Thursday, 22 January 2009

Northern Rock Bonuses give lie to shareholder compensation rules

So there we have it on the week after the main Northern Rock shareholders were in court arguing the lie of the governments compensation order that Northern Rock should have been valued as if it were in administration we learn that the repayment targets have been met and workers will get a 10% bonus.

Now I am pleased for them they stuck it out when all was bleak and clearly have done a good job since. If that was the deal then they deserve every penny they get.

However there are two glaring issues in this. Firstly the amount of debt repayment that has been made at a time when there is a dire shortage of credit, if Northern Rock had been allowed to function this could well have enables a small but significant easing of pressures on a number of other organisations. The government may let them do that now but too little too late springs to mind.

But as significant is the fact they have been able to repay this in the first place. This is not a small nibble this is a considerable chunk of the debt to the government. In fact it offers plenty of evidence that far from being a basket case all the business needed was a resolution to its cashflow and a new board of management.

But hang on a minute isn't that the mantra of the government now "we must stop sound businesses going into administration and jobs being lost due to short term problems with credit supply" . Shame they didn't apply that right at the start they might have nipped it in the bud.

But I do have one final question. Why has this emerged now after the court hearings surely this is clear evidence which supports the shareholder case and needs to be placed before the judge undertaking the review or is that too inconvenient for the government to bare?

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