29/04/2016 BBC Business Live


29/04/2016

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This is Business Live from BBC News with Victoria Fritz

:00:00.:00:00.

Executive pay is in the spotlight again as the UK's second biggest

:00:07.:00:14.

drugmaker, AstraZeneca holds its AGM.

:00:15.:00:15.

But in the past few weeks have seen executives at oil majors,

:00:16.:00:19.

mining firms and media giants have have their pay deals rejected

:00:20.:00:22.

Live from London, that's our top story on Friday the 29th April.

:00:23.:00:43.

Are the big bosses getting paid to much?

:00:44.:00:44.

Can the advertising boss, Sir Martin Sorrell, justify his 100

:00:45.:00:47.

Judging from the mood - as the AGM season gets underway -

:00:48.:01:01.

Also in the programme...tens of thousands

:01:02.:01:03.

of fans are flocking to Omaha in Nebraska this weekend.

:01:04.:01:06.

Not for a festival or concert - but to the annual shareholder gig

:01:07.:01:09.

held by the legendary investor and money maker Warren Buffett.

:01:10.:01:11.

We'll have report on one of the world's savviest investors

:01:12.:01:14.

you the latest from the financial markets where Europe is already

:01:15.:01:20.

And we'll be getting the inside track on what the world's

:01:21.:01:30.

top central bankers have been up to, the state of the auto industry

:01:31.:01:34.

As always, we would love to hear from you. Just drop us a step --

:01:35.:01:47.

just drop us a line. We are talking big bucks this Friday

:01:48.:01:49.

- specifically the controversial Are top bosses worth

:01:50.:02:00.

the money they earn? biggest companies hold their annual

:02:01.:02:08.

shareholder meetings. More and more -

:02:09.:02:13.

the answer seems to be no. Earlier this month, BP shareholders

:02:14.:02:18.

revolted over a big pay rise for the boss Bob Dudley -

:02:19.:02:23.

awarding him $20 million despite record losses

:02:24.:02:26.

at the oil giant. Almost 60% of shareholders

:02:27.:02:31.

voted against it. Just a week later, Anglo American

:02:32.:02:35.

shareholders also revolted. The CEO was in line

:02:36.:02:38.

for a $5 million payout - despite Anglo being the worst

:02:39.:02:41.

performing company Today the boss of drug

:02:42.:02:46.

company AstraZeneca - They're expected to cry foul

:02:47.:02:52.

over the $12 million Mr Soriot rejected a takeover bid

:02:53.:02:56.

from Pfizer two years ago. All

:02:57.:03:11.

of these pale into insignificance Sir Martin Sorrell, of the world's

:03:12.:03:13.

biggest advertising company WPP - is due for a $100 million pay

:03:14.:03:22.

package - most of it in performance related share awards -

:03:23.:03:25.

he could face a rocky ride They'd have you with us. We have

:03:26.:03:52.

been about this 2012, we saw a shareholder spring. Is it that? It

:03:53.:03:59.

looks like it. Given the fact that companies have been doing less well

:04:00.:04:02.

in the financial markets, shareholders are up in Mark -- up in

:04:03.:04:08.

arms. In particular, given the new cable regulations coming in, giving

:04:09.:04:13.

shareholders a binding vote on executive pay, that has focused the

:04:14.:04:19.

spotlight on shareholders voting on executive compensation. I would say

:04:20.:04:23.

that basically, when it comes to that, shareholders need more

:04:24.:04:26.

alignment of compensation with performance. Can I ask you that? For

:04:27.:04:35.

our viewers around the world, you mentioned Vince Cable, the Business

:04:36.:04:41.

Secretary in 2012. He implemented some rules. Is there a difference?

:04:42.:04:51.

Between some of these CEOs? We cannot put them all into one basket.

:04:52.:04:57.

Martin Sorrell said that he spent 31 year building it, and he is backing

:04:58.:05:04.

the company. That is a different picture than Bob Darley who look

:05:05.:05:11.

over the -- looked over the biggest failure in the history. CEOs can be

:05:12.:05:19.

paid in terms of the value they add, or the what they would get

:05:20.:05:26.

elsewhere. So insect -- so executive compensation could be in between the

:05:27.:05:29.

two. It depends on market conditions. The market is looking

:05:30.:05:34.

less attractive, and so shareholders are being more exacting on executive

:05:35.:05:40.

compensation. That is why we are seeing more of a revolt on executive

:05:41.:05:46.

