Ryde a cock horse
If the Chancellor's tough measures really are made to work and lots of companies go bust as a result, perhaps the National Enterprise Board may come along as the street sweepers follow the household cavalry. For the company concerned it may be better than liquidation, but for the country, I doubt it. I for one have little faith in Sir Don Ryder's analytical ability or toughness since his recommendations on British Leyland omitted any mention of the details of plant rationalisation, and did not make the availability of public money strictly dependent on the continuing and measurable cooperation of the unions.
Now he has tried to spread his influence and -contacts — and broadened his power — by asking the City financial institutions to cooperate with him. Fair enough on the face of it since they seem similar sorts of set-ups, but the parallels are superficial and cover a, fundamental difference in purpose which cannot be harmonised without compromising the purpose of sine of the organisations.
The NEB is a public sector body with a £1,000m purse set up to help foster and support nationally important corporations in distress. At some stage it is also supposed to get involved with prosperous undertakings to balance its portfolio, but how and why is still unclear and that is certainly the less urgent aspect of Sir Don's work. First comes the ambulance service. But Sir Don does realise that in the current climate and with his funds, he cannot run a major hospital for the mortally sick as well as a huge outpatients department for the walking wounded. In fact probably neither with any thoroughness.
So he is courting the City. They should have nothing to do with him. The purpose of an insurance company or pension fund is not to help companies. The primary duty is not to the firms in which they invest and they are not philanthropic institutions for the indigent industrialist. Their purpose is to safeguard their own shareholders /holders of insurance/pensioners.
To be sure they have a wider responsibility as well: the duty to society which all of us have and to a lesser extent they as powerful institutions do have some responsibility to the companies whose shares they own. But this social awareness should be indulged only when it does not conflict with the primary beneficiaries' interests. After all, if I lend somebody money it is only in my interest to keep him solvent if that means he can pay my interest and capital. Obviously I will not gratuitously throw him on the streets, quite apart from the fact that it would not be in my interest to do so. And if he turns out an improvident fool I will not give him more money in the hope that his horse comes in. But that does not mean I would refuse him reasonable help and advice to sustain him through-a brief tricky patch.
The role of the state and the NEB is different. Their priorities are rigorously undefined but are not necessarily continued corporate profitability. It is to be hoped the new inquiry by the National Economic Development Office into nationalised industries at last clarifies the persistently conflicting aims foisted on corporations by governments. But more of that some other time.
For the moment let us acknowledge that the institutions have already ventured tentatively down this rocky road by setting up a joint committee to look into dicey companies. The intention was that instead of always just pulling out, and leaving the hapless small investor with the loss, the institutions were going to take the dangerous step of moving outside their known sphere of competence — managing funds — and breathe down the necks of industrial managers when those were performing less than adequately.
It was a gallant gesture but fraught with conflicting interests and seems not to have been very active. There are patently no absolute rights and wrongs but the institutions should bear in mind — as should their detractors — that although they have an interest in the continued success of the corporate sector they are seldom in a position to be the best judge of what should be done, by whom and how. And that although they should obviously try to act on long-term views and get more involved in helping their charges, their main purpose is to safeguard themselves.
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