Andrew Kakabadse and Nada Kakabadse’s Blog

Looking ahead to 2011, I think global conflict will be a major issue. The second issue is the reaction of governments to bankers’ bonuses and I think governments will do nothing about that whatsoever. For me, almost everything else falls into second place because until these two issues are sorted out, I don’t know how we’re going to make progress in other areas. Regarding bankers’ bonuses, we need increased government regulation and increased transparency. We also need a political movement to see if we can genuinely get stakeholder financing at a national level, and the only way I can see that is ultimately if, as unimaginable as it may seem, Europe becomes one country. If Europe did become one nation state, the stakeholder financing philosophy of Germany and the Scandinavian states would probably begin to have world significance and a different form of investment would take place; a [...]

The article by Ian Wylie in the Financial Times, entitled “ From charity to teacher, Oxfam sets sights on MBAs ”, is indicative of the trend where business school training is now setting its sights on meeting some of the needs, challenges and concerns of third sector organisations. At the School for Leadership at Exeter University, a third sector MBA has virtually been created which tries to hit the whole of this sector in terms of providing business discipline application but with a stakeholder philosophy. The internships that MBA programmes traditionally try to pursue, particularly in financial services, are being balanced by offering work experience in third sector organisations with Oxfam being just one of them. The idea behind this is to see whether a more sustainable, green way of living and operating can be the way of the future.
I have mixed views on this. The [...]

A very interesting article in Harvard Business Review by Ian Bremmer and David Gordon, The Conversation , draws to the surface one of the most critical issues we are facing today, and that is whether the major powers of the world can collaborate or not. The article indicates that there are a number of worrying trends: Iran, North Korea, Pakistan and Mexico. My view is that what is happening is the world is splitting into two and we are beginning to see the Anglo-American allies concentrating in one end and the Chinese and their allies concentrating in the other. Certainly Brazil is much more aligned with China than Anglo-American interests. It does also seem as if the attack on South Korea by North Korea was simply a warning to Anglo-American interests that if Iran is bombed then there will be serious problems, and that North Korea will [...]

Bethany McClean’s article in Slate questions Goldman Sachs’ deal to invest $450 million in Facebook and to raise another $1.5 billion from its own investors, raising the question: just how fair is this?
In one sense what Goldman Sachs is doing is nothing new. During the crash of 1929, we saw these same sorts of behaviours by the key financial institutions of the time. Asset prices were low and the banks were calling the shots in terms of ownerships. However, while eighty years ago the banks tended to be the owners themselves, today banks are acting as agents on behalf of their own wealthy clients as well as being owners themselves. The situation is absolutely and distinctly unfair.
The position that we are in today is that we just do not have free markets. We have open markets that are open to people with [...]

The case for professional boards, as set out in an article in Harvard Business Review by Robert Posen, is no surprise. The lack of attention paid by boards to the current economic crisis has been problematic. There have been two factors, both in the UK and US that contributed to this.
•    The lack of knowledge of board directors about the organisations that they serve and the lack of time to get familiar with it.
•    The dynamics of the board: courage, resilience and insight are required by board members to challenge the status quo and add real value
The proposal for professional boards is therefore on the horizon. It would undoubtedly provide a far better level of professional input in assessing risk, nominating directors etc. However, this will not improve the boards’ dynamics. This is a leadership issue and that is where the role of the Chairman [...]

The David Walker update on bankers wages (following his 2009 report) which calls for more open rules for bonuses in Britain, is welcome. However, it is unlikely to make much difference.
Recent research that we conducted found that there was an estimated £450 billion awaiting investment in the City of London alone – more than twice the upper estimates of the UK national debt. This is a result of short termism and bonuses. In order to make the big bonuses bankers must focus on short term gain, which is also demanded by shorthold shareholders.
Something needs to be done if we are not to see similar economic collapse in future. Yet the governments’ actions to the recommendations will be tempered by the fear that they will cause a migration of capital. While this is a risk, I personally believe that this will [...]

The Independent recently highlighted the clash between Vince Cable and George Osborne over the reform of bankers’ bonuses. One bone of contention is Cable’s wish to make bonuses over £1million public. The real issue between the two here are concerns of the migration of capital, but this probably won’t make much difference. An article in Director covers Cable’s drive for responsible capitalism, however it is individual corporations that must be responsible, not just the financial services industry. At present, both the UK and US is hooked on short term shareholder value.
In recent research that we conducted it was estimated that £450 billion is awaiting investment in the City of London alone. The estimates for Wall Street range from $1 trillion to $2.8 trillion. The funds are waiting for investment and M&A when an opportunity that is considered sufficiently lucrative arises.  [...]

An article by Jennifer Goodwin on Business Week on how lessons from flight crews can help surgeon’s works better highlights just how important teamwork is. The idea that you can learn from one team to another is good. In reality, it is all about details and such transference is not easy.
I have spent some time using psychological instruments to analyse how teams operate and how effective they are.  Disfunctionality in a team at any one time is likely to have a ripple effect on the wider team, as well as the organisation. Sectors and teams need to be analysed individually so that the relevant details are captured. I cannot apply the same instruments to analyse boards to surgical teams, but I can apply them to teams with similar processes or from a similar context. Flight crews, for example, are one type of team that [...]

Patience Wheatcroft’s article in the Wall Street Journal on the death throes of the Irish economy highlights a major concern of a small country in a mass market world. The situation in Ireland will be dire for a long while yet. In order to pay back the £85 billion bail-out loan, further cuts will see the same level of Irish austerity as was experienced there in the 1950s and 1960s. The issue here is- will European economies continue to work as individual nation states?
An Irish banker recently told me that he could see the current situation coming, but was forced to adopt the instruments that are used in the UK and US. If he didn’t he would be sacked. Ireland is a small economy. In order to create longer term infrastructure investments as required in the UK and US a unified Europe is needed. [...]

There have been several articles recently on the issue of the representation of women on the board. This is a well-worn issue which deserves greater attention if it is to be resolved. There are undoubtedly socio-political reasons for ensuring that women are represented at board level, but the real issue is how you tackle the lack of female presence here.
Introducing a quota system is not the solution. That devalues the work of the women that are selected on this basis. Instead, education and mentoring to ensure that women are ready for a job on the board are much more desirable measures. In order to make sure that women can be elected to the board, there needs to be a pipeline of women up to the job at executive level. At present this does not appear to be the case. Women therefore need support and [...]