17 years after the release of the Cadbury Report, the accepted wisdom in most English-speaking countries is that, except in unusual circumstances, the same person should not hold the roles of CEO and chairman* of the board at the same time.  European countries have increasingly adopted the same practice. The USA stands notably apart, having a very high prevalence of combined CEO/chairman appointments. However, do the results justify the change?  5 years ago, professors from the Wharton Business School said that, as shown by analysis of the financial performance of US corporations, there was no evidence to support separation. Now Harvard professor Bob Pozen reports similar findings from British and European studies. Given this lack of evidence, Pozen comes out against any mandatory requirement for a separation of duties in publicly listed companies.

However, Pozen notes:

… most US firms already have an independent person performing the key functions that you would want from an independent chair. That person is the lead director, an independent board member who helps set board agendas and conveys the concerns of independent directors to the CEO. The lead director is also needed to preside over periodic executive sessions — attended only by independent directors — which are now mandated by listing standards at US stock exchanges. Choosing a lead director is a less dramatic way of fulfilling this listing standard than appointing an independent board chair.

In other words, there is a degree of separation and oversight in many USA listed companies, albeit the CEO is still the dominant player. However, notwithstanding the lack of empirical evidence one way or the other, I suspect most boards who have separated the roles of chairman and CEO, especially outside the USA, will be extremely reluctant to go back to the old model.  Boards want CEOs to perform, to get things done,  to drive the business forward, but they like the positional advantage a chairman has over a CEO on the odd occasion they need to rein the CEO in. It’s easier for a board to steer via the chair, than from the side.

Finally, Pozen adds:

… there is only one arrangement with generally negative results for a company: having a former CEO becoming the board chair of the same company. This can undermine the power of the new CEO. Unfortunately, as mentioned above, over 15 percent of US companies have this arrangement. Clearly that practice needs to change.

PS:

• I am a member of the Wellington branch committee of the Institute of Directors in New Zealand, whose recommended best practice is generally separation of duties.
• I use the chairman* title in a non-gender specific way, taking my cue from some notable female company chairmen who vehemently eschewed the “chair” title prevalent in more PC circles.

This weekend, I finally got round to reading Michael Hill’s book “Toughen Up.”  For those who don’t know him (US and UK, I’d guess), Michael Hill is the founder of Michael Hill International,  the publicly-listed mid-market jewellery retailer which grew from a single store in small-town Whangarei to a multinational chain spanning New Zealand, Australia, Canada and (recently) the USA. Hill’s story is an inspiration to those who think they’ve left it too late to strike out on their own.  Hill didn’t do well at school, and he wasn’t talented enough to pursue a career in music or architecture, his early passions. When he was 17, his parents arranged a job in his uncle’s jewellery store where, learning from his salesman father who also worked there, Hill discovered he was good at selling jewellery.  For 23 years, he drifted along, eventually running the store despite his uncle’s disdain and repeated refusals to let Hill buy into the business. Everything changed when Hill’s house burned down.  Watching the flames, he had an epiphany, resolving to buy his uncle’s business. When Uncle Arthur again refused Hill’s very generous price, Hill announced he would set up in competition; he was ordered to clear out there and then.  The rest, as they say, is history.

Michael Hill’s book (co-written with Claire Harvey and already in its third print) is a deceptively simple read.  With a light, self-deprecating and chatty manner, he expounds his business insights through his personal and company history. I found myself nodding vigorously at several points, particularly learning not to fight on too many fronts at the same time, keeping things simple, keeping focused on big goals, and being prepared to make mistakes. Several chapters feel like something I might have written myself when explaining business ideas to staff.

Hill’s narrative is interspersed with adoring short notes from some of his staff; some readers may find that it feels too much like a company indoctrination manual.  Even so, persevere. There are some golden nuggets of business wisdom in there. And the title?  It goes back to Hill’s house fire epiphany at age 40.  Times may be tough now, but there is no better time to start something new.

UK IT industry analyst TechMarketView has published a review of the UK software products industry (payment required):

“There is a tendency to write-off the UK software industry because most of the familiar software companies are in the US. That would be a big mistake…  organic and inorganic growth has resulted in the top 50 UK headquartered software companies growing c20% in the last year. Perhaps even more surprising, to an ever sceptical British audience, is the c70% of revenues that the UK software industry earns abroad. Indeed, the UK is not that far off earning as much from overseas markets as we buy in. Currently £4.6b plays £5.6b with the gap narrowing each year.”

