The ill wind blowing a flock of rights issues into UK markets brings with it the old debate about how much – if anything – underwriters and sub-underwriters should earn for insuring cash calls against failure.

Shareholders in Royal Bank of Scotland have just won themselves improved terms for insuring part of the bank’s £12bn whopper share issue. They’ll get 1 per cent of the sum insured for sub-underwriting it, while the principal underwriters receive 1.5 per cent plus an additional discretionary 0.25 per cent.

There’s little high ground in the debate about how these fees are divvied up. Institutional investors complain that investment banks make a fat profit from underwriting, even after paying the institutions to take on much of the risk. But if the same institutions have already decided to subscribe for their rights – and are big enough to influence others to do the same – they have virtually guaranteed its success. At which point sub-underwriting is itself almost free of risk.

The bigger question is whether deeply discounted rights issues need underwriting at all. Asked to look into the system nine years ago, the old Monopolies and Mergers Commission expressed the wish for more frequent non-underwritten deeply discounted issues.

The problem is that the deep discount sends an emergency signal and is usually applied at times when equities are already in turmoil. This is an underwriters’ market: capacity is low, demand high. Confidence is all. It would be reckless of RBS not to pay for its cash call to be underwritten. But could you not argue that the chance of RBS falling from 340p to below the 200p price of the new shares is negligible? Of course you could. But for anyone to have confidence in your argument, you would have to be the only person who successfully predicted both the run on Northern Rock and the bail-out of Bear Stearns.

JP to GSK: get therapy

The good news is Jean-Pierre Garnier, the head of GlaxoSmithKline, has come up with a new therapy for the malaise dragging down valuations of his company and the entire pharmaceutical sector.

The bad news is that his prescription for turning round the industry’s poor productivity in research and development (contained in the Harvard Business Review) comes out as he retires and loses the ability to administer the medicine himself.

Mr Garnier’s candour in criticising the old models is welcome. But given he took over at GSK in 2000, he surely could have acted on his latest advice to separate the teams working on breakthrough “first-in-class” medicines from those developing “best-in-class” ones (often follow-on drugs that prove more effective). He could have embraced more quickly “progressive blockbusters”, which gradually introduce new medicines to targeted patient groups for which they are well suited, rather than winning mass-market approval and only then identifying side effects.

To be fair, under Mr Garnier, GSK has gone a long way towards implementing his prescription, stripping out management, making executives more accountable, and rewarding innovation from scientists. Its pipeline of experimental drugs looks far healthier today. But investors are still sceptical about whether the mega-merger that created GSK has added value, or was a necessary step towards restructuring R&D.

Reckitt and cool man

Reckitt Benckiser’s first-quarter results had all the impact of one of its new fast-acting Nurofen Express capsules. Within minutes, the consumer product group’s shares were up 5 per cent and rising. No wonder. Everyone from banks to housebuilders has been whining about how tough March was. Yet Bart Becht, Reckitt’s chief executive, is coolly confident enough to increase revenue and net income growth targets for the year on the basis of only three months’ trading.

If he were a less likeable chap, you might put this down to an I-told-you-so urge to wreak vengeance on anyone who has complained over the past few years that Reckitt’s shares look too expensive.

Since early 2000, they have risen from 550p to nearly £30. Is it too late to share in the success of Reckitt’s “power brands”, from Air Wick to Vanish? Increasing raw material costs and declining consumer confidence suggest it is. But Reckitt laughs in the face of economic downturn, pointing out that customers tend not to shift down to own-label products, but instead extend the life of their trusted brands. The group’s defensive qualities are reinforced by its successful first-quarter counter-attack on input costs that are out of its control. The shares trade at more than 20 times forecast earnings for 2008, compared with rival Unilever on a p/e of 19. But you can expect fewer headaches from Reckitt.