Occupying the Isle of Skye

Note to self:  Next time you travel on one of the world’s top ten scenic train trips remember:

(i)                  do not do so on a day that includes severe  weather warnings,

(ii)                especially as you must stand at the open platform train station in Dalmuir for an hour or so,

(iii)               with horizontal rain, and severe wind gusts, no coffee shop nor newspapers and

(iv)              every few minutes news of more train delays and cancellations.

(v)                Also, choose to travel past the most picturesque scenes of the Scottish coast during daylight.  You may see something.

Well that is all a bit embarrassing then, but goes on to prove the point about local knowledge.  The train trip to Mallaig was great all the same.  There is no Occupy Mallaig though, that I can report on, although I searched far and wide.  The only occupying was being done at the pubs, because outside you could only travel in the one direction, and that was with the wind.

The ferries to Isle of Skye were cancelled of course.

However, when they were running again, it was a wonderful if rolling trip to Armadale.  Now ponder this, that trip cost GBP3.15.  After arriving in Armadale I was planning to stay until late afternoon and have a look around, before catching the bus to Portree. The latter being the capital of the Isle of Skye.

On this glorious ferry, (who doesn’t love a good swell), was one other passenger.  With a little local knowledge, which proved correct, she said take the bus straight to Portree, it will be at the ferry terminal.  And as soon as we arrived I knew why…..there was nothing at Armadale.  Certainly no Occupy Armadale. 

And what a trip, in a small bus, winding road up hill and down dale, horizontal rain, and heavily gusting wind, and a driver hell bent on arriving on time in the face of apparently overwhelming natural forces massed against him.  Aghh, that wonderful highland spirit, and it doesn’t take a lot to look around at the incredibly inhospitable environment to learn what makes the highlanders incredibly fierce and tenacious.

For the record there is also no Occupy Portree, either.  But there are more of those happy happy happy Scottish people first met in Glasgow.  This last summer season has been a bit slower for them however, and although many tourist service destinations close for winter anyway, there are more so this winter, apparently, and earlier.  Yes they are feeling the economic downturn. 

But not the buses.  One driver, one bus ride cost GBP6 compared to one ferry ride with at least 10 people, from the captain to the deckie, and a cost of slightly more than GBP3.  What does that tell you about economies in small communities? 

I searched in severe weather for any hint of Occupy.  But there was none.  However, the economic woes against which Occupy Everything is standing up, are here to.  Even here on the wild and immensely beautiful coast of Scotland, and the tenacity of the highlanders is going to be tested.

Then I recalled the books I read in my youth about this region, and I realised that the highlanders were the first Occupiers.  From Robert Louis Stevenson’s “Kidnapped”, where the lowlander David Balfour of the Shaws, was kidnapped and then fought and crawled his way through this desolate highland landscape to reclaim his landed birthright. 

But more prosaically, Katherine Stewart’s book, “A Croft in the Hills” is seemingly about Occupying Everything Everywhere.  “When you have lived for a few years in the bare uplands, where life has been precarious from the start, you learn, first, not to panic. Then you learn to love wholeheartedly what need no longer be feared.  You become so deeply involved in the true drama of cherishing life itself that mere attitudes and the pursuit of possessions are discarded as absurd.”  Where people no longer “fall under the spell of the shopwindow”.   Now that is true Occupying!

Occupying Glasgow

A wet and windy afternoon on arrival in Glasgow.  But warm, warm, not November weather at all everybody tells me.

There are two main rail stations in Glasgow, go figure; Central and Queen St.  Such poor central city planning usually suggests graft somewhere along the way.  Maybe that isn’t the case here, and now Glaswegians everywhere will be cross with me.  Hold back, I am here because my Granny was born here.  So we are one.

Taxi driver’s view of the economy is things are tight.  People have stopped their spending, worried about their jobs.  “That is the main worry, heating and electricity costs are up 20-30% over the last 18 months, and salaries aren’t going up that fast”.  “People are worried about losing their jobs, it is all to do with what the banks did.  So they aren’t spending, saving their money just in case. Same as Europe and London.  There will be a lot of people doing it tough this Christmas”.

