Starbucks has had second thoughts.
Starbucks has UK sales of £400m annually but arranged its affairs so that it paid no UK corporation tax in the last 3 years.
It paid £8.6m over the last 14 years. In contrast homegrown Whitbread's Costa turns over less but
pays about £15m annually. It's was all legal but the questions was: was it right? Neither UK politicians nor UK public opinion thought so.
Now Starbucks has changed course. It will pay about £10m UK tax in each of the next two years by foregoing tax deductions on coffee purchases, inter-company loans, royalty fees and capital allowances. In other words it is abandoning widely used, generally legal, strategies designed to shift profits from higher tax countries to lower tax countries.
Three questions:
First, who will follow Starbucks? Amazon? Google?
Second: Does a system that encourages corporation tax avoidance overlaid with voluntary tax donations make sense?
And third, will the Chancellor now consider dropping all corporation tax deductions (except perhaps bad debts) and setting an ultra-low flat rate of corporation tax?
Anthony Fitzsimmons
Reputability
London
Anthony Fitzsimmons is Chairman of Reputability LLP and author of “Rethinking Reputational Risk: How to Manage the Risks that can Ruin Your Business, Your Reputation and You”
Thursday, 6 December 2012
Sunday, 11 November 2012
BBC loses its Director General
Just when you hoped it couldn't get worse, the BBC's crisis just
did. It's new Director General, hit by two scandals since he arrived on
17 September, has resigned.
The first scandal was inherited - dating back decades; but the second one, a badly misjudged editorial decision, was ultimately his responsibility as BBC Editor in Chief. An honourable man, he decided to resign.
This leaves the BBC and the BBC Trust in quintuple trouble.
The BBC has lost its DG partly as a result of poor crisis management which has left it rudderless in a hurricane. Its many enemies will be rejoicing.
The hurricane is also a sign of failed crisis strategy. That reflects badly on the BBC. It ought to understand crises since it analyses the crises of others daily. But it's not the only organisation that routinely deals with the crises of others but turns out to be unable to handle a crisis about itself.
Third, the BBC now has only an acting DG, the no doubt talented Tim Davie. His last role was head of Audio and Music. Leaving aside the problems of being an Acting DG parachuted into a crisis, he appears to have an English degree and a career spanning brands, marketing, music and drama - but never to have been in charge of news. That isn't an obvious pedigree for an Editor in Chief taking office during a potentially existential maelstrom unless it partly reflects Tony Hayward's comment that he needed an acting degree to handle the Deepwater Horizon crisis. I wish him good luck, excellent judgement and a solid constitution.
Fourth, the DG's manner during both crises, particularly the second, suggests that the he may have been an example of the Peter Principle and promoted one level beyond his natural level of competence. If so that explains the personal tragedy for the now ex-DG; but it has also put in question the judgement and reputation of the BBC Trust as well as the BBC. The Trust appointed him.
And fifth, there is of course the question of the degree to which the BBC's organisation is, to use a phrase the BBC often uses, fit for purpose. The structure that the DG inherited clearly did not serve him well. Lord Patten seems to accept that the organisation needs a "radical structural overhaul". That may well be part of the problem - an easy part to solve. But to judge by the evidence of 'events' so far it's far from all that's needed.
As I've written before, the BBC must find and fix the fundamentals. Whatever the constitutional niceties, Lord Patten will have to take the lead in these exceptional circumstances. He has every incentive to do so since his personal reputation is now at risk.
But he won't succed in fixing the fundamentals unless he finds them all. Fast and systematically. As I've also written before, the current enquiries won't find them.
If the BBC doesn't find the fundamentals, it can't fix them. Which will leave the BBC teetering on a cliff edge, no place to leave the nation's favourite Auntie. The BBC is much too important an institution to be allowed to collapse or be dismembered.
Anthony Fitzsimmons
Reputability
London
www.reputability.co.uk
The first scandal was inherited - dating back decades; but the second one, a badly misjudged editorial decision, was ultimately his responsibility as BBC Editor in Chief. An honourable man, he decided to resign.
