Business Blog

22 April 2013 Last updated at 10:30 ET

News Corp has reached a $139m (£91m) settlement with shareholders over complaints filed against the company's board of directors.

The 2011 suit related to the company's UK phone hacking scandal and the purchase of a UK TV production firm.

The money will be covered by the insurance policies of the directors, who are the defendants in the suits.

News Corp said it "acknowledges the meaningful role the plaintiffs" played in improving corporate governance.

The company agreed to adopt enhanced measures as part of the derivative settlement. In a derivative suit, shareholders, acting on behalf of the company, sue against executives to rectify a wrong in a firm.

"We are pleased to have resolved this matter," News Corp said in a statement.

"The agreement reflects the important steps News Corporation has taken over the last year to strengthen our corporate governance and compliance structure and we have committed to building on those efforts going forward."

Trustees of Amalgamated Bank of New York and the Central Laborers Pension Fund, which are both News Corp shareholders, first filed a lawsuit in March 2011.

It was directed against News Corp's directors for overpaying when the company bought Shine Group, a UK TV production company, from News Corp's chairman and chief executive Rupert Murdoch's daughter Elisabeth.

They claimed that the takeover deal was "unfairly" priced and that the News Corp board of directors failed to challenge Mr Murdoch about the terms of the transaction.

The pair then expanded their lawsuit in July 2011, to accuse the board of providing "no effective review or oversight" and permitting a "culture run amok" at the News of the World, which News Corp owned. The extent of phone hacking at the tabloid, then owned by News Corp, led to its closure in 2011.

"We are proud of this historic settlement, which continues the 20 year history of Amalgamated Bank encouraging corporate reform and improved corporate governance," Amalgamated Bank president and chief executive Edward Grebow said in a statement

22 April 2013 Last updated at 09:48 ET By Will Smale Business reporter, BBC News

Boeing has admitted that it may never know what caused the battery malfunctions that resulted in all its 787 Dreamliner aircraft being grounded.

The admission came from Boeing's Larry Loftis, the general manager of the company's 787 division.

Replacement battery systems are now being fitted to all 50 Dreamliners that had been in operation with airlines around the world.

Boeing expects the planes to resume service in the coming weeks.

'Best practice'

On Friday, US aircraft regulators approved a revamped battery design for the aircraft, paving the way for the fleet to return to the skies.

Speaking at a media briefing in London, Mr Loftis said: "It is possible we will never know the root cause.

"It is not uncommon not to have found the single root cause. So industry best practice is to look at all the potential causes and address all of them."

The groundings of all Dreamliners in January followed two major incidents concerning the plane's two lithium-ion batteries.

Firstly, on 7 January, a battery overheated and started a fire on a Japan Airlines 787 at Boston's Logan International Airport.

Nine days later, an All Nippon Airways 787 had to make an emergency landing in Japan after a battery started to give off smoke.

'Exhaustive study'

The two lithium-ion batteries are not used when the 787 is in flight.

Instead they are operational when the plane is on the ground and its engines are not turned on, and are used to power the aircraft's brakes and lights.

Mr Loftis said Boeing had put 200,000 engineer hours into fixing the problem, with staff working round the clock.

Improved batteries are now being introduced. Mr Loftis explained that the newer batteries did not have to work so hard, and therefore operated at a cooler temperature.

In addition, the new batteries are enclosed in stainless steel boxes which have a ventilation pipe that directly goes to the outside of the plane. So Mr Loftis said that any future "rare cases" of battery failure would be "100% contained", with any smoke immediately leaving the plane.

He added: "We did an exhaustive study of potential causes, and addressed all of them. We do feel that with all the work we have done, we have tackled the potential problems."

Expanding production

A total of 300 Boeing engineers, pooled into 10 teams, have now started fitting the replacement batteries and battery systems to the 787s in service around the world, and also to those that have been built by Boeing since January.

Mr Loftis said it would take five days per plane to do the necessary work, and that it would be carried out by the order in which airlines first received the planes. For this reason, Japan's All Nippon Airlines will be the first to get its 787s fixed.

Boeing is likely to release details of how much fixing the battery problem has cost the company when it releases its latest quarterly results on Wednesday.