“Our unemployment is much the same as the rest of Britain, but we are all worried.  Our young people are going over to Australia looking for work.”

You’re not a banker are you?, Yes I say, an ex-investment banker, and we both have a good laugh.  Mainly because I cannot repeat some of the things he said in this blog.  And that is the main thing I have found here in just a few hours.  Everybody seems so damn happy.

I am straight off looking for Occupy Glasgow, and I am sure it is here somewhere.  But instead I find another version, Occupy St Enoch Square.  And on a wet and windy Wednesday afternoon it is packed with browsing shoppers, young future louts, pretty young women parading, families with children playing and running around in the soft rain, couples and business people, all of many cultures.

It is also full of market stalls from all over the world; food, clothes, delicatessen, cheeses, biscuits, meats, tomatoes. German cooking and beer, Holland sweets, hamburgers made with wild beests [not sic] from all parts, from Kangaroo to Springbok, Ostrich and Crocodile.  French delicacies, baking, and food.  Russian dolls. Asia is not forgotten and nor is the various woolly animals that are doing a thriving trade with the teens and children.

Business women and men on their way home stopping for some mulled wine and Asian food;  lovers walking and laughing; and the people serving in the stalls dancing to the loud Christmas music and love songs (young and older).  All service is with a smile and a bit of teasing and joking. And this all stays every day until Christmas.  Fun fun fun! Happy happy happy!

I am talking HAPPY!!

Even the security service at the markets in St Enoch Square, who are ubiquitous with their earpieces, and muscles, well groomed haircuts, bring a smile to ones face.  They have boldly printed on the back of their florescent jackets "McSecurity".  Police are pounding the pavements as well, around the perimeter.  Nodding and smiling at those passing.  On the back of their jackets, they have their website so you can read all about them.  I feel as though I have entered a parallel world.  But one that is very welcome. 

I had been here for business many times in my old banking days.  What a glum lot they were back then.  Obviously I was meeting the wrong people, huh?

Is it possible to fall in love with a city?  Just have.

And they wonder why!

Yes mate, we will be in Australia for a week near Christmas.  Just the two of us, haven’t worked out what the children are doing yet.  Can’t turn up to stay with some people with three kids for a week. Yes just back from Amsterdam, at the Edinburgh train station.  Great to talk with you.  Yeah will let you know, but wanted to give you a heads up about that week away so that you can put it in your schedule.

Doesn’t matter what happens I have just bought the best beach house on the best beach in the UK.  

Aside to the barista….what’s that, yes a cappuccino. 

The barista says, that will be GBP3 sir,  sir,  sir!!

So I will be in touch, let you know what is happening.  Oh what are you doing for Christmas?  Yes we are all going to northern Scotland, have just heard about a shoot.  Don’t know the full details but I’ll let you know.  We could organise something.  Should be big. Open house.  Yeah well speak then, see if you can make it.

To the barista, is that mine?

Hi mate.  Dined on the Royal Yacht Britannia last night, yeah yeah, sat next to a friend of yours from the old XXXXX rugby days.  Spoke very highly of you.  So how’s the season, is XXXXX playing this weekend?  How’s his form.  So no money on it then.  What do you know? Yeah I am at the train station heading home to my babies.  Yeah, haven’t exchanged yet but have just bought the best beach house on the best beach in the United Kingdom, and I have the best knee board you can buy.  Life doesn’t get much better does it?  I am up to my eyeballs in silver, enough to live on forever, life is as good as it can get.  What’s that?  Yeah okay okay speak soon.

Just calling to ask about the dishes.  Yeah yeah, we wanted a dozen of each. Full score.  Maybe just ship them out, we will be there!!

And so the whole train station at Edinburgh Waverley had to sit through this man’s phone calls at the top of his voice.  No comprehension at all of the people around him, holding up the coffee line, of people rolling their eyes, of people avoiding him, even the people he was speaking with on the phone obviously closing the conversation quickly, almost autistic in his lack of empathy.  So very very full of himself and all his fantastic possessions and pursuits. 

