By Jorge! When is a cork like a baby?

By Jorge! When is a cork like a baby?

I came across a very interesting story last week. If you ever wanted an explanation on how serendipity works, the article by Paul Sloane of Destination Innovation does it for me. It’s also a good example that crazy ideas are often the best but it takes some time to convince other people.

Paul is a regular contributor to Better Business Focus, my monthly business magazine for business owners and managers.

Paul wrote about Jorge Odon, an Argentinian car mechanic who has invented a simple device which could save millions of lives of mothers and babies. The story of his invention is remarkable and instructive.

The story starts when Jorge was shown a YouTube video of a trick to remove a cork from inside a bottle (below).

Jorge won a bet by demonstrating the trick to a friend.  The secret is to insert a plastic bag into the bottle, inflate the bag around the cork and then pull it out.  Later that night Jorge had a brainwave – what if he could use the same principle that extracted the cork from the bottle to extract a baby during a difficult childbirth?

Jordge OdenHe developed the idea and discussed it with people – most of whom thought he was crazy.  But he persisted.  He patented the concept and gained the support of a leading obstetrician in Buenos Aires, Dr Javier Schvartzman who helped him develop and improve a prototype device.   This gained the attention of the World Health Organisation whose chief co-ordinator for maternal health, Dr Mario Merialdi, was intrigued by the idea.

Over 5 million babies and over a quarter of a million mothers die in childbirth every year – mainly in the developing world.  Odon’s invention could save many of these lives because it is inexpensive and relatively easy to use.

The product is to be manufactured by Becton Dickinson and Company who say it will be sold cheaply to developing countries. This is very important to Odon.

There are some helpful lessons for innovators in this story:

  • Take a different view.  We tend to think of childbirth as something biological or medical. But if we view it as a mechanical process then it is natural that a mechanical device can be used for improvement.
  • Spot a weird connection.  Odon watched a video of a cork in a bottle and saw an analogy with a baby in the birth canal.  A solution in one field can be applied in another if the connection can be found.
  • Outsiders can find radical solutions.  Odon knew nothing about obstetrics but this turned out to be an advantage.  He thought like a mechanical engineer not a doctor.
  • A radical idea initially looks absurd and needs support.  Putting a plastic bag around a baby in the birth canal sounded ridiculous at first so the open-minded support of Shvatzmann and Merialdi was crucial to the survival and development of the idea.

Jorge Odon is now celebrated for his invention.  He said “I woke up one night with this idea, it almost felt magical. What I cannot understand is how I came up with a solution to help babies be born. I’m moved by the potential of this invention and I’m especially grateful to the doctors who first believed in me.”

More details are given in this a BBC report, here and on the Odon Device website here.

The Odon Device won a World Health Organisation “Saving Lives at Birth: A Grand Challenge for Development” award for its potential to save the lives of mothers and new-born babies.

We can all learn something from the way Jorge’s thinking worked. He may have come up with a crazy idea but Jorge wasn’t crazy. It reminds me of the Apple Think Different commercial which said… “… the people who are crazy enough to change the world, are the people that do.” View it here.

Focusing on the right numbers could change your life

Focusing on the right numbers could change your life

This blog looks at some old, even odd, number rules. We live with them all the time and often refer to them.

The 80:20 rule
The other day I was reading the Bizezia publication: Glossary of Marketing Terms and, for some unknown reason, arrived at the definition of the Pareto Principle: The 80:20 rule: 80% of an outcome will come from 20% of effort.

Wikipedia describes the Pareto Principle in more detail:

  • The Pareto principle (also known as the 80:20 rule, the law of the vital few, and the principle of factor scarcity) states that, for many events, roughly 80% of the effects come from 20% of the causes. Business-management consultant Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who observed in 1906 that 80% of the land in Italy was owned by 20% of the population. Pareto developed the principle by observing that 20% of the pea pods in his garden contained 80% of the peas.

Wikipedia goes on to say that it is a common rule of thumb in business; e.g., “80% of your sales come from 20% of your clients”.

But F. John Reh writing here puts it differently. He says: “The value of the Pareto Principle for a manager is that it reminds you to focus on the 20 percent that matters. Of the things you do during your day, only 20 percent really matter. Those 20 percent produce 80 percent of your results. Identify and focus on those things. When the fire drills of the day begin to sap your time, remind yourself of the 20 percent you need to focus on. If something in the schedule has to slip, if something isn’t going to get done, make sure it’s not part of that 20 percent.”

His article concludes:  Apply the Pareto Principle to all you do, but use it wisely.

There’s a good article by Kalid Azad, here.

Do you believe in the Pareto Principle and if you do, how has it helped you in your business or private life. Please email me at or comment below.

The Rule of 72
Then, I came across another mathematical rule this week. It’s called “The Rule of 72”. It enables you to estimate the effect of any growth rate if you want to double your money. The formula is: Years to double = 72/Interest Rate.

You can use this formula for any financial estimate using compound interest. Some examples are:

  • At 6% interest, the millions you have in savings takes 72/6 or 12 years to double.
  • Since nobody I know gets 6% on their money, let’s take 0.5% which is what most banks pay. At that rate, your money takes 72/0.5 or 144 years to double.
  • To double your money in 10 years, you will need an interest rate of 72/10 or 7.2%.
  • If your country’s GDP grows at 3% a year, the economy doubles in 72/3 or 24 years.  3% isn’t on the horizon for the UK, the estimated annual growth rate has now risen from 1.5% to 1.9% (see here) so it will take 72/1.9 or nearly 38 years to double.

The Rule of 37037
Have you heard of the rule of 37,037?  It’s quite simple really although I haven’t worked out why it works. Just multiply 37,037 by any single number (1-9), then multiply that number by 3. Every digit in the answer will be the same as that first single number. Try it. Then perhaps you can explain to me why it works and what can be done with this invaluable information.

