Friday, October 16, 2009

Global banks in UK to follow G-20 pay code

S Kalyana Ramanathan / London October 15, 2009

The UK subsidiaries and branches of leading overseas banks have agreed to support the reforms related to bankers’ pay that were agreed by the G-20 in Pittsburgh last month, the Financial Services Secretary, Lord Myners, has said.

Bank of America Merrill Lynch, Citigroup, Credit Suisse, Goldman Sachs International, JP Morgan Securities, Morgan Stanley, Nomura and UBS have confirmed their commitment to the FSA Rule and the supporting Code on remuneration practices. These were published in August and would come into force on January 1, 2010 (and cover payments for performance year 2009).

European Union banks with major branches in London, like BNP Paribas, Deutsche Bank and Société Générale, confirmed that they would implement the G-20 agreement in accordance with the rules of their home regulators and voluntarily comply with the norms for their UK-based employees.

In a joint statement, the banks said, “In a competitive and global business, banking remuneration must be consistent with effective risk management and there must be national and international consistency on this issue. We will work with the FSA (Financial Services Authority) and regulators in our home countries in adopting the reforms, recognising that all G20 nations have also committed to their implementation to ensure a level-playing field.”

Lord Myners said, “The financial services industry must take a responsible and long-term approach to remuneration if it is to retain its competitiveness and regain public trust. I will be writing to the chairs of their parent companies’ remuneration committees to share with them the outcome of this meeting.”

The reforms will have little impact on the Indian banking sector for many reasons, according to experts. For one, the remuneration of senior bankers in India is much lower than what their counterparts in the west get. Further, the Reserve Bank of India has a strong control over bankers’ remuneration, though the mechanism is not transparent. Indian banks are yet to make any statement on their stand after the Pittsburgh meeting earlier last month.

Under the new G20 guidelines, major financial institutions are to have their independent remuneration committees. Also, the institutions are supposed to ensure that the total variable pay is consistent with ensuring their ability to maintain a sound capital base over the long term while managing the risks that arise if they cannot pay competitively to retain the right people. Also, multi-year guaranteed bonuses can’t be a part of future arrangements – any minimum bonus agreements have to be limited to one year. Poor performance will lead to a considerable contraction of bonus payments, including through clawback arrangements.

Failure to implement policies in line with the FSB standards will result in corrective measures by the FSA to offset the extra risk due to this. These may include asking the institution concerned to hold additional capital.

Monday, October 12, 2009

UK reprimands Vedanta over Orissa mining project

S Kalyana Ramanathan / London October 13, 2009

Company accused of overlooking local community’s interests.

The UK government today pulled up metals major Vedanta Resources over its controversial mining project in Orissa, stating that “a change in the company’s behaviour is essential”.

The UK National Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises upheld Survival International’s allegation that Vedanta Resources has not complied with Chapter V(2)(b) of the guidelines. The UK NCP concluded that Vedanta failed to put in place an adequate and timely consultation mechanism to engage the Dongria Kondh, an indigenous community whose health and environment would be directly affected by the company’s plans to construct a bauxite mine in the Niyamgiri Hills in Orissa.

The UK NCP also concluded that Vedanta failed to engage the Dongria Kondh in adequate and timely consultations on the construction of the bauxite mine and it did not consider the impact of the construction of the mine on the rights and freedom of the community, or balance the impact against the need to promote the success of the company.

The verdict came after a nine-month investigation into a complaint submitted by Survival International against Vedanta’s proposed bauxite mine on the Dongria Kondh’s sacred mountain. The complaint, upheld by the government, was brought under the OECD Guidelines on Multinational Enterprises — the key principles for ethical corporate behaviour.

Human rights campaigners have been up in arms against Vedanta’s mining project in Orissa that has allegedly affected the lives of tribals in the state. Apart from holding pickets outside the company’s annual general meeting venue in London, campaigners had also recently forced investors like the Church of England to reconsider their position in the company.

A Survival International spokesperson said the UK government’s latest stand on this issue was a moral victory for campaigners, though it may have no obligatory impact on the way the company conducts its business. Survival International’s Lindsay Duffield said, “Public opinion can have a very serious impact on the company’s operations. We do hope that the OECD guidelines would have more serious impact in the long run.” Duffield further said that after nine months’ investigation, Vedanta did not provide a “shred of evidence” to vindicate its position in the Orissa project.

Vedanta Resources did not answer the queries raised by Business Standard following the UK government’s statement.