Mr Loftis said he did not expect the issue to have any lasting negative impact on the popularity of the Dreamliner among either airlines or passengers.

He said that Boeing had continued to make five 787s per week, and that the company was about to increase that to seven, raising output to 10 per week by the end of this year.

21 April 2013 Last updated at 19:01 ET By John Sudworth BBC, Shanghai

All businesses face their ups and downs along the way to success.

But the Hangzhou Zhang Xiaoquan Company can claim a history longer and more tumultuous than most.

Imperial dynasties have come and gone, wars and revolutions have passed, and the economy has morphed from capitalist to communist and back again.

But through it all, Zhang Xiaoquan's workshops and factories have been quietly making one humble, household utensil - scissors.

In the dying years of the Ming Dynasty, a craftsman by the name of Zhang Jiasi found a way to make scissors that were both beautiful and durable.

He continued to use iron for the body of the scissors, allowing the handles to be easily moulded and shaped.

But the new trick, adapting an ancient sword-making technique, was to mix molten steel into the cutting edges of the blades - using a high temperature and a lot of careful hammering - to give the scissors a much harder, sharper bite.

Seventeenth century Chinese housewives suddenly had a powerful new weapon in their kitchen armoury - bad news indeed for 17th century Chinese chickens.

A few decades later Zhang Jiasi's son, Zhang Xiaoquan, inherited the business and moved it to the eastern Chinese city of Hangzhou, and in 1663, his namesake company was born.

Modest prices

Ding Chenghong, Zhang Xiaoquan's current general manager, tells me that the business is still trying to maintain the connection to its history.

"Our founder had a motto," he says. "Good steel and excellent workmanship."

"Today, the steel we use is different from many other manufacturers. Cheap steel is around 7,000 to 8,000 yuan (£736; $1,132) a ton. Our steel costs between 11,000 to 12,000 yuan a ton."

There are even a few craftsmen who can still fashion a pair of scissors the old way, bashing the molten steel and iron together entirely by hand, and a few of those techniques have been retained in some of the modern-day factory-made products.

But as I'm given a tour of one of the modern factories, I wonder if something is slightly amiss.

With the giant metal presses hissing and clanking inside the hangar-like building, and overall-wearing workers resembling something out of a communist propaganda poster, there is little sign of any of that heritage.

This is the mass production that China is famed for, with the company today employing a total of 1,500 people and making around seven million pairs of scissors and three million knives a year.

The average pair of household snips being churned off the production line sells for around $3 to $5 (£2 to £3.25) a pair.

Anywhere else in the world, you might think, a brand with the pedigree of Zhang Xiaoquan would have positioned itself as something a little more high-end, and maybe even built an upmarket international reputation.

But exports account for less than half of one per cent of the company's total sales revenue of around $40m a year.

'Voluntary nationalisation'

The answer lies perhaps, once again, in a corporate history that has mapped the changing fortunes of China itself.

I find Zhang Qian, an administrative manager, in a small office on the second floor of the factory.

She has little to complain about it seems, with a good job and a small apartment provided by the company.

And yet Ms Zhang - note the name - could have had so much more.

She is the direct descendant, the 13th generation ancestor, of none other than the esteemed founder Zhang Xiaoquan.

In 1958 her grandfather, the 11th generation, and the then capitalist boss of a thriving scissor-making business, found himself very much on the wrong side of history.

The communist government was busy abolishing private property and the family business and all of its assets, including the family home, were "volunteered" into the hands of the state.

"You had to volunteer," Zhang Qian tells me. "I wasn't even born then so I can't say I'm regretful, but surely my life would be different now if history had been different."

A scissor heiress marooned among the paper clips, just one of many millions of lives altered by the turbulent course of Chinese politics.

Transformation plans

So began decades of state control of the company, a period from which it is has only recently emerged.

By the 1990s the payroll had mushroomed to 2,500 employees, and the cutting and sharpening machines were running full tilt, producing 20 million pairs of scissors and knives a year.

They included some rather low-end products, and that's how things could well have remained were it not for another turn of history.

