:00:10. > :00:16.Amnesty International. Now it is time for HARDtalk.
:00:16. > :00:21.Elizabeth Corley is one of the most powerful women in finance anywhere.
:00:21. > :00:26.She's the boss of Allianz Global Investors, overseeing over $400
:00:26. > :00:32.billion. Her biggest clients are companies that want their pensions
:00:33. > :00:38.managed. What does she have to say about the economic turmoil and
:00:38. > :00:48.equity investment? Where does the responsibility for change lie and
:00:48. > :01:10.
:01:10. > :01:16.just how brittle could be future Elizabeth Corley welcome to
:01:16. > :01:22.HARDtalk. You sit atop a pension fund management worth hundreds of
:01:22. > :01:27.billions of dollars. From your vantage point, why do you think the
:01:27. > :01:31.market in Europe is so jittery at the moment? That is a great
:01:31. > :01:37.question and I think you have phrased it a great wave. It is
:01:37. > :01:42.jittery on any news. Europe is going through a very difficult
:01:42. > :01:52.transition, from a line on too much debt to get in its books in balance.
:01:52. > :01:57.-- from the relying on. Any headline, there is a distorted
:01:57. > :02:02.reaction. We want to keep a level head and keep calm. I am not sure
:02:02. > :02:08.how you managed to do that when you are trying to transition away from
:02:08. > :02:14.too much debt but countries are taking on more and more debt last
:02:14. > :02:19.engaging in a savage austerity. Do you think there is too much
:02:19. > :02:23.austerity? I think we have got the right balance between austerity and
:02:23. > :02:31.structural change. Austerity on its own is not enough. We have got to
:02:31. > :02:37.see gross, a boom in the economy from export. Without austerity
:02:37. > :02:41.Europe will be too indebted to be strong as a trading regions. Do you
:02:41. > :02:49.think the fiscal adjustments being asked of countries like Spain with
:02:49. > :02:59.bond yields of 6% are actually feasible? They are having to cut
:02:59. > :03:01.
:03:01. > :03:07.their GDP by more than 5%. It is pretty unprecedented. There was a
:03:07. > :03:11.lot going on because it is a new currency. We are in a new
:03:11. > :03:14.environment we have not been through before. The austerity
:03:14. > :03:19.packages are part of wider structural changes going on in
:03:19. > :03:27.Europe. They are a painful growing up of the currency into a strong
:03:27. > :03:31.currency. A lot depends on the individual states but also what is
:03:31. > :03:36.done collectively in Europe in terms of political growing together
:03:36. > :03:41.and working together. Undoubtedly there are those who say Europe
:03:41. > :03:47.needs to work better together but there are plenty of people who also
:03:47. > :03:51.say the path that Europe is on is just a economically illiterate. If
:03:51. > :03:56.you're taking on not more and more debt yet to dealing with more and
:03:56. > :04:06.more savage austerity, reducing your chances to grow, at some point
:04:06. > :04:11.the last it is going to break. cannot say there are not risks,
:04:11. > :04:18.there are big risks but they are everywhere in the world. Inside the
:04:18. > :04:22.eurozone, outside the eurozone, in the US and emerging markets. The
:04:22. > :04:26.whole world is going through a delicate and sometimes dangerous
:04:26. > :04:29.transition from an old way of running to a better way of running
:04:29. > :04:37.which is more stable and based on genuine growth. Europe is part of
:04:37. > :04:42.that but not alone. I am wondering how sustainable the approach is.