pay. It is interesting, because many of the major shareholders in

:05:47.:05:50.

companies are fun urgent -- managers. This poses some sort of

:05:51.:05:55.

conflict of interest when they are investing themselves, but act --

:05:56.:06:02.

particularly in financial institutions. I have done research

:06:03.:06:09.

in this area, and what I found is that when fund companies vote on

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other fund companies, they are more supportive of these companies than

:06:15.:06:18.

they are of other companies outside of the financial sector. This might

:06:19.:06:22.

be driven by social ties between these companies, so if I work for a

:06:23.:06:28.

financial company, company one, then I might be concerned that I want to

:06:29.:06:34.

get a job at company to, and so I am going to vote more favourably with

:06:35.:06:38.

them. Tit-for-tat voting can be important. If company one owns

:06:39.:06:45.

shares in company 2, they will be concerned that company 2 will vote

:06:46.:06:51.

against it. A complete conflict of interest. At the end the day, the

:06:52.:07:00.

financial crisis, and one of the reasons for the financial crisis, it

:07:01.:07:03.

is being blamed on the poor governance of financial companies a

:07:04.:07:06.

financial companies are the policeman of other financial

:07:07.:07:12.

companies, what will be expecting terrapin we had to leave it there.

:07:13.:07:20.

Shares of online retail giant Amazon have jumped in after hours trading -

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after it said sales rose 28 per cent in the first three

:07:24.:07:26.

months of the year - to more than 29 billion dollars.

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Profits hit $513 million - both were better than

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Amazon's been boosted by rising sales of its

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It's also seeing strong growth in customers for its Prime service,

:07:40.:07:43.

which includes free delivery and TV shows - as well as in its

:07:44.:07:46.

Comcast has confirmed its NBCUniversal unit will buy

:07:47.:07:52.

DreamWorks Animation for $3.8bn in cash.

:07:53.:07:53.

DreamWorks is the studio behind a string of animated hits films

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including Shrek and Kung Fu Panda - but has been losing

:07:57.:07:59.

The deal will put Comcast in direct competition with Disney.

:08:00.:08:02.

Dreamworks Animation shares surged 24 per cent on confirmation

:08:03.:08:04.

My teeth have not been in all morning!

:08:05.:08:25.

And the US car giant Ford has made record quarterly profits

:08:26.:08:28.

of $3.8 billion - on strong sales in Europe -

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and a revamped range of trucks in North America.

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Ford shares were boosted further - after the Chief executive

:08:33.:08:37.

Mark Fields confirmed Ford is working on an electric vehicle

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with a 200 mile range to match rivals from Tesla

:08:40.:08:42.

Are you going to help me with my teeth today? Not the scripts! Let's

:08:43.:09:08.

have a look at the website. I AG, the airline group, the parent group

:09:09.:09:17.

of British airways. A good first quarter. Pre-tax profits have jumped

:09:18.:09:28.

to 124 million euros. About $140 million. This compares to the same

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period a year ago, when they had an loss of 37 million euros.

:09:33.:09:38.

Interesting, the comment about trading remaining the same, despite

:09:39.:09:43.

attacks. They are keeping their eyes attacks. They are keeping their eyes

:09:44.:09:45.

on the rest of the competition. Italian luxury goods maker Gucci has

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sent warning letters to Hong Kong shops selling paper versions

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of its products as Paper replicas of items

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like mansions, cars, iPads and luxury bags are burnt

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in the belief that deceased relatives can use them

:10:03.:10:05.

in the afterlife. Juliana Liu is in Hong Kong and has

:10:06.:10:06.

more on the story. I understand this is all about

:10:07.:10:18.

keeping your relatives happy in the next life. Presumably, they are

:10:19.:10:22.

going to be buried happy with Gucci handbags? Absolutely, especially

:10:23.:10:28.

ones that were not able to afford these handbags when they were still

:10:29.:10:32.

alive. I went to visit some of the shops, and I can tell you that Gucci

:10:33.:10:37.

handbag and a pair of shoes costs just ?4 when they are made of paper!

:10:38.:10:45.

This comes from a long try knees traditions -- Chinese tradition of

:10:46.:10:49.

worshipping your ancestors. Their spirit remains somehow alive, and

:10:50.:10:52.

they are able to influence what happens in the land the living. If

:10:53.:10:57.

you want to avoid a run of bad luck, you have to keep your ancestors

:10:58.:11:02.

happy. In the past, that done by burning paper notes, so fake money,

:11:03.:11:07.

but these days, ancestors are much more demanding and they want iPads,

:11:08.:11:11.

they want mentioned, they want Gucci! This is what their

:11:12.:11:20.

descendants burn. Very demanding and since -- ancestors!