The Rule of 78
As every accountant knows (or should know) the Rule of 78 is also known as the sum-of-the-digits method used in lending that refers to a method of yearly interest calculation.

If you take the digits, 1 to 12 and add them up, you get a total of 78. The name of the rule comes from the total number of months’ interest that is being calculated in a year (the first month is 1 month’s interest, whereas the second month contains 2 months’ interest, etc.).

When I was a student accountant, I was told about this rule since finance companies and banks used it to calculate the interest spread over the loan period. So, if the loan was for a 12 month period, the interest accrued 12/78 ths in the first month, 11/78 ths in the second month and so on until the 12th month at which time 1/78th of the interest is that month’s portion of the total interest charge.

I was taught to apportion the interest cost to include in accounts using this method. The method was used by lenders to calculate how much interest to charge for loans paid off early. For example, if a 12-month loan is paid off at month 11, the lender will want 77/78ths (of the total interest to settle and allows only 1/78th rebate for early settlement.

The formula to arrive at the sum of the digits for any loan for any period is found by taking N/2 x (N+1) – where N is the number of months in the loan period.  So for a 24 month period, the sum of all the digits from 1 to 24 is (12*25) = 300.

I recall that the formula was used a lot with hire purchase agreements, particularly for the purchase of cars.

Tougher health & safety penalties

Tougher health & safety penalties

Last week, the Department for Work and Pensions (DWP) said (here) that tougher penalties are being handed out to employers who breach serious health and safety laws following a change in the approach to prosecutions. The report reviews the first 5 years of the Act, which was passed in 2008 and took effect on January 16, 2009. It was conducted by the Health & safety Executive (HSE) on behalf of the DWP.

Changes introduced under the Health and Safety Offences Act, have led to more cases being tried in the lower courts, higher fines handed out to convicted offenders and more jail terms for unscrupulous employers who pay scant regard to the welfare of their staff or the public.

The perpetrators, that is unscrupulous employers, could be in for a big shock if they breach the rules in future. Minister of State for Health and Safety Mike Penning said:  “By handing greater sentencing powers to Magistrates and Sheriffs it has sent a clear message to unscrupulous employers that if they do not take their responsibilities seriously they will face stiff penalties, which include heavy fines and – in the very worst cases – prison. At the same time it has removed the burden of prosecuting all but the most serious of cases through the Crown Courts, which is generally less efficient, more time-consuming and more expensive than hearings held at the lower courts.”

The purpose of the Act was to increase the maximum penalties for workplace health and safety offences that could be heard in both the lower and higher courts. It was believed that if the penalties were increased it would provide a greater deterrent to would-be offenders. The maximum fine that could be imposed by the lower courts increased four-fold from £5,000 to £20,000. Magistrates and Sheriffs were also given greater powers to send an offender to prison.

In the past custodial sentences were reserved for specific cases, but now someone can be sent to prison for the majority of offences.  And certain offences that in the past could only be tried in the lower courts, such as the failure to comply with an improvement order, were made triable in either court, meaning the offender could face a much tougher sentence if their case was referred to the Crown Court.

You can read the full report: Health and Safety Act 2008: Post-legislative scrutiny memorandum 16 January 2014, here.

In a separate report affecting employees, doing a night shift throws the body “into chaos” and could cause long-term damage, warn researchers. Shift work has been linked to higher rates of type 2 diabetes, heart attacks and cancer. We are told that scientists at the Sleep Research Centre in Surrey have uncovered the disruption shift work causes at the deepest molecular level.

If we don’t go to sleep when we should (something our parents told us when we were children), it has profound effects on the body, altering everything from hormones and body temperature to athletic ability, mood and brain function. The human body has its own natural rhythm or body clock tuned to sleep at night and be active during the day.

Prof Hugh Piggins, a body-clock researcher (now, that’s an interesting job title) from the University of Manchester, told the BBC: “The study indicated that the acute effects are quite severe.  It is surprising how large an effect was noticed so quickly, it’s perhaps a larger disruption than might have been appreciated.”

Disruption in the body’s circadian rhythm can also lead to obesity as well as increasing the risk of diabetes and heart disease. That is the conclusion of the first study to show definitively that insulin activity is controlled by the body’s circadian biological clock. The study, which was published in the journal Current Biology, helps explain why not only what you eat, but when you eat, matters. You can read about it here.

Government pledges personal support to help boost exports

Government pledges personal support to help boost exports

I read today that the government has pledged “personal” support to help UK medium-sized businesses trade with emerging markets. Yesterday the trade minister Lord Livingston announced that he will write to all of the UK’s 8,900 mid-sized businesses (those with a turnover between £25m and £250m a year) to offer them support from UK Trade and Investment in a bid to boost flagging exports.

You might ask this: aren’t these businesses already big enough to get on with their export activities. Surely it’s firms in the £1m to £10m range that really need help?

Anyway, back to Lord Livingston. It seems that his move comes after it emerged that just 17 per cent of mid-sized businesses in the UK currently transact business outside of the EU. Germany does 25 per cent whilst Italy does 30 per cent. Earlier this month the government said that exports have only seen “modest growth” since 2011. The Office of Budget Responsibility attributed weak export figures to low demand in Europe, cementing the need for UK businesses to trade with emerging markets instead.

You might ask, and I would agree with you, how it that the Germans and Italians have cottoned on how and where to export but we haven’t?

But the IOD thinks it’s all a good idea. Alexander Ehmann, deputy director of policy at IoD says: “Doing business abroad will always involve risk, so companies want to have as much information as possible before diving in.”