:04:42. > :04:50.There is a recent Goldman Sachs report that says the attempts to
:04:50. > :04:55.restore competitiveness will mean with a squeeze on the real economy,
:04:55. > :05:03.the cash economy is that in places like Portugal you can end up with a
:05:03. > :05:07.debt to GDP ratio of 35% over a decade. That is out of kilter and
:05:07. > :05:15.counter-productive, isn't it? is no way of getting out of the
:05:15. > :05:19.austerity measures. You have to be careful about judging what is going
:05:19. > :05:23.on by the headlines. We talk to people on the ground, we have an
:05:23. > :05:33.extensive presence and our view it is not without risk but we need
:05:33. > :05:38.accommodation of -- and the deep combination of measures. If you
:05:38. > :05:45.look at individual markets, some have maintained competitiveness but
:05:45. > :05:49.many have not. The labour market changes are as important as the
:05:49. > :05:53.austerity and the stimulus for export is important. If everyone
:05:53. > :06:03.agreed with that approach why do you think the chief economist of
:06:03. > :06:07.
:06:07. > :06:13.the IMF described the market's reaction as schizophrenic? They see
:06:13. > :06:17.the measures that have been taken leading to reduced growth. They
:06:17. > :06:23.react negatively against something they want. It doesn't sound as if
:06:23. > :06:30.everyone buys into the part you are suggesting. Markets always have two
:06:30. > :06:34.sides. You are always going to have differences of opinion. We should
:06:34. > :06:40.expect to see differences in opinion. The bigger issue is what
:06:40. > :06:45.is being done for growth. There is focus on austerity and the way in
:06:45. > :06:50.which the European Central Bank has helped by a three-year window with
:06:50. > :06:56.an injection of monetary policy. The other side is what is happening
:06:56. > :07:02.in terms of recapitalising with the banks and regulations. We are still
:07:02. > :07:08.dealing with the legacy of the crisis in terms of the regulatory
:07:08. > :07:13.agenda. Some of the schizophrenia we see is there because we have on
:07:13. > :07:18.the one hand and monetary policy and fiscal policy aimed at getting
:07:18. > :07:27.Europe fit but legacy issues from the crisis and a regulation that
:07:27. > :07:32.comes with that which can be negative for growth. He former
:07:32. > :07:39.chief economist from the European Central Bank talk to us recently
:07:39. > :07:45.and said the problem with that the increase in debt is that it does
:07:45. > :07:51.not solve anything. He said the fundamental issues remain to be
:07:51. > :08:01.addressed. Elsewhere he said that this, essentially, is like drunks,
:08:01. > :08:04.
:08:04. > :08:10.doping the banks. -- like drugs. What we see it as his have a window
:08:10. > :08:15.of opportunity for Europe to fix itself. The ECB has created the
:08:15. > :08:20.three-year window. It is up to the participants in the market - banks,
:08:20. > :08:27.policy makers, politicians to do what they can to take the measures
:08:27. > :08:31.on austerity and on the labour market freedoms. He is right, it
:08:31. > :08:36.does not fix it. It is a means to give us the time to fix it at the
:08:36. > :08:40.right pace. What happens if it doesn't work? We think the
:08:40. > :08:47.consequences for the world are very severe. Our central scenario is
:08:47. > :08:55.that it will work. We will see strong policy implementation in the
:08:55. > :09:05.peripheral states. Presumably you are also gaining Greece leaving the
:09:05. > :09:09.
:09:09. > :09:19.euro? -- gaming. You must have a plan... It is feasible that in the
:09:19. > :09:26.Greek elections, the Greek people - it is a technocratic government
:09:26. > :09:29.which might repudiate the deal. vast majority of the population in
:09:30. > :09:35.Greece want to stay in the euro. But they do not necessarily want
:09:35. > :09:39.the terms under which the deal is done. It is a great advantage that
:09:39. > :09:44.we have strong technical skills in the peripheral countries. They
:09:44. > :09:48.understand economics, the way capital markets and monetary
:09:48. > :09:55.systems work. They are not worried about their future political
:09:55. > :10:02.careers but getting the country in state. They do not have a
:10:02. > :10:07.democratic mandate. They may well turn on you. I am interested to
:10:08. > :10:13.know, I am sure you will not show the plans but do you consider the
:10:13. > :10:17.possibility of these countries leaving the euro? As the chief
:10:17. > :10:24.executive of a large company with pension and private money with us
:10:24. > :10:28.we have to look at every scenario. How to prepare for the unexpected.
