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The boardroom must share the financial pain of employees

Boardroom
There has been too little sacrifice from company chiefs so far and that needs to quickly change

There has been too little sacrifice from company chiefs so far and that needs to quickly change

What a bloodbath the last few weeks has been for investors. Share prices plummeting and more than £1.5bn of dividend payouts axed as companies scramble to shore up balance sheets. Persimmon, Bellway, Biffa, McBride and Morgan Sindall are the latest to cancel payments.

The workforce has taken more than its fair share of the pain. There have been layoffs, pay freezes and pay squeezes.

Some companies, such as JD Wetherspoon, initially refused to continue paying staff until Treasury support kicks in. Others, like Sports Direct, have tried to flout Government guidance and remain open.

There is no excuse for putting profit before the safety and well-being of employees. The public will remember those who behaved with decency and did their bit. Don’t rule out boycotts of the sinners.

The full gamut of cost-saving measures is being deployed. Capex is being cut, deal making sent into the deep freeze and daily discretionary spending reined in. If you work in marketing or advertising, then God help you. Coca-Cola has suspended all marketing spend. Many other multinationals will be doing the same. Suppliers and landlords are being leaned on hard.

Cash is king right now. Overdrafts, revolvers, working capital facilities and every other line of credit will be called upon. Banks need to show leniency to companies and consumers on a scale never seen before.

But there is one vital ingredient missing: we are yet to see much evidence of the pain being shared in the boardroom. Rentokil has got the right idea. The ratcatcher and hygiene outfit has drawn up a detailed plan to conserve cash. It, too, has cancelled dividends.

The FTSE 100 company has also cut capital spending, scrapped acquisition plans and drawn down on a major loan facility. And yes, it has uttered the immortal words: “Reductions in other employment costs are being evaluated.” Which means employees are probably in the firing line, too.

But in a demonstration of solidarity with its workforce, those at the top are also taking a hit. Pay is being slashed, not just in the boardroom but across “all senior management grades”, bonus schemes have been cancelled and the long-term incentive plan for 2020 shelved. Executives at a handful of other FTSE companies have made pay sacrifices, such as McCarthy & Stone, DFS and Stagecoach.

In the private sector, Kurt Geiger’s Neil Clifford has set the standard for others by agreeing to suspend his salary until its stores reopen. As Clifford says – he can afford it. But on the whole, there has been too little sacrifice from company chiefs.

That needs to quickly change. In the coming weeks, the Chancellor will be stepping in to protect the pay packets of millions of workers. The bill for that support will be eye-watering, but those put on furlough will still see their wages fall by a fifth. Company directors cannot expect to be exempt from the fallout. Everyone must shoulder the burden.

Banks should turn on credit taps

The reputation of the banks was shredded during the last crisis. Not only were they blamed for causing it – but when companies fell on hard times during the global recession that followed, lenders were quick to pull the plug. Unforgivably, the restructuring units of the high street banks saw it as a chance to turn a profit.

They now have a shot at redemption by ensuring credit continues to flow to businesses up and down the country, particularly those hit hardest. The banking industry’s new motto must be “forbearance”. These are extraordinary times.

Even businesses that have been a model of restraint are struggling to keep their head above water. It shouldn’t need saying. Banks are supposed to support the economy but that is more crucial than ever during a shock of this magnitude. Still, in case there was any doubt, the Chancellor, the Bank of England and the City regulator have issued a stern reminder.

As they point out, policymakers have stepped up quickly with two loan schemes for firms but most of the £330bn of funds has been set aside for large multinationals, while smaller companies with turnover below £45m are able to access interest-free facilities of up to £5m.

That means there is a swathe of businesses in the middle that risk being left without financial aid because they don’t qualify. These include some FTSE 250 companies at one end of the scale and family-owned enterprises at the other.

Banks need to fill the void by ramping up loans to the private sector. The relaxation of rules forcing the sector to hold more capital for a rainy day means the likes of Lloyds, Barclays and RBS NatWest have more firepower than ever – an additional £190bn, the Bank of England estimates. Time to turn on the taps.

Time to keep calm and get sozzled

In these straitened times, it is reassuring to learn that we haven’t forgotten our priorities. Off-licences and other alcohol retailers have been granted “essential business” status by the Government.

That is welcome news because if there’s one thing that we are all going to need more of, it’s booze. Forget loo roll, beans and hand sanitiser, it is beer and wine that will keep us going.

The Government should now go further and allow pubs and bars to reopen to sell alcohol for takeaway. Such a move would be a lifeline for boozers up and down the country.

There could be a new slogan for this modern day war effort – keep calm and get sozzled.