Former Northern Rock shareholders have lost their legal challenge to the government's plan to compensate them.
In the High Court last month they argued the government had deliberately undervalued the bank in the run up to its nationalisation last year.
This had infringed their human rights, they argued, and meant they would now receive nothing.
Full article found on the BBC Website
Robin Ashby has done interviews with IRN and Tyne Tees News today on the issue
Friday 13 February 2009
Thursday 12 February 2009
Evidence to Treasury Select Committee
By Christopher Bean 3rd February 2009
Thoughts on the Treasury Select Committee's exploration of the audit & credit rating agencies activities during the present financial and economic crisis.
Verification vs. Viability
The examination of the auditors and credit agencies stimulated a strong feeling of ambivalence as they provided true to form a dissimulation of their reliance on ‘compliance’ with current standards which seemed to dissolve them of any responsibility and certainly any accountability; which was satisfying only in that it confirmed my interpretation as being not wrong. All that such ‘certification’ establishes is that the organisation (system) has been built and is operating in accordance with a codified set of criteria – it does not establish if the organisation (system) is viable within the current and predicted volatility of even the short term future.
Building the wrong system right does not make it any less wrong.
The aggregation of standards reveals nothing as to the viability of the organisation’s ability to operate within an evolving dynamic environment; by dynamic I do not mean the rather sophistic answer provided by the witnesses, but at least those representing: flows of energy, material and information aligned with spatial and temporal progress of the organisation’s relationships with its operating environment.
This does not require 500 pages of detailed analysis as the witnesses mentioned; it is fully acknowledged that the problem is complex, but so is the human body and you would not expect your doctor, the health accountant, to present you with an analysis that was too difficult to understand; you would expect a synthesis of your condition to provide a comprehensible picture of your health, something that could be grasped within minutes.
As soon as we go into detail which is where individual domain experts operate, no matter how small our specialist area we shall sooner or later be overwhelmed by data. Not understanding the nature of systems, results in difficulty finding the right level of aggregation, which as you will be aware requires taking account not only of higher systemic levels but also of indicators of sub-systems. We are all aware, implicitly, of the need to understand how deep we need to break down the detail; but where does the limit lie? For instance, to understand the breeding behaviour of a sheep there is absolutely no need to record the wool count, research blood-pressure and renal function; even if you did take all that into account, the resultant degree of refinement would be an arbitrary choice. What matters is not the amount of information but making the right choice. This is a universal truth as regards the flood of information currently overwhelming us. Information is invariably the fear of complex states of affairs. Possessing more information certainly does not mean being better informed.
The problem is not the complexity, which as we know is essential to the richness of life; it’s the inability of the auditors, restricted by the needs of their comfort blanket compliance, to absolve themselves from the responsibility and its associated accountability, for dealing with complexity. Within any complex system there are only so many variables (not constants) that represent the viability of the organisation – any viable system being governed by only a small number of rules.
Summary currently the auditors test for verifiability against accounting standards, compliance - is the organisation being operated right. What they, or some new body, should be examining is the viability; the validation of the organisation – is it the right organisation for the dynamics of the environment it is operating within. This also has the effect of restricting new entries and forms of competition to the market place.
This problem is the most common oversight made by auditors (who I accept have no remit, which includes national audit activities in the public sector, certainly both NAO & WAO are aware of this limitation) when striving to understand and put meaning to the viability of a complex problem. Verification is useful when you are buying something with causal relations such as a clock.
What separates a verifiable organisation, system, from a validatable viable one is complexity – a difference of such significance as the difference between success and failure.
This dilemma in dealing with complexity stems from the fact that our whole education and management practice (see OGC project management guidance plus Treasury Green, Red & Magenta books) tends towards drawing simple logical conclusions and defining obvious cause-effect relations. Yet simple cause-effect relations exist only in theory; they have no existence in reality; intervention in a system where its links have not been understood, results in that system behaving in a counter-intuitive manner; action taken does not produce the result that might ‘logically’ have been expected or that previous experience of the system suggested.
Conclusion Certainly within the UK, much is spoken about complexity, but the reality is that institutionalized thinking has not developed beyond a whole plethora of traditional practice, doing better what was done before; yet future success (however that might be measured, possibly in terms of competitive and comparative advantage) depends almost entirely on possessing the capability (not requiring new high cost domain expertise) to understand the nature of complexity. The present financial and now economic crisis highlights more than anything else this essential need; however, I have yet to witness any desire to grasp this nettle, a nettle which is somewhat akin to Poe’s Purloined Letter!
