Words ought to be a little wild, for they are the assault of thoughts on the unthinking
- J.M. Keynes

Friday, 17 February 2012

EZSE - A tragedy in several acts returns

Financial playwrights despaired as the sub-prime drama came to an end. Ben Bernanke and his horsemen of the monetary apocalypse snuffed out the flames gripping the financial system by throwing wads of paper over them. No more exciting market swings, no more tense weekends waiting for colossal policy errors, no more suspense about who was next. It was time to write a book on the crisis and move on.
But they despaired too early. Europe as always was ready to lend a helping hand to sustain an ancient art form such as drama. As we head into another nail-biting weekend, the drama is back – bigger, grander, better.
Without further ado, Llama Productions presents Act n+1 of ‘EZSE – A tragedy in several acts’.

Cast of characters (introduced in this Act)
Antony – The real power centre and Papa’s rival for the CEO post. Confident of staging a boardroom coup to become CEO
George – Mercurial member of the top management committee
Evan – Current CFO of the olive oil business
Moira – Omnipresent secretary at meetings
Wolf – CFO of Angela’s business (Engineering and Heavy Industry division)
Francois – CFO of Nick’s business (Nuclear Power division)
Jan – CFO of Mark’s business (Transport and Trade division)
Julie – CFO of Katy’s business (Forestry division)

Act n+1 Scene 1
After the emergency board meeting, Papa is sent back to his business HQ to persuade the management and workers to agree to the harsh terms outlined by Angela in return for saving the olive oil business. The scene opens with him in a heated discussion with other members of the firm’s management committee.

Papa: Listen, if we don’t agree to these demands then it is all over. We can’t repay our debts and the business will be shut down.
Antony: These demands are impossible.
Evan: We have no choice.
George: It is only a matter of choosing our preferred method of collapse.
Papa: Now…
Antony (interrupting): We can’t cut the workers’ wages any further. They will either resign or refuse to work. And without workers there is no production. That means no revenue. No revenue, no loan repayment.
George: In the end we still default but in the meantime we inflict massive pain on the workers. The same people who have been loyal to us their entire life. (raising his voice) What sort of nonsensical plan is this?
Papa: Now George, a lot of people with degrees in microeconomics have said that we need to have swingeing cost cuts to re-instill confidence in our suppliers, customers and lenders and give our business a second change. And this buys us time.

Phone rings. Moira picks it up and takes a message.

Moira: Sorry to interrupt, but the plant manager just called. The workers seem to have heard about the proposed cuts to their salary and benefits. They’re picketing at the gate.

Papa: Oh god.
Evan: We have to undertake these cuts. The board of the conglomerate will not give us the money otherwise. And without the money we’re finished.
George: They will give us the money.
Evan: Why? I know that Angela is tired of doling out cash to us.
George: Because if we go, the conglomerate goes.
Antony (chucking): Yes.
George: As John Paul Getty said, if you owe the bank a hundred dollars and can’t pay then you have a problem. But if you owe the bank a hundred million and can’t pay, the bank has a problem. If we go down not only will they lose what they've given us earlier but the lenders will probably also pull the plug on Pedro’s business. And then hasta la vista conglomerate.
Papa: That is crazy talk. We are not engaging in such brinkmanship. It’ll permanently damage our standing with the rest of the conglomerate.
Antony: So what do you want to do? Punish our workers and then default anyway?
Papa (weakly): We won’t default.
Antony: A degree in microeconomics is great. Common sense is better. The workers are already picketing. They won’t stand for another round of cuts. Especially as harsh as these. Motivation is already low and is affecting productivity and therefore we keep missing revenue and profit targets despite the cuts already made.
Evan: Once the workers understand that the option is between unemployment and low wages, they’ll return to their posts. And believe me, if the cuts are not made Angela is not going to transfer the money. Even if you’re right, it is better to be paid for a few months more before the inevitable hits.
Antony (after some thought): I see your point.
George (looking at Antony): What? I will not stand for this. The workers will never forgive us.

Phone rings. Moira again picks it up and takes a message.

Moira: Sorry to interrupt again but the workers are turning violent. They’ve started throwing petrol bombs into the factory compound. The police have been called.

Papa: Oh god.
George (sarcastically): Bravo! They know their management is selling them out.

