viernes, mayo 08, 2015

VACACIONES MAYO 2015 / GRL

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VACACIONES MAYO 2015


Jueves 30 de Abril del 2014

Queridos amigos,

Les escribo estas líneas con motivo de mi próximo viaje que me tendrá ausente de la oficina y de nuestras lecturas cotidianas, desde el lunes 4 hasta el miércoles 20 de Mayo próximo.

Durante estos días no tendré acceso regular al Internet ni a mis correos.

Lamentablemente, en los últimos meses la situación internacional se ha seguido complicando tanto social, económica, financiera y geopolíticamente, de acuerdo a lo previsto en mi carta de Setiembre pasado y las anteriores, a pesar de todas las declaraciones y anuncios en contrario por parte de las autoridades de los bancos centrales y los representantes de los gobiernos.  

En realidad no podía ser de otra manera, si tenemos en cuenta que no se ha hecho nada en los últimos años para reparar los profundos desequilibrios estructurales en los fundamentos de la economía global, sino que mas bien, por el contrario, se ha seguido "maquillando" por parte de los bancos centrales la insostenible situación económica y financiera global, profundizando los desequilibrios y la inestabilidad vía el constante crecimiento de las deudas, aumentando las ineficiencias y dilatando el necesario ajuste. El crecimiento estructural de la economía global es cada vez mas frágil, dudoso e insostenible.

Hasta la crisis del 2000 y luego de la del 2008, ahora así llamada la Gran Recesión, la demanda global había sido “subvencionada” por un sistema financiero manipulado e intervenido, creando una demanda y una economía global ficticia, una recuperación así llamada "subprime", liderada por la FED mediante un crecimiento desproporcionado de las deudas, imposible de auto-sustentarse en un crecimiento de la economía real en el largo plazo. 

Deuda, deuda y mas deuda, parece ser el mantra de la FED.

Desde entonces, la FED y el resto los bancos centrales de todos los países más importantes del mundo se han negado y se siguen negando a reconocer esta realidad, aceptando el inicio de un ajuste inevitable y estructural, regresando a un nivel real de la economía global de alguna manera manejable. Aun siguen abocados al esfuerzo de una gran represión financiera, manipulando e inflando irresponsablemente los mercados financieros vía una política monetaria de emisiones inorgánicas de papel moneda sin respaldo y muy bajas tasas de interés.

Las deudas de consumidores, empresas y gobiernos, eran y son insostenibles.

Por ello creemos que los bancos centrales no aumentarán de "motu propio" las tasas de interés de manera importante a corto plazo, salvo que este aumento provenga final y sorpresivamente de una crisis generada por la desaparición de la confianza de los inversionistas globales en los mercados financieros.

Inmediatamente sus deudas se volverían obviamente impagables y la crisis que tanto han tratado de evitar reconocer, sobrevendría inevitable.

Solo para mencionar al país con la economía mas importante, la deuda de los Estados Unidos de Norteamerica ha crecido por encima de los 18 trillones de dólares, a mas del 100% de su PBI. Y si incluimos las deudas contingentes internas, como el Seguro Social y los Fondos de Pensiones, algunos analistas calculan que la deuda norteamericana podría llegar a sumar entre los 80 a 120 trillones de dólares, es decir, entre 5 a 7 veces el producto bruto anual.

Para un análisis detallado del desarrollo de esta problemática y la verdadera situación actual, ver los artículos del blog, aquí, aquí y aquí.

Esta situación se ha seguido agravando en los últimos años y es insostenible en el mediano y largo plazo.  (ver articulo)

Para evitarlo, es que los bancos centrales han tenido que esforzarse en mantener ficticiamente una apariencia de normalidad en el "statu quo", inyectando cantidades innombrables de papel moneda sin respaldo a los mercados financieros y reducido las tasas de interés a niveles nunca vistos por largo tiempo, desde que la historia económica recuerda. (QE1, QE2, QE3, Q4, Abenomics, China, etc….)

Todo ello nos hace presumir que todo ello se lleva a cabo por el fundamentado temor a perder el control del esquema Ponzi mundial, que es lo que son ahora la economía global y los mercados financieros, y por ende se derrumbe el castillo de naipes enfrentando de golpe un ajuste económico enorme y hasta la posibilidad de una revolución social incontenible, guerras, etc.