Here’s hoping the price of silver tanks, huh!! And he again becomes part of the 99%ers.

Occupying Edinburgh

Glorious, glorious, Edinburgh.  Surely, the most beautiful city in the world.  If a little overcast today, but the plus side of climate change is that it still seems like early autumn so it was warm. [Okay, there are no plusses, I know].

Straight to St Andrew’s Square to visit our Occupying forces. I say ‘our’ because they are working for you and me. 

Counted about 20-25 tents, and after five pm, when the darkness has arrived seemingly early, there were no lights in them.  However there were about 25 people milling around the main tent, and other scattered about.  And the whole scene looked fabulous with the fairy lights in the trees of the Square, and, ironically, the windows of Harvey Nicholls, Louis Vuitton, and Rathbones casting their warming glow over the whole occupation.

Inside the main tent there are message boards with many signs on how to conduct yourself in the Square, from security to cleaning.  The Square was very clean and tidy, and not at all intrusive as you walked through the Square, on one’s business so to speak.

Also up on the notice board and highlighted is the manifesto that appears to come from the Occupy Wall St team –surprisingly profound and actually true.  I was pleasantly surprised.[i]

Soon an ex antipodean introduces himself.  All around other people are in deep conversations and I hear wafts of communism [“just means community”], Marxism, and all the “isms’.  On the message board is a notice saying “forget the isms, look at the issues”. So someone was there before them.

Also on the board are various notices containing the words “citizen” etc.  This is the only thing that gets up my nose.  Only semi and permanent fringe people use this word.  It is a word that rarely comes up in normal mainstream life [unless in warfare] and is a barrier, a wall, a jargon indicator, that isolates them to some degree from the rest of us.

I have a long conversation, listening, with the ex antipodean and later with a local publican.  Both raise Royal Bank Scotland ["RBS"], and both raise Fred Goodwin.  Is it in shame? Anger? But they don’t speak heatedly.  They speak of the loss of sight by the executives of RBS and all the other banks with their service to the community.  Their race to achieve bigger and more more more.  As the economy tanks, on the old people who will die this year due to an inability to afford heat, of the kids not getting jobs when they leave school.

However they [bankers] have / had no insight into the effect on the community of what has happened, “mainstream community” they called it.  The publican quotes me all the statistics which I later look up and he is right.  This is a topic they know well, whether in the Square or at the pub.  Fred Goodwin and the RBS's nearly GBP25 billion dollar one year loss; the hundreds of thousands of people who have since lost their jobs in the community; the long road ahead for the economy.  The fact that the average wage in the UK is GBP25,000 and Fred Goodwin lost the equivalent of 100,000 job in one year alone[ii].  The waste.

Everyone I spoke to did not appear angry;  if anything the impression I walked away with was they just seemed to want someone to listen.  They spoke eloquently, and with care, in both terms of the word. As an investment banker I certainly feel shame.  After all, who can blame them!!

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[i] http://www.dangerousminds.net/comments/first_official_statement_from_the_occupy_wall_street_movement/

[ii] Actually this site has a lot of info on averages http://career-advice.monster.co.uk/salary-benefits/pay-salary-advice/uk-average-salary-graphs/article.aspx.

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…..

Previous titles in this series and on this site are D&O and Peak Everything, D&O and Peak Oil - Carbon - Water - Food, D & O and Bankers and Insurers, and D&O and Peak Everything Responsibilities.  The series runs sequentially over these various subjects.

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Directors and Officers, Current Disclosure Regulations

Conducting this research to answer the first question above, I was at the end left with a sense of urgency. This was exactly how I felt after the ASrIA conference, but my own reasonable amount of research has confirmed it.