The BBC wrote last week, here, that efforts to boost UK exports are being hampered by strict visa controls and a lack of co-operation between government departments, MPs have warned. The Public Accounts Committee (PAC) says the UK “is not performing as well as Germany, France and Italy”.  The PAC’s report said that despite the Foreign & Commonwealth Office (FCO) and UK Trade and Investment (UKTI) spending £420m last year on promoting exports, growth remained flat. Worse still, the FCO lack the necessary information to assess the effectiveness of its promotional activities, while UKTI needs to work harder on finding new opportunities in overseas markets.

The British Chambers of Commerce say that “More support for SMEs looking to trade internationally is needed, and this means giving UK businesses more resources in areas such as trade finance, insurance and promotion.”  Note the emphasis on SMEs rather than firms in the £25m to £250m range.

So, against this background, it’s hard to see what Lord Livingston is up to.

Does anyone out there know?

But things are looking up, at least for pigs. Three British pig breeding companies are preparing to start exporting pig semen to China after a deal was struck between the two countries last month. Half the world’s pigs are in China and the deal is worth up to £45m a year to British pig producers.

Equal Pay – Is your firm exposed to claims running into £millions?

Equal Pay – Is your firm exposed to claims running into £millions?

equal payBefore I start, I should say that none of the remainder of this post is legal or other advice. Whilst every effort has been made to ensure that the information given in this note is accurate, at the end of the day only the courts or tribunals can give authoritative interpretations of the law.

Last week, Birmingham City Council were front page news having agreed settlements with thousands of women who were paid less than male workers who did equivalent jobs. BBC News reported that one law firm is said to be dealing with 4,000 outstanding cases. The legal claims over equal pay are said to total more than £1bn.

So, what’s all the fuss about?

It stems from The Equal Pay Act in the UK which is designed to eliminate discrimination as regards pay and other terms and conditions between men and women in the same employment when they are employed to do:

  • Like work – work that is the same or a broadly similar nature
  • Work rated as equivalent – that is, in jobs which a job evaluation study of part or all of their employer’s workforce has shown to have an equal value
  • Work of equal value – that is, in jobs which are equal in value in terms of the demands made on them under headings such as effort, skill and decision-making

Men as well as women are entitled to equal pay for equal work, but in practice most claimants are women.

A complainant, the fancy legal term for the person bringing a claim, must choose an actual comparator of the opposite sex who is treated more favourably and is shown to be employed on “like work”, “work rated as equivalent”, or “work of equal value”.  Equal value involves a comparison of the work of the claimant and the comparator under various headings such as effort, skill and decision.Equal value claims can be made using comparators paid under different grading systems, collective agreements or job evaluation schemes.

The Equal Pay Commission recommends that all employers carry out equal pay audits. This will help in identifying any potential vulnerability to equal pay claims. An equal pay audit is the best and most effective way to compare the pay of employees doing equal work and it provides a detailed picture to identify and put right any unlawful pay discrimination. There a useful toolkit on the Equality and Human Rights website, and money

The Equal Pay Act refers to the “same employment”, a term that has to be interpreted in the light of European law. Anyone thinking they have been unfairly treated by their employer will need to get legal advice on interpretation of the law by domestic courts and the European Court of Justice.

The Equality Act 2010 replaces the previous anti-discrimination laws with a single Act. It simplifies the law, removing inconsistencies and making it easier for people to understand and comply with it. The majority of the Act came into force on 1 October 2010. The Equality Act 2010 gives women (and men) a right to equal pay for equal work. It replaced previous legislation on equal pay, including the Equal Pay Act 1970, the Sex Discrimination Act 1975, and the equality provisions in the Pensions Act 1995. The provisions relating to equal pay are known as ‘the equality of terms’ provisions and are scattered throughout the Act, but are brought together in the Equal Pay Statutory Code of Practice.

There a useful glossary of terms used in connection with equal pay here.

From October 2014, The Enterprise and Regulatory Reform Act 2013 requires Employment Tribunals to order employers to carry out an equal pay audit, where they may have breached equal pay provisions under the Equality Act 2010, except in prescribed circumstances. The Act can be viewed on the UK legislation website here.

Is your firm exposed?

Obviously, Birmingham City Council is a big target. But compliance with the law on equal pay could become a nightmare for accountants and lawyers – in fact for any professional firm.

So, how do these firms go about checking whether they have any exposure?  Going through the following brief checklist could help.

Equal Pay Checklist – Are you exposed? (© Copyright 2014, Bizezia Limited)

o  Have you paid a male employee a bonus or given a pay rise but have not done the same for a female employee because she is on maternity leave?

o  Have you restricted sick pay, holiday pay or pension benefits of a female employee because she works part-time?

o  Have you put male employees on individual contract and told them not to discuss the terms with female employees?

o  Have there been any mergers or acquisitions where pay rates for the same job have never been harmonised?

o  Have jobs changed over time but because no job evaluation or other review has ever taken place, the growing similarities between jobs have not been recognised?

o  Are there any similar jobs which were originally paid at the same rate but one of the jobs is now done by a part-time worker who does not have access to the same total pay package as her full time male colleague?

Author’s Note: this checklist is not complete. I intend to update it as events unfold.

What next?

Over the next week or so, I shall be adding to the checklist and probably add it to the online Calculators and Evaluators – see here. It will be useful tool for professionals to introduce the issue to clients as a value-adding service, and of course for businesses to use themselves. I’ll also be talking to law firms to see what expertise is available on this matter.

In the meantime, please email me with your thoughts on the matter to

Does it add up? Is 10,000 hours really the key to success?

Does it add up? Is 10,000 hours really the key to success?

keytosuccessBest-selling author Malcolm Gladwell studied the lives of extremely successful people to find out how they achieved success. Gladwell’s book Outliers popularised the work of K. Anderson Ericsson and the notion that the key to success in any field was logging 10 years or 10,000 hours of practice. It’s worth reading The Influence of Experience and Deliberate Practice on the Development of Superior Expert Performancei, here.