¿Porqué un ahorrista o un inversionista estaría dispuesto a depositar su dinero en un banco o comprar un bono de un gobierno, que no solamente no le paga ningún interés sino que más bien ahora le cobra por mantener su deposito, o si se lo paga, es un interés muy reducido y hasta negativo?

Ello sucede solo cuando el ahorrista y/o el inversionista esperan una deflación en la economía, i.e. que los precios mañana serán mas bajos que los de hoy, la que sería mayor que el costo de ese depósito, y/o una ganancia potencial en el fortalecimiento de esa moneda, es decir, en ambos casos, a pesar de todo, un aumento del poder adquisitivo de sus inversiones. Y también, cuando además, existe una enorme aversión al riesgo en los mercados financieros "tradicionales". Solo así se puede justificar racionalmente esta realidad por un ahorrista o inversionista que desea mantener su poder de compra, sin tener que enfrentar riesgos desconocidos e incalculables, pero claramente presumibles en los mercados financieros globales. (ver articulo)

El hecho es que el esfuerzo de política monetaria intervencionista llevada a cabo por la mayoría de los bancos centrales del mundo, en los últimos 15 años, más intensa y desproporcionadamente desde los últimos siete años, además, ha producido la transferencia más importante de riqueza que se recuerda en la historia, de manos de los pensionistas y los ahorristas, hacia las clases privilegiadas. 

Mas importante todavía, se ha distorsionado y manipulado fundamentalmente las reglas de la economía del libre mercado con consecuencias funestas y aun impredecibles en el mediano y largo plazo para los consumidores e inversionistas del mundo, incrementando la alocación  ineficiente de los recursos de inversión, además de multiplicar el costo de la inevitable implosión de los mercados financieros, tanto de las acciones, como de los bonos y otros instrumentos de inversión financiera.

Todo esto para no mencionar a los derivados financieros, estimados por algunos analistas en mas de 1 cuadrillón de dólares (1000 trillones de dólares),  que se ciernen como una espada de Damocles, sobre todo el sistema financiero y económico internacional.

Recientemente el FMI ha advertido de la posibilidad que la economía global esta entrando a un periodo de "stagnación" y a una probable nueva recesión, con las consecuencias que ello implicaría. (ver articulo)

El reconocido economista y analista Ricardo Lago hace recientemente en un diario local un excelente resumen de la ultima reunión del FMI y el Banco Mundial en Washington, sus conclusiones e implicancias. (ver articulo

Obviamente estos organismos no pueden decirnos toda la verdad. Ello sería propiciar ellos mismos el adelanto inevitable del descalabro global, el caos y el ajuste sin anestesia, con resultados imprevisibles. 

La pregunta de fondo es ¿hasta cuando se podrá o podrán mantener esta realidad bizarra?
Y eso nadie lo puede responder con seguridad. La confianza de los inversionistas en los mercados financieros es la verdadera incógnita.

¿Existen aun los inversionistas? 

Observan algunos críticos y analistas que los pequeños y medianos inversionistas se han retirado del mercado y todo el movimiento que observamos en los índices, es solo en volúmenes reducidos. Piensan que ello se debe solo a la actuación de unos cuantos brokers y/o "high frequency traders"de los grandes bancos globales que se siguen "alimentando" de las manipulaciones y ventajas, coordinadas y producidas por los bancos centrales.

Hace alrededor de 100 años el asesinato del archiduque Francisco Fernando y su esposa Sofía Chotek en Sarajevo fue el detonante de la primera guerra mundial. Y nadie pensó en ese momento que ese acontecimiento, aparentemente sin importancia global, traería la primera guerra mundial.

Por ello ahora tenemos que preguntarnos seriamente, ¿cuál de todos los potenciales "cisnes negros", conocidos o no, que hoy se ciernen sobre la economía global ,y que son muchos, económicos, sociales y geopolíticos, podrían ser el detonante de la nueva catástrofe?

Solo la historia nos responderá a esta crucial pregunta. No hay cuerda para mucho. Y evidentemente, toda situación que es insostenible, finalmente se caerá.

Tenemos que insistir mas que nunca que la experiencia y la prudencia, el análisis y la inteligencia, la vigilancia y la paciencia, son los socios más importantes en las decisiones de políticas y estrategias de inversión a corto y mediano plazo.

