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Amnesty International. Now it is time for HARDtalk. | :00:10. | :00:16. | |
Elizabeth Corley is one of the most powerful women in finance anywhere. | :00:16. | :00:21. | |
She's the boss of Allianz Global Investors, overseeing over $400 | :00:21. | :00:26. | |
billion. Her biggest clients are companies that want their pensions | :00:26. | :00:32. | |
managed. What does she have to say about the economic turmoil and | :00:33. | :00:38. | |
equity investment? Where does the responsibility for change lie and | :00:38. | :00:48. | |
:00:48. | :01:10. | ||
just how brittle could be future Elizabeth Corley welcome to | :01:10. | :01:16. | |
HARDtalk. You sit atop a pension fund management worth hundreds of | :01:16. | :01:22. | |
billions of dollars. From your vantage point, why do you think the | :01:22. | :01:27. | |
market in Europe is so jittery at the moment? That is a great | :01:27. | :01:31. | |
question and I think you have phrased it a great wave. It is | :01:31. | :01:37. | |
jittery on any news. Europe is going through a very difficult | :01:37. | :01:42. | |
transition, from a line on too much debt to get in its books in balance. | :01:42. | :01:52. | |
-- from the relying on. Any headline, there is a distorted | :01:52. | :01:57. | |
reaction. We want to keep a level head and keep calm. I am not sure | :01:57. | :02:02. | |
how you managed to do that when you are trying to transition away from | :02:02. | :02:08. | |
too much debt but countries are taking on more and more debt last | :02:08. | :02:14. | |
engaging in a savage austerity. Do you think there is too much | :02:14. | :02:19. | |
austerity? I think we have got the right balance between austerity and | :02:19. | :02:23. | |
structural change. Austerity on its own is not enough. We have got to | :02:23. | :02:31. | |
see gross, a boom in the economy from export. Without austerity | :02:31. | :02:37. | |
Europe will be too indebted to be strong as a trading regions. Do you | :02:37. | :02:41. | |
think the fiscal adjustments being asked of countries like Spain with | :02:41. | :02:49. | |
bond yields of 6% are actually feasible? They are having to cut | :02:49. | :02:59. | |
:02:59. | :03:01. | ||
their GDP by more than 5%. It is pretty unprecedented. There was a | :03:01. | :03:07. | |
lot going on because it is a new currency. We are in a new | :03:07. | :03:11. | |
environment we have not been through before. The austerity | :03:11. | :03:14. | |
packages are part of wider structural changes going on in | :03:14. | :03:19. | |
Europe. They are a painful growing up of the currency into a strong | :03:19. | :03:27. | |
currency. A lot depends on the individual states but also what is | :03:27. | :03:31. | |
done collectively in Europe in terms of political growing together | :03:31. | :03:36. | |
and working together. Undoubtedly there are those who say Europe | :03:36. | :03:41. | |
needs to work better together but there are plenty of people who also | :03:41. | :03:47. | |
say the path that Europe is on is just a economically illiterate. If | :03:47. | :03:51. | |
you're taking on not more and more debt yet to dealing with more and | :03:51. | :03:56. | |
more savage austerity, reducing your chances to grow, at some point | :03:56. | :04:06. | |
the last it is going to break. cannot say there are not risks, | :04:06. | :04:11. | |
there are big risks but they are everywhere in the world. Inside the | :04:11. | :04:18. | |
eurozone, outside the eurozone, in the US and emerging markets. The | :04:18. | :04:22. | |
whole world is going through a delicate and sometimes dangerous | :04:22. | :04:26. | |
transition from an old way of running to a better way of running | :04:26. | :04:29. | |
which is more stable and based on genuine growth. Europe is part of | :04:29. | :04:37. | |
that but not alone. I am wondering how sustainable the approach is. | :04:37. | :04:42. | |
There is a recent Goldman Sachs report that says the attempts to | :04:42. | :04:50. | |
restore competitiveness will mean with a squeeze on the real economy, | :04:50. | :04:55. | |
the cash economy is that in places like Portugal you can end up with a | :04:55. | :05:03. | |
debt to GDP ratio of 35% over a decade. That is out of kilter and | :05:03. | :05:07. | |
counter-productive, isn't it? is no way of getting out of the | :05:07. | :05:15. | |
austerity measures. You have to be careful about judging what is going | :05:15. | :05:19. | |
on by the headlines. We talk to people on the ground, we have an | :05:19. | :05:23. | |