This urgency was heightened when I read the International Energy Agency report World Energy Outlook 2011 published on 9 November[i].  This is the agency that represents the commercial end of energy production. Using its scenario analysis, it says..”cumulative CO2 emissions over the next 25 years amount to three-quarters of the total from the past 110 years, leading to a long-term average temperature rise of 3.5°C. China's per-capita emissions match the OECD average in 2035. Were the new policies not implemented, we are on an even more dangerous track, to an increase of 6°C.” Further “[with] a 450 Scenario, which traces an energy path consistent with meeting the globally agreed goal of limiting the temperature rise to 2°C. Four-fifths of the total energy-related CO2 emissions permitted to 2035 in this 450 Scenario are already locked-in by existing capital stock, including power stations, buildings and factories. Without further action by 2017, the energy-related infrastructure then in place would generate all the CO2 emissions allowed in the 450 Scenario up to 2035. Delaying action is a false economy: for every $1 of investment in cleaner technology that is avoided in the power sector before 2020, an additional $4.30 would need to be spent after 2020 to compensate for the increased emissions.”

Whatever way you look at it, that is five years away.  And if you are a Director or Officer of a medium sized company, or a large company, that timeframe is within your strategic planning forecasts.

And as I stated in previous blogs on this subject [see above or to the side], there is a loop between peak food, oil, water and carbon [the FOWC Peaks]. Any effect on one, a catastrophic event flows through to the others.

Mandatory international accounting disclosure regulations

If you are a company anywhere in the world, you report your financial results according to accounting guidelines first set by the International Accounting Standards Board [IASB], via its working body the International Financial Reporting Standards Foundation.[ii] [Well okay the USA has its own, but they are pretty similar]. Complying with these standards is mandatory and is regulated by an Act in each country.  Penalties can be both criminal and common law, and attract large fines for companies and Directors and Officers.

Every Director and Officer would be [hopefully] familiar with them.

The standards principal objectives are:

·         to develop a single set of high quality, understandable, enforceable and globally accepted international financial reporting standards (IFRSs) through its standard-setting body, the IASB;

·         to promote the use and rigorous application of those standards;

·         to take account of the financial reporting needs of emerging economies and small and medium-sized entities (SMEs); and

·         to bring about convergence of national accounting standards and IFRSs to high quality solutions.

Non mandatory disclosure

However the IFRS also publishes guidelines for disclosure, some of it mandatory and some not. 

In December 2010, IFRS issued an International Financial Reporting Practice Statement called Management Commentary.[iii]  This was a broad-brush and non-mandatory framework for narrative reporting of a non-statutory nature, that would accompany the statutory financial statements. 

As it is non-mandatory, it is not essential.  And in the event that the company reporting does comply with IASB statutory reporting, and does not comply with the IFRS statement above, it would still be considered compliant with IASB.

Its flexible approach is intended to ensure that companies internationally “will generate more meaningful commentary to discuss those matters that are most relevant to their individual circumstances”.[iv]

It is primarily forward looking, and compares past forward looking commentary and the differences in outcomes, both financial and qualitative.  Its key elements are: [v]

(a) the nature of the business;

(b) management’s objectives and its strategies for meeting those objectives;

(c) the entity’s most significant resources, risks and relationships;

(d) the results of operations and prospects; and

(e) the critical performance measures and indicators that management uses to evaluate the entity’s performance against stated objectives.

In the release, the IFRS statement makes it clear[vi] that its Statement, encompasses both the Corporations Act’s in various countries and also the mandatory Management Discussion & Analysis of Canada and USA [See later].  It provides details of the history of the Statements development at page 19 [nearly ten years of consultations], and its intended to be a guide for those already providing some form of non-statutory guidance and those who are yet to provide such information.

It is high level in what should be reported and giving guidance on the methodology and purpose of the reporting. 

Significant Resources and Risks (C) above

However I am going to concentrate on what it says about the guidelines for significant resources and risks. It says, in part, for Resources, “Management commentary should set out the critical financial and non-financial resources available to the entity and how those resources are used in meeting management’s stated objectives for the entity. Disclosure about resources depends on the nature of the entity and on the industries in which the entity operates.”

