The new Untouchables

By DAILY MAIL REPORTER
Updated:

 

BRITISH financial policing all too often looks dysfunctional. The time taken to conduct investigations and to bring charges more often than not runs to years not months. Cases frequently fall through the regulatory gaps.

And when the authorities seek to demonstrate the firm hand of regulation they find themselves pinned back by appeals tribunals. This is before European human rights law is brought into play.

The disclosure that Malcolm Walker, the founder and former chairman of Iceland, will not be prosecuted after four years of probes into allegations of insider trading is a case in point.

The Walker allegations were passed to the Serious Fraud Office by the Financial Services Authority, which conducted the initial inquiry. At the time that the FSA conducted its probe, it had no means of taking the matter further because it was still to inherit its market abuse powers.

The Department of Trade & Industry, the traditional dispenser of corporate justice, showed no real interest. The SFO found it impossible to proceed because the burden of proof for insider trading cases was so high. So Walker is now able to say he is 'totally vindicated'.

Sir Philip Watts, former chairman of Shell, plainly hopes that the checks and balances of British corporate justice will save him from the hands of the Securities and Exchange Commission (SEC).

Watts has accused the FSA of persecuting him by associating him personally with its decision to fine Shell £17m for covering up the shrinking size of its oil reserves.

The FSA has decided not to take the matter lying down and has referred it to the Financial Services and Markets Tribunal in an effort to clear the air. The quarrel has a hidden significance. Watts is personally under investigation on both sides of the Atlantic. The SEC apparently is interested in extraditing him to the United States to face allegations.

Watts and his lawyers are proclaiming his innocence, but their tactics may also tie the British regulators in knots and keep the Americans at bay.

Pensions onslaught

THE fragile state of the Sainsbury pension fund is typical of what is happening among some Footsie companies. Sainsbury's fund has a big shortfall of £630m, has been cutting back its contributions and is choosing to invest in more risky share investments instead of bonds.

Even more galling for the company's 85,000 current and former staff is the difference between the way in which ordinary staff are being treated and those at the very top.

Former chief executive Peter Davis has a pension pot worth £1.9m which will deliver him £111,000 for life - about the same as the Prime Minister Tony Blair.

The gap between pensions provision for most employees and senior executives is one of the key points that will be raised by the TUC general secretary Brendan Barber at today's pensions conference at the CBI. Adair Turner, author of the Pensions Commission report, will be the star turn.

Barber will note that the average accrued annual pension for a FTSE-100 director is now almost £170,000 for life, which is 26 times the average in occupational pensions. The TUC chief will rightly suggest that this 'irresponsible behaviour is doing great damage to the public perception of business'.

Barber seeks to counter the argument that the current problem of company pension funds is all down to Gordon Brown's dividend tax. He notes that employers used surpluses to take contributions holidays of £18.1bn between 1988 and 2003. He adds that companies creamed off £1.2bn of surpluses for themselves.

His greatest anger is directed at the way in which companies have shifted into riskier defined contribution schemes, while at the same time taking a meat axe to employment costs by cutting back the money they are putting in.

Indeed, as the Turner Commission makes clear, the biggest part of the decline in pensions saving is the result of 'the reduction in the generosity of employer contributions'.

This may not be what the CBI wanted to hear when it organised its gabfest.

Asda way

JUSTIN King has one of the least enviable tasks in British business when he explains the forward strategy for J Sainsbury today. The mantra he will adopt is investing in the business, by delivering price, quality and service.

Many experts have given up on Sainsbury. But it is forgotten that a decade ago, before Sir Archie Norman and Allan Leighton took the reins, Asda was regarded as a basket case too.

It is a lesson that King, a pupil of the Asda university, will not have forgotten.

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