Archive for November, 2009
After the banking crisis and the debacle surrounding the collapse of MG Rover, it’s surely time for a rethink of corporate limited liability.
The Phoenix Consortium, an ad-hoc partnership of four businessmen friends led by John Towers, extracted at least £9 million each from MG Rover, thanks to a sum of just under £500 million paid to them by BMW to take the firm off their hands. In May 2000 the Consortium purchased MG Rover through a company, going by the name of ‘Techtronic’, that they set up with £60,000 each of their own money. This holding company profited from interest on BMW’s £500 million while paying none. This profit was transferred to a higher tier holding company, Phoenix Venture Holdings (PVH) of whom the controlling and main beneficiary owners were the Phoenix four.
The four partners failed to find a joint venture partner for Rover, and in April 2005 it went bankrupt owing £1.2 billion to its creditors, including the pension fund of its own workers. For this work and its failure and their investment of £60,000, each of the Phoenix four received the equivalent of over £2 million per annum (excluding the benefits from MGR Capital). Even by current inflated standards of boardroom pay, this would be excessive for success but for failure it is absurd. Read the rest of this entry »
I’m interested to see that the Real World Economics Review (an e-journal for heterodox economists) now has a blog. They already have some interesting contributions, and I hope fertile discussion will follow!