#corporategovernance

When the lights go out

Oh the irony of a company, PG&E, that has 100% knowledge of the diversity of its workforce and suppliers but is unsure of the status of the very infrastructure of the core business. It has been enforcing blackouts to assess the matter. That’s what one calls ‘progressive‘ in the world’s 5th largest economy. This cartoon sums it up.

Is it any wonder it filed for bankruptcy. Get woke, go broke.

ESG Blacklisted portfolio

ESG (Environment, Social Responsibility & Governance) blacklisted stocks. We all know deep in our hearts that vices are far more fun than virtues. Real Coke tastes better than Diet Coke. Full cream is better than skim. McDonald’s fries are tastier than mashed potato. CM made this point in yesterday’s piece on the irresponsibility of socially responsible investing for building a retirement nest-egg given the long term underperformance.

When all of this politically correct ESG investing meets a recession, these oversold anti-ESG darlings, many with gobs of free cash will look like total bargains. Suffice to say in a downturn, vices tend to be what people resort to.

All CM cares about is the G in ESG. Governance is a must for investing. E & S are merely subjective views which don’t automatically convert to shareholder value. Good governance goes without saying.

So perish the thought that CEOs, like Harvey Norman’s Katie Page are being attacked by the likes of Ownership Matters which thinks putting in a shareholder activist who has failed 49 times out of 49 to be appointed to ASX listed boards is a better bet? As Janet Albrechtsen of The Australian wrote,

A copy of the report obtained by The Australian reveals Ownership Matters has recommended that Stephen Mayne be elected to the board of the retailer, even though the 50-year-old has no corporate experience in retail or property, no corporate board experience and no corporate management experience…Harvey Norman has a market capitalisation of $5.2bn, and shares in the retailer have gained more than 32 per cent over the past year, outperforming the 16.4 per cent gain in the benchmark S&P/ASX 200 over the same period…The advice sent out on Monday has baffled Ms Page’s husband, the business’s billionaire co-founder Gerry Harvey, who remains its largest shareholder, retaining ­direct ownership of almost a third of the company. “I have been on a public company board as chairman since 1972, and I have never seen anything as bizarre as the fact that the best ­retail executive in Australia is to be replaced by a ratbag called ­Stephen Mayne who has been a proven failure … every time he’s run for a board seat,” Harvey said.

 

Former Fire Chief inflames the climate debate

Greg Mullins, the former chief of NSW Fire and Rescue said today, “Just a 1 degree C temperature rise has meant the extremes are far more extreme, and it is placing lives at risk, including firefighters…Climate change has supercharged the bushfire problem.”

CM could not hope to hold a flame (no pun intended) to his knowledge of fire behavior but why does the WA Government’s own fire service website, Bushfire Front (BFF) contradict him,

Compared to slope, wind strength, fuel quantity and dryness, temperature is an insignificant driver of fire behaviour. Experienced firefighters do not fear a 40-degree day per se. This is because even on a hot day, a fire in one or two-year old fuel can be controlled; on the same day a fire in 20-year old fuels with high winds would usually be unstoppable.”

One of them must be right. Could it be that Mullin’s personal beliefs about climate change are a factor? After all he serves as an author for the Climate Council.

Mullins also said that ” We saw it coming. We tried to warn the government.”

Indeed BFF notes clearly,

““Large wildfires are inevitable”

This statement is, to put it politely, bosh. Large wildfires can only occur when there is a combination, at the same time, of three things:

• an ignition source,

• severe fire weather and,

• a large contiguous accumulation of fuel.

Remove any of these three and you cannot have a large wildfire (= megafire).

We obviously can’t control the weather, nor can we hope to eliminate all possible avenues of ignition. The only factor we can control is the large contiguous accumulations of fuel. Therefore, broadscale fuel reduction burning is the only defence we have against large wildfires. This will not prevent fires occurring, but it will ensure fires are less intense, are easier and safer to control and will do less damage.

Does it work? Yes it does, as has been shown many times, over many years, by the experience of Western Australian forest managers. The “proof of the pudding” is the incidence of large wildfires in Western Australian forests over the last 50 years. There were a number of very large fires in Western Australian forests from 1900 to 1960, but after the 1961 Dwellingup fire disaster, the wide-scale fuel reduction program carried out by the then Forests Department, ensured that the fuel accumulation was well controlled. The graph below demonstrates this very clearly. It was only after the burning program gradually fell away following a diversion of resources away from forest areas, that the area of wildfires began to climb again after about 1990.

