Corporate Social Responsibilty doesnt exist.

"Corporate Social Responsibility doesn't exist." A bold statement right? But in all sincerity what exactly are the organisations of the UK and across the world doing to be socially responsible bar the bare minimum legal requirements?


The general theme of my blogs has centred around the lack of responsibility the government and our businesses are taking to overcome the current economic crisis. To grow our economy these companies must be prepared to be reinvest into the UK. Currently none of the big players seem prepared to do this because in business terms, investing money into something that is not going to maximise share holder profit is ludicrous. Investors are looking for short term profit and do not care about the long term impact to society.


Recently Business Link a UK government lead support system set up for all sizes of UK businesses released this statement along with guidance on how firms can engage in CSR,

"Your business doesn't exist in isolation nor is it simply a way of making money. Your employees depend on your business. Customers, suppliers and the local community are all affected by your business and what you do. Your products, and the way you make them, also have an impact on the environment."

Although the government are publicising these concerns, how far are they actively showing interest in encouraging businesses to give back to their communities. 


Last week I attended a local business meeting in my home town of South Shields to discuss the possibility of obtaining a £100,000 grant. The grants have been allocated from the government in response to the Mary Portas review of the high street (look at my first blog for more info, link below).  The grant was by all means  difficult to get hold of as only a few local authoties would qualify dependent on who came up with the best idea. 

First of all its ridiculous to suggest that £100,000 is going to make a great deal of difference to many struggling worn down high streets.  Furthermore rents still remain severely high. £100,000 would barely cover a years rent in South Shields, which by the way is predominately full of empty worn down units and bottom end low cost retailers such as pound land and Gregg's. Low cost brands flourish in a recession.  South Shields high street like many others screams out 'do not invest in a business here'. Are the government out of touch or are they turning a blind eye to the bigger picture? Are these grants just a way of trying to keep local governments happy whilst things inevitably get worse?

I challenged a local councillor on why rents had not been reduced in line with the current conditions, and why landlords weren't prepared to take a cut in order to at least get some sort of income. I was flabbergasted with the response. The majority of these premises are owned by overseas investments companies and pension schemes. These investors have such a vast portfolio that abandoned stores like these are simply dots on their ever expanding maps. One overseas investors didn't even know that they owned one of these properties until they were contacted by the local council. Once again a clear example of how global economy is bad for individual countries who are finding themselves worse off then ever before. 

Fundamentally the drive to extreme profit and shareholder wealth is what has caused the majority of the issues mentioned above. GDP and overseas investment is in my opinion capitalism gone badly wrong. 


I find it difficult to see how companies will ever be socially responsible. Business isn't positive now especially when on a grand scale. Even sourcing ethical produce is often done so as a marketing strategy and practises tend to be not so ethical in real life. I wont even mention the impact that the behaviour of these large corporations is having on the environment, I don't have the line space.

In the video below Micheal Moore a personal favourite of mine compliments this notion beautifully. 

If corporate leaders want to see this country and countries alike flourish again there must be investment within the community. They must stop fighting to be the richest. This is not going to get us out of this crisis and this will not improve the world we live in. Corporate Social responsibility is caring about the world we live in. 






http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1075408468
http://www.guardian.co.uk/environment/2012/feb/16/al-gore-quarterly-reporting
http://www.money.co.uk/article/1002519-the-credit-crunch-menu-how-the-recession-is-changing-what-we-eat.htm
http://www.maryportas.com/news/2011/12/12/the-portas-review/

Merger and aquistions - Why two is not always better then one .....

On paper mergers always sound like a great idea. The joining of two well established companies can surely only mean twice the profit and expertise right? WRONG! In fact theory even tells us that mergers are predominately a bad idea so why do companies continue to do it?

There are many theoretical explanations of why mergers and acquisitions come about, different types of mergers which exist and the benefits and negatives of doing so. The one which I believe underpins all mergers and acquisitions it that of Hubris. Hubris is the notion that management get too sure of themselves through times of good results. The effect of this is that managers think that they can identify why other companies are not doing so well and believe that acquisition will improve the situation.

It is my personal belief that mergers and acquisitions only work when the intention is to increase greater economies of scales. This is particularly applicable to companies within the oil industry who need to merge to gain access to limited exploration and production sites. However even this is not always plain sailing.

The merger of BP and Tyumen Oil Company is a great example of how coming together can have significant benefits in terms of improving the balance sheet and revenues. Profit Margins have increased year on year and only today they have announced another takeover of the Koltsovo airport company.

But despite all of these successes the greatest press releases TNK-BP have received have been about the internal disputes the new partners have undergone over their time together. Collapsed deals and disagreements on strategy finally came to boiling point last year. Russian partners accused BP of foul play resulting in an embarrassing and aggressive statement being made from TNK-BP when bailiffs turned up to the UK offices. Although they have now settled and made public displays of unity - for the most part this has been a very expensive fall out for BP. Subsequently BP  had to sign over assets to TNK-BP as a means of out of court settlement and took the costs of a failed deal with Rosneft.

I would imagine this kind of outcome was not anticipated at the start of the deal. BPs ex chief exec Lord Browne was once quoted as saying "There is a big cultural problem with mergers or equals ... in the end their has to be a controlling strain from the two companies'. Although I cant say that this was 'the' case for the TNK 50/50 deal, it seems obvious that when BP went into partnership with 5 lesser experienced Russian billionaires, this would have been the consensus. Unfortunately for BP the partners weren't willing to stand so silently and be used in the pawn game of oil exploration. The question for BP was - was it worth it? Did the profit outweigh the cost? According to the 2010 end of year report no - but account disclosure is another issue with in itself.......

