Wednesday, December 30, 2009

Financier criticizes banker pay

From today's Money & Investing section of the Wall Street Journal, a small article with quite some significance.

Guy Hands of Terra Criticizes Banker Pay


Guy Hands, founder of buyout firm Terra Firma Capital Partners, questioned banker pay and warned globalization is delivering a "massive transfer of economic power from the west to the east" in his annual letter to investors.

The firm's entry as first hit on google result page: Terra Firma, the Private Equity firm. Rather self-assured, calling itself the firm. Its webpage has this logo: We aim to be the leading contrarian investment firm, responsibly delivering superior returns over the long term.’

Mr. Hands, who each year sends a topical book to investors, this year picked economist Roger Bootle's "The Trouble with Markets." His Christmas letter accompanying the book also criticized how bankers are remunerated.

Finally, someone not a politician making sense on this issue.

It said: "It cannot be right to continue with a system which allows risk to be taken in the knowledge that, if things go right, bankers will take on average 60% to 80% of the profits generated through compensation and, if they go wrong, shareholders and ultimately the Government will pick up the costs."

And the government is also to blame: not just Lehman should have been allowed to fail. More, firms such as Citigroup should never have been allowed to get that big.

Mr. Hands also was pessimistic about the U.K. and the West, having moved offshore from the U.K. to the Channel Islands earlier in the year: "We need to question the accepted wisdom that a truly global market benefits all citizens in western developed nations. Indeed, I suspect we will, in time, see globalization as the driver that delivered a massive transfer of economic power from the west to the east."

Didn't that happen with petrodollars?

Terra Firma struck its first Australian deal earlier in the year, having bought Consolidated Pastoral, and was optimistic about its portfolio, including music company EMI Group.

No comments:

Post a Comment