extensive presence and our view it is not without risk but we need | :05:23. | :05:33. | |
accommodation of -- and the deep combination of measures. If you | :05:33. | :05:38. | |
look at individual markets, some have maintained competitiveness but | :05:38. | :05:45. | |
many have not. The labour market changes are as important as the | :05:45. | :05:49. | |
austerity and the stimulus for export is important. If everyone | :05:49. | :05:53. | |
agreed with that approach why do you think the chief economist of | :05:53. | :06:03. | |
:06:03. | :06:07. | ||
the IMF described the market's reaction as schizophrenic? They see | :06:07. | :06:13. | |
the measures that have been taken leading to reduced growth. They | :06:13. | :06:17. | |
react negatively against something they want. It doesn't sound as if | :06:17. | :06:23. | |
everyone buys into the part you are suggesting. Markets always have two | :06:23. | :06:30. | |
sides. You are always going to have differences of opinion. We should | :06:30. | :06:34. | |
expect to see differences in opinion. The bigger issue is what | :06:34. | :06:40. | |
is being done for growth. There is focus on austerity and the way in | :06:40. | :06:45. | |
which the European Central Bank has helped by a three-year window with | :06:45. | :06:50. | |
an injection of monetary policy. The other side is what is happening | :06:50. | :06:56. | |
in terms of recapitalising with the banks and regulations. We are still | :06:56. | :07:02. | |
dealing with the legacy of the crisis in terms of the regulatory | :07:02. | :07:08. | |
agenda. Some of the schizophrenia we see is there because we have on | :07:08. | :07:13. | |
the one hand and monetary policy and fiscal policy aimed at getting | :07:13. | :07:18. | |
Europe fit but legacy issues from the crisis and a regulation that | :07:18. | :07:27. | |
comes with that which can be negative for growth. He former | :07:27. | :07:32. | |
chief economist from the European Central Bank talk to us recently | :07:32. | :07:39. | |
and said the problem with that the increase in debt is that it does | :07:39. | :07:45. | |
not solve anything. He said the fundamental issues remain to be | :07:45. | :07:51. | |
addressed. Elsewhere he said that this, essentially, is like drunks, | :07:51. | :08:01. | |
:08:01. | :08:04. | ||
doping the banks. -- like drugs. What we see it as his have a window | :08:04. | :08:10. | |
of opportunity for Europe to fix itself. The ECB has created the | :08:10. | :08:15. | |
three-year window. It is up to the participants in the market - banks, | :08:15. | :08:20. | |
policy makers, politicians to do what they can to take the measures | :08:20. | :08:27. | |
on austerity and on the labour market freedoms. He is right, it | :08:27. | :08:31. | |
does not fix it. It is a means to give us the time to fix it at the | :08:31. | :08:36. | |
right pace. What happens if it doesn't work? We think the | :08:36. | :08:40. | |
consequences for the world are very severe. Our central scenario is | :08:40. | :08:47. | |
that it will work. We will see strong policy implementation in the | :08:47. | :08:55. | |
peripheral states. Presumably you are also gaining Greece leaving the | :08:55. | :09:05. | |
:09:05. | :09:09. | ||
euro? -- gaming. You must have a plan... It is feasible that in the | :09:09. | :09:19. | |
Greek elections, the Greek people - it is a technocratic government | :09:19. | :09:26. | |
which might repudiate the deal. vast majority of the population in | :09:26. | :09:29. | |
Greece want to stay in the euro. But they do not necessarily want | :09:30. | :09:35. | |
the terms under which the deal is done. It is a great advantage that | :09:35. | :09:39. | |
we have strong technical skills in the peripheral countries. They | :09:39. | :09:44. | |
understand economics, the way capital markets and monetary | :09:44. | :09:48. | |
systems work. They are not worried about their future political | :09:48. | :09:55. | |
careers but getting the country in state. They do not have a | :09:55. | :10:02. | |
democratic mandate. They may well turn on you. I am interested to | :10:02. | :10:07. | |
know, I am sure you will not show the plans but do you consider the | :10:08. | :10:13. | |
possibility of these countries leaving the euro? As the chief | :10:13. | :10:17. | |
executive of a large company with pension and private money with us | :10:17. | :10:24. | |
we have to look at every scenario. How to prepare for the unexpected. | :10:24. | :10:28. | |