En un cambio importante de ciclos como en el que pensamos que estamos envueltos hoy día, y en el que mas allá de lo circunstancial, el pasado y el futuro se bifurcan y se oponen,  los riesgos para los inversionistas son profundos. (ver articulo)

Con estas  anotaciones y advertencias que espero les sean de utilidad, me despido de Uds. con un cordial abrazo hasta el regreso a mis actividades, Dios mediante, a inicios de la semana del lunes 23 de Mayo próximo, cuando estaré nuevamente a su gentil disposición.

Gonzalo

PD. Algunos días durante mis vacaciones en la medida de lo posible y excepcionalmente publicaré artículos en el blog que podrán leer entrando directamente y/o subscribiéndose al blog:  www.gonzaloraffoinfonews.com

Shanghai equities roar as China floats QE-lite

The central bank is acting as a lender-of-last-resort for debt-strapped local governments struggling to sell new bonds on the open market

By Ambrose Evans-Pritchard in Washington

8:32PM BST 27 Apr 2015


A Chinese man walks past a billboard showing collage of Chinese Yuan and US dollars in Beijing Photo: AP
 
 
China is drafting plans for bond purchases to boost liquidity and shore up the country's $2.6 trillion edifice of local government debt, becoming last of the world's big economic powers to resort to quantitative easing.

The news propelled the Chinese stock market to a seven-year high on Monday, helped by fevered talk of a merger between Sinopec and PetroChina, the country's two oil giants..
 
The Shanghai Composite index of equities has risen by 40pc this year and 125pc since June, even as the economy grapples with a property slump.
 
Corporate profits fell 2.6pc in the first quarter and swathes of industry are mired in recession. "The operational situation of industrial enterprises remains grave," said the National Bureau of Statistics.
 
The People's Bank of China (PBOC) is looking at menu of unconventional measures to expand its balance sheet, according to officials cited by Market News. These include the option of buying $160bn of local government bonds from the banks.

 




While this is already being dubbed "China's QE", it may not add much stimulus and has an entirely different purpose from actions by the US Federal Reserve, the European Central Bank, or the Bank of Japan. The latter were attempting to drive down borrowing costs once short-term rates could drop no further. China is still a long way from the 'zero-bound'.

"It is only akin to QE in the sense that it involves asset purchases by the central bank," said Mark Williams from Capital Economics.

The PBOC appears to be stepping in to help local governments as they struggle to find market buyers under a new debt-swap regime, a reform pushed through earlier this year to clamp down on regional finances.

"It is acting as lender-of-last-resort for local governments. This is not a monetary policy measure, or part of broad monetary loosening. If they wanted to do that they would cut the reserve requirement ratio (RRR), which is 18.5pc and still very high," he said.

The PBOC slashed the RRR by 100 basis points earlier this month - the biggest cut since 2008 - but this was chiefly to offset monetary tightening caused by a surge of capital flight in March.

It is not stimulus as such but that has not stopped investors reacting with euphoria, stoking further excesses in a market already in the thrall of dangerous speculation.

A record 3.3 million people opened 'A-Share' accounts last week and joined the stampede. Margin debt has risen to a record 8pc of the free float on the stock exchange, evoking comparisons with the final blow-off on Wall Street in 1929.

"Financial logic dictates that asset prices cannot decouple from the growth of the global economy forever," said Mark Haefele from UBS. "Investments eventually need to be justified by profits. The assets on the receiving end of liquidity can change suddenly."

Ma Jun, the PBOC's chief economist, insists that the Chinese economy can weather the current slowdown for now without the need for major stimulus, citing healthy levels of job growth.

There is no doubt that the authorities are taking precautionary action to head off a very bumpy landing. Seven-day interbank lending rates have dropped by 200 basis points to under 3pc since the cash-crunch in March, a sign of easing.





















Mr. Ma said the PBOC's measures were intended to offset "passive" monetary tightening occurring for other reasons. The country's slide into near-deflationary conditions has automatically pushed up real borrowing costs for Chinese companies by five percentage points since 2011.

The Chinese authorities still have enormous fire-power. They could cut the RRR all the way down to 5pc or even lower in extremis, injecting at least $2 trillion of credit into the financial system. But this would perpetuate the same corrosive 'on-off cycle' of ever-rising debt.





























Total debt has reached 250pc of GDP, if all forms of trusts, shadow banking, and off-shore lending are included. "No country has ever survived that sort of rise without something bad happening," said Nariman Behravesh, global economist for IHS Global Insight.