Does this resonate with you?

Louis Pasteur, inventor of pasteurisation, is said to have remarked in a university lecture, “chance favours the prepared mind.” But how much preparation is enough? If you’re a fan of Malcolm Gladwell’s work, you know the answer: it’s 10,000 hours of preparation.

Based on research suggesting that practice is the essence of genius, Malcolm Gladwell has popularised the idea that 10,000 hours of appropriately guided practice was “the magic number of greatness,” to achieve success.  In his book Outliers, Gladwell says that it takes roughly ten thousand hours of practice to achieve mastery in a field.

It sounds like an interesting idea and it’s one that has been getting quite a lot of attention recently and the idea has come under fire. Critics argue that the “10,000-hour rule” is over-simplified and doesn’t account for genetic differences. In The Sports Gene, former Sports Illustrated senior writer David Epstein (author), points out some contradictions to Gladwell’s rule – for example, that athletes at the same level of competition can have very different amounts of practice time or playing experience, and that success in sports isn’t determined only by how much an athlete practices.

In an article posted on line in the New Yorker last year Gladwell, here  comments on his theory and supports the research findings he reached.

In his new book, Focus: The Hidden Driver of Excellence, best selling author of Emotional Intelligence (which I first read during my MBA studies in the late 1990s), Daniel Goleman says “The ‘10,000-hour rule’ – that this level of practice holds the secret to great success in any field – has become sacrosanct gospel, echoed on websites and recited as litany in high-performance workshops. The problem: it’s only half-true.” Read more on what Goleman says in a posting on Huffington Post, here.

My view is this. To achieve success you need to be able to see things that exist and envisage something new, plus all or some of these:

  • An innate skill or aptitude
  • Desire
  • Commitment /Perseverance
  • Opportunity
  • Serendipity
  • Focus

What do you think?

Bizezia has a publication on achieving success in business: 130 Reasons why some people are much, much more successful in business than others. Some of these reasons come from mega-successful entrepreneurs while others come from working with small businesses, over the last 40 years.

If you would like a copy of this publication, please email me at:

UK farms and country estates are favoured investments for rich foreigners

The South China Morning Post reported yesterday that Chinese investors are joining the rush for British country estates. So, what’s happening?

Last Friday, the Guardian reported that, in addition to snapping up multimillion-pound townhouses in Knightsbridge and Chelsea, rich foreigners are now buying farms and country estates across the UK. The story is here.

Estate agents are reporting a big increase in investment buyers – some from as far away as China – trying to buy swaths of British farmland. The influx has sent the price of farmland to a record high of £6,882 an acre – an 11% jump on this time last year and a 210% increase over the past decade.

The Guardian reports that Andrew Shirley, head of rural research at estate agents Knight Frank, said: “People from around the world who buy a townhouse in Chelsea look around for what else they could buy… increasingly they’re looking at country estates and farmland. There has been a significant increase in inquiries from overseas investors.”

He said rich buyers were “not going to be sitting on the tractors themselves” but were buying farms for investment or as a “lifestyle estate”.

The Chinese are also becoming increasingly attracted to the British countryside, though more for its investment potential than to be country squires.

Rich buyers spent £54m on Scottish estates last year, according to the estate agency Savills. One world-renowned grouse-shooting estate changed hands for £20m and two others sold for between £8m and £10m.

Farmland’s cost per acre compared with gold prices over the last 50 years

The Guardian article refers to research by Knight Frank which shows the average price of UK farmland has risen to £6,882 an acre, compared with £6,214 a year ago. That works out as an 11% increase, compared with an 8% increase in UK average house prices and a 30% decrease in the price of gold over the same period. The 210% rise in the price of farmland over the past 10 years is significantly more than that for the FTSE 100 – the index of leading shares has risen by 51%.

Also mentioned is Ian Bailey, the head of rural research for Savills, who said prices were rising because demand far outstripped supply. Last year just 150,000 acres of farmland were put up for sale compared with 300,000 a decade ago.  “It’s a tangible asset – people can live on it and walk on it,” he said. “It’s a popular product and we’re not making more of it.”

Don’t miss the news. It happens every day. And it’s on EziaNews on the Bizezia website at:

A Window of Opportunity?

A Window of Opportunity?

You may not know it but if you use a PC, you’re on the threshold (forgive the pun) of something new. This week it was reported that Microsoft will provide a sneak peek at its vision for the next generation of Windows at its April BUILD conference, according to a new report.

Windows 8 didn’t achieve the success that Microsoft had hoped for as many users were put off by the new interface and lack of a Start Menu. OK, Windows 8.1 was a lot better, but it still didn’t go far enough for many people. Another update to Windows 8.1 is expected this year, next year, we’ll see Windows 9, codenamed “Threshold”.

Reported on here, according to sources who spoke to Paul Thurrot, a well-known Microsoft watcher with a track record of breaking stories about the software giant, the next version of the Windows could launch in 2015, but details about how much of an overhaul it will get from version 8 are still thin on the ground.

At its annual BUILD conference taking place in April 2014, Microsoft is also expected to launch Windows Phone 8.1.

Are you a PC or Apple user? I’ve been a PC user since the time that PC’s first appeared on the scene. From DOS to Windows, my journey has been interesting. Apart from the early Apples, I never bothered with Macs… that is until about 4 or 5 years ago when I bought an early version of the MacBook Air. Whilst I still use a PC for most of the time, I also use a Mac every day. They are terrific computers – easy to use, and it’s no wonder that Apple became the most valuable company ever.

But things may be changing – I see that, as reported here, Apple fell out of favour with UK consumers in 2013, losing its coveted spot last year as one of the UK’s top ten brands. The previous year, Apple’s iPad held the number 6 slot on YouGov’s BrandIndex report, but this year the technology giant is nowhere to be found.