That would be the case of a terrorist attack, a political event, | :10:28. | :10:38. | |
:10:38. | :10:39. | ||
a tsunami. We sit very much in that sort of business continuity context | :10:39. | :10:44. | |
that we plan for it but do not run a business in that way. Given that | :10:44. | :10:52. | |
Europe is pretty much a basket case at the moment, where else are you | :10:52. | :10:58. | |
looking for long-term investments? Emerging markets? We see faster | :10:58. | :11:02. | |
growth in emerging markets and Europe in the next five years but | :11:02. | :11:09. | |
still in Europe. There are some thriving parts of Europe - sectors | :11:09. | :11:14. | |
and countries. It is an absolutely essential trading partner for the | :11:14. | :11:24. | |
UK and others. When you are moving into emerging markets to have | :11:24. | :11:28. | |
talked about trying to engage in company culture, to be on the | :11:28. | :11:32. | |
shoulders of those running the companies in order to make sure | :11:32. | :11:36. | |
they do their job well. How do you do that in a place like | :11:36. | :11:42. | |
China? The most important thing anywhere is to have teams on the | :11:42. | :11:46. | |
ground. We are a global investor with 500 professionals around the | :11:46. | :11:56. | |
:11:56. | :11:56. | ||
world. They have got to have people who can engage locally in of China, | :11:57. | :12:06. | |
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Singapore, Korea. We do not engage in public but in private. We don't | :12:07. | :12:17. | |
:12:17. | :12:20. | ||
find a difference in engaging with a Chinese company Bilton company. - | :12:20. | :12:27. | |
- Belgian company. Do you think the company culture generally, | :12:27. | :12:37. | |
:12:37. | :12:37. | ||
especially in regard and too short- term returns, do you think the | :12:37. | :12:42. | |
balance has got a bit wrong in recent years is nap I think we do, | :12:42. | :12:48. | |
actually. As long-term investors within the focus on quarterly | :12:48. | :12:55. | |
earnings, it forces you to look at quarterly earnings and that pension | :12:55. | :13:00. | |
funds have to think about the terms on a quarterly basis is a step too | :13:00. | :13:06. | |
far. Do you like the idea of having the two classes of shareholders - | :13:06. | :13:13. | |
those in for the long-term get a better class of the voting rights | :13:13. | :13:23. | |
:13:23. | :13:23. | ||
than those in for the short-term? We have one vote. A lot of people | :13:24. | :13:30. | |
think that is an effective way of moving against short-term profit. | :13:30. | :13:34. | |
Wouldn't it played to your advantage? We would rather see | :13:34. | :13:40. | |
shareholders to want to engage in the company and stayed there. If | :13:40. | :13:48. | |
you look at riots, you start with good intentions but end up creating | :13:48. | :13:58. | |
:13:58. | :14:00. | ||
first class, second class and third If you are engaged, or what is your | :14:00. | :14:06. | |
position on the other hot topic, executive pay? Do you agree as a | :14:06. | :14:11. | |
shareholder that it has got completely out of whack. I do not | :14:11. | :14:16. | |
think that is the right way to describe it. A lot of people do. | :14:16. | :14:21. | |
think there should be some fundamental principles. This is how | :14:21. | :14:25. | |
we engage with people at the board level and the people that we invest | :14:25. | :14:30. | |
with. There are fundamental differences. If a company does | :14:30. | :14:35. | |
extremely well and it is producing dividends and growth for investors | :14:35. | :14:38. | |
and the good quality consumer product and is ethically managed | :14:38. | :14:41. | |
then the people running that companies should get paid for | :14:41. | :14:48. | |
performance. But it is balance, isn't it? Exactly. We like before | :14:48. | :14:53. | |
performance. The dislike pay for failure. Add disconnect between | :14:53. | :14:57. | |
executive pay and shareholder rewards is something I am | :14:57. | :15:04. | |
particularly unhappy with. Are you unhappy with Barclays? They are | :15:05. | :15:08. | |
coming up for their general meeting and there is a lot of disquiet | :15:08. | :15:15. | |
about the fact that shareholders have got �725 million in recent | :15:15. | :15:19. | |
results and pay on bonuses has gone up to �2.2 billion. That does not | :15:20. | :15:26. | |
sound Fiore. You will never get me to speak on individual company. -- | :15:26. | :15:35. | |
does not sound fair. But that type of balance. To me, as someone who | :15:35. | :15:40. | |