Mr Behravesh said a financial crisis is unlikely since the Chinese state controls the banking system, but that alone cannot conjure away excesses on this scale. "What is more likely is a Japanese-style lost decade. The question is at what point they forget about reforms and just stimulate again and put off the day or reckoning because they can't bear the pain. We're not there yet but we are seeing a dramatic slowdown," he said.






























President Xi Jinping seems determined to tough it out, opting to lance the boil of excess credit early in his 10-year term, and before it escapes control altogether. He has established such a tight grip on the Communist Party that he can probably withstand an economic squall.
Finance minister Lou Jiwei warned over the weekend that there is a 50pc likelihood that China will slide into the "middle-income trap" over the next five to ten years unless it curbs leverage.

The low-hanging fruit of easy catch-up development has already been exhausted.

Citigroup estimates that growth has dropped to 4.6pc over the last year, far below the official claims of 7pc. The Conference Board thinks the real figure is just 4pc.

Diana Choyleva at Lombard Street Research says GDP actually contracted by 0.2 in the first quarter, led by an ominous plunge in real domestic demand of 2.1pc. "Beijing has made a conscious policy choice to go for “creative destruction”, although we have yet to see the extent of corporate defaults," she said


 
"Sceptics of China’s ability to rebalance without a major crisis are right to worry, as the task is fraught with uncertainty. China has taken a huge gamble."

Review & Outlook

Bernanke’s Rebuttal

He credits the Fed for lower unemployment but not for slow growth.

April 30, 2015 7:28 p.m. ET
.


Former U.S. Federal Reserve Chairman Ben Bernanke Photo: REUTERS/Jonathan Ernst

This is fun, so let’s parse the Revered One’s arguments. First, Mr. Bernanke accuses us of “forecasting a breakout in inflation” at least since 2006. The central banker is getting into the polemical swing, but he’s wild with that one. We’re not always right. But we’ve been careful not to join some of our friends in predicting inflation from the Fed’s post-crisis policies. We’ve written that we are in uncharted monetary territory with risks and outcomes we lack the foresight to predict.

Our view has been that the Fed’s first round of quantitative easing was necessary to stem the financial panic—and that it worked. We were skeptical of the later bouts of QE, and in our view these have been notably less successful in helping the economy return to robust health. Asset prices are up and the wealthy are better off, but the working stiff is still waiting for the economic payoff.

Mr. Bernanke defends the Fed’s over-optimistic economic growth forecasts by saying the central bank has been overly pessimistic about unemployment. “The relatively rapid decline in unemployment in recent years shows that the critical objective of putting people back to work is being met,” Mr. Bernanke writes.

Now, that’s over-optimism. One reason the jobless rate has fallen to 5.5% is because so many people have left the workforce. The labor participation rate has plunged to 1978 levels during this supposedly splendid expansion. Most economists acknowledge that if the participation rate had stayed constant, the jobless rate would still be close to 8%. The failure to attract the long-term unemployed into the job market is one reason the Fed continues to hold interest rates so low.

Mr. Bernanke’s other defense is the counterfactual that it could have been worse: “It seems clear that the Fed’s aggressive actions are an important reason that job creation in the United States has outstripped that of other industrial countries by a wide margin.”

That’s conveniently unprovable, not least because it doesn’t correct for non-monetary variables. The structural policy impediments to growth in Europe and Japan are far worse than in the U.S., yet Mr. Bernanke implies that the main policy difference is that they waited too long to try QE.

We learned in school that something isn’t a theory if it can’t be tested. Mr. Bernanke’s theory of post-crisis monetary policy is that if it’s working, then do more of it. And if it’s not working, then do more of it too. This isn’t data-driven monetary policy.

Mr. Bernanke also says that we “argue (again) for tighter monetary policy.” If lifting the fed-funds rate to 50 or 100 basis points after six years of near-zero policy is tighter money, then we plead guilty.

But perhaps Ben should consult Stanley Fischer, the Fed’s current vice chairman, who recently said on CNBC that “we are going to be changing monetary policy from the most extremely expansionary we’ve been able to do in all of history to an extremely expansionary monetary policy.” That doesn’t sound like a return to tight money. Lifting rates off zero means beginning an inevitable return to monetary normalcy that lets markets set rates and allocate capital.

We can understand that Mr. Bernanke doesn’t like being tagged with any responsibility for poor economic results. He absolved himself for any mistakes before the financial crisis too. But sooner or later he and the Fed have to stop using the financial crisis as the all-purpose excuse for slow growth.

