“If this is industrial policy, I’m a Frenchman”. Gerald Corbett is seldom short of something to say, but it’s hard to disagree with his latest bon mot, as the Office of Fair Trading despatched the merger between Britvic and A G Barr to the Competition Commission. Mr Corbett, the former chief executive of the former Railtrack, is used to blows from the authorities, but this one was as unexpected as it is bizarre.

The Office of Fair Trading mulled the mixing of Irn-Bru and Pepsi for months and what had seemed like a routine waive-through will now turn into a thorough examination of Britain’s fizzy drinks industry. This will conclude with the bleedin’ obvious, that Coca-Cola dominates it, that Barr Britvic would be a distant second, and that not even Coke can dictate terms to the supermarkets.

The decision defies common sense, but it’s  the leisurely pace of the regulators that does real damage. The Commission will take until the summer to rule, more than a year since the two sides began merger talks. The original terms will be hopelessly out of date by then. If Britvic (much the bigger partner) can avoid further Fruit Shoot own-goals, its instantly-appointed new CEO will be reluctant to see the Barr boys take over the top slots.

In short, this deal – as close to a genuine merger as it ever gets – is now dead. Both companies are perfectly capable of continuing on their own, but the efficiency savings are lost, and they walk forever in the shadow of Coca-Cola. Is this really the best outcome for UK plc?

Fantasy governance

Prof Colin Mayer of the Said Business School thinks the corporation exists purely for the enrichment of its owners and needs to be brought under wider control. In Firm Commitment, published last week (OUP), he’s whacking the greedy shareholders, especially those horrid short-term traders. In his view, corporations cannot exist purely for their enrichment, but “to make and do things that are of benefit to us all”.

The prof has certainly caught the zeitgeist. Big companies make easy targets, whether it’s abusing the food chain or abusing financial ignorance. He wants “trustees” to oversee their activities because “it is damaging to…pay large dividends when companies require money to invest.” This is a strange charge. Shareholders in banks, for example, can’t remember when they last had a dividend, and the damage to their capital scarcely bears contemplation. Shares generally have been a road to genteel poverty over the last decade.

He’s on stronger ground criticising executives who are “paid astronomical salaries to deliver mediocre performance”. A CEO whose bonus is based on profits may veto investments which would damage them next year, however attractive the longer-term prospects. Prof. Mayer’s solution is to give long-term shareholders more say. As the FT put it 125 years ago, he’s the enemy of the gambling operator. There is some evidence that family involvement does help performance, as at DMGT, AB Foods and BSkyB (although not at J Sainsbury). Family control aside, there’s the question of defining a long-term holder, and how much more say. Best of luck with that.

Big companies are an inescapable part of our lives. Prof Mayer may prefer the John Lewis model or the BBC, but the BBC has its own tax base, while the founders of Google and Microsoft show no sign of giving the business to their employees. Until entrepreneurs start behaving like John Spedan Lewis, the corporation, greedy shareholders and overpaid executives and all, seems likely to dominate the capitalist economy.

 It could be you

A nice twist to Vince Cable’s revived idea of giving us all shares in Royal Bank of Scotland: Richard Woolnough of Bond Vigilantes suggests parcelling the shares into million-pound lots and offering them as prizes in a jumbo national lottery. The mechanism is already there and it would create 13,000 new millionaires. Given our enthusiasm for gambling at silly odds, ticket sales would cover the government’s embarrassment at having to write off the investment. Remember: it could be you (but it won’t be).

 
I am a director of Finsbury Growth & Income Trust, which has a significant holding in AG Barr.
 
This is an updated version of my Saturday FT column
http://www.ft.com/cms/s/0/5c27c31e-7780-11e2-b95a-00144feabdc0.html#axzz2LF0B031M
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