:11:21.:11:21.

Let's have a quick look at the markets. The Japanese yen is going

:11:22.:11:33.

strong. Let's have a look at the Nick Hayden. That is the second day

:11:34.:11:37.

that we have seen falls of 3%. This is how it is across Europe. Spain

:11:38.:11:44.

has defied expectations that GDP and economic growth would slow. Their

:11:45.:11:51.

economy expanded by 0.8%. That is despite the recent political drama

:11:52.:11:54.

there. Crossing over to the States. Let's hear from Michelle Fleury.

:11:55.:12:02.

Inflation will be an investors' minds. The PCE price index is

:12:03.:12:10.

released. It is expected to show prices rising below the Fed's target

:12:11.:12:18.

of 2% a year. One factor in that is the very low price of oil. Possibly

:12:19.:12:25.

good for consumers, but terrible for the big oil companies. The biggest

:12:26.:12:30.

in America, Exxon, is expected to report a drop in profits after the

:12:31.:12:37.

indignity of having it credit rating cut for the first time in 86 years.

:12:38.:12:42.

But it is still in better shape than Chevron, who is expected to report a

:12:43.:12:49.

loss for the fourth -- loss for the quarter.

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Joining us is Bronwyn Curtis, Chair, Society of Business Economists.

:12:52.:12:54.

You just got back from down under. It was sunny and warm! Let's talk

:12:55.:13:11.

about the markets. We have seen a lot of movement on the currency. The

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dollar is down, the Japanese in -- Japanese yet is up. It just seems

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that the markets and investors are all waiting for something, I am not

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sure what they are waiting for. It is the uneasy period. They are

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waiting for the Central banks, they are waiting for government, probably

:13:36.:13:39.

to do stimulus. When the Fed met this week, they talked about global

:13:40.:13:48.

risk, and moved it down, but we expected the central bank of Japan

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to do something and they did nothing. It is less risky than in

:13:52.:13:56.

January, when everyone was worried about China. The numbers from China

:13:57.:14:01.

are coming a bit better, but I am worried when we see big moves in

:14:02.:14:05.

currencies, because it usually means that something is going to happen.

:14:06.:14:09.

The worst big move is when the dollar goes up, and it is going down

:14:10.:14:13.

at the moment. We should seek slightly positive numbers, but it is

:14:14.:14:19.

the awful feeling that is it selling may and go away? So we have two or

:14:20.:14:23.

three weeks before we sell in May and go away into -- until September?

:14:24.:14:30.

Speaking of the dollar, you said it was coming down. The strong dollar

:14:31.:14:34.

has been a real problem for America recently. We did have some figures

:14:35.:14:38.

out from America when it came down to GDP in economic growth. They

:14:39.:14:43.

weren't great, but we also did hear from the Federal reserve, and they

:14:44.:14:46.

offer little is fairly bullish on the ballot for the American economy.

:14:47.:14:52.

I wonder how significant those numbers are going to be? I think

:14:53.:15:00.

everyone is watching those numbers, plus the GDP numbers, but the

:15:01.:15:04.

inflation numbers, as we talked about earlier, really important

:15:05.:15:09.

today, because we are seeing Germany back in deflation, we are seeing

:15:10.:15:12.

Japan with deflation. That is going to be the key. I am still looking, I

:15:13.:15:16.

still think there is a good chance that the federal reserve will hike

:15:17.:15:23.

rates in June. So your money is on June. Bronwen, you are going to take

:15:24.:15:26.

us through the papers. We will see very shortly.

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Legendary money Warren Buffett hold his annual gig in Omaha,

:15:32.:15:34.

Nebraska tomorrow - tens of thousands flock

:15:35.:15:36.

to the annual shareholder meeting of Berkshire Hathaway.

:15:37.:15:38.

We find out what the future holds for Mr Buffett and his company.

:15:39.:15:41.

You're with Business Live from BBC News.

:15:42.:15:48.

Part-nationalised Royal Bank of Scotland has reported a widening

:15:49.:15:50.

first quarter loss on Friday as lower income, restructuring costs

:15:51.:15:54.

and sluggish assetsales showed the scale of problems

:15:55.:15:56.

RBS reported a loss of ?968 million, up from ?459

:15:57.:16:03.