:10:28. > :10:38.That would be the case of a terrorist attack, a political event,
:10:38. > :10:39.
:10:39. > :10:44.a tsunami. We sit very much in that sort of business continuity context
:10:44. > :10:52.that we plan for it but do not run a business in that way. Given that
:10:52. > :10:58.Europe is pretty much a basket case at the moment, where else are you
:10:58. > :11:02.looking for long-term investments? Emerging markets? We see faster
:11:02. > :11:09.growth in emerging markets and Europe in the next five years but
:11:09. > :11:14.still in Europe. There are some thriving parts of Europe - sectors
:11:14. > :11:24.and countries. It is an absolutely essential trading partner for the
:11:24. > :11:28.UK and others. When you are moving into emerging markets to have
:11:28. > :11:32.talked about trying to engage in company culture, to be on the
:11:32. > :11:36.shoulders of those running the companies in order to make sure
:11:36. > :11:42.they do their job well. How do you do that in a place like
:11:42. > :11:46.China? The most important thing anywhere is to have teams on the
:11:46. > :11:56.ground. We are a global investor with 500 professionals around the
:11:56. > :11:56.
:11:57. > :12:06.world. They have got to have people who can engage locally in of China,
:12:07. > :12:07.
:12:07. > :12:17.Singapore, Korea. We do not engage in public but in private. We don't
:12:17. > :12:20.
:12:20. > :12:27.find a difference in engaging with a Chinese company Bilton company. -
:12:27. > :12:37.- Belgian company. Do you think the company culture generally,
:12:37. > :12:37.
:12:37. > :12:42.especially in regard and too short- term returns, do you think the
:12:42. > :12:48.balance has got a bit wrong in recent years is nap I think we do,
:12:48. > :12:55.actually. As long-term investors within the focus on quarterly
:12:55. > :13:00.earnings, it forces you to look at quarterly earnings and that pension
:13:00. > :13:06.funds have to think about the terms on a quarterly basis is a step too
:13:06. > :13:13.far. Do you like the idea of having the two classes of shareholders -
:13:13. > :13:23.those in for the long-term get a better class of the voting rights
:13:23. > :13:23.
:13:24. > :13:30.than those in for the short-term? We have one vote. A lot of people
:13:30. > :13:34.think that is an effective way of moving against short-term profit.
:13:34. > :13:40.Wouldn't it played to your advantage? We would rather see
:13:40. > :13:48.shareholders to want to engage in the company and stayed there. If
:13:48. > :13:58.you look at riots, you start with good intentions but end up creating
:13:58. > :14:00.
:14:00. > :14:06.first class, second class and third If you are engaged, or what is your
:14:06. > :14:11.position on the other hot topic, executive pay? Do you agree as a
:14:11. > :14:16.shareholder that it has got completely out of whack. I do not
:14:16. > :14:21.think that is the right way to describe it. A lot of people do.