By the late 1990s, China had begun the large-scale restructuring and privatisation of many of its state-owned companies.

In the year 2000 the state divested itself of 75% of Zhang Xiaoquan's shares.

Like many Chinese businesses that emerged, blinking, into the bright new economic reality, it has had to find its feet.

About 1,000 jobs were shed - gradually and through natural wastage they tell me. The volume of items being produced was dramatically reduced.

"The history of the private company and professional chief executive is short in China," Jiang Shashan, manager of the company's branding department, tells me.

"Our main plan is to transform ourselves from a manufacturer to a brand operator. In the past we believed that 'good wine sells itself,' and focused only on production."

Earlier this year, for the first time, representatives took the company's products to the Frankfurt Trade Fair, one of the world's largest.

They are also now, of course, using the internet to help sell their goods and are developing new product lines.

Global ambition

But there still remains one major obstacle in the way of building an export market.

"Chinese scissors are different from western scissors," Mr Ding tells me. "In Europe and America, the blade is longer and the handle is shorter because they are mainly used to cut paper.

"But in China scissors are used to cut paper, food, cloth and even to repair shoes."

The company is now in discussions to import advanced machinery from Germany to help make products of a size and shape more suited to the foreign market.

A total of 350 years after it was founded, Zhang Xiaoquan still faces challenges. There is an on-going trademark dispute and - inevitably for China - the scourge of counterfeit goods.

But perhaps now it has a chance to really capitalise on its heritage and turn itself from a well-known Chinese name into a truly global brand.

After all, marketing folk will tell you, a story is much easier to sell than a product and Zhang Xiaoquan has quite a story to tell.

21 April 2013 Last updated at 19:05 ET By Andrew Walker BBC World Service economics correspondent, Washington

More than five years after the onset of the financial crisis, you might have thought economic policy makers would know what to do next.

Well they don't. Or at the very least, there is nothing like the kind of consensus that prevailed before the financial crisis.

The International Monetary Fund (IMF) has been hosting a conference on rethinking economic policy, organised by four experts in the area, including the IMF's own chief economist.

One of the other organisers - the Nobel Prize winner George Akerlof of the University of California - had a vivid analogy for the state of uncertainty the economics profession now faces.

"It's as if a cat has climbed this huge tree - the cat of course is this huge crisis. My view is 'oh my God the cat's going to fall and I don't know what to do'."

Another one of the organisers, David Romer also of the University of California, picked up the analogy: "The cat's been up the tree for five years. It's time to get the cat down from the tree and make sure it doesn't go back up."

The trouble for the economics profession is, according to the last of the conference hosts and another Nobel Prize winner, Joseph Stiglitz: "There is no good economic theory that explains why the cat is still up the tree".

Changed world

No more cats I promise. But the analogy give a sense of the degree of uncertainty this stellar gathering of economists grappled with.

It is a very different world from the apparently more comfortable one we lived in before the crisis.

What were the key features of that world?

The main economic policy tool was in the hands of central banks. They set interest rates, raising them to keep inflation low and cutting them when the economy was weak.

Fiscal policy - government spending and taxation - was no longer seen as part of the routine toolkit for keeping the economy on an even keel.

Financial regulation was for the most part relatively light touch.

What we got was the worst financial crisis and the deepest recession for the wider economy since the Great Depression in the 1930s.

For Joseph Stiglitz, the crisis was evidence for his view that "economies are not necessarily stable or self-correcting".

There was quite a lot of support for that kind of view and for the idea that various state agencies have an important role in doing something about it.

Many favoured more financial regulation, especially measures that are intended to help stabilise the whole financial system rather than individual banks.

If you really want to know, it's called macro-prudential policy and it's an idea that has really built up a head of steam in the last few years.

One example is a limit on the size of loans relative to the price of the asset such as a house that it's used to buy - the loan-to-value ratio.

It sounds like a reasonable idea, but there was acknowledgement that these policies and their effects are not well understood.

And David Romer, one of the organisers, didn't think he had heard anything big enough to produce a really robust financial system.

Then there is monetary policy. Before the crisis the main tool was interest rates, but the toolkit has since expanded to include quantitative easing - shovelling money into the financial system hoping it will stimulate more spending.

