Morning:
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Take a moment to raise a glass to Philip Green - not the High Street billionaire retailer but the man who runs United Utilities, the UK's largest listed water company, which owns, operates and maintains utility assets including water, wastewater, electricity and gas.
When he took over the FTSE 100 company, he told me that his first objectives were to increase the motivation and engagement of his employees and to improve levels of customer satisfaction. Almost three years on, he informs me that there has been a dramatic improvement in both - customer satisfaction rising, for example, from around 50% to 75% and engagement moving positively in the same direction.
It is a shame about the jargon, though. Engagement is one of those overworked words beloved of management gurus who see it as an easy answer to all the problems of their business - a magic dust that will transform the dullest of companies into a sparkling pace-setter.
These people tend also, of course, to be the managers who discover engagement just at the time they are about to hit their workforces with a round of redundancies.
The truth is that engagement is rare in business and hard to build because it depends on leadership. An executive who knows how to lead will almost by definition see a rise in employee engagement because his people will at last have someone they can believe in, who is honest with them, whom they can respect and think worth following.
It follows that engagement is so rare because most executives, including most of those who demand, and get, vast bonuses for "performance", could not lead the way out of a paper bag, and while they may successfully fool the investment community and the media, they don't fool their employees for a minute.
The ability to lead and motivate is the real talent that is in too short supply in British business. It is the thing head-hunters and nominations committees are normally unable to recognise, so they have invented a pseudo science of management selection and process that purports to look at everything else but exists mainly to cover up this fundamental inadequacy.
Yet when leadership is present, the results are there for all to see. Green is a leader, employees have responded, customers are much happier. This has fed through - and this is the pay-off - to profits and share-price performance.
United Utilities now ranks first in its sector in total shareholder return.
Assurer tests miss the point
When Lord Turner delivered his rightly praised Economist City lecture last month on what we should learn from the current crisis, he said regulators must learn to "adopt policies that avoid unnecessary pro-cyclicality in capital requirements". In plain English, he means regulators should avoid bringing in rules that make things worse, which make neither the booms more manic and irrational, nor the busts more desperate and destructive.
A laudable sentiment, but one not apparently endorsed by the organisation he heads. In the past few days, the leading life assurance companies have been informed by email that the FSA expects them to press ahead with a further round of stress tests just to see how much spare capital they would have left and how solvent they would be if markets were to plunge by a further 20%, and interest rates fall by 50 basis points.
Assuming they manage to get through that ordeal, the FSA has expressed an interest in a further test to see how they would cope if the FTSE 100 were to fall to 2000. It is an exercise it seems perversely determined to continue until it finally gets to a test so extreme no one can pass, rather like loading weights on a weightlifter until he finally collapses with a hernia.
There may be a point to this if insurance companies were like banks, and required to repay their customers at a moment's notice. But their business model is quite different, and their customers cannot by law get their money back until their policies mature, unless they want to pay a massive penalty.
In addition, the bonds that life and pension companies hold have been bought for the most part to match their long-term liabilities to pay customers' pensions, and cannot be sold even if the company wanted to. All logic demands that these assets should be marked to maturity, not marked to market.
The regulator seems not to accept that life assurance is a very long-term business and, though equities are volatile, insurance companies have a long enough time horizon to live with that volatility, and in return they are rewarded with the higher returns equities deliver in the long term.
The regulator, if it fails to understand this, will destroy the long-term savings business and deprive its customers of one of the safest ways in which they can get exposure to the equity market. That seems a high price to pay if the only purpose of this exercise is for the FSA to cover its back.