How is it that so many of these fires have been started by arsonists? A 16-yo has been alleged to have started fires in central Queensland. Johannes Leak’s cartoon was absolutely on the money.

Even assuming Australia pandered to Mullins and went zero carbon emissions tomorrow, could he guarantee that the bushfires would slow or end? Even though Australia is such a tiny contributor to global CO2 emissions? Could he show the science behind his beliefs on fires and the link to climate change even though 85% are deliberately, suspiciously or accidentally lit?

Of course the climate alarmists immediately endorse his words because he is a firefighter. Although are his words on climate change anymore relevant than those of the AMA?

Maybe we should reflect on the politics within the upper echelons of the fire services? Not so much the rank and file front line fire fighters but the bureaucrats who make daft decisions such as buying a Boeing 737 fire-bomber which can only be used at 4 airports rendering it highly inflexible (as much as it’s a great political sales point) or a military helicopter which spends 5hrs in maintenance for every hour it is in the field working. Or replacing 1yo trucks with brand new ones because records are poorly kept?

Nope, just blame climate change for it. Get out of jail free card for everything.

M&S pushes sandwich equality

Corporate virtue signaling at its finest. Marks & Spencer hijacks a movement to sell lettuce, guacamole, bacon & tomato (LGBT) sandwiches. Where is the quinoa or Italian tomatoes to include the Q & I minorities? Shame on the marketing team. Surely deserved of a written warning? Did they use soy ink and recycled paper? How thoughtless to have bacon as an option for “B”, given it is most certainly not Halal?

M&S is free to make & sell what it likes. Although the LGBT is made with political correctness to appear woke. Perhaps an ANTIFA sandwich? Asparagus, nutmeg, tomato, iceberg lettuce, fennel and artichoke? A REMAINER baguette? Ricotta, egg, mustard, apple, Idaho potato, nuts, eggplant and radish. A Trump Derangement Syndrome (TDS) focaccia made from turkey, dill and sauerkraut? Or a Greta ? Ginger, radish, egg, taramasalata and almonds?

For equality in the debate, why not make a White Patriarchy (WP) sandwich with white bread and pastrami? A right wing nut job (RWNJ) ciabatta made of rye, walnuts, New York steak and jalapeños perhaps? A NAZI roll? Nutella, anchovies, zucchini and iodized salt?

Then see which politically correct sandwich sells the best? C’mon M&S, spice it up and allow people to have a laugh at lunch rather than push a narrative.

Time for a Lefty loaf. Lettuce, egg, figjam, turnips and yams. It seems unfair at a time the left wants to eat its own that there isn’t an offering on M&S shelves.

Parker Hannifin orders slump again

Despite an EPS beat, Parker Hannifin (PH) orders fell by even greater margins over the last quarter. Overseas orders -10%. North American orders -6%. Aerospace +22% but that is on a 12 month rolling basis and more driven by anticipation of 737MAX returning to service and the long lead times involved. In short, manufacturing is bound to get weaker than it already is. Caterpillar results already portended this. PH confirms it.

CM has been saying for almost two decades that PH orders are a great global barometer of industrial health. PH supplies all the monster tier 1 industrial companies like Boeing and Caterpillar. It is like a major hardware store for major industrials. PH is a world leader in pumps, hydraulics, pneumatics, linear drives, vacuums, seals, gaskets, valves, hoses and pretty much any other widget that is used in modern machinery.

Worse to come from global industrial indicators.

#CancelWhitePeople Sarah Jeong dumped by NYT

What irony that The NY Times finally came to the conclusion what the majority knew about potty mouthed Sarah Jeong, albeit 12 months too late. The picture above shows a selection of tweets before she was hired by NYT. Despite that, NYT defended her hire.

CM wrote back in August 2018,

“Was Jeong not aware that 8 of the 12 board of editors are currently white? Not that the board’s racial identity should have any bearing on disgraceful bigotry displayed by her.

