It changes your vision, to take the challenge. The labyrinthine jargon, acronyms and insider knowledge and connections that are used to control and confuse. The secret handshakes, the confident words, the knowing nods, taking us back to the days of the Guild. The challenge arose, for a week of research, to learn if this really mattered for Directors and Officers.
However, as Arundhati Roy says in her 2001 book, Power Politics: “The trouble is that once you see it, you can’t unsee it. And once you’ve seen it, keeping quiet, saying nothing, becomes as political an act as speaking out. There’s no innocence. Either way, you’re accountable.” Your world is tilted.
Lack of transparent disclosure has been an aggravation since my days as an international equity analyst. In my experience, there is only one solution to this aggravation: research. (Occasionally a sharp stick poked at the company directors worked.) The following was prompted by attendance at the ASrIA conference in Hong Kong in September 2011. The challenge to learn as much about the environmental sector in one week for three reasons: (1) How quickly may a director and officer become “reasonably” informed? (2) Do directors and officers need to know about it to survive? (3) If so, what should they be disclosing to shareholders and how? This is what I learnt….. The series runs sequentially over various subjects.
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The first thing that comes to mind is “what do I tell the grandchildren?” As a Director or an Officer of a company, listed or not, the next thought is “what do I tell the shareholders, what do I tell our customers, our staff, our suppliers, our governments?”.
And the answer is, very little, if you are not collecting the critical information and analysing it. Because without this information, you cannot tell anybody anything, and without this, you cannot forecast what needs to be done. Without this there cannot be mitigation of the risks, cannot be strategies for managing the negative effects on profits, on jobs, and on the prosperity of the commons. Without the commons there are no customers.
There can be no mitigating the risks to your own financial wealth either, nor that of your family.
Because it became very clear to me as an attendee at the ASrIA (EN 1) conference that many Directors and Officers of companies around the world still have not figured out how the operating environment that they confront in the near term [not medium or long term] is very different to that which they have in their strategic plans and that which they report to shareholders in compliance with international mandatory reporting regulations.
It also became clear that the consequences of this serious failing has still not dawned on Directors and Officers; that it could be slated back to them personally. And their assets. And their families. And themselves.
So ended the two day ASrIA conference on sustainable and responsible investing held in Hong Kong in September 2011. To be a layman amongst professionals, albeit a well-informed one, was to be delivered a crisp landscape of the near term future and an understanding of the systemic risks to global business and economies. Bringing it home, especially, to every company.
So I set myself the challenge of taking a week to research this for myself; for our shareholders, our staff, our customers, suppliers and our commons. And here it is.
Peak Everything
The tsunami of peak everything is staring us in the face. It’s on the front pages of the Financial Times, the Wall Street Journal, the Economist, book after book, scientist after scientist, and government after government.
Yet with all this knowledge it is like observing a slow paced GFC collapse. A tautology, but worth repeating. This time a systemic economic crisis for companies worldwide, not just the financial services sector.
With the GFC, awareness reached a tipping point, but it wasn’t until about early 2009 if one considers the global equity markets as a signal, that it reached its nadir. Yet in early 2007 [and to a lesser extent well before that] there was clear concern in public and private global commentary, but global equity markets continued to rally to a peak in late October (EN 2).
From there the realisation that something was seriously amiss spread like a wildfire through equity and debt markets (the latter being the canary in the mine) throughout the global financial systems, then into all private sectors, then public as liquidity seized up. The fears included counter party risk, and as is the case when markets fail, the governments stepped in and effectively transferred private losses to the public. Now governments are going back to companies and making them pay. Okay, well not in USA, but they should.
The tipping point for the companies and the coming tsunami of peak everything is at the same stage as pre 2007. The warnings have already been made in quality media; by international institutions; by leading scientists that there is a tsunami of resource rationalisation on its way, yet we are still not measuring the correct things to ensure as Directors and Officers we and our companies can survive it.
When it comes to carbon, some governments have already assumed the role of correcting the market failure through regulation and legislation in some countries, and making companies pay [think airlines in Europe, carbon tax in Australia]. However, the tipping point is yet to be reached when all companies realise this is a material problem now, and we should be preparing.
It also shows government can act decisively when required, and make companies pay.
It is clear that extreme consumerism has failed; that extreme free markets fail; that extreme resource usage has failed; and that extreme wealth divergence is failing as we speak.(EN 3) As a Non Executive Director, I just need to know how bad it may be.
(1) ASrIA is the Association for Sustainable and Responsible Investment in Asia, and recently held its 10th Annual Conference celebration in Hong Kong. Founded by Tessa Tennant
(2) Bloomberg Markets, Dow Index http://www.bloomberg.com/apps/quote?ticker=INDU:IND
(3) Occupy Wall Street is a populist movement that is spreading all over the USA after its initial protest approximately a month ago in Wall Street, Ney York. It is a protest against the elites, symbolised by Wall Street banks. Also referred to as the 99%’ers, as they represent the down trodden relative to the elite 1%. http://www.alternet.org/economy/152601/5_facts_you_should_know_about_the_wealthiest_one_percent_of_americans suggests that the top 1% own 40% of the country’s wealth, take home 24% of the country’s income, own 50.9% of the country’s stocks and bonds; have only 1% of country’s personal debt; have the highest income gains, the first peak since the 1920’s. It is interesting to watch the response of the police tactical forces relative to the response in other countries such as Egypt and Syria and England.
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