This leaves the BBC and the BBC Trust in quintuple trouble.
The BBC has lost its DG partly as a result of poor crisis management which has left it rudderless in a hurricane. Its many enemies will be rejoicing.
The hurricane is also a sign of failed crisis strategy. That reflects badly on the BBC. It ought to understand crises since it analyses the crises of others daily. But it's not the only organisation that routinely deals with the crises of others but turns out to be unable to handle a crisis about itself.
Third, the BBC now has only an acting DG, the no doubt talented Tim Davie. His last role was head of Audio and Music. Leaving aside the problems of being an Acting DG parachuted into a crisis, he appears to have an English degree and a career spanning brands, marketing, music and drama - but never to have been in charge of news. That isn't an obvious pedigree for an Editor in Chief taking office during a potentially existential maelstrom unless it partly reflects Tony Hayward's comment that he needed an acting degree to handle the Deepwater Horizon crisis. I wish him good luck, excellent judgement and a solid constitution.
Fourth, the DG's manner during both crises, particularly the second, suggests that the he may have been an example of the Peter Principle and promoted one level beyond his natural level of competence. If so that explains the personal tragedy for the now ex-DG; but it has also put in question the judgement and reputation of the BBC Trust as well as the BBC. The Trust appointed him.
And fifth, there is of course the question of the degree to which the BBC's organisation is, to use a phrase the BBC often uses, fit for purpose. The structure that the DG inherited clearly did not serve him well. Lord Patten seems to accept that the organisation needs a "radical structural overhaul". That may well be part of the problem - an easy part to solve. But to judge by the evidence of 'events' so far it's far from all that's needed.
As I've written before, the BBC must find and fix the fundamentals. Whatever the constitutional niceties, Lord Patten will have to take the lead in these exceptional circumstances. He has every incentive to do so since his personal reputation is now at risk.
But he won't succed in fixing the fundamentals unless he finds them all. Fast and systematically. As I've also written before, the current enquiries won't find them.
If the BBC doesn't find the fundamentals, it can't fix them. Which will leave the BBC teetering on a cliff edge, no place to leave the nation's favourite Auntie. The BBC is much too important an institution to be allowed to collapse or be dismembered.
Anthony Fitzsimmons
Reputability
London
www.reputability.co.uk
Saturday, 10 November 2012
Outsourcing the BBC's reputation?
The BBC is in deep water again.
On 2 November, a flagship news programme 'Newsnight' carried allegations that an unnamed "leading Conservative" was a paedophile. A media frenzy identified the alleged perpetrator. On 9 November, his accuser, apparently shown the alleged perpetrator's photograph for the first time, sorrowfully announced that this was not the right man. Result: an abject apology by Newsnight and discussion whether the BBC's Director General's head should roll. In true BBC style these included an interview with the BBC's Director General on 'Today', BBC radio's flagship news programme.
The BBC is still reeling from a second recent 'Newsnight' scandal, in which another paedophile investigation, into the former BBC star Jimmy Saville was canned - only for its commercial rival ITV to broadcast the allegations. As I wrote here, many of the issues are shared with the Jimmy Saville episode, but a new one has emerged.
It seems that the latest Newsnight debacle emerged from a "collaboration" with the Bureau of Investigative Journalism. To what extent, and why, the BBC outsourced or subcontracted its investigation to outsiders is not yet known.
One of the many lessons of lessons of the Deepwater Horizon explosion and the UK rail crashes of 2000 and 2002 is that outsourcing and sub-contracting are more risky than leaders recognise.
There is little doubt that outsourcing can save money. But particularly if it involves 'core' operations, outsourcing often saves money now at the cost of increasing risk for the future.
This is not only risk of those core operations causing harm to the outside world. Outsourcing puts the risk of causing severe reputational damage to the company into the hands of its sub-contractors and outsourcers. But particularly where core operations are concerned, the public never allows an organisation to outsource its responsibility if things go wrong.
