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News Digests

Stay abreast of what’s happening internationally with developments in corporate public affairs. Here is news that you may find useful and interesting:

Losing our AAA credit rating is not a harbinger of doom. It could be a blessing in disguise.ND

John Quiggin, The Guardian, 12 July 2016

John Quiggin argues that in today’s debt heavy society the retaining of triple-A status is simply unnecessary. To retain a AAA credit rating any risk around investments must be avoided, usually at the cost of socially beneficial investment. With falling interest rates (currently at 2% for government bonds) there is little benefit in the government not following the heavily indebted Australian public and use debt as a financial management tool on a larger scale. The pursuit of austerity and retention of triple A status in Germany at the potential cost of the European Union dispels the myth of credit rating equating to financial or social security. For more information see:

Three amigos and two spectresND

The Economist, 25 June 2016

The North American Free Trade Agreement (NAFTA), enacted by George H.W. Bush in 1992 allows for free trade between the United States, Canada and Mexico. The free trade zone has boosted trade since its signing, yet growing protectionism and the rise of Donald Trump has placed the agreement at odds with a public voting for isolation. However, as the U.S.A aims to distance itself from the agreement Canadian Prime Minister Justin Trudeau has placed enormous effort into improving Canadian-Mexican relationships. This has taken the form of visa free travel into Canada. Whilst NAFTA maybe a small agreement when compared to the planned Trans-Pacific Partnership (TPP) consisting of 12 Asian and Latin signatories in addition to Canada and Mexico. NAFTA provides a platform for dialogue within North America, along with geopolitical and economic security threatened by the rise in protectionism and isolationism within the U.S.A. For more information see:

Tony Blair unrepentant as Chilcot gives crushing Iraq war verdictND

Luke Harding, The Guardian, 7 July 2016

The report of the Chilcot enquiry into the 2003 Iraq war has been published. The report, announced in June 2009, was designed to create a clear narrative of the motivating forces which led to British involvement in the Iraq war in order to determine both the legitimacy and legality of the invasion. The findings of the report found, ‘military action was not a last resort’, there was no imminent threat from Saddam Hussein, there was an unjustifiable over-estimation of the threat of WMD and ultimately the invasion had failed to achieve its objectives. The 2.6 million word, 12 volume report concluded that Tony Blair overestimated his control of the US led direction of the war and the preparedness of the British armed forces. For more information see

Olympics ease a blackout, and brands flood the fieldND

Zach Schonbrun, The New York Times, 3 July 2016

In the build up to the Rio Olympics the International Olympic Committee has revised Rule 40 of the Olympic charter. The rule dictates a blackout of non-sanctioned advertising during the Olympic Games and the run up. The revision allows sponsors to run Olympic based adverts, just before the Olympics, as long as they don’t explicitly link the product to the Olympics. This revision has the potential to devalue exceptionally expensive, sanctioned, adverts taken out by companies like Citigroup and Adidas. The loosening of rule 40 also brings in the issue of social media marketing which has become a key source of revenue for athletes and sponsors. A source that is far harder to police. Whilst, it has yet to be seen if more adverts and therefor attention to the Olympics will facilitate higher demand for products or over saturation will devalue expensive adverts. For more information see:

Uber rival gains ground in South East AsiaND

Newley Purnell, The Wall Street Journal, 4 July 2016

With Uber currently focused upon expansion within India and China funded by the recent $3.5 billion USD investment from Saudi Arabia’s Public Investment fund, it has growing competition within South East Asia. Ride-sharing application based companies have become the latest billion dollar industry, created by easy access to GPS enabled smartphones and the constant desire for ease of use. Whilst the marketplace for transport based services is large, accessing it has proved challenging with largescale public protest occurring from London to Sao Paolo usually combined with litigation. Market presence has proved important with the threat of ride-sharing services being banned or illegal (as in France) eliminating a customer base. Whilst the currently small Uber competitor ‘Grab’ operated out of Singapore has focused its expansion in the highly populous and less regulated South East Asian marketplace. Due to this Grabs current value of $1.6 billion USD is forecast to reach $13.1 billion by 2025. For more information see:

The former attorney general has said a second EU referendum would be legalND

Jon Stone, The Independent, 5 July 2016

The dust over the Brexit may be settling with the British economy gradually stabilising. The divisiveness of a vote split 52 per cent leave to 48 per cent stay is evident with renewed calls for a further independence referendum in Scotland, and even the satirical request for London to join the EU. With Dominic Grieve (the former conservative chief legal advisor until 2014) stating it is “possible that it will become apparent with the passage of time that public opinion has shifted on the matter. [And] If so a second referendum may be justified” and a study completed by Opinium indicating around 7 per cent of voters regretted casting their exit vote, whilst 3 per cent regretted voting remain, further complicating the situation. Negotiations surrounding issues such as the single market have been set back by the Conservative party still seeking a ‘captain’ to ‘steady the ship’ whilst the Labour opposition suffers a crises of both leadership and identity. Until the formal declaration of Article 50 (stating the UK will leave the EU) the divided-United Kingdom remains an unstable political and economic marketplace for both individuals and investors. For more information see:

JB Hi-Fi has strongest corporate reputation in Australia; regains top spot ND

AMR Australia with the Reputation Institute, 4 May 2016

JB Hi-Fi is once again considered Australia’s most trusted company, according to the Corporate Reputation Index. The Index is an annual study conducted by research consultancy AMR, in conjunction with the Reputation Institute. The research sources 60 companies from the IBIS World Top 2000 Company list and measures how Australians consider each company on products and services, innovation, workplace, citizenship, governance, leadership and financial performance. Notable companies and movements included Apple climbing two spots to reach number nine. According to AMR, concerns over Apple's governance and citizenship are still on the rise. Samsung declined one spot and was listed at number 3 in 2016. Qantas jumped five places from ninth in 2015 to fourth, while Woolworths fell from 17th in 2015 to 40th in 2016 and Australia Post fell from 6th to 19th, and 7-Eleven fell 20 places to rank at 56. Optus climbed 15 places to 28 while Telstra jumped four spots to number 50. Both positions are considered average or moderate, according to the list. Vodafone has moved up two places, and is now ranked 55, it is among the companies considered vulnerable. In 2009 it ranked number 24 and was well ahead of Telstra and Optus. For more information see:

Beyoncé and the cultural lure of sweatND

Angelina Russo, The Conversation, 12 April 2016.

Beyonce is among a growing number of celebrities who have launched activewear collaborations. The 24/7 activewear market taps into the health and well-being industry, and while it’s commonplace within the gym its popularity in the street is gaining traction also. Global sports apparel sales have risen 42 per cent to US$270 billion over the last seven years and is expected to grow to US$178 billion per annum by 2019, according to Morgan Stanley. Australia has seen annual growth of 8.8 per cent between 2011 and 2016, with the investment bank estimating that the industry could grow by a further 30 per cent by 2020. For more information see:

Wealthier World, Poorer Nation: The Problem with the Rise of the RestND

Jack Goldstone, Foreign Affairs, 28 March 2016

Movements such as Occupy Wall Street and the Spanish anti-austerity movement 15-M may lie at the opposite end of the political spectrum from populist movements such as the Tea Party, the National Front in France, and Pegida in Germany, yet they share a common origin: anger at those whom they feel have profited at their expense. A sense of hopelessness and lack of opportunity is accentuated by dramatic economic shifts. Alphabet Inc., owner of Google and the most valuable corporation in the United States today, employs 61,000 people in the United States; the next most valuable company, Apple, employs 76,000. Comparatively, at its peak, General Motors had 618,365 U.S. workers. Airbnb employs just 1,600 staff yet has a market value of over $25 billion. A study by economists at MIT estimated that 2.4 million U.S. jobs have been lost because of shifts from local production to imports. Those in the middle and lower classes feel left behind. A recent study by the Pew Research Center found that while 61 percent of U.S. adults lived in middle-class households in 1971, by 2014 that portion had fallen to 50 percent. For more information see:

The Industries That Are Being Disrupted the Most by Digital ND

Rhys Grossman, Harvard Business Review, 21 March 2016.

