Friday, 10 September 2010

A misunderstanding of why business works.

Remember the liberal conspiracy whinge a few days ago about Connaught? The bosses were fiddling the figures, which should have been obvious as a consistently profitable company which somehow never seems to have cash-flow anywhere near the reported profits is always a source of worry. RBS (who else?) pulled the plug and the company went into administration.

10,000 jobs of real people doing real things are now at risk.
Well, no they're not. Morgan Sindall has bought some of the assets, and many of those jobs are now safe. The bosses and shareholders of Connaught, on the other hand have lost a lot, much of the Bonuses were paid in shares. The Chairman and Finance director have both lost shareholdings worth over £1m. No-one can deny that these people at the top of a large, public company were well remunerated, but robber barons they were not.

The financial markets have removed incompetent management and seen the businesses run better and more profitably. The tax-payer owned bank is going to get some of its loans paid back by Morgan Sindall, whose shareholders profit handsomely for picking up troubled assets cheaply (Shares up over 8% this morning). The work will still be done. Incompetent bosses lose out, the rescuer profits. The right people win, and lose.

This capitalist M'larkey sorta works, eh?



1 comment:

Anonymous said...

Not when it comes to the banks they are immune to the concept they spawned "bankruptcy".

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