CANTILLON:Inside the world of business

YOU COULD be forgiven for thinking that the Government’s steadfast position on Anglo Irish Bank – that winding it up is not an option – is looking a lot shakier these days.

Yesterday Minister for Finance Brian Lenihan told the Dáil that he does not have preferred approach to deciding a future for the ailing bank, which the State had to rescue from a considerable hole last year. Not only that, he said that an orderly wind up was one option that would have to be examined.

The Minister and his officials are insisting that this has always been his and the Government’s stance, and the priority is to get the best deal possible for the taxpayer, who is facing a €22 billion bill for saving Anglo.

The Government’s original argument for keeping Anglo afloat was that doing so was important to the overall financial system, and it could not renege on the €15 billion that the bank owed to overseas bondholders. Subsequently, it pointed out that winding up the bank could cost €35 billion, a lot more than saving it.

But a few recent developments are preventing the Government from being as definite about Anglo as it once was. The EU has told it to treat the money pumped into the bank as State spending, making it part of the national debt. It could be just as easy for the State to take over the €15 billion bond debt.

The EU’s competition directorate will have to approve the restructuring plan on which Anglo’s management is working and recently competition commissioner Joaquín Almunia warned about the dangers of supporting zombie banks.

All this points to the fact that the Government could have little real say in Anglo’s future. Is it possible that the change in emphasis in the Minister’s statements are softening us up for a Brussels-directed change in policy?

Conscience call

It is hard to argue with any of the measures being proposed by the Financial Regulator for the reform of corporate governance of banking and insurance groups.

But as with all such measures they are worthless if the individuals in question are lacking in personal integrity and judgment. For example, take the measures aimed at countering conflicts of interest. The regulator has proposed that individuals should not be appointed to a board if a conflict of interest could emerge that would be “significant to the overall work of the board”.

This is ultimately a matter of judgment and if recent events have shown us anything Irish banking executives, their advisers and the Government have been able to talk themselves out of even the most blatant conflicts of interest with references to Chinese walls and the like.

Despite the appalling consequences of this behaviour it would be too much to now expect an outbreak of conscience in Irish business and thus it is the hard and fast rules being proposed by the regulator that are most likely to bring about an improvement in standards.

Even implementing these rules – which are due to come into effect in the autumn – will prove difficult as the chairmen of both AIB and Bank of Ireland are already in breach of the spirit if not the letter of several of them.

AIB has an executive chairman in the form of Dan O’Connor, as a result of the compromise struck to allow Colm Doherty take the managing director post.

The regulator calls for a clear separation of the two roles.

Equally, Pat Molloy the chairman of Bank of Ireland is a former chief executive and while he meets the decontamination period of five years proposed by the regulator before a senior executive can take up such a role, it’s not an auspicious start.

Reputation capital

The success of two, albeit very different, media companies in the inaugural Irish RepTrak survey, is something that will be welcomed by those in the media world. The Irish Timesand Google are two very different media outlets – one has steadily solidified its brand through its 150-year history, the other, just over a decade old, has established itself as one of the most reputable and trusted brands in Ireland, attributes that are crucial to the identity of a media provider.

But while yesterday’s awards were an opportunity for those who pride themselves on “reputation” to pat themselves on the back, the survey also opened up broader questions as to the monetary value of such attributes. Reputation is one thing, profit is another. The question of whether a sound reputation translates into financial gain was something that was touched upon yesterday by Charles J Fombrun, the chairman and co-founder of Reputation Institute, the global consultancy which founded the RepTrak model. “Reputation capital” has direct effects on value, he told attendees yesterday, arguing that a 10 per cent improvement in reputation produces a 13 per cent improvement in market value.

The absence of some big corporate names from the top 100 of Ireland’s “most reputable” companies serves to dispute this.

Ryanair, one of Ireland’s most commercially successful companies, was ranked 109th out of the 115 companies listed.

While chief executive Michael O’Leary would no doubt claim not to care about the results of such a survey, Ryanair is undeniably one of Europe’s most recognisable brands, and the company’s commercial success undermines the correlation between reputation and profitability.

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