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If the British public were polled and asked whether they thought an American company should be allowed to take over Cadbury, they would be most likely to vote against.
If customers were asked whether they would prefer an independent Cadbury to one that is part of a US food conglomerate like Kraft, they would probably vote for its continuing independence. Employees faced with the possible break-up of the group and in time the likely transfer of production overseas would vote for the status quo.
A politician, asked if it was right that Hershey, a possible rival bidder which is smaller than Cadbury, should be allowed to bid for it when Cadbury would be blocked by its controlling charitable trust if it tried to take over Hershey, would mumble about the need for reciprocity while sitting firmly on the fence.
It is a fair guess that the majority of people in this country who have an opinion are opposed to the takeover of Cadbury. However, despite its being a particularly pointless deal, it will probably happen anyway because the people who will take the decision to accept the offer are none of the above but a handful of fund managers who are not even investing their own money. They will not consult any of the above stakeholders; they will not even consult those whose money they invest. They will ignore the wishes of the individual shareholders who oppose the deal.
None of them will think for more than a minute about how Britain can reduce its dependence on financial services if they pull the rug from under the few world-class companies we have left. The only thing that matters to them is that they are being offered tomorrow's price today.
This bid is in many ways no different from those of the past few years which have seen BAA, Pilkington, Asda, Scottish Power, Uncle Tom Cobley and all sold by the fund management professionals into foreign ownership. But it is different in that it is being played out against a background of renewed efforts to make institutional shareholders behave more like responsible owners of the businesses in which they invest.
Last week in the Walker Review and today with the publication of Sir Christopher Hogg's corporate governance review on behalf of the Financial Reporting Council came a recognition that the shareholder side of our capitalist system is not working as it should, or as many would consider desirable.
Both reviews accept the core of the analysis by City Minister Lord Myners that fund management incentives and behaviours have produced “less than ideal outcomes” from an unhealthy addiction to mergers and acquisitions to a failure to consider the longer-term consequences of their decisions on the broader economy and society.
Interestingly, as far back as March 2001 in a report he produced for the Treasury, Myners proposed that pension fund trustees and their fund manager agents should be required by law to have an explicit strategy for discharging the duties of ownership and promoting good governance — as is the case in America. The fund management industry successfully resisted the proposal. It will be interesting to see how much attitudes have shifted this time round.
French lesson for our banks
Asked yesterday which was the largest bank in the European Union as measured by deposits, I got the answer wrong. It is obviously no longer one of the British banks so I opted, wrongly, for Santander of Spain. The correct answer is France's BNP Paribas.
We tend to forget about French banks in London but BNP Paribas has had a particularly good crisis. Not only did it avoid most of the subprime fallout after being one of the first to hit problems with some money funds full of the toxic stuff, but it also pulled off what is arguably the coup of the crisis by snapping up the bulk of Fortis for next to nothing, after that bank had virtually bankrupted itself by partnering RBS in the acquisition of ABN Amro.
Indeed, at an investor roadshow in Brussels today, the bank showed what a good deal this was increasing its estimate of the cost savings and synergy to more than €700 million (£635 million).
As a result, Fortis is one of the leaders in European banking, and its head Baudouin Prot, who is also head of the French banking association, is one of its most influential figures. This matters because France now controls the EU economic brief and, with reform in the air, Prot is probably in a position of considerable influence.
It also matters that BNP Paribas still believes in universal banking, whereby one organisation provides investment banking and commercial banking services. What it does not believe, however, is that the Anglo Saxon approach is the right one.
This — as bank customers know to their cost — is where the investment banking tail wags the commercial bank dog, and so corrupts the culture that relationships cease to count and the bank tries to charge fees for everything — regardless of whether it is what the client wants or needs.
Instead, Prot believes that commercial banking relationships are the core of the business, and investment banking is an additional service to be grafted on when needed.
If British banks had believed that, more of them would still be standing.