There was support for that but it wasn't universal.

'Not a clue'

Allan Meltzer of Carnegie Mellon University in Pittsburgh Pennsylvania for one thought it was a huge amount of stimulus with very little effect.

There is also a debate about what should be the aim of monetary policy.

The idea of inflation targets gained widespread acceptance ahead of the crisis.

Now there is a debate about whether that's enough, but there was no consensus on whether change is needed.

David Romer said the approach seemed good for 15 or 20 years, but subsequently showed itself incapable of generating enough demand in the economy.

But Stefan Gerlach of Goethe University in Frankfurt argued that "it doesn't really make sense to rethink the entire monetary policy framework for an event that happens about once in a century".

There was no great enthusiasm for the rapid increase in government debt in the rich countries over the last few years, but few would go as far as the conservative view of Allan Meltzer:

"If we want financial stability, economic stability and other good things don't we begin by restricting budget deficits? Formally, indefinitely and for all future time?"

Which leaves us where? Confused? You are not the only one.

There were plenty of ideas for sure. But this is how the IMF's chief economist Olivier Blanchard put it at the end of the conference:

"We don't have a sense of our final destination… Where we end I really don't have much of a clue."

That may be disconcerting, but then the crisis has been an enormous jolt to economic policy, and it would perhaps be even more unsettling if there weren't some fundamental rethinking going on.

22 April 2013 Last updated at 07:34 ET

Work restrictions expiring later this year for migrants from Romania and Bulgaria has had little impact on the numbers planning to move to the UK or wider EU, BBC Newsnight polls suggest.

The countries joined the EU in 2007 but many member states put limits on their citizens working which end this year.

This has raised concerns in the UK that many will now come to seek jobs.

But BBC surveys in each country, both of more than 1,000 people, suggest most would move only with a firm work offer.

Of those questioned more people intended to seek work in the EU including the UK in 2013 than in 2014.

A significant number said they would like to work in the UK, but the number making concrete plans was much smaller.

Romania and Bulgaria are among the poorest countries in Europe and when they joined the European Union in 2007 work restrictions were imposed amid fears about mass migration.

These measures will be dropped on 1 January 2014 giving Bulgarians and Romanians the same rights to work across the union as other EU citizens.

Some in the UK have voiced fears that ending restrictions will trigger a huge influx of Romanian and Bulgarian immigrants seeking work as happened when in 2004 the UK allowed people from European Union accession states including Poland, Hungary and the Czech Republic to work freely.

BBC Newsnight wanted to find out what impact these changes were likely to have, particularly on the numbers intending to come to Britain.

In February 2013 the programme commissioned a test poll, asking independent survey company Vitosha to question 1,000 people across Bulgaria.

People were asked if they intended to come to the UK to work. Over a quarter answered yes.

Analysts say the relatively high figure is unsurprising - times are tough in Bulgaria and many Bulgarians dream of a better life. In some surveys as many as 50% of Bulgarians have said they would like to work abroad, but over the past decade only about 6% have actually left.

BBC Newsnight then asked Vitosha in Bulgaria and Gallup Romania to design a questionnaire which would distinguish between aspiration and real concrete plans.

In March 2013 each of the agencies interviewed face to face more than 1,000 people representative of the country as a whole, in villages, in cities, in all regions of Romania and Bulgaria.

People were asked a range of questions about their current situation and whether they had any intentions to move elsewhere in the EU.

When asked whether in the past five years they had considered moving to live and work in another EU member state, 33% of the 1,101 Romanians polled said yes, 67% said no. Of the 1,014 people questioned in Bulgaria - 37% said yes, 63% said no.

Top destinations

When all of those polled were asked to pick their first choice of EU country to move to in either 2013 or 2014, 4.6% of Romanians and 9.3% of Bulgarians chose the UK. These numbers rose to 8.2% for Romanians and 13.6% for Bulgarians when they were asked directly about whether they would consider the UK as a destination.

In the past people from Romania and Bulgaria who have worked in other EU countries have usually opted for places they can reach by car or where the culture and language are closer to their own.