This trade-off is often overlooked and too infrequently discussed by leaders under pressure to 'save money now'.
Outsourcing is fashionable and can save money. But poorly managed it can led to short term gain at the cost of long term pain. The wise prefer short term pain for long term gain.
Anthony Fitzsimmons
Reputability
London
www.reputability.co.uk
On 2 November, a flagship news programme 'Newsnight' carried allegations that an unnamed "leading Conservative" was a paedophile. A media frenzy identified the alleged perpetrator. On 9 November, his accuser, apparently shown the alleged perpetrator's photograph for the first time, sorrowfully announced that this was not the right man. Result: an abject apology by Newsnight and discussion whether the BBC's Director General's head should roll. In true BBC style these included an interview with the BBC's Director General on 'Today', BBC radio's flagship news programme.
The BBC is still reeling from a second recent 'Newsnight' scandal, in which another paedophile investigation, into the former BBC star Jimmy Saville was canned - only for its commercial rival ITV to broadcast the allegations. As I wrote here, many of the issues are shared with the Jimmy Saville episode, but a new one has emerged.
It seems that the latest Newsnight debacle emerged from a "collaboration" with the Bureau of Investigative Journalism. To what extent, and why, the BBC outsourced or subcontracted its investigation to outsiders is not yet known.
One of the many lessons of lessons of the Deepwater Horizon explosion and the UK rail crashes of 2000 and 2002 is that outsourcing and sub-contracting are more risky than leaders recognise.
There is little doubt that outsourcing can save money. But particularly if it involves 'core' operations, outsourcing often saves money now at the cost of increasing risk for the future.
This is not only risk of those core operations causing harm to the outside world. Outsourcing puts the risk of causing severe reputational damage to the company into the hands of its sub-contractors and outsourcers. But particularly where core operations are concerned, the public never allows an organisation to outsource its responsibility if things go wrong.
This trade-off is often overlooked and too infrequently discussed by leaders under pressure to 'save money now'.
Outsourcing is fashionable and can save money. But poorly managed it can led to short term gain at the cost of long term pain. The wise prefer short term pain for long term gain.
Anthony Fitzsimmons
Reputability
London
www.reputability.co.uk
Saturday, 3 November 2012
Teachers aren't the only cheats!
Are teachers cheating when marking public examinations? Ofqual, the UK exams regulator, thinks so - though it invented the term "overmarking" to describe the phenomenon. It ranged from giving pupils too much 'benefit of the doubt' through to giving pupils marks calculated to lead to the highly coveted "C" grade. The full report is here.
This is a classic case of incentives positively encouraging unacceptable behaviour.
In England, there are very strong incentives for schools to have as many students as possible get at least a Grade "C" in the English GCSE exam. In interviews of about 100 schools, Ofqual's press release reported:
Dan Ariely, a behavioural psychologist/economist, has made a special study of the subject. He has summarised the core of his findings in an entertaining short RSA Animate. For more read his book "The (honest) truth about dishonesty". It should be compulsory reading for business leaders and regulators.
So watch out! Teachers are far from the only people who cheat! Most people do it to levels they rationalise as 'acceptable'. But there's no need to design incentives that positively encourage cheating.
Anthony Fitzsimmons
Reputability
London
Anthony Fitzsimmons is Chairman of Reputability LLP and author of “Rethinking Reputational Risk: How to Manage the Risks that can Ruin Your Business, Your Reputation and You”
This is a classic case of incentives positively encouraging unacceptable behaviour.
In England, there are very strong incentives for schools to have as many students as possible get at least a Grade "C" in the English GCSE exam. In interviews of about 100 schools, Ofqual's press release reported:
"While no school interviewed considered that it was doing anything untoward in teaching and administering these GCSEs, many expressed concern that other nearby schools were overstepping the boundaries of acceptable practice.