“The problem for the UK software industry has never been the quality of its people or its innovation,” TechMarketView chairman Richard Holway said, instead blaming other factors holding the UK industry back:

• Lack of available financial backing: In comparison to the US, it is much more difficult for UK software developers to gain access to venture capital funding.
• Lack of marketing expertise: Many of the UK’s best developers simply fail in explaining how great their product is to investors and to the market.
• Local not Global: Many of the UK’s software companies focus mainly (if not solely) on products geared to the UK market.
• Lack of ambition: Many UK software companies are run as ‘lifestyle’ businesses. Very few UK software entrepreneurs seem prepared to risk the Merc for the seemingly scant possibility to become a global player.
• Lack of management skills: Growing from a small enterprise to medium-sized is hard enough - but not a fraction as hard as that required to grow to be large. Few founders are up to running large, global organisations; even fewer are prepared to step aside!
• Easily pleased: UK software companies have a long history of being other nations’ ‘acquisition fodder’. Founders seem to want to ‘take the money and run’ rather than take the risk of growing to something larger.

New Zealand (and Australian) industry observers will find the list very familiar, except perhaps for one thing.  When you’ve only got 4 million people in your home market, international ambitions are needed pretty much from the beginning, adding the complexities, risks and costs of heading overseas while still very small, unsophisticated, and fragile. Given that struggle, it’s no wonder that many are satisfied once they’ve got “the boat, the bach, and the beamer.”

PS. bach is Kiwi vernacular for a holiday cottage

KPMG has published  a comparison of effective tax rates for people on US$100k a year in 86 countries (click here for the pdf file).  US$100k is the entry-point for internationally-mobile managers and mid-level professionals.  (KPMG also compares tax at US$300k for those further up the income ladder). The comparison excludes local government taxes and consumption taxes, and ignores what government provides in return (eg. healthcare). However, the figures are for a childless married income earner, not usually a big user of government services at this income level.

Once again, The Economist publishes an edited highlights graph.  For my English-speaking readers elsewhere:

• New Zealand income tax 32%, social security 1%, total 33%
• Australia income tax 29%, social security 1.5%, total 30.5%
• Ireland income tax 21%, social security 7.3%, total 28.3%
• Singapore income tax 9.3%, social security 10%, total 19.3%
• Hong Kong income tax 10.5%, social security 0%, total 10.5% (but just to make you really turn green, tax waivers can return some of that to you!)

Whether or not you agree with his argument, Al Gore’s An Inconvenient Truth was a masterpiece of communication, galvanizing debate by people and governments; something that scientists and environmentalists struggled to do.  Keeping up the story-telling, this time from the sceptical side, is Australian broadcaster Mike Smith. Irrespective of whether the rationale is correct, I had to admire this explanation of the scale of Australia’s carbon emissions:

Imagine 1 kilometre of atmosphere that we want to rid of human carbon pollution.  We’ll have a walk along it.

The first 770 metres are Nitrogen.
The next 210 metres are Oxygen.
That’s 980 metres of the 1 kilometre.  20 metres to go.
The next 10 metres are water vapour.  10 metres left.
9 metres are argon.  Just 1 more metre.
A few gases make up the first bit of that last metre.

The last 38 centimetres of the kilometre – that’s carbon dioxide.
A bit over one foot.
97% of that is produced by Mother Nature.  It’s natural.

Out of our journey of one kilometre, there are just 12 millimetres left.  About half an inch.  Just over a centimetre.
That’s the amount of carbon dioxide that global human activity puts into the atmosphere.

And of those 12 millimetres Australia puts in .18 of a millimetre.
Less than the thickness of a hair.  Out of a kilometre.
As a hair is to a kilometre – so is Australia’s contribution to what Mr Rudd calls Carbon Pollution.

Imagine Brisbane’s new Gateway Bridge, ready to be officially opened by Mr Rudd.  It’s been polished, painted and scrubbed by an army of workers till its 1 kilometre length is surgically clean.  Except that Mr Rudd says we have a huge problem, the bridge is polluted – there’s a human hair on the roadway.  We’d laugh ourselves silly.

There are plenty of real pollution problems to worry about.  It’s hard to imagine that Australia’s contribution to carbon dioxide in the world’s atmosphere is one of the more pressing ones.  And I can’t believe that a new tax on everything is the only way to blow that pesky hair away.

Perhaps we all need to just take a few deep breaths.

While I admire the use of analogy, Smith’s reasoning can be countered.  As the Arabian parable said, it was the last straw added to the load which broke the camel’s back. Oh hang on, that’s another story with a message.

Reported in the HeraldSun; spotted by WOBF.

The Age reports that ANZ Bank is in advanced stages of planning a major brand update later this year and that ANZ’s Indonesian subsidiary Panin Bank was the pilot operation for the new look.

According to a briefing paper doing the rounds within ANZ last year, the bank’s brand did not resonate with women. Even the corporate colour of blue was considered “too male” by some respondents to a survey, thus the logic behind the bank’s high-profile sponsorship forays into netball and the Australian Open tennis, and a flower for a logo.

The Age also reports that, surprise surprise, executives are split over the change.  I’ve never seen a branding change with unanimous support.    Everyone’s an expert; arguments always rage over the new look, colours, logo, fonts and the need for a change at all.

