Long stories short
- Japan will impose curbs on the export of equipment used in making semiconductors, after similar moves by the US and the Netherlands.
- German insurer Munich Re quit the world’s largest climate finance alliance to avoid antitrust risks.
- Eurozone inflation dropped to 6.9 per cent in March as cost of living pressures eased.
Dimon in the rough
The ghost of Jeffrey Epstein is haunting finance on both sides of the Atlantic. Jamie Dimon, America’s most powerful banker, is due to be interviewed under oath about JPMorgan Chase’s relationship with the sex offender. Meanwhile, Barclays said that allegations made against its former chief executive Jes Staley in connection with Epstein are “serious and new.”
Staley denies any wrongdoing and is robustly defending himself in relation to the investigation.
So what? The two developments are linked by Epstein, but they are different: the Dimon case is about what the chief executive knew; the Staley case is about who the chief executive was. Both stories are harbingers of a long-overdue reckoning that’s coming for business in the delayed fallout of #MeToo.
Dimon, CEO of JPMorgan since 2006, is a titan of Wall Street. He led the rescue of Bear Stearns and Washington Mutual during the 2008 financial crisis (and is the only head of a major bank still in the top job since the crash). In the last few weeks, he has coordinated the rescue of First Republic, a San Francisco bank whose shares plunged in the current banking turmoil.
In 2008, when Epstein was jailed in Florida on charges of soliciting prostitution from a child, Jes Staley was head of wealth management at JP Morgan. Epstein was one of Staley’s clients. What did Dimon know? An Epstein victim, identified only as Jane Doe, and the US Virgin Islands – where Epstein had a home – are bringing lawsuits against the bank.
Jesse Fried, professor of law at Harvard Law School, said that forcing Dimon to testify strengthens the plaintiffs’ position. “It reminds Dimon, who is the ultimate decision maker, that there could be reputational and distraction costs to the ongoing litigation,” he said.
“It also imposes costs personally on Dimon, increasing his interest in settling the case… when organisations are sued, they work hard to minimise the scope and time of the deposition.”
Staley left JP Morgan in 2013. A few months later, the bank severed its ties with Epstein.
In December 2015, Staley was appointed chief executive of Barclays. Epstein was arrested on sex trafficking charges in 2019, and was found dead in his cell later that year.
In 2020, Barclays revealed that the Financial Conduct Authority, which regulates the City, was investigating Staley’s links with Epstein. The bank’s statement said he had “the full confidence of the board”. Staley then resigned in 2021.
So who is Staley? When he resigned, Barclays said: “It should be noted that the investigation makes no findings that Mr Staley saw, or was aware of, any of Mr Epstein’s alleged crimes.” Jane Doe has said that she was sexually assaulted by “a powerful financial executive”. JP Morgan said last month that it believes this is Staley.
Key figures on the board of Barclays who declared their “full confidence” in Staley include the chairman Nigel Higgins, a former Rothschilds banker, and senior independent director Crawford Gillies, a former managing partner at Bain. They remain in place (Gillies is retiring in May).
Simon Learmount, professor in corporate governance at Cambridge Judge Business School, said the 2008 crisis tipped the balance on banking boards in favour of people with “deep financial knowledge”.
“But what that then maybe drives out is strong devil’s advocacy on the board – the truly independent outsider who can pursue the difficult questions and be the honest critical friend,” Learmount said.
