Burberry’s well-paid bosses never quit their jobs, they “transition” out of them. Under the long chairmanship of Sir John Peace, the word has been obligatory at the fashion house and is designed to encourage the impression of smooth corporate progress towards greater conquests.
The exit of design guru Christopher Bailey, alongside glowing (and deserved) personal tributes, was given the usual treatment. Burberry is embarking on the next “chapter” in its “journey” and is ready for “the next exciting stage of our evolution” blah blah. Maybe it is, but shareholders could fairly expect Peace to explain why his carefully laid plan to retain Bailey’s services has come apart at the seams after only a few months.
It was as recently as July that Bailey, after a tricky three years as chief executive, was installed as Burberry’s president and chief creative officer. The man himself seemed pleased with his return to pure design work. He would have “a wonderfully collaborative partnership” with new chief executive Marco Gobbetti and his own “passion for making Burberry the most compelling brand” had “never been stronger” he said.
Now the passion has cooled for reasons that have not been adequately explained. Bailey wants to pursue unspecified “new creative projects,” a decision that will cost him £16m in lost incentive payments. He’s been spectacularly rewarded over the years but that’s still a princely sum to surrender. The suspicion will be that the double act with Gobbetti proved unworkable in practice, just as sceptical outsiders suggested it would.
Bailey is staying on the board until March, so there is time to hire or promote new design chiefs – but this cannot be the script Peace anticipated. For years the chairman presented Bailey as Mr Indispensable, even going to war with shareholders in 2014 to defend a £15m long-term pay package that he argued was essential to deter approaches from rivals.
Now Bailey is off and Gobbetti is the new star. That’s a transition of sorts but it’s not the one Burberry thought it was getting for all those retention millions. It may be a jolt.
Government has played a poor hand on problem gambling
Place your bets. The current maximum stake on fixed-odds betting terminals is £100. Will the government cut to £50, £30, £20 or £2? This column’s money is on £20.
The long-awaited review described the £50 option as representing “minimal change to the status quo” which probably means it was included only to give the impression of open-mindedness. At the other extreme, the £2 idea feels too bold since the Treasury still likes the tax revenues from the machines.
That leaves the two middle options. The practical difference between £20 and £30 is slight but the lower level looks more likely to be adopted because it offers more scope for the government to boast about being tough. Ministers are always in the business of managing expectations.
What would the right choice? That’s easier – £2. Politicians have danced around this debate for years, but there has always been two simple points to grasp.
First, the “crack cocaine of gambling” label is basically a correct description of fixed-odds betting terminals. The core product is roulette, a casino game where the house’s edge is set in stone. It is true that only a minority of players will try to chase their losses but, with only 20 seconds between spins (a big difference from how the game is played in casinos), the danger for addicts is plainly intensified. A £20 limit on stakes would be more palatable if spin frequencies were extended to a minute.
The second point is that the big chains, for all their protests about good intentions, have done a poor job of policing problem gambling. There have been too many cases of high-profile failures. That much was predictable, which is why New Labour was disgracefully naive in allowing the fixed-odds revolution in the first place.
“In 2005 we didn’t know how these machines would explode on to every high street, converting our betting shops into what [are] essentially high street digital casinos,” pleaded Labour’s deputy leader, Tom Watson, on Tuesday. Come on, that outcome wasn’t hard to guess: if you offer bookies semi-guaranteed cash flows, they will seize the opportunity.
Energy firms’ hefty margins help fuel intervention
What’s a fair profit margin for an energy supplier to make? Centrica, which owns British Gas, has always argued that 5% is about right, so presumably it would see no problem in regulator Ofgem’s finding that the average in sector was 4.5% last year.
To outside eyes, however, an average of 4.5% (and 7.2% for British Gas itself) will look rich. The big supermarkets rub along on about 2%-3% these days and Tesco’s previous attempt to sustain 5% was self-defeating since it allowed Aldi and Lidl into the market.
Comparisons between different industries with different investment profiles are problematic, of course. But common sense says a commodity business like energy supply should not make more than a well-run supermarket. The looming price cap on energy bills is an imperfect solution – but one can see why the firms brought it on themselves.