The comments by Nick Durlacher, chairman of the Securities and Futures Authority, and Phillip Thorpe, chief executive of Imro, followed the acrimonious departure of Nicola Horlick from Morgan Grenfell Asset Management last week.
Their comments were not aimed at MGAM directly but at an industry which over recent months has been dogged by the antics of characters perceived as star performers.Only four months ago MGAM sacked Peter Young, once one of its top-performing fund managers, after establishing he had set up Luxembourg holding companies to hide his investments in unlisted securities. Nick Leeson, now in jail after breaking Barings, was perceived as a star at the bank before it collapsed in February 1995. The same is true of Yasuo Hamanaka, a trader at Japan’s Sumitomo.Mr Durlacher said: “To some extent management have brought it upon themselves by the willingness to put so much of the reward for strong performance on individual performance and individual bonuses The danger is that it’s replaced… loyalty.”MGAM is fighting to reassure its clients that Mrs Horlick’s departure will not impact on the performance of the group, even though she was considered to be one of the key players behind its improved record in recent years.Dubbed Superwoman for her ability to juggle her hectic family life – she has five children and an investment banker husband – and her “star” role as head of pension funds at MGAM, she was rumoured to earn more than pounds 1m a year.”We use the word ’stars’ because we borrowed it from Hollywood and one can observe from casual reading of memoirs coming out of Hollywood that they were difficult to manage for the studios,” said Mr Durlacher.Mr Thorpe said he saw nothing wrong with businesses attempting to hire the best people. “However, we are concerned when management’s attention seems to wholly focused on performance,” he said.MGAM suspects that Mrs Horlick was trying to poach some its top fund managers. She denies this.City sources pointed out the irony of MGAM’s situation because Deutsche Morgan Grenfell, its parent company, is well known for its aggressive stance on hiring. Last year it faced legal action for poaching a team of traders from ING Barings.While hiring teams en masse can be an effective way to build a business, many in the City wonder if it pays off long-term by winning loyalty “You don’t buy their loyalty.

For a while you do, until the next big offer comes along,” said Phil Rivett, chairman of Coopers & Lybrand’s capital markets group.Late last year Andrew Large, chairman of the Securities and Investments Board, also called for strong management to control stars.Deadlock over job, page 4. Olivetti, the Italian information technology group, yesterday moved to tackle the problems that have been besetting it with a L250bn-L300bn (pounds 96m- pounds 115m) deal to sell its troubled personal computer division. The loss-making business is going to Piedmont International, a company established for the purpose by Edward Gottesman, a US lawyer based in London whose other interests include Raleigh bicycles and the Fila sports shoe group. The final sale price will be agreed before the end of February, with Olivetti retaining a 10 per cent stake in the new company.
Plans to sell the PC operation were announced last October as part of a programme to raise around L800bn to cut debt and restructure the company. With L450bn raised from the recent sale of an 8 per cent stake in Omnitel, one of Italy’s mobile telephone groups, the latest disposal means that target has almost been reached.Olivetti’s shares, suspended in Milan yesterday ahead of the announcement, have been rallying from new lows.. Anyone reading Hans Tietmeyer’s comments in the International Herald Tribune yesterday would think he had been converted to Kenneth Clarke’s particular brand of British Conservatism.

It was wrong, Mr Tietmeyer said, to blame Maastricht for the public spending cuts, labour market reforms and welfare upheaval going on throughout Europe; these would be necessary regardless of monetary union, for Europe is losing its position of competitive strength in world markets and needs to respond urgently. That’s remarkable enough for any beneficiary of the German economic miracle, but for the president of the Bundesbank it looks like a form of heresy. What’s this? Unskilled workers should not command high rates of pay, labour regulations are too rigid, collective wage bargaining is not sufficiently flexible, Germany in particular should get away from the idea that the service industries are a humiliating form of work? Hans Tietmeyer is not a politician, he’s said this kind of thing before (though not as strongly), and it may be some time before sentiments of this type are echoed publicly by Helmut Kohl. All the same, by German standards, he’s tilting at some very sacred cows.
In a different way, so is the Labour Party in its now very public public pronouncements on the importance of sound public finances and low rates of taxation. That this kind of thing should no longer be thought surprising coming from the shadow chancellor is almost as revealing as Mr Tietmeyer’s conversion to the cause of flexible labour markets. Are we beginning to witness the final triumph of Anglo-Saxon free market principles? From very different perspectives and political positions, Mr Tietmeyer and Mr Brown seem to be coming round to the same point of view.The problem for Mr Brown is that it is all very well to say these things, quite another for him to deliver.

It remains to be seen what sort of a credibility gap he has to close with the electorate; with the markets it is still a big one.The rhetoric is fine, but he’s got a hill to climb convincing financial markets that he’s as serious about it as claimed Income tax is in any case only part of the equation here. If he has to rely on the windfall profits tax and other wheezes to make the books balance, he could be in trouble.There is no such thing as a popular tax, however much a windfall levy on the utilities might look like one. While proposals for this tax languished in the pounds 3bn-pounds 5bn range, Labour looked like getting away with it, just about. But if it is true that Mr Brown’s office is now looking at a pounds 10bn levy – and his comments on income tax yesterday only tend to support the suggestion that he is – then that is a very different matter.This is not money that it is going to be magicked out of thin air Ultimately it will be the shareholders who pay.

There are about 8 million of them spread across the utilities, and the sums involved begin to look large enough to make an electoral difference. As Mr Brown is about to discover, squaring the circle between Labour’s social commitments, its policy of low taxation, Maastricht and the financial markets will be quite as hard as Mr Tietmeyer paints it.Demergers are no panaceaThe City was beginning to have its doubts about demergers, but the woeful performance of Thorn since its divorce from EMI has confirmed that the great business school idea of the early 1990s is no panacea. Since Thorn EMI did the splits in August last year, the rental arm’s shares have slumped 47 per cent.That would not matter so much if the music business had played a more cheerful tune, but it too has fallen, by 16 per cent as bid speculation evaporated.The theory of demergers is fine as far as it goes. When a valuable gem such as ICI’s pharmaceuticals arm is hidden from view behind a lower-rated business like bulk chemicals, it doesn’t take a genius to recognise the potential of spinning it off into a racier sector.The same was true of Racal’s progeny, especially Vodafone, where the potential of the mobile phone revolution was always likely to be diluted by the stock market rating on dull defence electronics contracts.But the list of failed demergers is lengthening.