Weekend Box: Net Zero Interest, Is C.o.E a Broad Church? & more
Welcome to the Weekend Box, Audley’s weekly round-up of interesting or obscure political, business and cultural news from around the world.
In the wake of the devastating earthquakes in Turkey and Syria, we wish to express our solidarity with those affected. The scale of suffering and loss is unimaginable and we are keeping those who have lost loved ones in our thoughts.
AMERICANAS BROUGHT TO ACCOUNT
An ongoing scandal with one of Brazil’s largest retailers is causing an international stir, as a $4bn-hole discovered in the accounts of Lojas Americanas threatens to drag in the country’s three richest men and international auditor PwC.
In late January Americanas, found on high streets and in malls and employing over 40,000 people, filed for bankruptcy protection after it emerged that there were “inconsistencies” in its accounts worth approximately 20 billion reais, or $3.8bn. The retailer, which counts three of Brazil’s richest men amongst its shareholders – billionaires Jorge Paulo Lemann, Marcel Telles, and Carlos Alberto Sicupira of investment firm 3G Capital – appears to have inflated profits by concealing loan repayments to suppliers on its accounts, according to the Financial Times.
In the wake of the discovery, Americanas CEO Sergio Rial resigned along with CFO Andre Covre, less than two weeks after Rial’s appointment. It was subsequently revealed that the retailer owed creditors over 41 billion reais (approximately $8bn), with one, investment bank BTG Pactual, fighting a short battle in court to be able to seize Americanas’ assets to compensate for its debts. When Americanas revealed it had just 800 million reais left, not enough to match the 1.2 billion reais BTG was allowed to withhold, the retailer filed for bankruptcy protection.
The three billionaires behind Americanas have claimed that they were unaware of the accounting ‘inconsistencies’ that led to the retailer’s downfall, while Milton Maluhy Filho, the CEO of Brazil’s largest private lender Itau Unibanco, described them as evidence of fraud this week. Weeks on from the initial discovery, the scandal is growing to international scale, as consumer and corporate activists have filed lawsuits against Americanas’ auditor PwC for failing to address the irregularities in its accounts.
For the time being, the question of who will take the fall for this scandal remains open – so too does the question of how many more individuals and entities will be caught in its web.
Image credit/PxHere/Public Domain
BIG FIVE: NET ZERO INTEREST
This month the “big five” – Exxon, Chevron, Shell, BP and TotalEnergies – revealed that 2022 was their most profitable year in history, at a combined total of $200bn. However, record-high profits have not translated into more investment in the green transition – in fact, it’s the reverse.
BP, which was one of the first energy companies to announce its 2050 net zero ambition, said that this week it would be rowing back on its climate targets. With oil and gas booming, the company is increasing its investment in the production of fossil fuels by $1 billion and paring back its pledge to cut emissions by 35-40% to 20-30%.
Other energy companies aren’t much better. Shell has reported that there would be no increase in its investments in renewables, carbon offsets, carbon capture, and biofuels, which are currently less than half of what the company invests in oil and gas. It also faces a battle in the English high court over its ‘flawed’ climate strategy with Clientearth.
Despite pressure on companies to address the climate emergency, oil and gas is proving a hard habit for energy companies to break. Naturally, this has sparked ire among environmental activists and BP CEO Bernard Looney has responded by saying that the company was just responding to ‘what society wants’. The war in Ukraine has sent governments scrambling to secure new supplies of energy and with their demand for drilling rising, some blame can be laid at the feet of policymakers. Messages to energy companies have been mixed. Take President Biden’s State of the Union address, where he criticised the ‘outrageous’ profits of energy companies, and then went off script to say that the US would need oil “for at least another decade” and “beyond that.” This ongoing conflict between the government’s climate and economic goals is not unique to the US. In the UK, Chancellor Jeremy Hunt this week said he wouldn’t increase the UK’s windfall tax on oil and gas companies, due to the risks to energy prices and investment.
The climate crisis is not going away anytime soon and while energy companies have much to answer for, arguably governments are still lacking the consistent policies needed to seize the opportunities that climate action offers.
IS C.O.E. A BROAD CHURCH?
Same-sex marriage has been legal in the UK since 2014, giving gay couples the same access to marriage as heterosexual couples - everywhere aside from the Church of England, which has an exception from the law due to its state-given ability to self-govern. Whether to alter this has been a matter of much debate within the Church of England, but at the start of the year Bishops refused to back the suggested change to the status quo.
