Encouraging national business
Ratan Tata, chairman of Tata Group, the Indian conglomerate which has just bought Corus, made a which would have been startling if uttered by a British business leader. He said: "We all felt that to lose [the takeover bid] would go beyond the group and would be an issue of great disappointment in the country".
He was saying was that it was a matter of great national pride that an Indian business is acquiring the venerable steelmakers of the UK and the Netherlands. Or to put it another way, he is confident that the people of India are enthusiastically supportive of private sector businesses like his in their determination to conquer the world.
By contrast, British business leaders fear indifference or even ridicule if they make the case for why the success of their businesses here or abroad is good for the UK. The British way is to be anxious that if a business is doing well it must be because consumers are being ripped off, employees are being trampled or management is manipulating profits to inflate their own performance-related pay.
Now, of course, all these bad things are wreaked from time to time by British companies 鈥 and by Indian ones and US ones too. But even after Enron, Worldcom and Tyco, the default position in the US is still to give business the benefit of the doubt 鈥 though also to punish hard when that trust turns out to be misplaced. The default position in the UK, even among many professional fund managers who look after our pension funds, is to fear that most managers are 鈥渁t it鈥 in some shape or form, and either to go along for the ride by investing with nose held or slightly sneer from the sidelines.
This dour climate of opinion rather dampens the appetite for taking risks in British boardrooms. It is one of the reasons 鈥 though only one 鈥 why British companies are more risk averse than either overseas companies or private equity. So for better or ill, big British businesses like BOC and Corus are being taken over by considerably smaller ones like Linde of Germany or Tata Steel respectively.
Another great trend of our age is for business to leave the public arena for the anonymity of ownership by private equity. That鈥檚 happening all over the world. But in the UK, private equity often receives a particularly sympathetic hearing from directors of public companies, largely because they feel that the stock market is unsympathetic to any investment or reconstruction proposal that might have a depressing effect on short-term profits. And that鈥檚 why the private equity troika of CVC, KKR and Blackstone do not expect a hostile hearing as and when they actually put a financial proposal for a takeover to the board of J Sainsbury.
All that said, I am not minimising the wholly legitimate questions about whether the fruits of business success are being fairly shared right now. Nor am I arguing that Tata鈥檚 takeover of Corus is bound to be a success: in fact, there is a good chance that it overpaid in the heat of last week's auction.
But as a nation we should encourage our businesses to take risks and should cheer when those risks pay off. Otherwise those economies like India with a healthier attitude to their business stars will not only overtake us in the fast lane of economic growth but will subsequently leave us for dust.
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Robert has hit the nail on the head.In Britain, majority of people tend to have very socialist tendencies. They are suspicious of businesses and prefer state interference in everything. Any country would be proud to have a national icon like Tesco, but here we are highly critical of it. We also like the comfort of the past and do not want modernism. Our housing construction is a case in point. All our recent residential constructions are just reproductions of earlier designs. There is hardly any innovation in building design for residential use.
I just don't get this column today. On the one hand "there is a good chance they overpaid", which means it was a good deal for us. End of story.
Steve Jones
I think we had enough 'housing innovation' in the fifties and sixties to last a century.
The only 'housing innovation' we need is somebody with a backbone to stand up to the nimbys, tighten up building standards to the best in the world and then deregulate planning.
Perceptive and realistic view of the difference of companies originating in emerging markets and those from more mature economies: national champions are revered until the economy broadens and consumers begin to perceive that their interests and those of the national champions are no longer aligned. You saw exactly the same phenomena in post-war Germany and even Japan way in to the '80s: Japanese companies could do no harm in the eyes of their countryfolk, till it all came down like a pile of cards around '90.
But, unfortunately, i don't think the UK attitude is wrong: what's so great about national champions? Nothing. Certainly the British public doesn't object to them being taken over, and our economy hasn't suffered but rather only gained from this FDI. For evidence read this week's Economist survey of Britain.
It is not only british business that is risk-averse. If you look at British society in general, risk is being managed out of the environment. I think the actions of the Health and Safety Executive while well intentioned are having a terrible long-term effect on society. How many air bags does your car have? How many news items are safety related these days? How many new laws are safety related? In each case - too many. Soon we'll all be too frightened to go outside......
"there is a good chance they overpaid", which means it was a good deal for us...Thats not the end of story.
They now control, they will recoup the price paid by cutting jobs, increasing prices locally and milk the money and more back to where it came from.
Once people there are paying an arm and a leg for gas because Exxon is making huge profits, that will be reversed.
yes, I was also struck by that statement, however not surprised, not aggitated; just pondering about the same as you, though I live in sweden.
WHAT AN OUT OF TUNE thing to say, the NATIONAL STATE IS DEAD, LONG LIVE EU,
the 40-talistic maffia with their post-ww2-stress syndrom, forbidds anyone to make anything for the own people, there is not even allowed to talk about the own people, there is no own people, so what are the so called leaders for, well, their own carrier in the celebrity of EU, to pick votes, sweden is not a country, has no people, it is a vote catching area.
"there is a good chance they overpaid", which means it was a good deal for us. Well thats not the end of story..
They now CONTROL, they can recoup the cost by hiking prices, cutting jobs and milking whatever its worth and more and the money will go back to where it came from!
It's the hypocracy of living in a capitalist society, enjoying its benefits, desiring its rewards such as nice cars, bigger homes, every electrical gadget possible and then denegrating those that are most successful at it.
Surely we're either capitalist and therefore celebrate the highest levels of achievement or we're communist and subscribe to equality in every facet of life.
I don't see too many people running to distch their BMWs though...
We should applaud achievement and be more supportive of business failure on the basis of people who genuinely tried to create something in our economy.
There was a news item in the World service about the 800m dollar trade in body parts going on in the USA. Some of the facts that stuck in my mind were:
1. a body only needs to be unclaimed for 24 hours before it can legitimately be stripped down, taken apart, colour code packaged, labeled and shipped across America. Pity the family members looking for a missing relative.
2. It's easier to move body parts across the states than it is food or car parts.
3. The industry is self-regulating.
4. Donating body parts is no guarantee that the parts will not be used for cosmetic surgery by whoever can afford it.
Surely this must be one of the worst (best) examples of self regulation and the simple limitless greed of Free Trade.
And this from the nation that brought us Religious, get (the pastor) rich quick channels. From Cradle to Grave and beyond, there's money to be made with free trade.
It's not just big business that are risk averse. The stigma of failure is often celebrated elsewhere as a usuual milestone on the road to success.
Here, despite recent changes in legislation, too many non-fraudulent small businesses go to the wall because a phoenix is frowned upon by the rest of society.
We are too quick to bring down the successful and adversely judge the failed.
Just when a small business has the tools and experience NOT to repeat their mistakes, too many are thrown on the scrapheap, where a perfectly valid and supported phoenix company could arise.
I've done just that. And unusually started a blog to share the experience as I go through it.
Perhaps by being open and very public about it, it will help in a very small way, if others contribute to a rallying call to change this national ailment.
Let's get behind both the successful for their endeavour and the failures to give them a chance to learn form their failures.
It's like graduating with a first class degree and deciding instead to remain unemployed for life.
Come on?