Richer Sounds A debate

There is a brief “debate” in the (often excellent) City AM on Richer Sounds employeee ownership.

Its worth a look just to see the views of a  seemingly ultra free market idealogue

Giving workers a stake in the business might improve outcomes for that particular company in the short term, but there are costs.

The economy needs new market entrants to keep it competitive and vibrant. Therefore workforces need to be as mobile as possible, allowing people to move to new opportunities with higher returns, generating a more efficient use of resources. But giving workers a vested interest makes it less likely they will leave and set up rival businesses or move to new industries

What utter drivel.

 

Richer at Richer Sounds

The news that the owner of Richer Sounds is effectively handing control of his business to his employees whilst taking out a sum of £9m is quite a significant story. It has been warmly greeted across the press. And rightly so although the Guardian has rather missed the point in claiming that its a justification for forcing through Labour’s measures to put “workers on boards”. It isn’t.

The first key point is that this is a decision taken by the business owner. He had the freedom to do so and was not forced by some idealogically driven politician who has never spent a day on the shop floor or the board room. Its virtually a philanthropic gesture and the immense reward he will receive in admiration from all quarters as well as the immense gratitude of his employees is incalculable. Compare and contrast with Philip Green who has more money than he can spend but is universally despised and seemingly friendless follwoing his despicable treatment of his employees.

The happiness he will cleartly derive from this maginificent gesture comes from having been able to take the decision himself and on his terms

I will also confess an interest here. I have been a customer of Richer Sounds since its very early days and have no doubt that their superb customer service is not unconnected to the ethical values of the owner

 

 

Metro secures funding

Metro Bank have gained a lot of good will from customers over the past few years. This is possibly more a reflection on the hostility towards the big four than actual service although few can doubt that for personal customers, their open friendly branch approach is appealing. As for the business side its probably fair to just say that I always refrain from detailing my clients direct experiences with specific banks.

Either way, I have some good contacts there and wish them well but why have they got into the current mess and as rightly stated by some commentators, why was the situation allowed to drift?

The bank was founded by Vernon Hill who wouldnt be described as low profile. There are shareholder moves to remove him from the business and this is surely indictative of considerable disquiet at the manner of the management within the business. Without a direct insiders view, its impossible to say whether this has contributed to these difficulties but a dominant leader who perhaps strikes some fear into the employees is going to invariably create a climate where bad news is swept under the carpet rather than addressed. And that is precisely what has occured at Metro.

 

 

“Zombie companies” Here we go again

We have been down this line before but yet again a major accountancy firm (KPMG) is expressing warnings about “zombie companies”. They are not firms who have colluded with major accountancy firms to have rigged audits to ensure that investors, lenders and unsecured creditors were fed duff information but rather those businesses that are simply servicing their debts rather than paying them down.

These firms are described as a “major drag on the economy” squeezing out other supposedly healthier enterprises. The implication is that they will quickly fail once (if?) interest rates rise

The article rightly points out that such a decription could apply to Tesla but I would stretch that and simply say that the argument is horribly simplistic.

Firstly many businesses (Tesla), incur substantial debt as they are developing. In fact lazy  minded enterprises can frequently be those that are carrying no debt and are not investing. This thought process works on the basis that all debt is a negative.

Secondly there is also an assumption that a rise in interest rates is simply going to knock existing firms sideways. A rise would be in response to a gradually heating up economy and surely that would frequently be to the benefit of businesses right across all sectors?

 

What next for departments stores?

I do tend to enjoy those websites covering derelict buildings and the above is from this montage  from the Abandoned Britain site

The question that has come to mind is what is to becomes of the 22 Debenhams stores slated for closure? Many in prime central locations but hardly likely to be taken over by another department store retailer in the current climate

This BBC piece may have a few answers

Value of Everything

Its not often enough I give my thoughts on writings on economics on the blog but two books have recently stood our for very different reasons. The first of these is Mariana Mazzucato’s Value of Everything

This is a deceptively wide ranging read that is beautifully and very concisely written over just 250 pages. Without giving too much away, the precis is that the global economy is not as free and as equitable as we like to believe and certain sectors are in a position whereby they are able to abuse their market positions. Finance is of course highly cited but also more damningly pharmaceuticals and perhaps more revealingly, “new media” too.  (I would also strongly recommend AA Gills piece “Uganda” as a devastatingly angry and yet unarguable polemic against Pharma)

The strength of her writing and thought is that its not simply a dreary moan but offers both reasoning and possible solutions.

Another aspect of her analysis is the value of government spending towards economic growth. She believes that it is seriously undervalued with too many seeing every component as little more than a cost and her arguments are strong.

I could go on and on but suffice to say this is one of those rare books that I will be returning to.