And for Risks, it says “Management should disclose an entity’s principal risk exposures and changes in those risks, together with its plans and strategies for bearing or mitigating those risks, as well as disclosure of the effectiveness of its risk management strategies….. Management should distinguish the principal risks and uncertainties facing the entity, rather than listing all possible risks and uncertainties. Management should disclose its principal strategic, commercial, operational and financial risks, which are those that may significantly affect the entity’s strategies and progress of the entity’s value. The description of the principal risks facing the entity should cover both exposures to negative consequences and potential opportunities.”

To me that is clear as daylight, having considered the research I’ve reported for Peak Everything, that Directors and Officer should at the absolute least, be collecting, collating, analysing [and hopefully reporting] the consequences for their companies from peak oil, food, water and carbon.  As I have suggested, these are not Black Swan or Playtpus events – they are staring us in the face now.  Even the International Energy Agency is warning you.

How will you know what your principal risks are if you aren’t measuring them?  Then again, I can hear some of you saying “aha!! But the IFRS Statement isn’t mandatory”.  Well, let’s see.

Mandatory international management discussion and analysis “MD&A”

Although the IFRS Statement is not called MD&A, comparing all known versions, that is exactly what it is.

And collecting and reporting climate data is reasonably mandatory in various countries.  For example in the USA the SEC issued an interpretive release in 2010 called Commission Guidance regarding disclosure related to climate change.[vii]  “This interpretive release is intended to remind companies of their obligations under existing federal securities laws and regulations to consider climate change and its consequences as they prepare disclosure documents to be filed with us and provided to investors.”

It speaks of the regulatory regime and how companies may be both directly and indirectly affected by climate change; summarises the regulations; then considers risk factors such as the effects on supply chains; staff; products; rises in costs.  Indeed it covers all the issues raised in this series of blogs including the changes in available water, increases in storm intensity, resource constraints and other issues. 

At page 15 it goes on to outline responsibilities under MD&A and at footnote 71, says  ^“Management should ensure that it has sufficient information regarding the registrant’s greenhouse gas emissions and other operational matters to evaluate the likelihood of a material effect arising from the subject.”  I would call that an obligation for all companies in USA to be measuring their FOWC Peak data, putting a risk factor on it, and in effect pricing its externalities.

It goes on to say that indirect risks as well as direct risks have to be reported under MD&A and possibly under mandatory disclosure sections, subject to materiality. 

And MD&As are now mandatory from all levels of reporting communities in the USA, from schools to federal government reporting[viii].  It is also mandatory for listed companies in the Canada[ix].  It is promulgated as, together with the audited statutory financial reporting, to form the backbone of an entity’s reporting. 

MD&As are also the subject of quite extensive academic studies, as to their usage and benefits.[x]

So any company with a dual listing in Canada or USA, say, would be preparing MD&A reports using these guidelines for its investors by law.

Some sectors are required by regulation to report their climate change footprint, such as insurance companies with greater than US$500m in premium revenue.[xi]

So, whether you are listed in the USA or a company in any other country, the disclosure regime is there in conventional regulation for you to be collecting this information, and as mentioned previously, if you are collecting, then analysing, then it should be reported. 

The USA and Canada are not alone in these regulations.  Although expressed differently in the UK, section 172[xii] of its Companies Act 2006  requires Directors and Officer to:

 (1)A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to—

(a)the likely consequences of any decision in the long term,

(b)the interests of the company's employees,

(c)the need to foster the company's business relationships with suppliers, customers and others,

(d)the impact of the company's operations on the community and the environment,

(e)the desirability of the company maintaining a reputation for high standards of business conduct, and

(f)the need to act fairly as between members of the company.

That looks like it covers off on the FOWC Peaks and my analysis in these blogs.  Most companies around the world have similar Acts, so this is not unique.

Although the IFRS Statement is not presently mandatory, my conclusions at the end of this research is that Directors and Officer have an obligation to report under at least, this international MD&A non mandatory reporting regime. For good reason, the risk itself is that it soon will be mandatory. 

However I would also argue that existing conventional mandatory regulation demands and places obligations on Directors and Officers to measure their environmental footprint, and disclose it.

I don’t think it requires new regulation as some have suggested.  It just requires current regulation to be enforced by governments around the world.  That is, it is not regulation that is missing, it is enforcement.