is uninitiated, and that is out of kilter. Looking at the wider | :15:40. | :15:44. | |
example, it goes back to what I said at the beginning, the right | :15:44. | :15:50. | |
balance between rewards for shiel warders -- shareholders, investors | :15:50. | :15:58. | |
and employees. Let's look further at the magic circle of those on the | :15:58. | :16:05. | |
board and the shareholders. Outside, people see figures like the CEOs of | :16:05. | :16:11. | |
the top 100 debt companies in Britain, and their pay has gone up | :16:11. | :16:19. | |
over the last dozen years, compared to when they were getting 47 times | :16:19. | :16:27. | |
the amount of the average full-time employee, now it is 88 times. -- | :16:27. | :16:34. | |
FTSE. Given the current economic circumstances, how can that | :16:34. | :16:41. | |
possibly be right? If you look at the wider issue on a global scale, | :16:41. | :16:46. | |
the disparity is growing, it is not narrowing, it is growing. That's is | :16:46. | :16:51. | |
not healthy. If it continues to widen, it will create significant | :16:51. | :16:57. | |
social tension and risk. The question is, what do you do about | :16:57. | :17:01. | |
it? We think you should go and engage with companies, and we do it | :17:01. | :17:06. | |
in private, have conversations about what they're doing and if | :17:06. | :17:10. | |
they are going about it in the right way. The something that | :17:10. | :17:15. | |
concerns a lot of people about the amount of money that they | :17:15. | :17:19. | |
themselves have, let alone these executives in top positions, you | :17:19. | :17:26. | |
are responsible for millions of people's pensions. Is the brutal | :17:27. | :17:30. | |
truth that we have to confront is that as we are living longer, we | :17:30. | :17:36. | |
should expect of in return? That is such a tough question. -- expect | :17:37. | :17:44. | |
less in return. They have to think about how long we are working. And | :17:45. | :17:49. | |
we are engaged in a lot of think tanks on this. We care passionately | :17:49. | :17:53. | |
about this. We had the responsibility for managing | :17:53. | :17:58. | |
people's money but it is the outcome that matters. It is not | :17:58. | :18:04. | |
just the money, it is, can people live on that money? The returns | :18:04. | :18:10. | |
available for investors are low. People will have to work longer or | :18:10. | :18:14. | |
save more, we have got to produce good results for them and there | :18:14. | :18:17. | |
must be better value for money. They are working with other members | :18:17. | :18:22. | |
in the industry come up with the Government, with policy makers, not | :18:22. | :18:26. | |
just in the UK but in other countries, to see what we can do | :18:26. | :18:34. | |
about that. There is a lot of concern about pensions being sold. | :18:34. | :18:39. | |
There is a lot of evidence being produced on how people are frankly | :18:39. | :18:45. | |
being ripped off on their fees. What are you doing about that? | :18:45. | :18:49. | |
wasn't a conference yesterday with the pension Minister and others | :18:49. | :18:54. | |
talking about good contribution schemes. -- I was in. We have to | :18:54. | :18:58. | |
engage with the Government, with the regulators on how we can make | :18:58. | :19:02. | |
sure we get really good quality schemes available for people. We | :19:02. | :19:09. | |
think the time to do it is now. you think it is fair to people? | :19:09. | :19:14. | |
terms of the information, yes. There is a lot of information. | :19:14. | :19:18. | |
does not answer the question. about how do you get that | :19:18. | :19:22. | |
information in a way that is understandable. We are doing a lot | :19:22. | :19:27. | |
of work in Europe on how we can improve the quality of information, | :19:27. | :19:32. | |
particularly on risk and how it is understood. Regulation has | :19:32. | :19:37. | |
specified how we have to communicate. They were the very | :19:37. | :19:41. | |
first to introduce key investor disclosures. We did that way ahead | :19:41. | :19:46. | |
of the deadline. It is a great step forward in Europe but it is not | :19:46. | :19:51. | |
enough. We have to consider how we can get not just information but | :19:51. | :19:58. | |
valuable information. How can we do it so a person who is not a | :19:58. | :20:02. | |
financial genius can compare the price of one product with another. | :20:02. | :20:06. | |
There is a lot of work to be done on that but we are very committed | :20:06. | :20:11. | |
