Corporate shareholders are acting on climate change

While fossil-fuel funded politicians avoid addressing climate change and strip away governance enabling industry polluters, shareholders have been picking up the baton. Last week, Reuters published an article called “Chevron ties executive pay to methane and flaring reduction,” which defines specific gas emissions targets.

The article penned by Jennifer Hiller notes that it is not just executives with incentive plan targets to reduce emissions. 45,000 employees also have incentive plan emission targets. In other words, their pay is tied to combatting climate change. The intermediate goal is to reduce gas emissions by 25% by 2023.

While Chevron is the first to tie incentives to reducing gas emissions, in the month before the current US President announced our pullout of the Paris Climate Change Accord, three energy companies -ExxonMobil, PP&L and Occidental Petroleum – announced shareholder votes requiring management to report on efforts to address climate change. The Exxon-Mobil vote is telling in that they face a shareholder lawsuit and one by the New York Attorney General, Barbara Underwood, for misrepresenting the impact of climate change on their business to investors.

Per The Guardian, the NYAG lawsuit notes Exxon’s “longstanding fraudulent scheme” to downplay the impact of climate change including under-representing the “proxy costs” of fossil-fuel extraction. This lawsuit follows a three-year investigation and uses Exxon’s own research and scientists’ speeches against them. Before they took a “global warming is a hoax” public relations stance around the turn of the century. Exxon was active in climate change research. Even Shell produced a video in the 1990s that was made for educational purposes about the dangers of climate change.

But, it does not stop there. Well before fossil-fuel company shareholders made these impositions on management, more forward thinking companies like Amazon, Facebook, Google, IKEA and Walmart have invested in renewable energy like wind and solar energy. IKEA and Walmart are using their expansive store rooftops to place solar panels, while the three technology companies have used all of the above renewable energy strategies to power their  data centers. In my state of NC, these companies have helped propel the state forward as a top four solar energy state.

Let me close with my favorite Super Bowl commercial of last week, Budweiser produced a commercial that noted their beer is now being produced by wind energy. Seeing the Clydesdales meander down a road surrounded by windmills was a beautiful sight. It showed this is not a future goal – it is here. And, just to show it is making a difference, over 1/3 of Iowa’s electricity is produced by wind energy and Germany just announced renewable energy now exceeds coal energy as the biggest electricity source and they plan to be 100% renewable energy powered by 2038, twenty years from now.

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There’s a lot of “money” in songs

After hearing me sing (of course singing is kind) a few lyrics to “Money,” by Pink Floyd, my daughter suggested a post on songs with “money” in the title. The song begins with a cash register ringing up sales, then proceeds with a well-known base guitar lick. Here are the first few lines:

“Money, get away
Get a good job with good pay and you’re okay
Money, it’s a gas
Grab that cash with both hands and make a stash”

I think the most famous money song is by The O’Jays called “For the love of money.” It is based on the biblical verse from Timothy, “For the love of money is the root of all evil.” The song starts with the words “Money, money, money, money…money,” Then they repeat it five more times before heading into the gist of the song. Here is a verse late in the song:

“I know money is the root of all evil
Do funny things to some people
Give me a nickel, brother can you spare a dime
Money can drive some people out of their minds”

Another favorite is courtesy of Donna Summer. “She works hard for the money,” is a pulsating disco song that she is known for, but this one has more meaningful lyrics like this one:

“It’s a sacrifice working day to day
For little money just tips for pay
But it’s worth it all
To hear them say that they care”

Shifting gears to rock-n-roll, an early Dire Straits song poked fun at MTV with “Money for nothing.” Mark Knopfler was joined on this song with a haunting harmony from Sting. In essence, it is hard-working people wishing they were MTV singing stars as they lament without realizing the hard work and dues they had to pay:

“Now that ain’t workin’ that’s the way you do it
Lemme tell ya them guys ain’t dumb
Maybe get a blister on your little finger
Maybe get a blister on your thumb.”

Two other songs about money are worth mentioning. AC/DC sang of money in “Money talks” and Notorious B.I.G. rapped on about “Mo money, mo problems.” The former speaks of how popular one is with money noting all the things they can buy, while the latter speaks to how that popularity causes more problems with folks coming out of the woodwork asking for some.

Let me close with a song which comes from the play and movie “Cabaret.” It is quite the comical farce and force in the play with a title similar to that of Pink Floyd’s, “Money.” Here is a sample:

“Money makes the world go around
The world go around
The world go around
Money makes the world go around
It makes the world go ’round.”

Money is needed to provide a roof over our heads and feed and clothe our children. These songs look at its acquisition and power from a variety of views. From the documentary movie “I AM,” the key lesson is money cannot make you happy, but the absence of money can make you unhappy. That sums it up nicely.

America’s Top 40 – 40% turnover that is

Every Sunday for many years, Casey Kasem would play America’s Top 40 pop songs. Earlier this week, NPR reported another, but ignominious top 40. The current White House has experienced an unheard of turnover rate of 40%. In other words, four out of ten staffers who were on the payroll a year ago have departed.

To add some seasoning to this, two of the most difficult jobs to keep people are customer service representatives and bank tellers, which often see turnover rates at or above 40%. So, to see similar turnover is alarming. But, how does this rank to other White Houses?

Earlier this year, an article appeared in the Brookings Institute webpages called “Why is Trump’s staff turnover higher than the five most recent Presidents?” by Kathryn Dunn Tenpans. She focused on A team turnover, but the turnover problem is pervasive. Per the article, “President Trump’s A team turnover is record setting – double the previous leader, Reagan, and more than triple his immediate predecessor, Obama.”