That was still the case among the 197 Romanians who said they were intending to work in another EU country in 2013 - 30% of them said they wanted to go to Italy, 24% to Germany, and 16% to the UK.

However, the Newsnight survey suggested that the UK is becoming a more attractive destination.

Concrete plans

When it came to Romanians intending to work in another EU country in 2014, a much smaller group of 73 people, the percentages changed - 25% wanted to go to Italy, 18% to Germany, and 26% to the UK.

Of the 242 Bulgarians who said they intended to work elsewhere in the EU in 2013 - 30% said they wanted to go to Germany, 27% to the UK and 10% to Spain.

As for Bulgarians intending to work elsewhere in the EU in 2014, again a smaller group, 123 people, 31% wanted to go to Germany, 24% to the UK and 12% to Spain.

Some people said one country for 2013 and a different one for 2014 - so they appear twice.

To get a clearer idea of how many people might actually come to the UK, those who had said they were planning to head to the UK were then asked whether they had made any concrete plans to move.

These plans included searching for somewhere to live and to work.

The number of positive responses fell significantly, though more Bulgarians than Romanians were making concrete plans.

Just 1.2% of the Bulgarians and 0.4% of the Romanians said they had begun to look for accommodation.

Estimations unsafe

The numbers were similarly small for those who had started looking for a job - 2.8% of the Bulgarians had started to look for a job with a recruitment agency and 0.3% of the Romanians.

And 1.4% of the Bulgarians and 0.7% of the Romanians had begun to look for work without the aid of a recruitment agency.

With such small numbers analysts say you cannot safely estimate real numbers of how many will come.

"I think if you're looking at who's making concrete plans, say who's spoken for instance to a recruitment consultancy or who has a firm job offer, I think yes the sample sizes there are a bit small to say specifically who are the numbers who are coming," Peter Flade, director of Gallup UK, told BBC Newsnight.

Many of the people who came to the UK from Poland and other eastern European countries did so without a job awaiting them. However, the results of the Newsnight surveys suggest that, for now at least, most Romanians and Bulgarians would only come to the UK with a firm offer of work.

Looking at Romania, of the 90 people who said they were planning to work in the UK, 65% would do so only with an offer from a recruitment agency, or directly from a company.

For the 138 Bulgarians answering this question, 60% said they would do so only with an offer from a recruitment agency, or directly from a company.

When looking at what kind of people are interested in moving to the UK, the Bulgarian survey suggested they tend to be younger and they are more likely to be unemployed than the average in the survey.

The Romanian survey suggested people interested in moving to the UK are more likely to have a university degree, more likely to be employed, and are likely to be more affluent than those looking to move elsewhere in the EU.

Benefits changes

The surveys were conducted before UK Prime Minister David Cameron made a speech in March suggesting restricting entitlements for new immigrants.

However, Newsnight asked whether the UK government considering restricting state benefits to Romanians and Bulgarians would affect their desire to come to the UK.

Although the 90 Romanian respondents who were interested in working in the UK were more professional and better off than the average respondent in the survey, just under half said it would affect their decision to a great or very great extent.

In Bulgaria, most people interested in working in the UK said a benefits change would not affect their decision.

Speaking to BBC Newsnight Bulgaria's Minister of Economy, Energy and Tourism Assen Vassilev said he did not think there would be a mass exodus of Bulgarians when the changes came into effect.

"I think people who wanted to leave have already left. Gone somewhere, come back, gone somewhere else come back. And going back to the survey that shows that 60-70% of people want a firm job offer. They know that going to a place that looks nice in pictures is not going to make your life better."

NB: When looking at the detailed tables that accompany these polls, it is important to look not just at the percentages, but at the total number of respondents who answer each question. At times this number will comprise the entire sample, a large figure that has been designed to reflect the views of the entire population. However, at other times, the number of people responding to individual questions may be as low as 20 and certainly fewer than 100. The margin of error increases significantly as the number of people answering any question diminishes.

You can watch Sanchia Berg's full report on the polls' findings on Monday's Newsnight at 10.30pm on BBC Two, then afterwards on the BBC iPlayer or Newsnight website.