Phone rings again. Moira picks it up.

Moira: JCJ on line 1. Asking how we’re getting on.
Evan: Put him on speakerphone. 

Moira puts JCJ on speakerphone.

Evan: Hi JCJ, we’re quite close to an agreement. Are you ready to transfer the funds?
JCJ: Before I transfer the funds I need a signed agreement by the entire management committee that the cuts will be made.
Evan: All our signatures? Is that necessary?

Phone rings. Moira picks it up.

Moira (to Papa): Sorry to interrupt, it’s Charles the banker on the line. He is getting a bit jittery.
Papa: Tell him everything is proceeding smoothly. I’ll call him back in some time.

Moira relays the message and has a brief conversation and again addresses Papa.

Moira: He’s seen the striking workers on live news. He’s not convinced that things are going smoothly. I told him that it is all under control and you’ll call shortly to confirm.
Papa: Live news! There should be a law...Thanks Moira.
JCJ: Yes we’re seeing it on live TV as well. That’s why we think it is a good idea if all of you collectively sign up for the cuts. We don’t want some boardroom reshuffle to lead to you reneging on our agreement.
Evan: We’re not going to renege on the agreement. Isn’t that right Antony?
Antony: Of course not. But these are harsh cuts and on principle I do believe that any future CEO should have a free hand. Of course he must try and honour all prior commitments but if that is impossible due to the circumstances prevailing at that time then it may be worth revisiting the commitment.
JCJ: I don’t like equivocation…
George to Antony (whisper): Rich coming from a banker
JCJ: The conglomerate’s finance committee is meeting in half-an-hour. We need you to send us the signed agreement in order for us to consider approving the money transfer.
Papa: No problem. You’ll have it. Goodbye.
JCJ: Goodbye.
George (emphatically): Goodbye. (starts walking out)
Evan: Where are you going? We’re not finished and you need to sign.
George: I will never sign. I resign from the management committee. (Walks out and bangs the door behind him)
Papa: Antony, are you going to sign?
Antony: Yes, we should take the money now and then see.
Evan: Good decision. Moira, can you send the agreement to JCJ ASAP. Also call up Charles and tell him to proceed with the debt rollover.

Scene 2
The conglomerate’s finance committee’s meeting is in progress chaired by JCJ. In the background a large screen TV shows news of rioting workers in the olive oil factory.

JCJ: I’ve just received the assurances from Papa and his team that they will impose the cost cuts. So I assume that we should wire the funds to them?
Wolf: I’m not so sure. The olive oil business is a hopeless case. And reading the text of what they’ve signed, Antony seems to be equivocating.
Francois: Oh come on, they’ve agreed to what we asked. Let’s now keep our end of the promise and disburse the money.
Jan: The numbers don’t add up. They seem to be missing 325 million in cuts.
Julie: You're right. We absolutely can’t disburse the funds until they show how they’re going to fill that gap of 325 million. And Antony promises to honour the agreement no matter what.
CFO 1: We musn’t delay. Charles can’t rollover their debt until we pay and they don’t have funds to make the next debt repayment.
CFO 2: I agree. They’ve agreed to our conditions. We must disburse the funds. It’ll be catastrophic otherwise.
Wolf: This threat of ‘Give us more funds or catastrophe beckons’ has gone on long enough. We seem to be shovelling money into a bottomless pit.
Jan: I agree. It’s time to divest the olive oil business. The conglomerate will be stronger for it.
Francois (horrified): You cannot be serious!
Julie: We are trapped in a sunk cost fallacy. The money we’ve given is gone. We can at least try to save what we have.
CFO 1 (panicked): But, but...what’ll happen to us? Charles’ banks will pull our credit lines if they think that the conglomerate is happy to divest loss making businesses.
Wolf: You needn’t worry. You are making good progress on your cost cutting program unlike Papa and co. so we’ll support you.

Phone rings. Moira picks it up.

Moira: Sorry to interrupt but Charles is on the line asking if you’ve sent the money and should he then start the debt rollover?
Wolf: No, tell him that the money isn’t going to be sent today.
Moira (relays the message): He’s asking what decision has been made?
Wolf: We’ve decided to decide the transfer at the next meeting subject to our conditions been met.
Moira: The usual decision then? I'll let him know. 

Moira relays the message and ends the call.


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