Apple faired a little better in YouGov’s worldwide brand rankings for 2013 – taking fourth position along with car maker Volkswagen – but still falls behind rival Samsung which ranks in the top 25 brands in 13 of the 15 countries surveyed for the report.


Are we at risk from EU-US trade deal?

This week, Oliver Wright and Nigel Morris writing in The Independent reported that Britain’s freedom to tackle climate change, protect consumers or guarantee a publicly-run NHS could be jeopardised by a trade deal being negotiated between Europe and the US, MPs and pressure groups have warned.  Under a draft plan supported by the European Commission, multinational firms would be given wide-ranging powers to sue EU governments that adopt public policies deemed to “discriminate” against free trade.

Why should we be worried about this?  It’s mostly because campaigners warn that similar trade deals elsewhere in the world have resulted in countries being sued for adopting policies in the public good – such as anti-smoking measures – because they were deemed to penalise foreign investors. These include Australia which is currently being sued by Philip Morris for introducing plain cigarette packaging, Canada, which is being sued by US drugs firm Eli Lilly for revoking patents on drugs on the grounds that their benefits may have been overstated and Germany is being sued for ending its nuclear power programme.

The article says that Zac Goldsmith, the Tory MP, told The Independent: “It is hard to see how this won’t seriously jeopardise the sovereignty of the UK Government and its legal system. Disputes between companies and legislators should always be dealt with by British courts.”

We’re told that more than 200 organisations across the EU, including the TUC, Greenpeace and War on Want, have written a joint letter to European and American trade negotiators demanding the removal of the investor-state dispute settlement (ISDS) process from the final treaty.

If you haven’t come across ISDS before, here’s what Wikipedia says about it: Investor-state dispute settlement (ISDS) is a provision in international trade treaties and international investment agreements that grants an investor the right to initiate dispute settlement proceedings against a foreign government in their own right under international law. For example, if an investor invests in country “A”, which is a member of a trade treaty, but then country A breaches that treaty, then that investor may sue country A’s government for the breach.

In response to the campaigners, the European Commission and the British Government insist the deal under the draft plan would include safeguards to prevent misuse by corporations, thus guaranteeing the right of EU governments to “pursue legitimate public policy objectives such as social, environmental, security, public health and safety” without the risk of being sued.

The article goes on to say that ISDS has been a long-established principle of multilateral trade deals between countries and is a process designed to ensure investors are not discriminated against by governments or biased judicial systems. It allows companies who believe they have been unfairly treated to take states to a neutral arbitration panel that can award compensation for loss of earnings.

But in recent years, campaigners claim, it has been used by large multinational companies to sue governments acting in the public interest. The Slovak Republic was forced to pay $22m (£13.4m) damages after the government reversed the liberalisation of its health-insurance market.

Green Party MP Caroline Lucas, who tabled the parliamentary motion, said the move would “overturn decades of laws and regulations formed through democratic processes on both sides of the Atlantic”.

A Department for Business spokesperson said the UK already has more than 90 ISDS agreements with other countries and added: “Investment protection provisions do not limit the ability of states to make or repeal any law or regulation.”

There doesn’t seem to be much written about these issues in the popular press. A few articles, some left-leaning, some Green, are now emerging, including WikiLeaks here and here. There’s an interesting piece described as a “Brief chronicle of an obscure, scarcely informative “civil society” meeting on the Transatlantic Trade and Investment Partnership in Brussels on January 14th, 2014” here.

Are we in Britain at risk? It’s not clear yet. It’s a case of “watch this space” as I think there’s more to unfold.


Child benefit key to self-assessment tax deadline

Child benefit key to self-assessment tax deadline

[15 January 2014, BBC News] Nearly 11 million tax returns are expected to be submitted by the deadline but some 110,000 higher-earning parents who receive child benefit payments face a fine if they fail to register for, and return, tax self-assessment forms.

taxThe deadline for submitting online tax returns is 31 January, with 10.9 million expected to be filed to HM Revenue and Customs (HMRC) by then.

Many people, who face a tax charge because they receive child benefit, will be filing for the first time. Tens of thousands of them have yet to register with the deadline looming. They face an immediate penalty of £100 if they miss the deadline.

This penalty could grow by hundreds of pounds if they fail to submit the returns during the following months.

Benefit rule changes

Those eligible for child benefit receive £20.30 per week for the first child and £13.40 a week for any subsequent children.

Child benefit amounts depend on the number of children in the family.  However, a change in the rules by the government has affected families where one parent has a taxable income of more than £50,000.

If they continued to receive child benefit after January 2013, then they must pay some of that back in a tax charge. If one parent has a taxable income of more than £60,000, then they must pay it all back.

In order to do so, they must first register and then complete a self-assessment tax return by the end of January. An estimated 90% of the 1.1 million parents affected have already registered, or opted out of receiving child benefit entirely. That leaves about 110,000 people who have yet to register. The process can take more than a week to complete, as they will need an activation code to be sent in the post, so HMRC has urged them to act now.

“The registration process is easy. We know that many parents are newcomers to self-assessment, so it is really important they register and file online to avoid getting a penalty,” said Lin Homer, HMRC chief executive.

Chas Roy-Chowdhury, head of taxation at accountancy body, the ACCA, urged people to file as soon as possible. But he added that the workload of dealing with these first-time filers had been “dumped” on HMRC which was already stretched for resources.

HMRC has an online calculator to allow people to check how much child benefit they need to include in their return.

Last-minute filing

Annual tax returns are already a way of life for the self-employed and workers with more than one source of income, in order to ensure they pay the correct amount of income tax. They must file the self-assessment form for the tax year ending in April 2013.

Some 10.9 million returns are anticipated by the end of January deadline, up from 10.5 million last year and about 6.5 million have filed already.