The losses were also driven by a one-off ?1.2 billion payment

:16:04.:16:15.

to end the British government's priority over dividends.

:16:16.:16:21.

Michael Hewson is Chief Market Analyst at CMC Markets Credit

:16:22.:16:24.

We are seeing some interesting numbers coming out of RBS. We are

:16:25.:16:36.

seeing losses more than double. ?238 million worth of restructuring

:16:37.:16:39.

costs. Is this a bank that is actually on track when it comes to

:16:40.:16:42.

restructuring and getting back into private hands or no? I think that is

:16:43.:16:49.

a very difficult question to answer. These restructuring costs are coming

:16:50.:16:53.

down very slowly but there is a long way to go and yesterday we heard

:16:54.:17:00.

that RBS are likely to miss the deadline for spinning off those

:17:01.:17:04.

particular branches as a result of the state aid rules. I am not overly

:17:05.:17:08.

optimistic that we will get any good news from RBS at the moment, that

:17:09.:17:13.

being said, I think the share price being down should be fairly limited.

:17:14.:17:19.

We are still above the lows that we sure -- we saw earlier this year.

:17:20.:17:23.

The upside is also likely to be limited though by the very

:17:24.:17:26.

full-court environment RBS is operating in. How difficult do you

:17:27.:17:32.

think the spin off of Williams and gain will be for RBS? It will be

:17:33.:17:37.

very problematic because for every month they push that out, it will

:17:38.:17:41.

increase their restructuring costs. They are already at ?1.5 billion and

:17:42.:17:46.

it is estimated it will be ?50 million extra per additional month.

:17:47.:17:51.

RBS will come back to us in respect of what that will cost going forward

:17:52.:17:54.

but it is likely to be very problematic. We will leave it there.

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The share price has been losing team in early trade.

:18:01.:18:05.

Of course here, a lot of stories about the BHS sagas and Sir Philip

:18:06.:18:13.

Green and the pension scheme, did it have enough assets when he flubbed

:18:14.:18:16.

it. Yes, for just ?1 and now it have

:18:17.:18:22.

gone bust the pension hole of ?575 million.

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You are watching business live. -- You're -- watching Business Live -

:18:27.:18:32.

Are the big bosses The boss of drug company AstraZeneca

:18:33.:18:34.

- Pascal Soriot faces They're expected to protest

:18:35.:18:37.

over the $12 million And judging from the recent mood

:18:38.:18:40.

at a raft of recent AGMs, they are indeed. Not with mighty

:18:41.:18:55.

though. I didn't have those in today.

:18:56.:18:58.

And now let's get the inside track on stories making waves this week

:18:59.:19:01.

with our Economics Editor, Kamal Ahmed.

:19:02.:19:03.

It is good to see you. Let's start off with the general theme of the

:19:04.:19:11.

global economy. The central banks we were just talking about. The Bank of

:19:12.:19:17.

Japan, so much expectation, the Federal Reserve did nothing. New

:19:18.:19:20.

Zealand did nothing. What does that tell us? New Zealand central bank,

:19:21.:19:28.

interest rates still at 2.5%. The key point here is that we are now

:19:29.:19:33.

seeing reflected in the great figures the turmoil that we were all

:19:34.:19:36.

reporting on in the first three months of the year which was around

:19:37.:19:42.

China's slowdown, market falls and also very low commodity prices. We

:19:43.:19:47.

are looking now at a picture, slightly in the rear-view mirror, of

:19:48.:19:51.

January to March. In America overnight they have announced graph

:19:52.:19:55.

-- great figures that are the slowest in two years. That is over

:19:56.:20:02.

company investment, in particular over the low oil price. In the UK,

:20:03.:20:08.

we announced to hear that our growth was slowing as well and as you say,

:20:09.:20:13.

Aaron, even Japan, the central bank governor decided not to do anything

:20:14.:20:20.

on rates, not wanting to drive them all into negative territory, because

:20:21.:20:23.

there has been little response to what he did earlier this year. The

:20:24.:20:29.

yen has actually strengthened despite him putting in negative

:20:30.:20:32.

rates. That has meant that people are not sure what this very odd

:20:33.:20:37.

monetary world we now live in has on the markets. The reason you touched

:20:38.:20:44.

on volatility, I think, is because a lot of this is political. Markets

:20:45.:20:49.

are looking at central banks and not being quite sure where they are

:20:50.:20:52.

going to go and are therefore reacting very strongly to quite

:20:53.:20:59.

slight signals. Nobody seems to know what is coming around the corner, it

:21:00.:21:03.

does seem. It certainly appears much more dovish now from the Fed, I

:21:04.:21:09.

would say. I know Bronwen said let's go for June, but some are saying not

:21:10.:21:16.

to until December. They did hint they might raise rates by four times

:21:17.:21:19.

this year. No one expects that any more. We have heard from Twitter,

:21:20.:21:24.