The only point at stake here is whether The NY Times will defend and maintain consistent standards it would certainly hold if a white editor raged on about people of other colour. This isn’t a rally or #boycott (please no more boycotts) to get Jeong sacked. On the contrary. In free market thinking the question is whether The NY Times exercises rational judgement and sees that from a commercial perspective defending the indefensible might not be good for growing the business or encouraging a shrinking pool of paying advertisers to rent more space?

After the election of Trump, the newspaper changed its slogan to “The truth is more important now than ever.” For someone to espouse such bitter hatred so candidly in social media forums which have a half life of infinity, her truths are for all to see. The truth in The NY Times’ slogan is also on display.

How could The NY Times possibly hope to uphold the highest levels of ethics and moral high ground by defending her? In her press blurb the paper is effusive with praise citing, “Sarah has guided readers through the digital world with verve and erudition, staying ahead of every turn on the vast beat that is the internet.“ It is also quite telling that Twitter didn’t think she broke the very standards that would see conservative voices banned for far less offensive tweets.

CM wonders what the Harvard Law School has to say about its deeply talented alumni who served as Editor of the Journal of Law and Gender? Perhaps she just missed the ethics classes because she was too busy battling to make sure the correct pronouns were used in the articles on identity politics.”

Now the NYT has terminated her contract. Undoubtedly her contribution was as empty as her Twitter bile. She will now be a contributor, a rather large downgrade from being on the editorial board. She tweeted about the NYT paying attention to subscriber numbers, something the paper might have considered at the start.

Maybe her impact was one which didn’t ring the turnstiles at NYT. It is likely the same reason why The Guardian begs for charity instead of coming to terms with the fact that the content maybe the problem.

Note NYT is offering Aussies an 80% off subscription deal for a year.

Qantas & Virgin answering questions nobody is asking

Qantas CEO Alan Joyce and Virgin CEO Paul Scurrah have told the National Press Club that part of the role of their businesses is to back social issues. Puhlease.

Have shareholders overwhelmingly voted in favour of Joyce deploying their funds to sponsor woke causes? No one is stopping Joyce from pushing whatever virtue signaling he likes in his own time, but he probably might reflect that most of his customers haven’t requested to be lectured on board. Scurrah is the newbie, so he seems to want to score some media attention.

The latest excuse to push this corporate social nonsense is the unfounded research that kids of today require their corporates to have these woke causes embedded in the culture for them to join. What happened to “employer of choice” based on the business model? Will budding pilots want to pick the airline with the best conditions and business survivability or that which has the best carbon offset programme? Truth be told, what young ecomentalist university graduate wants to join an evil carbon dioxide producing airline anyway?

Having said that, employee retention will not favour wokeness when pay and conditions remain crimped by misguided company policy vs more attractive opportunities at firms that focus less on this. Harvey Norman is exhibit A on that measure. It is crushing the competition.

Qantas only needs to look internally at its own carbon offset program and how dismal it is. While it might be the world’s largest, truth is around 2% elect to pay for the sin of flying.

Back in May 2018, CM noted, while waiting in the lounge,

“So to offset my flight to Haneda, CM would pay $11.21 AUD. CM can put it to ‘local action’ (fund activism?), ‘developing communities’ or ‘global renewables’. In its 2017 Annual Report, Qantas boasted,

We have the world’s largest airline offset program and have now been carbon offsetting for over 10 years. In 2016/17, we reached three million tonnes offset.”

Carbon calculators tend to work on the assumption of 0.158kg CO2/passenger kilometre.

In the last 10 years Qantas has flown around 1 trillion revenue passenger kilometres. While the literature in the annual report denotes one passenger offsets every 53 seconds, the mathematical reality is simple – 2% of miles are carbon offset. So that means that 98% of people couldn’t care less.

Perhaps more embarrassing is that The Guardian noted in Jan 2018 that,

Qantas [was the] worst airline operating across Pacific for CO2 emissions

Kind of a massive load of hot air when you do the maths!

Mr Joyce might earn $24m p.a. CM would reckon shareholders would be glad to hike that if he ditched the social justice nonsense.

Qantas service is rarely anything to rave about so more effort applied in that area could well serve the company’s (and shareholder’s) interests far better than answering question hardly anyone is asking.