… the M&C Saatchi-designed logo is meant to be a “three-petalled lotus” that represents the “trinity” of Australia, New Zealand and Asia, which are ANZ’s core markets.

Update: In the comments, Rob points us to this article and preview - better than I earlier thought it might look.

  I assume the new badge will be something like this (replace Panin with ANZ). Hmmm.

Most currency relative value tools look at some mix of goods in each country (purchase power parity). The Economist cuts through the complexity by looking at just one ubiquitous product sold by a single organisation - the McDonalds Big Mac.  Although the Big Mac index is really just a bit of fun, it has proved surprisingly effective over many years alerting people to significant disparities in currency fair values.

As with all international currency matters, the US dollar sets the base point.   In effect, this implies that the US dollar price of a good is fair value.  Clearly that’s not always so. The Europeans and, more recently, the Chinese have argued for an alternative, but there’s no sign of any real contender to be the new reserve currency.  With that caveat,  right now a Big Mac costs the Anglos and Japanese about the right price, the West Euros way too much, and most of the rest of the world way too little.  Sounds fairly accurate to me!

The OECD has just issued its annual survey of tax on wages using 2007/8 data.  Some readers may be surprised at where their country of domicile ranks. However, these simple averages are misleading:

• GST, VAT, sales tax and local government taxes, etc. are not included.
• What about the higher earners, say 65 or 75th percentiles? For example, NZ’s higher tax rates rate kick in at very low $ levels, by comparison with other countries.
• And let’s not even mention the differences between countries regarding real wages, local purchasing power, and tax or tax breaks on interest, dividends and imputation, mortgage interest, pension contributions, capital gains, inheritance, house purchase stamp duty, fuel tax, road tax, etc, etc, etc.

It’s a bit like comparing airline fare deals.

The Dominion Post reports that the founders of HELL Pizza have bought back their NZ master franchise 29 months after selling it to TPF, the owners of Burger King in New Zealand.

Callum Davies, Stu McMullin and Warren Powell opened the first Hell Pizza in Kelburn, in Wellington in 1996. With a menu and branding themed on the seven deadly sins and a penchant for provocative marketing campaigns, which included giving away condoms to promote its lust pizza, the chain had expanded to 66 stores by the time it was sold for about $15 million in December 2006.

The founders would not say how much they bought it back for but it is understood they paid less than they sold it for.

HELL’s founders sold their NZ operation to generate cash to expand internationally, establishing HELL in Britain, Australia, Ireland and Canada.  Under TPF, HELL NZ seemed to lose its way. Those who bemoan the sale of businesses will no doubt use the HELL buyback to push their barrow about the evils of companies being sold to “corporate” or “overseas” owners, who then “destroy” a good business. What’s not mentioned are the far greater numbers of business that prosper under new ownership, or the productive use of the sale money to reinvest in other ventures, new or existing.  And founders can destroy businesses just as easily as subsequent buyers.

However, it’s not unusual to see founders buy back businesses that they’ve sold, especially if they’re still involved somehow, and often for a much lower price than they received when they sold it in the first place.  I can think of several examples where I know the principals personally.  The extra capital they can apply (gained from the original sale and from their other ventures), combined with their renewed passion for the business, often takes the business on to new heights.

HELL built its brand on up-market pizzas and cheeky promotions.  Here’s the message to entice you to open an online account:

Your soul doesn’t do much. You can’t feel it. You can’t see it. It sucks at making coffee, and when you’re buggered after a hard day, it’ll never have dinner on the table. So give it to us. Then you can begin your descent into HELL. The deeper you go, the more retribution you’ll receive for your measly soul. The retribution could be anything from free morsels of food to exclusive access to random stuff. That all depends on how good you are at being bad. And if you make it right into the darkest depths of HELL, then you’ll receive free pizza for life. So sell your soul to us.

The good news keeps coming at Kiwi online accounting  firm Xero, which has announced a partnership with BT, the leading UK telecommunications company.  Xero shares, already lifted by MYOB founder Craig Winkler’s investment and winning global recognition with two Webby awards, rose 20% on the BT news before coming back slightly up on the open.  The marketing channel agreement expands Xero’s relationships with leading national telcos targeting small business, including Telecom NZ and Telstra. Telcos can very much more easily reach millions of small business customers in ways and at much lower cost than just about any other channel. BT in particular is seen as the trend-setter in offering a comprehensive suite of products and services for small business, and Xero fits in perfectly. Rod Drury and his team have adopted a smart strategy.

Disclosure: Isambard Investments owns Xero shares.

Courtesy of Capital Chronicle, here’s Global Finance magazine’s list of the world’s safest 50 banks.  I’m glad to see that the list includes all the ones in which I have an interest, directly or indirectly.  The list shows great variety in size and ownership. As Capital Chronicle observes, “public ownership or a cooperative structure certainly do not guarantee prudence.” In that light, NZ readers will note one notable absentee from the list - the so-called “people’s bank”, government-owned KiwiBank.