:14:21. > :14:25.think there should be some fundamental principles. This is how
:14:25. > :14:30.we engage with people at the board level and the people that we invest
:14:30. > :14:35.with. There are fundamental differences. If a company does
:14:35. > :14:38.extremely well and it is producing dividends and growth for investors
:14:38. > :14:41.and the good quality consumer product and is ethically managed
:14:41. > :14:48.then the people running that companies should get paid for
:14:48. > :14:53.performance. But it is balance, isn't it? Exactly. We like before
:14:53. > :14:57.performance. The dislike pay for failure. Add disconnect between
:14:57. > :15:04.executive pay and shareholder rewards is something I am
:15:05. > :15:08.particularly unhappy with. Are you unhappy with Barclays? They are
:15:08. > :15:15.coming up for their general meeting and there is a lot of disquiet
:15:15. > :15:19.about the fact that shareholders have got �725 million in recent
:15:20. > :15:26.results and pay on bonuses has gone up to �2.2 billion. That does not
:15:26. > :15:35.sound Fiore. You will never get me to speak on individual company. --
:15:35. > :15:40.does not sound fair. But that type of balance. To me, as someone who
:15:40. > :15:44.is uninitiated, and that is out of kilter. Looking at the wider
:15:44. > :15:50.example, it goes back to what I said at the beginning, the right
:15:50. > :15:58.balance between rewards for shiel warders -- shareholders, investors
:15:58. > :16:05.and employees. Let's look further at the magic circle of those on the
:16:05. > :16:11.board and the shareholders. Outside, people see figures like the CEOs of
:16:11. > :16:19.the top 100 debt companies in Britain, and their pay has gone up
:16:19. > :16:27.over the last dozen years, compared to when they were getting 47 times
:16:27. > :16:34.the amount of the average full-time employee, now it is 88 times. --
:16:34. > :16:41.FTSE. Given the current economic circumstances, how can that
:16:41. > :16:46.possibly be right? If you look at the wider issue on a global scale,
:16:46. > :16:51.the disparity is growing, it is not narrowing, it is growing. That's is
:16:51. > :16:57.not healthy. If it continues to widen, it will create significant
:16:57. > :17:01.social tension and risk. The question is, what do you do about
:17:01. > :17:06.it? We think you should go and engage with companies, and we do it
:17:06. > :17:10.in private, have conversations about what they're doing and if
:17:10. > :17:15.they are going about it in the right way. The something that
:17:15. > :17:19.concerns a lot of people about the amount of money that they
:17:19. > :17:26.themselves have, let alone these executives in top positions, you
:17:27. > :17:30.are responsible for millions of people's pensions. Is the brutal
:17:30. > :17:36.truth that we have to confront is that as we are living longer, we
:17:37. > :17:44.should expect of in return? That is such a tough question. -- expect
:17:45. > :17:49.less in return. They have to think about how long we are working. And
:17:49. > :17:53.we are engaged in a lot of think tanks on this. We care passionately
:17:53. > :17:58.about this. We had the responsibility for managing
:17:58. > :18:04.people's money but it is the outcome that matters. It is not
:18:04. > :18:10.just the money, it is, can people live on that money? The returns
:18:10. > :18:14.available for investors are low. People will have to work longer or
:18:14. > :18:17.save more, we have got to produce good results for them and there
:18:17. > :18:22.must be better value for money. They are working with other members
:18:22. > :18:26.in the industry come up with the Government, with policy makers, not
:18:26. > :18:34.just in the UK but in other countries, to see what we can do
:18:34. > :18:39.about that. There is a lot of concern about pensions being sold.
:18:39. > :18:45.There is a lot of evidence being produced on how people are frankly
:18:45. > :18:49.being ripped off on their fees. What are you doing about that?
:18:49. > :18:54.wasn't a conference yesterday with the pension Minister and others
:18:54. > :18:58.talking about good contribution schemes. -- I was in. We have to
:18:58. > :19:02.engage with the Government, with the regulators on how we can make
:19:02. > :19:09.sure we get really good quality schemes available for people. We
:19:09. > :19:14.think the time to do it is now. you think it is fair to people?
:19:14. > :19:18.terms of the information, yes. There is a lot of information.
:19:18. > :19:22.does not answer the question. about how do you get that
:19:22. > :19:27.information in a way that is understandable. We are doing a lot
:19:27. > :19:32.of work in Europe on how we can improve the quality of information,
:19:32. > :19:37.particularly on risk and how it is understood. Regulation has
:19:37. > :19:41.specified how we have to communicate. They were the very
:19:41. > :19:46.first to introduce key investor disclosures. We did that way ahead
:19:46. > :19:51.of the deadline. It is a great step forward in Europe but it is not
:19:51. > :19:58.enough. We have to consider how we can get not just information but
:19:58. > :20:02.valuable information. How can we do it so a person who is not a
:20:02. > :20:06.financial genius can compare the price of one product with another.