A year ago, around 578,000 people filed on the last day – 31 January – before fines were issued.

Paper returns must have been completed and returned by 31 October, with the final 31 January deadline for online returns. Anyone who misses these deadlines faces an immediate £100 fine, even if there is no tax to pay.

After three months, there are additional daily penalties of £10 a day, up to a maximum of £900 if no forms have been returned. After six months, there is a further penalty of 5% of the tax due or £300, whichever is greater. After 12 months, there is an additional 5% or £300 charge.

HMRC will want to avoid mistakes of a year ago when 12,000 people, who were told they no longer needed to fill in self-assessment tax forms, were sent penalty notices in error.



Newly released files from 1984 include miners’ strike

Newly released files from 1984 include miners’ strike

The National Archives has released almost 500 files from 1984, including papers from the Prime Minister’s Office and the Cabinet Office.

1984Highlights from the files

The government’s handling of the miners’ strike is revealed in greater detail than ever before in papers released today. The strike by Arthur Scargill’s National Union of Mineworkers (NUM) presented Mrs Thatcher’s government with one of its most serious challenges and divided opinion in the country.

The newly released material also sheds light on Mrs Thatcher’s response to the Brighton hotel bombing in October 1984 and its effect on Anglo-Irish relations, the murder of WPC Yvonne Fletcher, and the visit of future-to-be Soviet leader Mikhail Gorbachev.

The Prime Minister’s appointment diaries have been made public for the first time. This new series (PREM 32) provides a day-by-day summary of the Prime Minister’s appointments during her time in office. Mrs Thatcher’s 1984 diary is available online, while the diaries for 1979 to 1983 are available in the reading rooms at Kew.

Explore the files

You can view a selection of newly-released Cabinet Office and Prime Minister’s Office files online, the key events of 1984 and changes to the British Cabinet during the year.

You can listen to the National Archives podcast to hear contemporary records specialists Mark Dunton and Simon Demissie discussing highlights from the latest release and read more about the files on The National Archives’ Blog.

Something funny I noticed…

Something funny I noticed…


Customers were tricked into buying ferrets that looked like poodles (Picture: YouTube)

The next time you buy a cute poodle make sure you check that it isn’t a ferret filled with steroids, like some that sold in Argentina last year.

A couple of dog lovers thought they were getting adorable toy poodles but instead found they had been sold drug-enhanced ferrets.

Surprisingly the tricked owners did not immediately notice they had not received what they ordered, with one man from Catamarca only finding out he had a ferret after taking his pet to see the vet. Another woman, who also shopped at La Salada market, was led to believe she was purchasing a Chihuahua but this was just a con.

As you might expect, several social network users were low on sympathy for those who had been tricked.

A Window of Opportunity?

14 Famous People who started out as Accountants

You may find this interesting – my list of people who started out life as an accountant or studied it before becoming famous in another field.

I bet you didn’t know that about 1,400 FBI Agents are accountants, including Thomas Pickard, the #2 man in the organisation.

Here’s my list:



Mick Jagger studied accounting and finance at the London School of Economics on a scholarship, before falling in love with music and founding The Rolling Stones.

John D. Rockefeller was an accountant prior to starting Standard Oil and becoming one of the richest men alive at the time.

John Grisham, the writer was previously a lawyer and prior to that an accountant.

Kevin Kennedy, the former Texas Rangers Manager, as a CPA did his players’ tax returns to make extra money when he managed in the minor leagues.

Janet Jackson studied to be an accountant.

Fr. Luca Paciolo wrote the first book on double-entry bookkeeping in 1494. He is frequently referred to as the father of accounting.

J Walter Diemer, an accountant for the Fleer Corporation in the 1920′s, tinkered with gum recipes in his spare time and created a chewy, rubbery substance better known as bubble gum.

J.P. Morgan got his first Wall Street job as a junior accountant. Five years later he founded his own company.

Arthur Blank, owner of the Atlanta Falcons and one of the co-founders of the Home Depot was an accountant.

Bob Newhart, the comedian from The Bob Newhart Show, studied accountancy.

Kenny G. the saxophone player

David Graveney a leading figure in English cricket and former chairman of the England Test selectors, is a chartered accountant.

Ron Moody, the British actor probably best known for playing the part of Fagin in the stage and film versions of Oliver, originally trained to be an accountant.

“Mad” Mike Hoare, the mercenary, was a chartered accountant

Well, there you have it.

If you prefer pictures to words, there’s a great infographic available here.

18 Movies featuring Accountants

18 Movies featuring Accountants

You didn’t know it but bean counters really are exciting after all. Accountants have appeared in the movies at least 26 times since 1971, according to an AccountingWEB article published here.

My personal favourite is The Shawshank Redemption (1994) which starred Tim Robbins (playing Andy Dufrene) seeking revenge for being wrongly imprisoned for the murder he didn’t commit of his wife and her golf-club lover. In the film, the Warden used Andy to run his financial scam empire.

Here’s my list of movies featuring accountants:





Deception (2008): Timid accountant Jonathan McQuarry (Ewan McGregor) plays an auditor working out of New York.
Carnal Knowledge (1971): Jack Nicholson plays a deeply dysfunctional certified public accountant in this racy and frankly depressing movie, which bagged two Oscars.

The Untouchables (1987): This American crime drama is based on the book of the same name and stars Kevin Costner as government agent Eliot Ness and Charles Martin Smith as Oscar Wallace, a mean shotgun-wielding accountant.

The Producers:  This 1968 American satirical dark comedy cult classic film written and directed by Mel Brooks. The film is set in the late 1960s and it tells the story of a theatrical producer and an accountant who want to produce a sure-fire Broadway flop. They take more money from investors than they can repay – a bit ‘Ponzi’ like,

Save the Tiger (1973): 
A man-in-crisis movie, similar to Network or Falling Down. Jack Lemmon played the 50-year-old central character, Harry Stoner, and won a Best Actor Oscar for it. Comedian Jack Gilford played Stoner’s accountant.

