Poor way to set a Standard

STANDARD Life chairman Sir Brian Stewart will have a great deal of explaining to do at today's agm in Edinburgh. Few companies have executed such an abrupt volteface as the Scottish insurer, which has gone from being an enthusiastic backer of mutuality to an advocate of conversion in a matter of months.

Stewart is not exactly a pin-up boy in his native Scotland. Edinburgh is seething over his decision - wearing his other hat at Scottish & Newcastle - to close down the Fountain brewery. But that looks like being the least of his problems. He and the management team face serious questions over the running of Standard.

Among those in the forefront of the revolt will be Paul Braithwaite, veteran of the Equitable Life battles, who in the case of Standard is actually a policyholder. There is nothing like personal involvement to sharpen the sense of injustice.

There are several lines of attack.

Why did Standard spend so much of policyholders' money defending mutuality since 2000 - the time it first came under siege from carpetbagger Fred Woollard - when conversion would have been considerably more beneficial to investors than now?

If being a mutual was such a wonderful format, why were the interests of management at Standard and those of policyholders not better aligned?

No one can ignore the fact that over a period when bonuses have been cut, failed bosses such as departed chief executive Iain Lumsden and his successor Sandy Crombie have achieved over-generous awards of salaries, bonuses, pensions and long-term incentives.

Claims that they are in line with peer groups in other insurers do not hold water, in that mutuality demands more sharing of good times and bad.

Ideally, Standard's results for executives should have been linked to performance for policyholders, not to an amorphous industry-wide index.

Crombie, who is leading the drive to demutualisation, plainly hopes to see the two-year process through.

But policyholders may see matters differently. Do not be surprised if the doughty bunch of self-satisfied Scots at the top of Standard are bloodied. They deserve to be.

Improper perks

SOMETIMES you wonder about the lack of good sense in Britain's boardrooms. After the tales of US lavishness reaching this side of the Atlantic, you would have thought that the last thing that any self-respecting board would want to be associated with is perks.

This is especially true at a time when directors' pay and medium and long-term options plans are going off like cluster bombs hittingan airport runway. But not a bit of it.

Not satisfied with a corporate jet, used by European Banker of the Year Fred Goodwin, the Royal Bank of Scotland is constructing itself a marble palace in Edinburgh.

WPP's Sir Martin Sorrell has accommodation in New York, a salary paid there and free membership of the exclusive Harvard Club. Rose Marie Bravo, Burberry's chief executive, has a clothing allowance.

Eric Daniels, at Lloyds TSB, has his children's school fees paid by the bank, plus an allowance for personal financial advice.

None of this amounts to a row of beans in terms of shareholders' returns in any of these companies, which all perform relatively satisfactorily. But they are symptomatic of a corporate culture in which for those at the top, enough is never enough.

The mismatch between rewards for investors, staff and customers and for those in senior jobs is becoming a serious irritant. It risks real reputational damage.

Rate split

JUST when it looked as if a base rate rise on Thursday was a done deal, along comes a set of numbers which raise questions. In his recent Commons evidence, Bank of England governor Mervyn King argued that a strong pound could damage recovery for exporters.

Latest manufacturing data suggest we may have reached that point. Contrary to market expectations, production actually dropped 0.6% in February. Manufacturing output has slipped 1% over the last year.

The weakness is shared across all sectors with chemicals - one of the brighter spots - falling back. Hi-tech equipment was also in retreat.

This illustrates the dilemma for the Monetary Policy Committee. It wants to calm housing and consumption to head off future inflation.

But in raising rates it must recognise that it could put a floor under the stronger exchange rate and cause Britain to miss full participation in the recovery.

The MPC is likely to be split, with the hawks facing down the doves.