Are some bosses actually worth it?

The big problem with British digital technology firms is that they sell out before they go global. Their founders prefer the short-term payoff that comes from absorption into a larger, usually American, group.

They don't think big. Which is why Google, Facebook, and the rest, are based in Silicon Valley, not Silicon Roundabout. One doesn't need to travel very far through the UK business world before one hears this kind of lament.

But people should take a look at Bet365 to see a stunning counterexample.

It was founded only 18 years ago in a Portakabin in Stoke. But with a claimed 35 million customers it's now the world's largest online gambling company. Revenues in 2017-18 hit £ 2.7bn. Mouths gaped open last week at Companies House filings indicating £ 265m remuneration for its chief executive Denise Coates over that period. That's multiples of the pay of bosses of global digital companies such as Apple or eBay.

Indeed, it's just about the largest corporate pay packet on the planet.

I've spent the past few weeks complaining about excessive corporate pay and executive greed, whether on the part of Richard Scudamore or Carlos Ghosn or Jeff Fairburn. Yet I find it hard to get exercised about Coates' remuneration, even though their combined annual rewards don't come close to adding up to hers.

Why? Because the context is profoundly different.

She's more of an entrepreneur than a corporate bureaucrat brought in to run an established businesses, as was the case with Scudamore, Ghosn and Fairburn. Coates founded the company. She took a personal financial risk to do so, borrowing £ 15m from the Royal Bank of Scotland secured on her family's estate of betting shops.

This econometrics student from the University of Sheffield has masterminded the stunningly effective global expansion, spotting gaps in the market, grasping the importance of technological shifts (in particular the rise of mobile phone betting) and executing her strategy with impressive discipline.

If the Coates family want to pay her such sums from their own business as a salary it's more or less up to them, provided, of course, she pays full UK tax on it

Whatever one's view of online gambling and its clear social costs (and it's perfectly reasonable to object to the fact that she was honoured with a CBE, given the industry in which she works), it's hard to deny that she's been a quite extraordinary business leader.

No doubt there was a fair amount of good fortune involved, not least the online gambling bans in the US, China and India which drove traffic to Europe. And other members of her management team and her 4,300 workers surely deserve their share of the credit. But, unlike with Ghosn, Scudamore and Fairburn, it's easier to draw a clear and direct link between the organisation's success and her personal decisions.

But what about the quantum of her pay? Isn't that a neon-illuminated corporate governance scandal? Not really. It's important to bear in mind that Bet365 is not a listed company. Coates owns half the equity and her family most of the rest. It has not taken money from our pension funds. If the Coates family want to pay her such sums from their own business as a salary it's more or less up to them, provided, of course, she pays full UK tax on it.

Yet why, one might wonder, the desire to extract cash from a business she already effectively owns? Isn't this shifting wealth from one pocket to another? The company does not offer a breakdown of where it makes its money and as a private company has no obligation to do so. But analysts estimate that, like many other online betting companies, it operates in "grey markets" - offering services that are currently unregulated by governments but could easily become so in future. If politicians decide to regulate or shut down some of those activities entirely - to make those grey areas black or white - Bet365' s revenue streams could take a hit.

Gambling, due to its inherently addictive nature and often extreme social repercussions, is an industry that's always been vulnerable to government action, as demonstrated by the recent fixed-odds betting terminal rigmarole.

It's a fair bet that Coates recognises that vulnerability. Customers here today may be gone tomorrow. So it makes sense to shift some of her wealth out of her online gambling company and into other less volatile sectors of the economy.

Like all competent bookmakers, the Bet365 founder is diversifying to reduce her risk.

#Bet365, #Denise-Coates, #executive-pay, #online-gambling

The rise and fall of Carlos Ghosn shows the folly of treating businessmen like gods

This June, Carlos Ghosn, the boss of a French-Japanese automotive conglomerate, sat down for lunch with the Financial Times at an old-fashioned bistro in Paris.

As the interviewee dug into a € 40 chateaubriand steak, the FT broached the sensitive issue of Ghosn’s high remuneration. His pay had recently prompted a major row with the French government, which owns a 15 per cent share in Renault, an outpost of his empire.

“You won’t have any CEO say, ‘I’m overly compensated’,” Ghosn laughed. He’s not laughing now.

Or at least we can presume he’s not. Ghosn was arrested in Japan on Monday, accused of concealing the true value of his Nissan remuneration from shareholders over the last five years by 5 billion yen (£ 35m).

There are also allegations Ghosn benefited from the Japanese firm purchasing various luxury homes around the world for his personal use.

They are allegations at this stage, but this is clearly the end of the road for this titan of the automotive industry. Ghosn is already likely to be ousted from his leadership positions at Nissan, Mitsubishi and Renault.

That this scandal was unearthed in Japan might come as something of a surprise given that country’s reputation as a land of corporate secrecy and extreme deference. Yet a succession of level eight richter scale scandals – beginning with the Olympus affair in 2011 – appear to have precipitated a landslide of genuine reform when it comes to policing corporations.