Apple and Facebook this year. A different story that seems to be

:21:25.:21:30.

emerging when it comes to the social media giants of the world. Take us

:21:31.:21:37.

through those. Apple, its revenues well for the first time in 13 years.

:21:38.:21:44.

That has created an issue around its share price which has fallen by 10%.

:21:45.:21:50.

We have heard the news that one billionaire investor has withdrawn

:21:51.:21:52.

all of his stake from Apple. Let's not forget they are an extremely

:21:53.:21:56.

profitable business though. A business that in the smartphone

:21:57.:22:01.

business still leads the world. There is some slowing in that but in

:22:02.:22:04.

terms of the actual business, doesn't seem to be a problem.

:22:05.:22:09.

Facebook doing incredibly well on smartphones in particular.

:22:10.:22:12.

Advertisers flowing to Facebook. It has started using video, Instagram

:22:13.:22:20.

and messenger, so growing and Berry, very powerful figures. Its share

:22:21.:22:26.

price is now four times what it was at the original offering. Then you

:22:27.:22:31.

come to twitter. A social media company that is struggling to find

:22:32.:22:36.

new uses and is really struggling to prove to its investors that it has a

:22:37.:22:40.

revenue model, and advertising model. So the three stories are very

:22:41.:22:49.

different but tell us a lot about how the market is working.

:22:50.:22:53.

To the US, where tens of thousands of investors are flocking to Omaha,

:22:54.:22:56.

Nebraska for the annual shareholder meeting of Berkshire Hathaway.

:22:57.:22:58.

Through half a century, three the ups and downs of the stock market,

:22:59.:23:09.

there is one ambassador that everyone has followed - Warren

:23:10.:23:16.

Buffett. His strategies appear to be quite simple. He buys stocks and

:23:17.:23:21.

goods that we use everyday. His investment empire includes close 90

:23:22.:23:27.

companies with many household names like Walmart and Coca-Cola. Since he

:23:28.:23:33.

started buying shares in the 1960s, the company has had an average

:23:34.:23:38.

annual growth of over 19%. That is nearly double of the assembly by the

:23:39.:23:46.

hundred. Its shares have riven -- risen 2000% in the last 25 years

:23:47.:23:49.

alone. But as shareholders of Berkshire Hathaway gather, there is

:23:50.:23:56.

one concern. Warren Buffett is getting old and his number two is

:23:57.:24:00.

even older. He will be the beach of the company? Given the unique nature

:24:01.:24:06.

of Berkshire Hathaway, my sense is that a successor will emerge from

:24:07.:24:11.

within the company. Another thing to consider is that an argument could

:24:12.:24:15.

be made for breaking up Berkshire Hathaway and that "Another list of

:24:16.:24:22.

speculations. On Saturday, tens of thousands of shareholders will

:24:23.:24:26.

gather to cheer yet another year of Warren Buffett's unparalleled

:24:27.:24:31.

success. But one question on their minds will be, how much longer can

:24:32.:24:33.

he continue? Let's get back into it. Why did one

:24:34.:24:51.

billionaire investor drop all of his investment in Apple? If I had made

:24:52.:24:57.

$2 billion from my investment, I might take some money out as well.

:24:58.:25:09.

He only had it for three years? Yes. He got them to do some things with

:25:10.:25:13.

his cash and had some things changed. He feels that Tim Cook is

:25:14.:25:17.

doing a good job and wanted his money back. Really it is about

:25:18.:25:27.

China. The Chinese have stopped iTunes movies and books being sold

:25:28.:25:30.

in China and he is worried that a lot more revenue is coming from

:25:31.:25:33.

those apps rather than from the actual phones which, as we said a

:25:34.:25:41.

moment ago, are going down. We have only got about 15 seconds left, so I

:25:42.:25:44.

don't think will get to the other paper, but they are worried that

:25:45.:25:48.

China is Apple's future growth market but China is a problem.

:25:49.:25:52.

Sorry, short but sweet. Great is the youth.

:25:53.:25:57.

There will be more business news throughout the day on the BBC Live

:25:58.:26:01.

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