The report states: “The pattern of marks – the unprecedented clustering around perceived grade boundaries for each whole qualification – is striking”."Cheating is far more widespread than you think. We don't recognise much cheating because we rationalise it into 'normal' or 'acceptable' behavour.
Dan Ariely, a behavioural psychologist/economist, has made a special study of the subject. He has summarised the core of his findings in an entertaining short RSA Animate. For more read his book "The (honest) truth about dishonesty". It should be compulsory reading for business leaders and regulators.
So watch out! Teachers are far from the only people who cheat! Most people do it to levels they rationalise as 'acceptable'. But there's no need to design incentives that positively encourage cheating.
Anthony Fitzsimmons
Reputability
London
Anthony Fitzsimmons is Chairman of Reputability LLP and author of “Rethinking Reputational Risk: How to Manage the Risks that can Ruin Your Business, Your Reputation and You”
Friday, 26 October 2012
Starbucks' crisis management
Hit by a story of unfair tax avoidance, Starbucks has hit back. By rubbishing its UK management and undermining the truth of earlier analyst briefings that the UK business is profitable. Its rebuttal has drawn excoriating criticism from
Is it better to grow a reputation for misleading analysts? Or for avoiding tax to a socially unacceptable degree? Or for public denigration of senior management? Or none of these?
Time for Starbucks' leaders to take a coffee break?
Anthony Fitzsimmons
Reputability
London
www.reputability.co.uk
Is it better to grow a reputation for misleading analysts? Or for avoiding tax to a socially unacceptable degree? Or for public denigration of senior management? Or none of these?
Time for Starbucks' leaders to take a coffee break?
Anthony Fitzsimmons
Reputability
London
www.reputability.co.uk
Thursday, 25 October 2012
Barclays Board "Clear-out"
Sir David Walker is going to "clear out" the board and bring in the new.
Two questions:
Reputability
London
www.reputability.co.uk
Two questions:
- Will he bring in people with 'soft' of 'people'skills - Credit Suisse now has a specialist in human behavour and psychology, Iris Bohnet on its board.
- Will he bring back Alison Carnwath?
Reputability
London
www.reputability.co.uk
Tuesday, 23 October 2012
Fixing the BBC
The BBC has its back to the wall. Again. Why?
It's well established, by 'Roads to Ruin', that behavioural and organisational risks both cause crises and tip them into reputational catastrophes. Igonorance of these risks, which is widespread, leaves leaders living in a rose-tinted bubble. Until the bubble bursts.
To judge by what has emerged so far in the Savile debacle, it's likely that fundamentally important risks at the BBC include:
It took decades for the BBC to build its reputation. But as the FT once wrote of BP, one more bad step could send the BBC to oblivion.
The BBC will only set its reputation back on solid foundations if it fixes the fundamentals. But first it has to find them. Systematically. The current enquiries won't get near that.
Anthony Fitzsimmons
Reputability
London
www.reputability.co.uk
It's well established, by 'Roads to Ruin', that behavioural and organisational risks both cause crises and tip them into reputational catastrophes. Igonorance of these risks, which is widespread, leaves leaders living in a rose-tinted bubble. Until the bubble bursts.
To judge by what has emerged so far in the Savile debacle, it's likely that fundamentally important risks at the BBC include:
- poor internal communication that leaves leaders in the dark about important information
- a culture that leads to turning a 'blind eye'
- a culture of "what's normal around here" that doesn't stand external scrutiny
- inability to see themselves as outsiders see them
- inability to learn from past mistakes
- incentives not to 'rock the boat'
- inability to see or deal with fundamental risks to their licence to operate
- reluctance to recognise the potential toxicity of their track record.
It took decades for the BBC to build its reputation. But as the FT once wrote of BP, one more bad step could send the BBC to oblivion.
The BBC will only set its reputation back on solid foundations if it fixes the fundamentals. But first it has to find them. Systematically. The current enquiries won't get near that.
Anthony Fitzsimmons
Reputability
London
www.reputability.co.uk
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