Same Time Next Year (1978): 
A romantic comedy about infidelity, starring Alan Alda (aka Hawkeye Pierce from M*A*S*H) as a neurotic and guilt-ridden accountant in the starring role.

Highpoint (1982):Christopher Plummer is a businessman who rips off both the mafia and the CIA and then frames unemployed accountant Louis Kinney (played by Richard Harris).

Hannah and her Sisters (1986): Woody Allen movie starring Michael Caine as an accountant, financial planner, and husband of starring lady Mia Farrow, who plays the Hannah of the title.

Moonstruck (1987): Cher as Loretta Castorini plays a cool and rational accountant from New York, but finds herself in a difficult situation when she falls for the brother of the man she agreed to marry (the best friend of her late husband who died seven years previously).

Midnight Run (1988): Nominated for two Golden Globes, this film sees Robert De Niro as a bounty hunter who has to bring in an accountant who embezzled $15 million from the mafia. Former talk show host Charles Grodin plays the accountant.

Lethal Weapon II (1989): 
Franchise duo Murtaugh (Danny Glover) and Riggs (Michael Gibson) are assigned to protect money laundering accountant Leo Getz, brought to life by the talkative Joe Pesci, who uses a high-pitched nasal whine throughout.

She-Devil (1989):
 Rosanne Barr plays a woman scorned when her accountant husband (Ed Begley Jr.) is seduced by a trash fiction author (Meryl Streep). Based on a novel by less trashy fiction author Fay Weldon, who had scripted a BBC version three years earlier.

‘The Crimson Permanent Insurance’, Monty Python’s Meaning of Life (1983): 
A bunch of elderly clerks and accountants turn their office block into a pirate ship and sail off to fight the Very Big Corporation of America’s skyscraper by firing filing cabinets at it.

Strike it Rich (1990):
 Comedy in which Robert Lindsay plays a stereotypically bland accountant who starts spending beyond his means after marrying the attractive Cary (Molly Ringwald)

Oscar (1991): Sylvester Stallone plays a gangster who wants to go straight. A young good-natured accountant wants to marry Stallone’s daughter, Stallone’s daughter.

Dave (1993):Kevin Kline plays Dave, a man who happens to look exactly like the U.S. President, and who is taken on by the White House to conceal the fact the real President has had a stroke. With the help of his old accountant friend (played by Charles Grodin) he rewrites the US national budget to help the homeless.

Nick of Time (1995):
 Johnny Depp jumped at the chance to play a widowed accountant who takes on two kidnappers in this experimental “real-time” movie. The film flopped.

The Accountant (2001): This comedy short by independent writer and director Ray Kinnon actually won an Oscar, as well as being voted top movie in three different film festivals. McKinnon also stars as the heavy-drinking, paranoid accountant who is summoned to a Georgia farm to keep the bailiffs away.

Accounting Scandals and Corporate Failures

Accounting Scandals and Corporate Failures

Accounting scandals and corporate failures?

I don’t quite know how I got onto this topic. Maybe it came to mind when I wrote a blog on creative accounting.

A review online reminded me of a number of accounting scandals that have happened over recent years. Some I remember well, others not quite as much. See what your memory is like.

scandalOne of the most recent scandals is the Bernard L. Madoff Investment Scandal:  this perpetrated the Ponzi scheme and robbed millions of people of their hard-earned money. It is acclaimed as the largest investment fraud ever committed by an individual. The scandal here is not in Madoff, himself (although he would have engaged in improper accounting practices to hide the fraudulent scheme), but on how such scheme escaped the watchful eyes of the auditors and the regulators. The amount of fraud is estimated to be around $10 to $17 billion.

But the most famous of all, is perhaps Enron. This scandal involved hiding debts, inflating revenues and corruption. The fallout resulted to the displacement of more than 20,000 people, the death of “America’s Most Innovative Company” for six years in a row and the dissolution of one of the Big 5 global accounting firms (Arthur Andersen). It also gave rise to the passage of Sarbanes-Oxley and more rigorous auditing standards.

I remember Arthur Andersen well. The former Deputy Chief Executive of Andersen Worldwide and Council member of the CBI, Don Hanson commented to Accountancy Age in 1986 when I launched The CharterGroup Partnership: “It’s no good being a mile wide and an inch high”.  I think it was intended as a disparaging remark intended to say that a large firm had much more to offer than medium-sized firms.

Perhaps the next best well-known collapse was Lehman Brothers. Barry Ritholtz wrote an excellent article last year entitled: “10 Things You May Not Have Known About Lehman Brothers”.  I can do no better than refer you to that article.

Moving onto the other well-known scandals and corporate failures:

