Roger’s back-to-the-future moment. It wasn’t just Marty McFly who made a career out of his back-to-the-future moment. Roger Corbett, the former CEO of Woolies and chair of Fairfax Media, is in the midst of a sequel himself right now. After running Woolies from 1999 to 2006 (and then chairing Fairfax from 2009 till this year), Corbett is returning to his alma mater for his second stint as a consultant. For five years from his retirement as CEO in 2006, Corbett was paid $600,000 a year by Woolies to be a consultant to the board. That was $3 million, after Corbett had departed Woolies with a package and shares that were worth around $50 million or more. The five-year deal was to prevent another retailer stealing him (Corbett’s predecessor, Reg Clairs, went off to join the David Jones board.
Corbett’s return to Woolies was announced yesterday by new chair Gordon Cairns. During Corbett’s consultancy, under CEO Michael Luscombe, the retailer pushed for profit over low prices. The board then chose Grant O’Brien to replace Luscombe and also decided to move the company into hardware with a joint venture with US giant Lowes Cos. That was called Masters. Several small takeovers built a presence in the trade side of the sector, and Masters proceeded to be an ever-growing black hole for Woolies and eventually claimed O’Brien, chair Ralph Waters and a couple of other directors and senior managers. At the same time management and board lost control of the company’s Big W department store chain as sales went backwards (and rival Kmart, owned by Coles, powered ahead by selling product at low prices). The hope is that Corbett can save Woolies from itself. — Glenn Dyer
And speaking of back-to-the-future moments. Is there a drug for financial pain mismanagement? Novartis AG, the big Swiss drug maker, has just had a settlement with the US Justice Department concerning rebates it paid to specialty pharmacies that turned out to be very naughty indeed. The company has also had two other recent brushes with US regulators (and several with regulators in Europe over separate cases) that have cost it a lot of money. In October, the Basel-based company said it had agreed to pay US$390 million (more than A$540 million) as part of a settlement regarding claims that it paid kickbacks in the form of rebates to boost prescriptions for Novartis drugs. That settlement related to a June court filing by the Justice Department, based on earlier whistleblower allegations from a former sales manager involving a drug called Exjade, which is an iron-reduction treatment for patients undergoing blood transfusions, and a second called Myfortic, a drug used by kidney transplant patients. Novartis says it is still settling cases with various US state governments — so more financial pain ahead?
In October, Novartis CEO Joe Jimenez said that the rebates were designed to induce specialty pharmacies to ensure that patients completed a course of medicine. But according to the US government, it was more than that. As part of the settlement with the aggressive US federal attorney in Manhattan, Preet Bharara, Novartis admitted to various facts, including that it kept “scorecards” of patient orders of the drugs. As well, Novartis acknowledged it had threatened the pharmacies with reducing the number of undesignated patients it would allocate to those pharmacies if the pharmacies didn’t increase sales. “Novartis turned pharmacies that should have been disinterested healthcare providers into a biased salesforce for the drug-maker,” Bharara said. But when the final settlement is done, Novartis’ total bill will be a fraction of the US$3.4 billion the US Justice Department and a number of US states had sought in damages in the case. — Glenn Dyer
Groundhog day for UK. And another back-to-the-future moment for the UK. Back in 2010, UK Chancellor George Osborne announced billions of pounds of spending cuts (and some smaller tax rises) and claimed “today is the day that Britain steps back from the brink”. He said the cuts and other changes that flowed from a comprehensive spending review would achieve a balanced budget and falling national debt by 2014-15 while putting public services and the welfare system “on a sustainable, long-term footing”. Fast forward to this week, and Osborne will announce another round of spending cuts, which will generate a surplus by 2020, and further slash public spending and welfare services, which were supposed to have been placed on a sustainable footing. If anything Osborne’s 2010 cuts and failed promises have exposed the folly of austerity with an axe instead of austerity with a scalpel. For that, George Osborne and Prime Minister David Cameron take the cake. And yet they got away with it, helped by an incompetent Labour Party opposition (and Liberal Democrats, who were punished for going into coalition with the Conservatives) at the national elections in May.
Osborne’s cuts in 2010 failed in their primary task (to produce a surplus by this year and lower debt), but the UK economy eventually rebounded, cutting unemployment and boosting growth. But that was helped by the 375 billion pounds of quantitative easing. It was that spending by the Bank of England and its record low interest rates, which started in 2009, and which still remain in place, which have done more to support the UK economy than any action from the government. Osborne’s claims of aiming to produce a surplus by 2020 of 10 billion pounds is just as suspect as his claims back in 2010. We will find that the first casualty is the size of that surplus in the Wednesday package. — Glenn Dyer