What this example does teach us is that unless one part of a merger group is willing to step aside and let the other be in charge then it can never work, or can do so only at a cost and hold the potential to damage professional reputation.

http://www.ft.com/cms/s/0/1fa32f2c-03c9-11e1-bbc5-00144feabdc0.html#axzz1oXNTx46G
http://english.pravda.ru/news/russia/18-08-2003/51950-0/
http://blogs.ft.com/beyond-brics/2011/08/31/bp-another-mauling-in-moscow/#axzz1oXZajoQ1
http://www.ft.com/cms/s/0/0fe8475e-67b8-11e1-b4a1-00144feabdc0.html#axzz1oXNTx46G
http://www.infoworld.com/d/the-industry-standard/the-7-worst-tech-mergers-and-acquisitions-168942
http://www.bloomberg.com/quote/TNBP:RU
http://www.4-traders.com/TNK-BP-HOLDING-OAO-6498768/news/TNK-BP-HOLDING-OAO-TNK-BP-Acquires-Fuelling-Company-at-Koltsovo-International-Airport-in-Ekaterinbur-14209101/
http://www.ft.com/cms/s/0/164ea02a-241f-11e1-bbe6-00144feabdc0.html#axzz1oqD6qOAD

Foreign Direct Investment - Doing our part in the global economy? Or Damaging our own trades industry?

For large corporations Foreign Direct Investments (FDI) seems to be the most sensical approach in maximising shareholder wealth. Foreign markets can provide a more skilled trading workforce at a lower cost. Similarly raw materials are more easily accessible abroad therefore again reducing costs. Acquisitions and mergers through foreign direct investments can also help corporations tap into new market places. This is particularly true of the oil industry where mergers can take place to access mining platforms in overseas waters.

Beyond the obvious financial incentives of FDI exists the bigger picture consequences. A general theme of the blogs I write is how the continuous focus on maximising shareholder wealth can have detrimental effects on a countries own economy and industry. To me for the most part FDI is no exception particularly in the industry sector.

For many years now we have seen a huge increase in overseas supply within many industries but particularly in the clothing industry. China and India among other Far East countries have provided developed countries with astronomically low unit prices. This has led to the birth of the 'throw away fashion' phenomenon across our own high street from the likes of Primark and Asda George among others. It’s not just the lower end retailers who are using such a supply chain - middle end retailers such as next and even high end brands such as Hugo Boss and Ralph Lauren are all choosing to manufacture in the Far East as a means of increasing margins. More over the Far East is now able to provide a more skilled workforce than the UK trade industry along with a better portfolio of up to date machinery and technology. The UK can no longer compete with the Far East from all angles - cost, skill and quality.

The major benefiter of this is that the Chinese economy in booming. Whilst this is great for China, but as a result the UK retailers who have invested so heavily into the Far East trade industry are subsequently seeing an increase in costs. Labour costs in particularly are increasing as a result of the boom again impacting the margins of the retailers.

Furthermore India’s recent export ban on cotton has caused further price increases. Whilst high street favourites like M & S and H & M are tolerating decreased margins, price increases are not optional in today’s heavily price lead market place.

As Chinas stability and industrial strength grows and the UKs clothing industry declines FDI in overseas supplies has effectively led retailers to shoot themselves in the foot. Why? Because we are already reliant on overseas manufacturing meaning that price increases are already becoming out of the control of the retailers. Because the UK industry has fallen so far behind through lack of investment, retailers no longer have that industry to fall back on. Furthermore the loss of UK jobs in the clothing manufacturing industry has also impacted the economy. The trend to outsource to developing countries has led to an increasingly problematic employment issue. Unemployment rates of young people leaving school and university are now higher then the wuropean average. This is simply because there are not enough labour intensive jobs or apprenticeships left as the industry sectors continue to diminish. Young people feel that the main route to employment is through professional qualifications meaning that the level of graduating professionals are greater then the professional jobs available.

If Britain is to recover stakeholder investment is crucial. Manufacturing needs to be promoted within the UK and investment needs to be made from both the government and private sectors to encourage growth. Whilst this all sounds very patriotic it’s not a case of being terribly 'British' but more of a desperate bid to bring back a dying economy within the UK. The UK cannot continue to push cash flows into foreign market places when its own market place so desperately needs boosting. Presently UK companies are doing so for the sake of being ethically correct (boosting developing countries) or for the short term expansion of profits (maximising shareholder wealth), putting their home country’s needs aside. Now that is being terribly British!

http://www.peoplemanagement.co.uk/pm/articles/2009/01/uk-youth-unemployment-rises-above-european-average.htm

http://www.ft.com/cms/s/0/08b600fc-66f0-11e1-9d4e-00144feabdc0.html#axzz1oXNTx46G

http://www.ft.com/cms/s/0/e02d1cd0-690e-11e1-9931-00144feabdc0.html#axzz1oXNTx46G

http://www.ft.com/cms/s/0/97f3f5d4-6076-11e0-9fcb-00144feab49a.html#axzz1oXNTx46G

http://www.ft.com/cms/s/0/355229a4-2d17-11dd-88c6-000077b07658.html#axzz1oXNTx46G