to making it happen. Do you shudder with Shemar revulsion the you hear | :20:11. | :20:21. | |
:20:21. | :20:24. | ||
things like the report last year of people being charged 1p in the | :20:25. | :20:33. | |
pound but, because of compounding, the pension cost actually add up to | :20:33. | :20:39. | |
40 %. -- shame or revulsion. Nobody fully understands the power of | :20:39. | :20:44. | |
compound interest. David and I have spoken about this. There are a | :20:44. | :20:49. | |
number of research papers on this. I think he is put in a spotlight on | :20:49. | :20:53. | |
exactly the right issue which is the effect of compounding and the | :20:53. | :20:57. | |
fact that people don't understand interested. We want to find a way | :20:57. | :21:02. | |
to describe it on a level playing field with all of the products to | :21:02. | :21:05. | |
make sure that people can understand the implications of that. | :21:05. | :21:09. | |
While at the same time not scaring people of to your competitors? | :21:10. | :21:14. | |
is not that. The worst thing that you can do right now is nothing at | :21:14. | :21:18. | |
all. People have to save. You have to rebuild confidence in his system | :21:18. | :21:24. | |
that has been shaken, rightly shaken I think, no one could | :21:24. | :21:28. | |
criticise individuals for having a lack of trust in the system at the | :21:28. | :21:32. | |
moment. People are surprised and shocked by the scale of the | :21:32. | :21:37. | |
conflict -- the problems. We have to rebuild confidence. What we | :21:38. | :21:42. | |
don't want to do is make people so destabilised that the stops saving | :21:42. | :21:50. | |
altogether. Then there will be a timebomb. -- they stop saving. | :21:50. | :21:54. | |
People like David are great at shaking our people and getting them | :21:54. | :21:59. | |
to think. We are working very hard at that. -- shaking up. You have | :21:59. | :22:03. | |
got every right to roll your eyes in despair about this question. | :22:03. | :22:10. | |
am dreading what it might be! talking to you not just as the boss | :22:10. | :22:19. | |
of Ali and global investors -- Alianz Global Investors, top female | :22:19. | :22:24. | |
executives are few and far between. Do you have any sympathy at all | :22:25. | :22:28. | |
with the statements of the vice- president of the European | :22:28. | :22:32. | |
Commission who has tried and failed to get companies across Europe to | :22:32. | :22:37. | |
sign up to targets for female executives. What do you think about | :22:37. | :22:43. | |
that? The first thing I would say about that is I am on the record as | :22:43. | :22:48. | |
against quotas. That is the last resort when we have failure. That | :22:48. | :22:52. | |
means that every single woman or minority that gets into his senior | :22:52. | :22:56. | |
position by merit is looked at in the wrong way. Targets and an | :22:56. | :23:01. | |
interesting idea. We have voluntary targets with an our company. I am | :23:01. | :23:05. | |
on the council and we are working very aggressively towards those | :23:05. | :23:09. | |
targets. You are working aggressively but there must still | :23:09. | :23:14. | |
be a lot of discrimination and sexism for women not to have risen | :23:14. | :23:17. | |
to the top and the numbers that they ought to have. Discrimination | :23:17. | :23:22. | |
is significantly less than it was. It is definitely in decline. We | :23:22. | :23:28. | |
have something called unconscious bias, all of us, men and women. | :23:28. | :23:32. | |
you perceive that when you are working? I am sure you are treated | :23:32. | :23:37. | |
with the other was respect but do you get a sense of it? I don't and | :23:37. | :23:42. | |
career. There has been discrimination but I have shrugged | :23:42. | :23:48. | |
out of. There is a survivor bias and the women that have been able | :23:48. | :23:52. | |
to shrug out of. I do not think it is appropriate that I have had to | :23:52. | :23:57. | |
face that but I was not going to make a big deal of it. What has | :23:57. | :24:01. | |
changed in the last 20 years is you get significantly less of that type | :24:01. | :24:04. | |
of discrimination but we still have problems. We still have the fact | :24:04. | :24:08. | |
that the only people who can carry a child are women. If you want to | :24:08. | :24:13. | |
have a family, a normal family life, you have to find ways of making | :24:13. | :24:20. | |
sure that families can survive through their 30s and can come back | :24:20. | :24:24. |