  • Bank of Credit and Commerce International (BCCI): BCCI was founded in Karachi, Pakistan in 1972. It was a major international bank with 30,000 employees and had operations in 78 countries. It was the seventh largest private bank up to 1991 until it was closed following one of the largest scandals in the financial history. Allegations included: more than $13 billion funds unaccounted for.
  • Enron Corporation: Enron was founded in Houston, Texas and was one of the world’s leading electricity, natural gas, pulp and paper and communications company employing 22,000 people.  If failed in 2001: Allegations included: an accounting fraud which involved hiding liabilities and inflating profits.
  • WorldCom: WorldCom was a large US long distance phone company founded in 1983. In 2002, the company’s accounting scandal came into exposure. Its Chapter 11 bankruptcy filing is second only to that of Lehman Brothers in 2008. Allegations included: underreporting interconnection expenses by capitalising them on its balance sheet and several billions of cash was overstated as capital expenses rather than operating expenses. WorldCom is now known as MCI, Inc. and is part of the Verizon Communications group having emerged from bankruptcy in 2003.
  • Tyco International: Tyco international was a global manufacturing company founded in 1960. Its operational headquarters is in Princeton, New Jersey. With 118,000 employees. Allegations included: the CEO and former CFO being were accused of the theft of $600 million from the company in 2002.
  • Kanebo Limited: Kanebo Limited was a textiles/cosmetics group giant in Japan, established in 1887. It had 13,580 employees. In 2003 a major accounting fraud was revealed which was considered as the largest fraud in Japan. Allegations included: Inflating profits by $2 billion over a five-year period.
  • Waste Management, Inc: Waste Management, Inc was founded 1894 and was in Houston, Texas. This waste management and environmental services company had 50,000 employees and a network of 413 collection operations. Allegations included: inflating earnings by $1.7 billion understating the depreciation expense of the company.
  • Parmalat: Parmalat was founded in 1961 in Italy. This multinational Italian dairy and food corporation had more than 15,000 employees. This leading company collapsed in 2003 with an accounting scandal of $ 20 billion – considered as the biggest bankruptcy ever. Allegations included: investment disasters, non-existent cash in bank, fake transactions; hidden debts and the use of derivatives and accounting fraud to hide these facts.
  • Health South Corporation: Health South Corporation was founded in 1984 in Birmingham, Alabama, USA to offer healthcare services. The company had 22,000 employees and operated 100 Inpatient Rehabilitation Hospitals. Although the company’s accounts were falsified from 1996, the scandal came into exposure in 2003. Allegations included: overstating income by as much as 4,700 percent and $1.4 billion was inflated to meet the expectations of investors.
  • American International Group (AIG): AIG was founded in 1919 in Shanghai, China and went public in 1969. It is a major insurer based in New York City with 116,000 employees. Allegations included: lucrative payoff agreements, soliciting rigged bids for insurance contracts and inflated financial results by $2.7 billion in 2005.
  • Satyam Computer Services: Satyam Computer Services was founded in 1987 in Hyderabad, India to offer information technology services. With a network in 67 countries and 53,000 employees, an accounting scandal exploded in January. Allegations included: Inflating cash and bank balances of more than $1.5 billion overstating receivables by $100 million and understating liabilities by $250 million.

Wikipedia lists no less than 46 accounting scandals since 1980, here. Among them are:

Associated Electrical Industries (AEI): a British holding company formed in 1928 through the merger of the British Thomson-Houston Company and Metropolitan-Vickers electrical engineering companies. In 1967 AEI was acquired by GEC, to create the UK’s largest electrical group. The scandal followed the acquisition.

Pergamon Press: was an Oxford-based publishing house, founded by Paul Rosbaud and Robert Maxwell. It published scientific and medical books and journals.

Barlow Clowes International Ltd: Some 18,000 customers invested their money on the recommendation of intermediaries. The company was established as a ‘bond-washing’ operation, in which gilt-edged Government bonds were purchased and sold in order to create tax advantages. Whilst investors believed that their money had been invested risk-free, much of the money was diverted to fund the extravagant lifestyle of the company’s co-founder.

Polly Peck International (PPI): PPI was a small British textile company that expanded rapidly in the 1980s and became a constituent of the FTSE 100 Index before collapsing in 1990 with debts of £1.3bn. PPI was was one of several corporate scandals that led to the reform of UK company law, resulting in the early versions of the UK Corporate Governance Code.

I could go on. You get the picture, I am sure. For a murder, you need means, motive, and opportunity. Add to that greed plus a will to deceive and weak auditors as well as under-par regulators and you have the perfect combination for an accounting scandal to happen.

Accountants who changed the world

Accountants who changed the world

changeLast month an accountant, aged 96, died in New York. Maybe you’ve probably never heard of him. His name was Abraham Briloff. He was decent and honest and he was not greedy. He argued against something called creative and earnings management.

Wikipedia describes creative accounting and earnings management as “euphemisms referring to accounting practices that may follow the letter of the rules of standard accounting practices, but certainly deviate from the spirit of those rules.”

I go along with that description. It’s generally understood to mean the systematic misrepresentation of the true income and assets of companies and is at the root of a number of accounting scandals that have rocked the financial world over many years.

One commonly accepted incentive for the systemic over-reporting of corporate income, and which came to light 12 years ago, was the granting of stock options as part of executive pay packages. Because the price of stocks reflect what’s said in corporate reports, stock options could be most profitably exercised when earnings are artificially exaggerated, and the stock can be sold at an inflated profit.

But some accountants changed this world of deceit. The most notable of these was Abraham Briloff who for years wrote about breaches of ethics and audit professionalism among accounting firms in the United States.

Briloff was unafraid to say what he thought. He knew right from wrong. As an accountant and accounting professor, he was outraged by the manipulative games some accountants play. His trenchant and sometimes scathing analyses of corporate financial records often sent investors scurrying to dump their stocks. The articles he wrote turned him into a celebrity, revered by investors and vilified but also respected by companies and their accounting firms.

Briloff wrote several books but the most admired is “Unaccountable Accounting” in which he debunked many accounting myths, and pointed out the shortcomings of corporate financial reporting and fragility of GAAP in the hands of accounting marauders. In this, his second book, he describes the ineptitude and conspiratorial nature of auditing firms and asked why academics abandoned accounting for financial economics.

It’s worth reading about Briloff if you can get hold of his book. One useful source about him, here, is an article describing him as “An Accounting Hero for the Ages”. Yet it’s remarkable and almost unbelievable that this accounting hero was legally blind and relied on graduate students and his daughter Leonore to read financial statements to him.

There ought to be more accountants like Briloff and then the financial world of deceit would be changed for the better as scandal and greed is exchanged for integrity and honesty.