So what is your footprint?  How much? Don’t know? As a Director or Officer, you will have to do the numbers.

The questions that prompted this research were:  (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? And the answers are (1) In less than 7 days (2) Absolutely (3) Their FOWC Peak footprint, under existing mandatory disclosure regimes.  The End

[i] http://www.iea.org/press/pressdetail.asp?PRESS_REL_ID=426

[ii] International Financial Reporting Standards provide principled based standards adopted by the International Accounting Standards Board “IASB”.  Visit http://www.ifrs.org/.

[iii] [iii] IFRS Practice Statement on Management Commentary, A Framework for Anslysis, 8 December 2010, viewed at http://www.ifrs.org/News/Press+Releases/Management+Commentary+Practice+Statement.htm

[iv] Ibid.  Page 6.  http://www.ifrs.org/NR/rdonlyres/9EA9F29A-3F34-4E39-9388-

[v] Ibid Page 11.

[vi] Ibid.  Page 18

[vii] http://www.sec.gov/rules/interp/2010/33-9106.pdf

[viii] USA Government/s, Federal Accounting Standards Advisory Board, Statement of Accounting Standards Number 15, “Management’s Discussion and Analysis” April 1999 http://www.fasab.gov/pdffiles/15_md&a.pdf

[ix] Canadian Performance Reporting Board from The Canadian Institute of Chartered Accountants  “MD&A: Guidance on Preparation and Disclosure, Comprehensive Revision - Update #3.”   July 2009

http://www.cica.ca/research-and-guidance/mda-and-business-reporting/item29637.pdf

Canadian Securities Administrators set out rules for the preparation of MD&A in National Instrument 51-102 Continuous Disclosure Obligations

[x] This paper investigates the how professional and nonprofessional investors use the information contained in the MD&A portion of the corporate annual report in making decisions. Also analyses the use of XBRL, data tagging for analysis.  “The Impact of Information Tagging in the MD&A on Investor Decision Making: Implications for XBRL” January 2009

http://www.aicpa.org/InterestAreas/FRC/AccountingFinancialReporting/DownloadableDocuments/Info%20Tagging%20in%20the%20MDA.pdf

[xi] On March 17, 2009, the NAIC adopted a mandatory requirement that insurance companies disclose to regulators the financial risks they face from climate change, as well as actions the companies are taking to respond to those risks. All insurance companies with annual premiums of $500 million or more will be required to complete an Insurer Climate Risk Disclosure Survey every year, with an initial reporting deadline of May 1, 2010. The surveys must be submitted in the state where the insurance company is domesticated. See Insurance Regulators Adopt Climate Change Risk Disclosure, available at www.naic.org/Releases/2009_docs/climate_change_risk_disclosure_adopted.htm.

[xii] http://www.legislation.gov.uk/ukpga/2006/46/section/172

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Directors and Officers and Peak Everything Responsibilities

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…..

Previous titles in this series and on this site are D&O and Peak Everything, D&O and Peak Oil - Carbon - Water - Food, D & O and the Bankers and Insurers.  The series runs sequentially over these various subjects.

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ASrIA Sustainable Investing Conference outcomes; 

What they wanted

The conference that prompted this series of blogs on Directors and Officers and Peak Everything, was perfectly constructed in what they called “Across the Value Chain” of investing.  They had senior executives of stock exchanges, of index managers, of mutual and pension funds, of fund managers, of union trustees of funds, to different style of fund managers, and insurers, and associations, and assets allocators, from all regions of the world.  That is, the entire value chain of investing.

At the end of the conference, during the summary a couple of key ideas emerging from the delegates were presented.  Key of these, and discussed at some length, to paraphrase, were:

·         “new regulation to force companies to measure, monitor and report their sustainability footprint”; (that is, investment managers wanted this information but couldn’t get it from Directors and Officers of companies) and 

·         that companies be required to make an “externality statements” (different from the above); and

·         the lament that when companies are reporting their sustainability foot print information as part of the mandatory reporting and disclosure regime, “ investors were not rewarding them for it”. 