Even President Obama has stopped blaming George W. Bush for everything. Maybe Mr. Bernanke should stop blaming everyone else too.

April 30, 2015 9:12 pm

 
Executive pay: The battle to align risks and rewards
 


The annual meetings season has brought renewed anger over executive pay. This week, 75 per cent of shareholders at Barrick Gold , the world’s biggest gold producer, voted against its pay plans, which included a $13m package for John Thornton, the chairman. Almost one-third of shareholders refused to support HSBC’s remuneration report at its annual meeting last week.
 
And a smaller but significant 11 per cent of BP shareholders voted against resolutions on executive remuneration after the pay and bonuses of Bob Dudley, the chief executive, rose 25 per cent to £12.74m last year while shareholder returns deteriorated.
 
Talking ahead of Barrick’s meeting, money manager Michael Sprung summed up the sentiment expressed by many shareholders who are speaking out against executive pay this spring.

“Their (Barrick’s) approach the last few years does not seem to have served the shareholders that well,” Mr Sprung said. “It seems to have served management quite well.”

Talk to those involved in executive pay, whether as investors, academics or consultants, and it is striking how many describe the system as “broken”. Even many board members feel that way. In a survey conducted by Mercer, the consultants, 54 per cent of UK-based non-executive directors polled described the executive remuneration model as “very much” or “somewhat” broken.
 
Asked whether he thought the system was working, Colin Melvin, chief executive of Hermes EOS, which represents institutional investors worldwide, says: “No, I don’t think it is.” Like many, he says the system needs fundamental reform.

Why do critics and shareholders object so strongly to the way top executives are rewarded?

First, investor champions such as Mr Melvin say the way executives are paid has become overly complex, with too many cash and share-based awards, long and short-term targets and a profusion of measures of success, ranging from earnings per share to total shareholder return to return on equity. Mr Melvin says many chief executives and other top managers struggle to understand what is in their pay packages or how to hit their targets.
 
Even pay consultants agree with this assessment, saying the link between achievement and reward is frequently opaque. “Very often, executives don’t understand the plan because it’s too remote from them,” says Sophie Black, UK head of reward at Mercer.

Above all, critics say, the amount of money top managers in the US, the UK and many other countries earn is unjustifiably high. Between 1978 and 2013, US chief executive remuneration, adjusted for inflation, rose 937 per cent, more than double the level of stock market growth and vastly more than the 10.2 per cent increase in the average American worker’s pay over the same period, according to the Washington DC-based Economic Policy Institute.
 
The average US chief executive earned 295.9 times as much as a typical American worker in 2013, compared with 20 times as much in 1965. In the UK last year, chief executives at the biggest companies earned, in cash and shares, 120 times more than full-time employees. In 2000 they earned 47 times more, according to Incomes Data Services.
 
The AFL-CIO, the US trade union federation, says that while the chief executive-to-worker average pay ratio is higher in the US than anywhere else in the developed world, countries such as Canada, Germany, France and Sweden have even bigger gaps than the UK.

The ballooning of top-level remuneration has help fuel the debate about growing inequality. Donald Hambrick, professor of management at Pennsylvania State University, says executive pay has created “anger on Main Street that affects capitalism in general”.

Apart from the damage to the image of business, high pay at the top does not seem to have done much for companies. Alexander Pepper, professor of management practice at the London School of Economics, said in a collection of essays for the High Pay Centre that studies since 1990 had either failed to demonstrate a positive link between executive pay and corporate performance or had detected, at best, a weak correlation.
 
How did executive remuneration become so complex — and why did pay levels increase as fast as they did? The complexity can be traced to concerns in the 1970s and 1980s about the “agency problem” — that those who ran companies would act in their own interests rather than in those of the shareholders.

One of the early ways in which companies attempted to overcome this was to award executives share options. By giving them the right to exercise the options at some point in the future, top managers would dedicate themselves to ensuring the shares performed well over a long period. The practice received a boost from a 1993 US provision limiting tax deductibility to $1m per executive.

The problem was that too many executives sold their shares as soon as they exercised the options.

Critics argued that this encouraged excessive risk-taking as executives attempted to boost the share price when the options came due.

In a 2010 paper, Prof Hambrick and Adam Wowak wrote that share option schemes not only encourage risk-taking, such as supposedly transformative acquisitions — they may have also helped attract executives who were disposed to risky behaviour in the first place. “One can readily envision how 20 years of aggressive use of financial incentives . . . may have attracted a new breed of executive,” they wrote.