In July this year, after persistent campaigning by human rights activists, the Church of England’s Ethical Investment Advisory Group agreed to meet the management of Vedanta Resources to assess for itself if it should continue to stay invested in the company. The Church of England’s investment in the company is valued at an estimated £2.5 million. The results of this investigation, however, is yet to be made public.

Though the possible divestment by such groups cannot have a direct impact on the company, they can create strong public opinion against the company.

Friday, October 9, 2009

National Grid to outsource work to TCS

S Kalyana Ramanathan / London October 09, 2009

UK-based electricity and gas company National Grid today said it has decided to outsource some its back office administrative support services to Tata Consultancy Services (TCS) in India, even as the workers’ union represented by GMB protested this move.

After months of negotiation with the union representatives, National Grid today said it had decided to outsource some of its “Shared Services” to TCS in India. The value of this order bagged by TCS is not known yet.

The job losses at National Grid on account of this could be around 300. A company spokesperson said the consultation process with the affected employees will start soon and employees who can be accommodated into other functions and departments would not have to lose their jobs. However, there will be some compulsory job losses, and the company will help those affected find alternative jobs.

Steve Noonan, director of UK Shared Services at National Grid, said: “We recognise that these are sensitive and difficult times for those employees affected by the result of the review. However, National Grid has a great track record in looking after its employees through change. We strongly encourage staff to take up positions elsewhere in the company and to investigate retraining for other available roles. And for those who choose to leave the company, we offer generous severance packages, and we provide outplacement support to help them find alternative work.”

A statement from the union said it will not accept that National Grid, which makes multi-billion profits as a monopoly supplier, has the right to export these jobs from the UK at a time of very high unemployment across the land.

According to union estimates, the company’s Newcastle site will be closed with a loss of 189 jobs in total, of which 163 are permanent jobs. The other 137 job losses will be at the Warwick and Northampton sites. The Newcastle jobs are being outsourced to India.

Tory chief says much expected of Tata's Corus

S Kalyana Ramanathan / London October 09, 2009

Conservative party head David Cameron has said Corus and British steel industry should be "at the heart of our economy." In an interview to a regional paper, Scunthorpe Telegraph, Cameron said any form of government subsidy or protection for the industry is not the right answer. "Corus is a great British company, employing many thousands of people in our country," he told the Telegraph. "We want a strong British steel industry, it should be at the heart of our economy and as we look for recovery in the economy and recovery in things like construction, housing, commercial property, the car industry, clearly steel making is a very important part of the whole process."

UK Conservatives vow to cap numbers of migrants

S Kalyana Ramanathan / London October 09, 2009

Britain’s shadow home secretary Chris Grayling on Wednesday said his Conservative Party will, when it comes to power, introduce a ceiling on immigration to check the “gaping hole” in policy. He said, should the conservatives be elected to form the next government, measures will be introduced to check the “rampant abuse” of students’ visas.

Speaking on the third day of the party’s annual conference in Manchester on Wednesday, Grayling said he would encourage immigrants to live and work in the UK, if their talent and skills would help fix the domestic economy, but will introduce a cap on the number of immigrants who can settle in the UK.

“A Conservative government would be “robust” about immigration. (But) there will be no open door to Britain,” Grayling said.

Grayling said the “gaping hole” in the student visa system would be closed and there would be a crackdown on traffickers. Britain would have its own, specialist border police force. “I will not tolerate more of the chaos of the past few years,” he added.

Though the current Labour government does have checks on immigration through a two-year-old, points-based system, it did not have a policy of putting a quantitative cap on the number of immigrants who can settle and work in the UK. The proposed policy by the Conservatives, should they be elected, will be more in line with the American system of issuing a fixed number visas for any given year.

Britain is getting ready for its next general election, to be held before next June. The latest opinion polls have indicated the 12-year Labour government has very little chance of retaining power, falling behind the Conservative party and the Liberal Democrats. The Conservative party is led by David Cameron, 42, who will be the next Prime Minister should his party win the elections.

Thursday, October 8, 2009

Jaguar secures Rs 1,300 cr loan from SBI

S Kalyana Ramanathan / London October 08, 2009

Tata Group-owned British car maker Jaguar Land Rover today announced it had secured a £175 million (Rs 1,300 crore) from State Bank of India. This comes over and above the $90 million (Rs 420 crore) committed export financing facility with ABC International Bank, the company said.