Thoughts on the Treasury Select Committee's exploration of the audit & credit rating agencies activities during the present financial and economic crisis.
Verification vs. Viability
The examination of the auditors and credit agencies stimulated a strong feeling of ambivalence as they provided true to form a dissimulation of their reliance on ‘compliance’ with current standards which seemed to dissolve them of any responsibility and certainly any accountability; which was satisfying only in that it confirmed my interpretation as being not wrong. All that such ‘certification’ establishes is that the organisation (system) has been built and is operating in accordance with a codified set of criteria – it does not establish if the organisation (system) is viable within the current and predicted volatility of even the short term future.
Building the wrong system right does not make it any less wrong.
The aggregation of standards reveals nothing as to the viability of the organisation’s ability to operate within an evolving dynamic environment; by dynamic I do not mean the rather sophistic answer provided by the witnesses, but at least those representing: flows of energy, material and information aligned with spatial and temporal progress of the organisation’s relationships with its operating environment.
This does not require 500 pages of detailed analysis as the witnesses mentioned; it is fully acknowledged that the problem is complex, but so is the human body and you would not expect your doctor, the health accountant, to present you with an analysis that was too difficult to understand; you would expect a synthesis of your condition to provide a comprehensible picture of your health, something that could be grasped within minutes.
As soon as we go into detail which is where individual domain experts operate, no matter how small our specialist area we shall sooner or later be overwhelmed by data. Not understanding the nature of systems, results in difficulty finding the right level of aggregation, which as you will be aware requires taking account not only of higher systemic levels but also of indicators of sub-systems. We are all aware, implicitly, of the need to understand how deep we need to break down the detail; but where does the limit lie? For instance, to understand the breeding behaviour of a sheep there is absolutely no need to record the wool count, research blood-pressure and renal function; even if you did take all that into account, the resultant degree of refinement would be an arbitrary choice. What matters is not the amount of information but making the right choice. This is a universal truth as regards the flood of information currently overwhelming us. Information is invariably the fear of complex states of affairs. Possessing more information certainly does not mean being better informed.
The problem is not the complexity, which as we know is essential to the richness of life; it’s the inability of the auditors, restricted by the needs of their comfort blanket compliance, to absolve themselves from the responsibility and its associated accountability, for dealing with complexity. Within any complex system there are only so many variables (not constants) that represent the viability of the organisation – any viable system being governed by only a small number of rules.
Summary currently the auditors test for verifiability against accounting standards, compliance - is the organisation being operated right. What they, or some new body, should be examining is the viability; the validation of the organisation – is it the right organisation for the dynamics of the environment it is operating within. This also has the effect of restricting new entries and forms of competition to the market place.
This problem is the most common oversight made by auditors (who I accept have no remit, which includes national audit activities in the public sector, certainly both NAO & WAO are aware of this limitation) when striving to understand and put meaning to the viability of a complex problem. Verification is useful when you are buying something with causal relations such as a clock.
What separates a verifiable organisation, system, from a validatable viable one is complexity – a difference of such significance as the difference between success and failure.
This dilemma in dealing with complexity stems from the fact that our whole education and management practice (see OGC project management guidance plus Treasury Green, Red & Magenta books) tends towards drawing simple logical conclusions and defining obvious cause-effect relations. Yet simple cause-effect relations exist only in theory; they have no existence in reality; intervention in a system where its links have not been understood, results in that system behaving in a counter-intuitive manner; action taken does not produce the result that might ‘logically’ have been expected or that previous experience of the system suggested.
Conclusion Certainly within the UK, much is spoken about complexity, but the reality is that institutionalized thinking has not developed beyond a whole plethora of traditional practice, doing better what was done before; yet future success (however that might be measured, possibly in terms of competitive and comparative advantage) depends almost entirely on possessing the capability (not requiring new high cost domain expertise) to understand the nature of complexity. The present financial and now economic crisis highlights more than anything else this essential need; however, I have yet to witness any desire to grasp this nettle, a nettle which is somewhat akin to Poe’s Purloined Letter!
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