However, yesterday the Church of England’s General Synod voted in favour of allowing blessings for the civil marriages of same-sex couples. This followed a fraught debate at the national assembly of the Church of England, with the Archbishop of Canterbury Justin Welby holding back tears as he considered the risk that “people who will die, women who will be raped, children who will be tortured” in anti-gay countries around the world if the proposal passed. Other members spoke of their feelings of discrimination and alienation from the church.
However, the motion did not seek to change the position on gay marriage, meaning same-sex couples are still unable to marry in church. The Church is facing mounting pressure from Parliament, with a group of Conservative and Labour MPs exploring how a parliamentary intervention might force the church to change this stance. Welby has pushed back against “being told exactly what to do” by MPs and said “I’m not doing any of it.”
Also, this week, the Church announced it would be reviewing the use of gender-neutral terms for God, recognising that “God is neither male nor female, yet the variety of ways of addressing and describing God found in scripture has not always been reflected in our worship.” Many priests already opt for ‘God’ and ‘Our Father and Mother’ instead of ‘he’ and ‘Our Father’, but have now officially announced a commission into the matter which will launch in Spring.
Whether this signifies a shift towards a more ‘woke’ establishment seems unlikely, but this week’s motion is an important step forward from the Church’s historic position on homosexuality.
Image credit/Steve Lynes/License
BOEING TAKES REP STRATEGY TO THE MAX
In his book Flying Blind, investigative journalist Peter Robison chronicles the downfall of Boeing, one of the great American companies of the 20th century.
For years, he argues, the company built its brand and reputation by listening to customers and responding to their needs. As a result, safety and reliability were key. Only when the priority switched to focusing on shareholders did the rot start to set in – leading inexorably to the two devastating 737 MAX crashes in 2018 and 2019 that saw the aircraft grounded and faith in the manufacturing giant destroyed.
Robison’s book is a devastating critique of a culture gone awry and of a political and regulatory system that has been captured by corporate interests. If you’re anything approaching a nervous flyer, it’s maybe not for you.
But though the repurposed MAX is now back flying, the legacy of the culture that led a trusted brand like Boeing to put a fundamentally unsafe aeroplane in the skies continues to linger.
This week, the new leadership announced it was shedding 2,000 jobs in what was seen by many as just the start of a restructuring programme forced on the company by the need to get its reputation and strategy back on track. The announcement came just a week after new CEO Dave Calhoun used the delivery of the last ever 747 to roll out of the factory to tell industry-watchers that no new models would be launched in the next ten years. “What kind of vision is that?”, some incredulous analysts asked.
Boeing is now said to be enforcing a policy that sees the bottom 10% of performers let go every year. While not uncommon in corporate America, it’s an approach made famous by another large US company, Enron. The cases may be very different but both are perhaps an example of what can befall even the biggest companies when culture goes wrong.
SHAPING REPUTATIONS 400 YEARS ON
Historians often say that King Charles I was “more successful in death than life.” After a recent finding and decoding of new documents, the same assessment could be made of Charles’ grandmother, Mary Stuart, better known as Mary, Queen of Scots.
Over the years, the grain of historical opinion about Mary has largely cast her as a witless woman hopelessly manipulated by the male nobility – Scottish, English and French – around her. Indeed, a seminal biography of Mary by the late Jenny Wormald is entitled ‘Mary, Queen of Scots: A Study in Failure’.
The discovery and decryption of letters written by Mary have kept the debate about her alive. The coded letters are fascinating historical artefacts in themselves, displaying brilliantly complex ciphers. They serve as a reminder that there is still much about the past to uncover.
The contents of the secret correspondence – sent by Mary to the French ambassador - have added weight to a more positive image of her. Professor John Guy of Cambridge University describes her as “an astute and capable political analyst” and a “shrewd judge of character.”
It marks something of a rehabilitation of Mary’s reputation, building on the sympathetic view of her in the 2018 biopic. Alas, it is all far too late for Mary, who was beheaded 436 years ago this week for her alleged complicity in plots to assassinate Elizabeth I.
It is remarkable that Mary’s character and her abilities are still being debated today. History can end up being kind to you – but waiting for that potential outcome isn’t a reputation strategy that Audley would recommend…!
And that’s it for this week. I hope you found something of interest that you might want to delve into further. If so, please get in touch at cwilkins@audley.uk.com.
For now, that’s the weekend box officially closed.