A final thought: the institutional investors that dominate ownership of publicly listed companies are focused on the E of ESG, wanting boards to prioritise climate risk. That’s a good thing. But Epstein’s legacy is a reminder of the damage that can be caused by overlooking the S.
the 100-year life health education and government
Sick of waiting
With the NHS facing chronic staff shortages, UK plc is coming under increasing pressure to provide private healthcare to employees. According to Tortoise’s Responsibility100 Index, 69 firms in the FTSE100 in 2022 provided some form of healthcare (on-site GP practices, free consultations or treatment) to all employees, rising from 61 the previous year. The three largest insurers in the UK – Bupa, Vitality and Aviva – collectively added nearly half a million new customers in 2022, taking their total national customer base to 4.4 million. An ONS survey in December found that 13 per cent of the population used some form of alternative paid-for care. According to Aviva, long waiting lists and staff and bed shortages are also resulting in “significant interest from younger age groups” and “improved retention rates [for insurers] as individuals and employers are prioritising keeping their valuable healthcare cover in place”.
capital economy, business and finance
Sergio Ermotti is back to help UBS digest Credit Suisse. At Disney, Bob Iger has ousted Ike Perlmutter, chairman of Marvel Entertainment. The boomerang boss is a familiar move when a company is in crisis and it has mixed outcomes: Jack Dorsey’s return to Twitter is the most high-profile example of the tactic failing. It also raises questions about corporate culture, including the effectiveness of succession planning when a 72 year-old is tapped to return. Both Iger and Ermotti have proven strengths – the bank boss has been particularly effective at cutting costs before. The danger is that the organisation fails to evolve once the immediate crisis is past. Research by Chris Bingham, professor of strategy and entrepreneurship at the University of North Carolina’s Kenan-Flagler Business School, sampling more than 6,000 CEO tenures, finds that companies led by boomerang bosses tend to under-perform on the stock market, and this negative effect is particularly strong in dynamic industries.
technology ai, science and new things
Rise of the machines
An open letter signed by Elon Musk, Steve Wozniak, Stuart Russell, and researchers at Google’s Deepmind calls for a six-month pause on training artificial intelligence more powerful than GPT-4. It’s a tad contradictory. Despite being signed by people who have worked on AI for a decade, “there are no literal proposals in the actual moratorium,” Aaron Levie, CEO of Box, told Axios. The letter warns against a “dangerous race to ever-larger unpredictable black-box models with emergent capabilities” and says that AI governance decisions “should not be delegated to unelected tech leaders”. Who then? At the moment regulation is a patchwork. The UK this week ruled out the creation of a new body dedicated to AI governance. The US Chamber of Commerce’s calls for more regulation have not been answered.
our planet climate and geopolitics
Shares of UK energy company Drax fell 12 per cent on Thursday morning after traders noticed it didn’t appear on a shortlist of carbon capture projects seeking state support. Drax, which is proposing a £2 billion bioenergy and carbon capture project in Yorkshire, has since entered into talks with the government to “move the project forward”. But the delay isn’t ideal: the company’s subsidy for burning wood pellets to make electricity runs out in 2027, leaving a potential funding gap between then and the next round of funding in 2030. Without the carbon capture and storage element, using biomass to generate electricity isn’t emission-free and decisions to classify biomass investments as “green” have been controversial. Former business secretary Kwasi Kwarteng said that Drax’s importing of wood pellets from the US “doesn’t make sense” and “isn’t sustainable”.
culture society, identity and belonging
They could be heroes
Business has been the butt of movies since Charlie Chaplin was a human cog in the machine in Modern Times. But something’s changed. The long bull market produced The Wolf of Wall Street, part brag and part condemnation of capitalist excess. A grimmer economic climate brings Air, the origin movie for a pair of trainers, and Tetris, the story behind the game. Cinema requires heroes and villains: business is usually the latter (It’s a Wonderful Life is the rule-proving exception). By focusing on the quest behind two famous products rather than the companies themselves, filmmakers have flipped the script at a time when entrepreneurs desperately need a crumb of optimism.
And finally… Memorabilia bearing Credit Suisse’s name and logo is already selling fast online. An 167 year-old, 10g bar of gold marked by the issuer will set you back £590, while retro red and blue “CS” ski hats are going for around £177. But don’t forget the tech bros – an SVB risk management department mug is a bargain at £19.97.
Thanks for reading.
Additional reporting by Barney Macintyre.
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