Apparently, the Ghosn scandal was exposed by an internal Nissan whistleblower. This is one of the encouraging elements of the affair: it is hard to imagine a better advertisement for whistleblowing than this case, in which exposure of wrongdoing led to the downfall of one of the world’s most powerful and feted industrialists.

There’s another Japanese lesson in this. Chief executives in the country have not shared in the explosion of compensation relative to the workforce that we have seen among their counterparts in the US and the UK since the 1980s.

That’s one of the reasons why the (pre-tax and post-tax) income share of the top 1 per cent of earners has not soared in Japan as it has in the Anglophone world.

Sometimes we’re told that the rise in this form of equality is inevitable due to inexorable global market forces such as technological advance, scalability and fierce competition for the finest management talent.

In fact, the rewards that corporate bosses receive across the world still depend mostly on local pay “norms” – the social acceptability about how much some company employees get relative to others. Those norms, for various reasons, have been distorted more in some countries than others. And Ghosn’s greed appears to have exposed him in Japan.

But let’s not rewrite history to suggest that this was someone widely seen as heading for a fall. Ghosn was lauded by the business media around the world like few other figures; he was the subject of countless fawning profiles.

And even Japan was infected by the cult-like atmosphere around him. He featured in a manga cartoon comic book and his face adorned a bento lunchbox. One poll in 2011 suggested many Japanese people would like him to run their country.

This adulation was excessive. As effective as “Le Cost Killer” might have been as a manager and strategist, it was always ludicrous to present him as single-handedly responsible for turning around the fortunes of these giant companies. Too many people in business, markets, politics and the media who ought to have known better were caught up in that simplistic presentation.

Venerating business leaders as gods not only leads to hubris on their part, it also interferes with our moral sensibilities and misleads the public about the true sources of our prosperity. And there really is nothing funny about that.

#CarlosGhosn #Japan #Nissan #Renault

The rise and fall of Carlos Ghosn shows the folly of treating businessmen like gods

This June, Carlos Ghosn, the boss of a French-Japanese automotive conglomerate, sat down for lunch with the Financial Times at an old-fashioned bistro in Paris.

As the interviewee dug into a € 40 chateaubriand steak, the FT broached the sensitive issue of Ghosn's high remuneration. His pay had recently prompted a major row with the French government, which owns a 15 per cent share in Renault, an outpost of his empire.

"You won't have any CEO say, 'I'm overly compensated'," Ghosn laughed. He's not laughing now.

Or at least we can presume he's not. Ghosn was arrested in Japan on Monday, accused of concealing the true value of his Nissan remuneration from shareholders over the last five years by 5 billion yen (£ 35m).

There are also allegations Ghosn benefited from the Japanese firm purchasing various luxury homes around the world for his personal use.

They are allegations at this stage, but this is clearly the end of the road for this titan of the automotive industry. Ghosn is already likely to be ousted from his leadership positions at Nissan, Mitsubishi and Renault.

That this scandal was unearthed in Japan might come as something of a surprise given that country's reputation as a land of corporate secrecy and extreme deference. Yet a succession of level eight richter scale scandals - beginning with the Olympus affair in 2011 - appear to have precipitated a landslide of genuine reform when it comes to policing corporations.

Apparently, the Ghosn scandal was exposed by an internal Nissan whistleblower. This is one of the encouraging elements of the affair: it is hard to imagine a better advertisement for whistleblowing than this case, in which exposure of wrongdoing led to the downfall of one of the world's most powerful and feted industrialists.

There's another Japanese lesson in this. Chief executives in the country have not shared in the explosion of compensation relative to the workforce that we have seen among their counterparts in the US and the UK since the 1980s.

That's one of the reasons why the (pre-tax and post-tax) income share of the top 1 per cent of earners has not soared in Japan as it has in the Anglophone world.

Sometimes we're told that the rise in this form of equality is inevitable due to inexorable global market forces such as technological advance, scalability and fierce competition for the finest management talent.

In fact, the rewards that corporate bosses receive across the world still depend mostly on local pay "norms" - the social acceptability about how much some company employees get relative to others. Those norms, for various reasons, have been distorted more in some countries than others. And Ghosn's greed appears to have exposed him in Japan.

But let's not rewrite history to suggest that this was someone widely seen as heading for a fall. Ghosn was lauded by the business media around the world like few other figures; he was the subject of countless fawning profiles.

And even Japan was infected by the cult-like atmosphere around him. He featured in a manga cartoon comic book and his face adorned a bento lunchbox. One poll in 2011 suggested many Japanese people would like him to run their country.

This adulation was excessive. As effective as "Le Cost Killer" might have been as a manager and strategist, it was always ludicrous to present him as single-handedly responsible for turning around the fortunes of these giant companies. Too many people in business, markets, politics and the media who ought to have known better were caught up in that simplistic presentation.

Venerating business leaders as gods not only leads to hubris on their part, it also interferes with our moral sensibilities and misleads the public about the true sources of our prosperity. And there really is nothing funny about that.

#Carlos-Ghosn, #Japan, #Nissan, #Renault