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!
Thursday, 22 January 2009
Foresight
Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalised and the State will have to take the road which will eventually lead to State
intervention and thus Communism."
Karl Marx
Das Kapital 1867
Monday, 19 January 2009
Appeal to MP to pursue source of original Northern Rock leak.
Robin Ashby has today written to Jim Cousins MP, MP for Newcastle Central and a member of the Treasury Select Committee, in the following terms:
Dear Jim,
As you know, the Northern Rock Small Shareholders Group is not a party to the legal proceedings currently under way. The story on page 41 of today's Times is therefore the first we've heard about the evidence of John Kingham, ex Treasury, about who is responsible for the first leak to Peston of the BBC.
Can I therefore urge you to take up the cudgels again to try to find out through Parliament who in effect caused the run on the bank - and arguably made a substantial contribution to some of our current problems - by premature disclosure.
With best wishes
Robin Ashby
Dear Jim,
As you know, the Northern Rock Small Shareholders Group is not a party to the legal proceedings currently under way. The story on page 41 of today's Times is therefore the first we've heard about the evidence of John Kingham, ex Treasury, about who is responsible for the first leak to Peston of the BBC.
Can I therefore urge you to take up the cudgels again to try to find out through Parliament who in effect caused the run on the bank - and arguably made a substantial contribution to some of our current problems - by premature disclosure.
With best wishes
Robin Ashby
Monday, 1 December 2008
Northern Rock Shareholders Action Group - Update No. 46
Letter from Andrew Caldwell
Many shareholders have received a letter from Andrew Caldwell of BDO Stoyward concerning the valuation of Northern Rock - he is the Government's appointed independent valuer. A copy of the letter is present on the UKKSA web site here.
Our response to the letter on behalf of shareholders is also present on the UKSA web site here.
In respect of your own response to the letter (all shareholders are invited to comment), we suggest you may simply write to Mr Caldwell and express the view in your own words that the terms of reference for the valuation effectively undermine his independence as a valuer and make a nonsense of the whole process (see below). In reality it is the acquirer of a company dictating the valuation terms for their own benefit.
You should also send a copy to your local M.P. so that he/she is aware of this issue. If you don't know who your M.P. is or how to contact him, use this web site page to find that information.
Note that we have already received quite a few samples of letters sent to Mr Caldwell from our supporters and thanks for those. A typical example is that from Robert Harris which probably represents the views of many.
Unfair Valuation Terms
To remind you: the Valuer is bound to assume that the company was not a "going concern" and was in "Administration", neither of which was true in fact. The company was definitely not in Administration and was trading normally (and the year end accounts for 2007 were produced on a "going concern" basis). In addition assumption have to be made that all financial assistance had been withdrawn by the Government and no future assistance would have been forthcoming - the first part is definitely untrue and the latter seems very unlikely and has not in reality taken place.
Donations Received
Thanks to all those supporters who sent donations in response to our last appeal. We do not acknowledge individual donations unless specifically asked to do so. We don't wish to add unnecessarily to our administration costs, but if anyone specifically wants an acknowledgement or a receipt we are happy to provide one.
It was also apparent from the responses received that a lot of people have changed postal or email addresses since this campaign commenced. Please notify us of any changes in either type of address if you wish to be kept informed.
Bank Dividends Campaign
For those investors who have been hit by the decline in the shares of other UK banks, and limitations on future dividends, we have started a general campaign to try to get more reasonable terms. The commitment by Royal Bank of Scotland, LloydsTSB and HBOS to not pay any dividends for five years is particularly distressing for those people living on dividends for their retirement income. More details of this campaign can be seen on a dedicated page on the UKSA web site here.
If you hold shares in the above mentioned banks you may care to register your interest in that campaign also. We are also holding a meeting for investors in these companies in London on the 11th December which you may care to attend. See the above web site page for more details.
Roger Lawson
Chairman, Northern Rock Shareholders Action Group
Many shareholders have received a letter from Andrew Caldwell of BDO Stoyward concerning the valuation of Northern Rock - he is the Government's appointed independent valuer. A copy of the letter is present on the UKKSA web site here.
Our response to the letter on behalf of shareholders is also present on the UKSA web site here.
In respect of your own response to the letter (all shareholders are invited to comment), we suggest you may simply write to Mr Caldwell and express the view in your own words that the terms of reference for the valuation effectively undermine his independence as a valuer and make a nonsense of the whole process (see below). In reality it is the acquirer of a company dictating the valuation terms for their own benefit.
You should also send a copy to your local M.P. so that he/she is aware of this issue. If you don't know who your M.P. is or how to contact him, use this web site page to find that information.
Note that we have already received quite a few samples of letters sent to Mr Caldwell from our supporters and thanks for those. A typical example is that from Robert Harris which probably represents the views of many.
Unfair Valuation Terms
To remind you: the Valuer is bound to assume that the company was not a "going concern" and was in "Administration", neither of which was true in fact. The company was definitely not in Administration and was trading normally (and the year end accounts for 2007 were produced on a "going concern" basis). In addition assumption have to be made that all financial assistance had been withdrawn by the Government and no future assistance would have been forthcoming - the first part is definitely untrue and the latter seems very unlikely and has not in reality taken place.
Donations Received
Thanks to all those supporters who sent donations in response to our last appeal. We do not acknowledge individual donations unless specifically asked to do so. We don't wish to add unnecessarily to our administration costs, but if anyone specifically wants an acknowledgement or a receipt we are happy to provide one.
It was also apparent from the responses received that a lot of people have changed postal or email addresses since this campaign commenced. Please notify us of any changes in either type of address if you wish to be kept informed.
Bank Dividends Campaign
For those investors who have been hit by the decline in the shares of other UK banks, and limitations on future dividends, we have started a general campaign to try to get more reasonable terms. The commitment by Royal Bank of Scotland, LloydsTSB and HBOS to not pay any dividends for five years is particularly distressing for those people living on dividends for their retirement income. More details of this campaign can be seen on a dedicated page on the UKSA web site here.
If you hold shares in the above mentioned banks you may care to register your interest in that campaign also. We are also holding a meeting for investors in these companies in London on the 11th December which you may care to attend. See the above web site page for more details.
Roger Lawson
Chairman, Northern Rock Shareholders Action Group
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