Whatever the dis/agreement about whether these are correct or not, they were clearly the outcomes from the meeting of minds of the international executives.

It was at this point that an out of body experience started happening;  like watching a ventriloquist and their puppet.  You see the mouth open and shut on the puppet, and yet you know that the person saying the words must be the person sitting beside them, but you keep watching the puppet.  It was a state of cognitive dissonance. The words didn’t appear to match the reality of the world as it already exists.

Because if I had been attending a conference of Directors and Officers, the latter would have been saying the direct opposite; that there is too much regulation and reporting required already, of such scope, that it stifles and confuses investors. 

The dissonance was between wanting more regulation to force companies to price and report their externalities on the one hand, and the existing mandatory and non mandatory international regulation on the other, that on its face, already requires companies to do exactly what was requested by the conference. 

In the end, there was a call for regulation at the conference, that as a Director and Officer I believed was already in law.  Hence this research on Peak Everything and the questions (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?  

Directors roles responsibilities and legal obligations / Pricing externalities

The first question took a week, so there can be no argument that a Directors and Officer can become quickly informed on the peak of resources on there doorstep.

The answer to the second, does Peak everything matter, is “yes”.  In the preceding reports on this website, I have considered Peak Oil, Carbon, Water and Food.  And each and every one of those topics based on reasonable research is hitting the tipping point into resource depletion. 

It remains difficult to understand, having done the research, how any Director and Officer would not be considering the risks of resource depletion within the business plans today.  And the potential for catastropic risks to their businesses. 

“Oi, that’s bad news then.  The wife’s a bit worried too.  What about your company?”  Don’t know.  “But haven’t you checked it all out?” No.  “What about the oil thingey?  Doesn’t it worry you?” No.  “But why not, sounds pretty serious to me.”  Don’t know.  “Well what about my shares then? Are they safe?” Don’t know.  “You donna care?” Nuh. ........And so goes the discussion on peak everything between the “reasonable man” on the omnibus in Clapham[i] and the Director / Officer of a large listed company. 

It could just as easily represent the business man on his way to work by fast train in China, by rickshaw in Phon Pen, ferry in Sydney, or the metro in London. 

This legal term would be familiar to any Director or Officer in countries with the Westminster legal jurisprudence.  In common law it is an objective measure against which any individual’s conduct can be measured for determining negligence in both criminal and common law.  If there is a duty of care, and an objective standard has been breached, then liability could arise. Some criminal, some common law.

Otherwise, the business judgement rule whereby Directors and Officers must only ensure that they are reasonably informed before making a decision, applies (as a generalisation). And they will be measured against their peers.  I think the series of reports so far on this blog, proves that it is so easy to be reasonably informed on this topic that that defense would fail.

Arguments Against Directors Roles and Obligations

Directors and Officers do not have obligations to individual shareholders nor anybody / thing else other than to the company; and their fiduciary duty to shareholders extends only to loyalty and care.  Few people understand that.  Unless a Director of a fund manager, or bank, or trustee, who have fiduciary obligations there are few obligations to anybody.  Indeed it has been expressed in the following quite clearly that a Director and Officers obligation on the part of the company is to optimise every known resource until there are none left, without any comeback whatsoever.

 “In The Failure of Corporate Law, (pp. 73-74) Professor Kent Greenfield of Boston College observes that the law normalizes, and even defends, corporate law breaking. He summarizes the recommendation of widely quoted legal scholars Fran Easterbrook and Daniel Fischel that “corporations should, with some exceptions, seek to maximize profits even when they must break the law to do so… . As long as the expected penalties from illegality are less than the expected profits, the corporation should act illegally.” According to Professor Greenfield “there is not a single contemporary example of a court finding that managers breached their fiduciary duty by causing a firm to break the law when it was profitable to do so.””[ii]

This is the classic, do first and apologise later, strategy.  Increasingly the latter part is going to cost shareholders money in the form of fines or judicial orders. BP is an example, and so is News of the World which ended in the papers complete demise, losses of jobs, and hopefully billions in restitution.  The Global Financial Crisis is another, that has yet to completely play out with Occupy Wall Street going global and viral.