:20:06. > :20:11.There is a lot of work to be done on that but we are very committed
:20:11. > :20:21.to making it happen. Do you shudder with Shemar revulsion the you hear
:20:21. > :20:24.
:20:25. > :20:33.things like the report last year of people being charged 1p in the
:20:33. > :20:39.pound but, because of compounding, the pension cost actually add up to
:20:39. > :20:44.40 %. -- shame or revulsion. Nobody fully understands the power of
:20:44. > :20:49.compound interest. David and I have spoken about this. There are a
:20:49. > :20:53.number of research papers on this. I think he is put in a spotlight on
:20:53. > :20:57.exactly the right issue which is the effect of compounding and the
:20:57. > :21:02.fact that people don't understand interested. We want to find a way
:21:02. > :21:05.to describe it on a level playing field with all of the products to
:21:05. > :21:09.make sure that people can understand the implications of that.
:21:10. > :21:14.While at the same time not scaring people of to your competitors?
:21:14. > :21:18.is not that. The worst thing that you can do right now is nothing at
:21:18. > :21:24.all. People have to save. You have to rebuild confidence in his system
:21:24. > :21:28.that has been shaken, rightly shaken I think, no one could
:21:28. > :21:32.criticise individuals for having a lack of trust in the system at the
:21:32. > :21:37.moment. People are surprised and shocked by the scale of the
:21:38. > :21:42.conflict -- the problems. We have to rebuild confidence. What we
:21:42. > :21:50.don't want to do is make people so destabilised that the stops saving
:21:50. > :21:54.altogether. Then there will be a timebomb. -- they stop saving.
:21:54. > :21:59.People like David are great at shaking our people and getting them
:21:59. > :22:03.to think. We are working very hard at that. -- shaking up. You have
:22:03. > :22:10.got every right to roll your eyes in despair about this question.
:22:10. > :22:19.am dreading what it might be! talking to you not just as the boss
:22:19. > :22:24.of Ali and global investors -- Alianz Global Investors, top female
:22:25. > :22:28.executives are few and far between. Do you have any sympathy at all
:22:28. > :22:32.with the statements of the vice- president of the European
:22:32. > :22:37.Commission who has tried and failed to get companies across Europe to
:22:37. > :22:43.sign up to targets for female executives. What do you think about
:22:43. > :22:48.that? The first thing I would say about that is I am on the record as
:22:48. > :22:52.against quotas. That is the last resort when we have failure. That
:22:52. > :22:56.means that every single woman or minority that gets into his senior
:22:56. > :23:01.position by merit is looked at in the wrong way. Targets and an
:23:01. > :23:05.interesting idea. We have voluntary targets with an our company. I am
:23:05. > :23:09.on the council and we are working very aggressively towards those
:23:09. > :23:14.targets. You are working aggressively but there must still
:23:14. > :23:17.be a lot of discrimination and sexism for women not to have risen
:23:17. > :23:22.to the top and the numbers that they ought to have. Discrimination
:23:22. > :23:28.is significantly less than it was. It is definitely in decline. We
:23:28. > :23:32.have something called unconscious bias, all of us, men and women.
:23:32. > :23:37.you perceive that when you are working? I am sure you are treated
:23:37. > :23:42.with the other was respect but do you get a sense of it? I don't and
:23:42. > :23:48.career. There has been discrimination but I have shrugged
:23:48. > :23:52.out of. There is a survivor bias and the women that have been able
:23:52. > :23:57.to shrug out of. I do not think it is appropriate that I have had to
:23:57. > :24:01.face that but I was not going to make a big deal of it. What has
:24:01. > :24:04.changed in the last 20 years is you get significantly less of that type
:24:04. > :24:08.of discrimination but we still have problems. We still have the fact
:24:08. > :24:13.that the only people who can carry a child are women. If you want to
:24:13. > :24:20.have a family, a normal family life, you have to find ways of making
:24:20. > :24:24.sure that families can survive through their 30s and can come back