Instead of share options reducing self-interested executive behaviour, they “may have led to an increased prevalence of exactly that trait in today’s top management”, they added.
 
Some defenders of chief executives and their pay argue that they are no different from high performers in other fields. Mark Reid, managing director of Towers Watson, says globalisation and technology have led to wide pay disparities in many fields, including entertainment and sport.
 
A second factor that drove up remuneration was the demand that companies disclose what they paid top people. Like share options schemes, disclosure was promoted with the best intentions; who is against greater transparency? But, as with share options, disclosure had unforeseen consequences: a ratcheting up of remuneration levels as chief executives demanded that their pay be competitive with, or better than, that of their peers. “Everyone wants to be top quartile. Pay has become about status. It’s not really the money,” Mr Melvin says.
 
With disclosure and complexity came the need for advice. Boards and remuneration committees felt they had to hire consultants to tell them what best practice was elsewhere. “I think compensation consultants are a big part of the problem,” Prof Hambrick says.
 
Consultants, critics say, helped produce greater complexity and a further ratcheting up of total remuneration.
 
They deny this. “We respond to market demand like any business. If the market demand wasn’t there we would go out of business,” Ms Black says. Mark Reid, managing director of Towers Watson, another consultancy, says: “All stakeholders have to take some responsibility.

Shareholders have their guidelines and they are all subtly different. We don’t take positions. We advise.”
 
What can be done? Some argue that the worst abuses have been dealt with. Glenn Davis, research director at the Council of Institutional Investors, says share options today form a far smaller part of compensation packages. He cites research by Equilar, a US provider of corporate governance data, which showed that the median value of options awarded as part of pay packages in S&P 1500 companies halved between 2009 and 2013.
 
Instead, there has been a move towards longer-term performance-based share awards. Ms Black points, too, to provisions for companies to claw back bonuses and other awards from executives if companies perform poorly.
 
Optimists add that pressure from shareholders has helped to moderate or change pay packages. They have been empowered by the introduction of non-binding “say on pay” votes in the US and binding three-yearly votes on pay policy in the UK. Britain has introduced a requirement that companies provide a single figure for each director, showing what they have earned from all sources.
 
There is also pressure on companies to act on the vast disparity between chief executives’ pay and that of the workforce. In the US, the Securities and Exchange Commission is planning to require companies to disclose the ratio between the chief executive’s annual remuneration and that of the company’s median-paid employee.
 
But not everyone shares the view that the tide has turned. Swiss voters, in a referendum in 2013, decisively rejected a proposal that would have prevented companies from paying their highest-earning employee more than 12 times the salary of the lowest earner.
 
Many expect that other efforts, such as the SEC’s, will fail to achieve much either. Mr Reid says it will be difficult to compare the chief executive-to-worker multiples in different companies. For example, a company that outsources its manufacturing could have a lower ratio than one that does its manufacturing itself, even though their bosses might earn the same.
 
Critics say none of the reforms deals with the complexity and opacity in executive remuneration.
 
Writing for the High Pay Centre, Peter Montagnon, former director of investment affairs at the Association of British Insurers, says “the awkward truth” is that “nobody really understands the value of share-based awards”. He says: “There is little point in addressing excess by increasing shareholders’ rights to vote on something they cannot honestly evaluate.”
 
Instead he and Mr Melvin suggest a radical alternative: pay executives in cash and shares that they have to retain for a long period, certainly beyond their departure from the company. Mr Melvin says: “That’s it. No bonus. No need for consultants. No need for performance targets, which might be irrelevant in a year or so.”
 
Mr Montagnon adds: “Senior executives would be less likely to take a short-term decision with bad long-term consequences if they were locked in this way. It would provide a strong incentive to deal sensibly with succession planning . It would prevent both the need for clawback and the incidence of payment for failure, because a disaster that hit during or even after the executive’s period of tenure would hit the value of his or her share portfolio.”
 
Could such a reworking of executive pay happen? Mr Reid says he has some sympathy but is sceptical. “We’re often asked to brainstorm for remuneration committees and we put that option, [although] not as simplified. Very few companies have reacted well.”
 
There is no perfect executive remuneration structure. But with business’s reputation still badly battered and resentment over outsized pay still high, critics from consultants to shareholders argue it is time for a new paradigm.