In all cases, on opposite sides of the world, the outrage of the populace caused intervention by governments.  And significant cost,  including criminal charges, to companies, possibly their Directors and Officers. 

And willful blindness is not a legal defense, however I think this paper has shown it is near impossible to use that as a defense given the sheer scale of published data on Peak Everything. Courts appear to rule that a defendant should have known and the consequences are defined as criminal negligence.

Strategies For Directors and Officers Reporting

It strikes me that using all resources to their extinction is not a good short or long term strategy for a company.  Maybe outsourcing operations risk to another country, such as China, short term, appeals, but it would appear that there had better be a plan B because that is not going to last too long either. 

I once had a highly respected Managing Director say to me that boards should not be concerned with social issues.  “Our responsibility is to shareholders, and that means profit”. His customers were retail; his company employed tens of thousands of ordinary people; largest market share in Australia.  That company survived the GFC but what if it hadn't.

Certainly, the first stop would have to be the company’s Directors and Officers insurance.  Are you covered for gross negligence?  For all the legal risks in a space where class actions are rising?  What about reputational risk, could the company recover?  What about government intervention?

It is reported “Many lawyers believe that [environmental] cases could follow the trajectory of tobacco and asbestos litigation, saddling high emitting companies that failed to act on GHGs, with potential massive claims for damage (Lambert 2004)”

The final response of Directors and Officers would be to measure, monitor, report and manage your FOWC Peak footprint.  And build strategies around that to mitigate risks, because as mentioned before, everybody else is starting to measure it for you.  Of course evan if measuring your FOWC Peak footprint, you could still keep chewing through resources until they are all gone, your costs will rise exponentially, but at least you will be able to measure when the last tree is standing so you can substitute it with something else. There’s a plan.

HE was the last tree standing no more could there be found the last one of a dying breed growing strong in fertile ground they slaughtered all his relatives his sister, mom, his dad his brother, uncles, cousins and all the friends he had 

He watched how humans killed with their loud machines and saws sparing nothing for the future  dismissing Mother Nature's laws there would be no other trees for kids to climb and play

no more playing hide and seek nor a shaded place to lay

He knew his time was over  in minutes he would die

He stood up to his full height so they would never see him cry have you any last words old tree

before we cut you down only a few said the ancient tree please gather all around from the very beginning of your time   we have kept your kind alive  we have made your sturdy houses as you used us to survive  we were boats for you to travel wood for your steaming train shade from the hot, hot  sun and shelter from the rain yes

He told the murderers come close and you shall see as they all danced and laughed at the ancient dying tree laugh you greedy people you shall never be denied your greed is your undoing as you are never satisfied spend your money quickly spend your blood money fast it will only buy you possession and possessions never last how will your kind ever survive clearing everything from the ground building your ugly buildings blind to beauty all around they killed the tree with fury as He fell on grass and cried a tear fell from God's very soul as the last tree on Earth had died~[iii]

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[i] Wikipedia:  The man on the Clapham omnibus is a reasonably educated and intelligent but non-specialist person — a reasonable person, a hypothetical person against whom a defendant's conduct might be judged in an English law civil action for negligence. This is the standard of care comparable to that which might be exercised by "the man on the Clapham omnibus" mentioned by Greer LJ in Hall v. Brooklands Auto-Racing Club (1933) 1 KB 205.  In Australia, the "Clapham omnibus" expression has inspired the New South Wales and Victorian equivalents, "the man on the Bondi tram".^[5] and "the man on the Bourke Street tram".^[6] In Hong Kong, the equivalent expression is "the man on the Shaukiwan Tram." http://en.wikipedia.org/wiki/Man_on_the_Clapham_omnibus

[ii] How to Liberate America From Wall Street Rule, July 2011, primary author David Kortenhttp://www.neweconomyworkinggroup.org/sites/default/files/LiberateAmericaONLINE.pdf[ii]

[iii] http://open.salon.com/blog/scanner/2011/03/23/the_last_tree_standing