In a statement to the media, the company said it has been in the process of enhancing its funding facilities and made significant progress. In all, £500 million (Rs 3,700 crore) of new facilities have been completed this year, including the facilities from SBI and ABC, and those secured earlier in the year from Standard Chartered Bank, Bank of Baroda, and Burdale Financial Ltd, a subsidiary of the Bank of Ireland.

JLR’s Chief Financial Officer Kenneth Gregor stated: “We are pleased our funding plans are progressing and appreciate the confidence shown by our banking partners in our business.”

Barely two months earlier, after prolonged negotiation for a guarantee from the UK government for a £340 million loan (Rs 2500 crore) from European Investment Bank, the company decided to pursue other options to raise funds on its own.

Fresh loans from banks in India and other countries that the company has managed to secure should help it tide over what is becoming one of the most challenging times in its history. Due to weakening demand for expensive cars globally, the company in the past year had reported heavy losses. As part of its restructuring, JLR had recently announced it would rationalise some production facilities that could lead to closure of one of its plants in the Midlands. It said this plan, to be implemented by the “middle of next decade”, will not result in any job loss. It further said its new plan will lead to fresh investments in new technologies and products and is likely to add 800 more jobs by the middle of 2010.

Over the past year, production in JLR was reduced by more than 100,000 units; spending and costs were cut; jobs reduced by 2,500; pay frozen and bonuses cancelled. “But this was not enough to offset the full magnitude of the downturn and the company swung from profit in 2007 to significant losses over the past 12 months. This was not a sustainable situation, the company had said.

Lakshmi Mittal tops football rich list

S Kalyana Ramanathan / London October 8, 2009,

ArcelorMittal’s boss and India-born steel billionaire, Lakshmi Mittal has topped the Football Rich List 2009-10 as ranked by football magazine

According to this British magazine, 59-year-old Mittal, who bought a 20 per cent stake in Queens Park Rangers Football Club for £200,000 in December 2007, is considered the wealthiest man among football club owners, with an estimated value of £18.4 billion at his command. With the stake acquisition in the QPR FC, Mittal made his foray into the club owners group two years earlier.

The wealth estimate of Mittal is based on his stake in the steel giant, valued at £15.4 billion, and “another £3 billion for past dividends and property”, the magazine’s website has said. Mittal’s son-in-law Amit Bhatia sits on the board of QPR as its vice chairman.

With the latest ranking, Mittal effectively replaces Sheikh Mansour bin Zayed Al Nahayan, (brother of Abu Dabhi’s ruler) whose wealth is now estimated at £17 billion and owns Manchester City FC.

FourFourTwo is a monthly English football magazine that started in 1994 and has a circulation of 112,000 copies a month. It derives its name from the basic formation in British football (4-4-2), with 11 players on each side.

India wants to open legal sector to foreign firms

S Kalyana Ramanathan / London October 03, 2009,

But it would tread cautiously on this decision

Union Minister for Law and Justice M Veerappa Moily said India was committed to opening its legal sector to foreign law companies as agreed under the World Trade Organization (WTO) negotiations, but would tread cautiously on this decision. At the same time, the country would not do anything that undermined the autonomy of the Bar Council of India, he added.

Interacting with the Indian media in London, Moily said since the issue was under consideration in the Bombay High Court and the bar council had some reservations on opening the sector to foreign companies, the matter needed to be dealt with caution. He hinted at reciprocity issues involved, where countries like the UK also needed to offer a similar privilege to Indian lawyers who wish to practise here.

“(It is in) active consideration of the government of India. But we will not overreach and will take the Bar Council along,” Moily said.

Moily was here as a state guest for the inauguration of the country’s new Supreme Court, which from October 1, will be the final court of appeals, replacing the House of Lords for performing this function.

The opening of the legal sector has been a contentious issue and Indian lawyers have resisted this move, as they feared they would lose to well-bankrolled foreign firms.

Leading law practitioners in India also face the disadvantage of not being able to treat their vocation as a business, whereby they cannot advertise their practice like other regular businesses, nor can they seek clients like other business consulting firms.

Moily said several steps had been taken to hasten judicial reforms in India. His ministry plans to set up 5,000 Gram Nyayalayas (village courts), the first of which was opened today (on the occasion of Gandhi Jayanti).

By March 2010, the country would have 200 village courts that would deal with pending cases in rural areas, Moily said.

The government would also set up “high value commercial courts” to deal with litigation involving large sums of money, he said, adding this move would improve investor confidence in India.

He also said the government would actively work towards reducing the number of cases the government files. “The government should not be the biggest litigant,” he said. In the next three to four years, the average pendency of cases would be brought down to one year, he said.