COMMENT : Strong should walk without compensation

Liam Strong is moving, with an inevitability which has long been obvious to everyone except his board, from being the embattled chief executive of Sears to the ex-chief executive. On the way out, he will pick up a nice big fat payoff. In his case the price of failure is a nice round half a million pounds. Having stuck so resolutely by its man for so long, it would have looked odd had the Sears board cut him off without a bean. But is there any reason for shareholders to take a similarly charitable view?

Since he arrived at Sears on Valentine's Day 1992, Mr Strong's relationship with the market has proved anything but a marriage made in heaven. During his five-year reign, Sears has underperformed the All Share Index by 55 per cent and despite two kitchen sink operations it has failed to shed its image as a ragbag collection of dull shoe shops tied improbably to a decent department store and mail order business.

Along the way Mr Strong has encountered some colourful and interesting characters, notably Stephen Hinchliffe, who volunteered to lift part of the burden from his shoulders. Unfortunately, any deal with Mr Hinchliffe's Facia proved to be worse than no deal at all. Shareholders are still paying for that entanglement.

To be fair on Mr Strong, he inherited a collection of businesses lacking in cohesion and, more importantly, market dominance. As Tesco, M&S and Next have proven, the secret of successful retailing is to have a single clear brand to retail. But Mr Strong hardly helped himself with his incessant chopping and changing of strategy, high turnover of senior staff and, most crucial of all, indecision. The maladroit handling of the Freeman's sale, which ended up netting shareholders pounds 30m less than they expected, probably sealed his fate.

It is not just hindsight that shows a break-up of Sears was always going to make more sense than trying to make a coherent whole out of its disparate parts. By sticking with the Strong stratagem, Sears lost precious time and shareholder value. For that reason he does not deserve to be compensated, even though Sir Bob Reid left himself with less and less room for manoeuvre every time he leapt to his chief executive's defence.

Consolidation is the best chance Co-op has

Co-operation seems to be a bit of a misnomer when it comes to relations between the co-operative movement's various moving parts. There's little love lost between the Co-operative Wholesale Society and its sister organisation, the Co-operative Retail Society, judging by remarks made yesterday by the CRS chief executive, Harry Moore.

So you thought Mr Moore would be full square behind the CWS's robust rejection of Andrew Regan's break-up bid? Wrong. If Mr Moore had been in control, he would have allowed the bid to be put to members. And you might have thought that he would at least have listened sympathetically to the CWS's proposals for merging the two organisations. They are meant to be in the same movement, after all, and it was Mr Moore who suggested the exact same thing three years back only to see the negotiations break down over "boardroom structure". Wrong again. Mr Moore now regards any such talk as "a distraction". He thinks the future lies in going it alone and carving out a distinctive position for the CRS as a quite separate company.

Most people might reasonably have thought the Co-op to be the same business the length and breadth of the land. Mr Moore is determined to disillusion them. To this end he has just spent pounds 6m of his members' money on building a new corporate identity and image. He's also built a new and entirely separate head office in Rochdale, just down the road from CWS's own headquarters.

None of this seems so far to have improved the company's performance. The CRS swung from a profit of pounds 12.7m to a deficit of pounds 13m between 1995 and 1996, an outcome so utterly lamentable that it makes even the CWS look sparkling by comparison. Mr Moore is burying his head in the sand by believing there is a viable future for the CRS as an independent company. If he doesn't come to his senses soon, he too could find himself facing a break-up bid. Does he really believe, as he insisted yesterday, that his membership (which, unlike that of the CWS, is exclusively individual) would reject the pounds 1,000 per head Mr Regan intended to offer for the CWS? If so, then he's being naive.

The best hope the co-operative movement has of reinventing itself and finding a proper place in the modern world is consolidation. That plainly has to start with the two biggest societies, the CWS and the CRS, however unpalatable and difficult ancient rivalries might make it.

Next chancellor will inherit a dilemma

With understandable desperation, Conservative politicians were hammering home the "Britain is booming" message yesterday. But would they want to inherit their own economic legacy? The next Chancellor will face a painful macroeconomic policy dilemma. Should he raise interest rates and cool the overheating domestic economy - but risk sending the pound even higher and hammering exports? Or should he cross his fingers and let consumers go on their spending spree, cushion exporters as much as possible, and deal with the resulting inflation next year?

A growing number of experts are starting to recognise that the dilemma is a bogus one. The National Institute put its weight behind them yesterday. Whether it is right in its extreme gloom about export prospects or not, it is surely correct to point out that the ideal policy would be to extract a few billion pounds from domestic demand via income tax rises.

This would be the correct response to the imbalance in growth between consumer demand and exports. More importantly, it would help put the public finances back on a sustainable footing. This is not just an arcane matter of economic theory - the report points out that the Conservatives' spectacular failure to balance the books this decade is costing us the equivalent of 1.5 pence on the basic rate of tax because of higher interest payments.

Unfortunately, both the Labour and Tory parties have boxed themselves with promises made in the heat of the campaign not to raise tax. Furthermore, strong growth means higher tax revenues and a falling borrowing requirement, so there is in any case no immediate pressure on the next Chancellor to raise taxes. It would be a rare politician who would put up taxes when there was no urgent pressure to do so - especially one who had staked his political credibility to not raising taxes.

So we are unlikely to get the right policy mix until the next recession, when ballooning government borrowing will make tax increases a matter of urgency. By the end of 1998 the UK is likely to have declining growth as exports show the impact of this year's strong pound, rising inflation due to the pressure stoked up this year, and a growing budget deficit. We can already start to feel sorry for whoever is going to be Chancellor 18 months from now.