, however, this new hair-shirt approach does not extend to the non-executive directors. No fewer than five of the people responsible for the wholly discredited strategy of the 1990s are still directing board policy and still collecting their directors' fees.
Keith Woodley, a former president of the Institute of Chartered Accountants, who has sanctioned every disastrous step made by Abbey since 1996, is still on the board (and still being paid £102,000 for a few weeks' work a year). Likewise, Lord Shuttleworth, Lord Lieutenant of Lancashire. Peter Ogden, a former Morgan Stanley banker, has been there since 1994, approving what turned out to be spectacularly bad decisions.
Leon Allen of the Tetley Group and Richard Hayden, a Goldman Sachs lifer, joined in 1998 and 1999 respectively, and must also shoulder some of the blame: by then, it was the talk of the City that Abbey was taking huge punts on abstruse financial instruments that perhaps it did not fully understand.
Why have the non-executive directors not fallen on their swords? One can only assume that the new chairman, Lord Burns, a former Treasury mandarin, has asked them to stay on pro tem, while he urgently seeks out new blood. Anything else would be unthinkable.
Reaction to the appointment of Sir Richard Lambert, a former editor of the Financial Times, to the interest rate-setting panel at the Bank of England falls into three camps: supreme indifference (99.9 per cent of the country); fawning approval (most of his former colleagues at the Pink 'Un); thin-lipped disapproval (the economics profession). For Sir Richard has committed an appalling solecism. He is not an economist. Gasps of Bateman-style horror have been heard wherever practitioners of the dismal science gather. Until now, only qualified economists have served on the monetary policy committee. A barbarian is to be admitted into the Bank's octagonal saloon where the high priests of monetary policy utter their weird incantations about "seasonally adjusted investment deflators" and "harmonised consumer price indices", and then clobber us with a mortgage rate increase.
George Bernard Shaw was right: all professions are conspiracies against the laity; economists are no exception. Let us pray that Lambert does not go native.
Speaking of prayer, a puff of white smoke appeared above HSBC's new tower-block home in London's Docklands the other day. A new chief executive to replace Sir Keith Whitson was anointed at Britain's biggest bank. He is Stephen Green, who currently runs the bank's investment banking arm, where he is far from popular. Last year, he scrapped bonuses for many traders while personally receiving a £461,000 bonus that boosted his pay to £965,000. Once in the chief executive's office, he can expect £2m a year if he doesn't mess up.
Green is an ordained Anglican minister, occasionally to be found preaching in London churches of a Sunday. He will doubtless have to suffer teasing about camels, needles, money changers and temples. His first task will be to justify HSBC's £9bn purchase of Household International, a moneylending business. Last year, Household International paid a $484m fine to settle allegations of some unchristian loan practices in the trailer parks and ghettos of poor America.
Patrick Hosking is deputy City editor of the London Evening Standard
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