Why is this important? There is a huge loss of productivity in those that leave as  well as those who replace them, as they get up to speed. Plus, there is downtime for the managers as they backfill and take time to interview, hire and coach. In some of my previous work in HR for a large bank, i used average productivity ratios and turnover by group to estimate the cost of turnover at roughly 1 1/2 times the compensation expense of the departed people.

Per the Brookings article, “while some turnover is expected and possibly beneficial, excessive turnover portends a problem.” This data is relevant with more than a few stories about the low morale in the White House. Several sources have cited feuding factions and jealousies as well as a leader who perpetuates and accentuates a highly toxic environment.

When people are not productive in jobs of import, it is harmful to their efforts. It is also harmful to our country. The President has been covered extensively over the years by financial reporters and biographers. His sales skills are envied, but the same cannot be said for his management skills. Trump has said on more than one occasion that he likes to pit  people against each other and does not mind the chaos. Well, that is an absolutely horrible management approach. And, the inconsistent messaging from the White House reveals as much, as well as its turnover.

Thoughts for Thursday

Here are a few random thoughts on a rainy Thursday, with more rain to come in the days ahead.

A retired ambassador said recently, the US strength is more than its military, it is its relationships with allies. What concerns me is we are devaluing our allied relationships. This is echoed by the European Union Chairman Dean Tusk. Tusk said the EU must be more united than ever before to deal with what he called Trump’s “capricious assertiveness”. My question is this how we want to be viewed by our friends?

Another retired ambassador to Israel said while he agreed with the move of the US embassy to Jerusalem, the US administration made two mistakes. It should have been announced in the context of moving toward a two state solution. In essence, the US placed little obligation on Israel for this move. Also, celebrating the opening on the anniversary of Israel is an insult to Palestinians. This date is not viewed favorably, so the celebration rubbed salt in a wound.

Assuming the role of ambassador for the disenfranchised in the US, a huge opportunity missed occurred during the rushed tax bill which hugely favored companies and the wealthy. I favored some relief on the corporate tax rate, but we went way too far and are negatively impacting our huge and growing debt. The additional opportunity missed I am referencing is not imposing a requirement on companies to provide raises. One way of doing this would have been a concurrent increase in the US minimum wage moving it from $7.25 to a living wage of above $10 per hour. Token one-time bonuses are actually the barest minimum of what could be done with an annual tax break – how about a raise instead? More income to people in need is accretive to the economy.

Finally, I have seen footage of conservative news sources highlighting Venezuela’s problems as an indictment of socialism. While I am a capitalist, I also recognize our country is a mixture of both. Social Security, Medicare, Medicaid, unemployment benefits, and bankruptcy laws are all forms of socialism. We also have other restrictions to prevent unfettered capitalism. Venezuela’s problems are due to corruption and mismanagement that can be traced even back to the popular Chavez. His successor, Maduro, has shown a level of incompetence that is quite visible to all.

That is all for this Thursday. Please share your thoughts.

US CEO Pay has reached epic differential

As reported in The Guardian today, US CEOs now make in pay 339 times the pay of the average worker according to a Bloomberg study of 225 companies. In retail companies, the ratio is 977 to 1 on average. Let that sink in a little.

A quote from the article entitled “‘CEOs don’t want this released’: US study lays bare extreme pay-ratio problem” by Edward Helmore is very revealing:

“According to a recent Bloomberg analysis of 22 major world economies, the average CEO-worker pay gap in the US far outpaces that of other industrialized nations. The average US CEO makes more than four times his or her counterpart in the other countries analyzed.”

Some people may push back and opine that US CEOs may be worth 4X that of their non-US industrialized nation counterparts. If that were true, it would mean US company performance is 4X that of non-US companies and there would be a huge flight of capital to the US.

In my years as a consultant, I have seen CEO pay ratchet up over time, rewarding CEOs with stock grants and options. What happens is a competitive totem pole exercise, where the competitive pay analyses are upward elastic and downward inelastic (they go up more easily than they go down) over time.

I have also observed the 80/20 rule applies to CEOs as well, with 20% of the CEOs earning their keep. I have worked with egalitarian CEOs, benevolent dictator CEOs and some of the greediest SOBs you will ever meet. Seeing CEOs who realize the teamwork involved in the company making money is admirable. On the converse, seeing CEOs who are imperialistic is off putting. As I write this, I am thinking of the handfuls I worked with and some who were notorious over the years for their greed.

On the bottom end of this exercise are efforts to flatten pay for the average worker. Over time companies will use a variety of rationales and tactics to put lids on pay increases. The salary increase budget may be limited because of the uncertainty in the economy, the company is having some hardship or the company expects to have hardship. Sometimes concurrent with the salary budget, groups of people are laid off. Why is the timing an issue? By moving on lower performers, people whose salary increases would have kept the average percentage increase down are removed from the equation meaning better performers will now get lesser increases.

Coupling this with pressure on not increasing the minimum wage and to diminish the power of labor unions (that is another story), these ratios result. I respect greatly the need for incentives to help reward successful CEOs, but we must not forget who helped them earn those numbers.

We have a poverty problem in this country. We have a middle class where too many are living paycheck to paycheck. Yet, our leaders passed a tax law that benefits CEOs, their companies and the wealthy by a large margin. It would have been nice to have at least obligated the pass through of salary increases or an increase in the minimum wage to a living wage. So, do not expect this ratio to measurably decrease any time soon.