Digital is today integrated into every aspect of a corporation. The inability of leaders to adequately respond to its transformational effects is prevalent. Many are struggling to remove the barriers preventing them from maximizing the benefits of new digital technologies. An annual survey spanning over 2,000 C-level executives on the impact, structure, barriers, and enablers of digital technologies across 15 industries, has highlighted the impact digital is having by sector. Predictably, the most disrupted organisations were B2C, with media being the most disrupted and telecoms and consumer financial services close behind. Ninety percent of companies surveyed have a digital strategy in place. However, the speed of change has produced a skills gap, which is preventing many of these companies from moving more quickly. This article suggests that here are three levers organisations can pull to keep pace: catalytic roles; culture; and commitment. For more information see:

Sharapova and Celebrity SponsorshipND

Richard Edelman, Edelman, 11 March 2016

Maria Sharapova’s recent disclosure that she had failed a drug test that was administered at the Australian Open in January sent shockwaves through the tennis world. She tested positive for a recently banned substance called meldonium, which is used to treat heart problems but also has performance-enhancing properties. She is now facing a lengthy ban from the game, and Porsche, Nike and Tag Heuer, have suspended their relationships with her. In addressing the situation Sharapova followed the classic crisis management textbook in claiming responsibility, trying to provide an explanation, then offering an apology to the sport and to her fans. Richard Edelman outlines why the classic crisis playbook failed in this case. For more information see:

Your next car will be hacked. Will autonomous vehicles be worth it? ND

Jemima Kiss, the Guardian, 14 March 2016

The Insurance Information Institute estimates that by 2030, 25 per cent of all cars sold will be autonomous. As a result there will be an estimated 80 per cent fewer traffic accidents because of the increased safety of autonomous cars. However, security experts predict that hacking into self-driving or “autonomous” cars will become more commonplace. It is the criminals motivated by money that present the biggest threat and are likely to increasingly target self-driving cars. The US market for cyber insurance is witnessing rapid growth, from $2bn in 2015 to a predicted $7.5bn in 2020. For more information see:

Why frontline workers are disengagedND

Michael Bazigos and Emily Caruso, McKinsey Quarterly, March 2016

A recently published Gallup Poll found that just three out of ten American workers feel engaged by their job. The Gallup research determined that actively disengaged employees cost the US economy between $450 billion and $550 billion in lost productivity every year. McKinsey established that when employees are fundamentally motivated, they are 32 percent more committed to (and 46 percent more satisfied with) their jobs, suffer significantly less burnout, and perform 16 percent better. Survey results from 3 million employees at 300 organisations has helped McKinsey deliver insights as to why disengagement is so prevalent. Part of the problem appears to be overly optimistic views expressed by senior executives. For more information see:

Part-time employees face unconscious bias, research reveals ND

Sue White, the Guardian, 23 February 2016

The Australian Bureau of Statistics recently reported that 3.7 million Australians work part of the time, and research has indicated that Australians are looking for flexible work two-and-a-half times more today than two years ago. Although increasing numbers of Australians are looking for flexible working arrangements, such workers can be viewed as unproductive or less committed by their colleagues. Research conducted by Professor Robert Wood, the director of the University of Melbourne’s Centre for Ethical Leadership, found that the opposite is true. His research determined that flexible roles, when well implemented, create more productive employees. Also, these workers are extremely loyal, despite getting a bad rap as being poor corporate citizens. Telstra, in 2013, was the first major Australian company to offer flexible working arrangements to all of its staff. For more information see:

Does a pretty office make a productive workforce?ND

Oliver Balch, The Guardian, 11 February 2016

There has been significant research into how plants and flowers enhance one’s working experience and a demonstrated correlation between the scenic quality of our daily environments and our personal wellbeing. Greenery in the office has been shown to generate physiological responses such as increased brain activity and reduce stress hormones. A Harvard University research paper revealed that the cognitive performance of workers in “green” office environments was double that of workers in conventional offices. Architects and commercial property firms are increasingly adapting to the findings with designs progressively incorporating as much natural ventilation and daylight as possible. For more information see:

Apple results: talk swirls of iPhone declineND

Tim Bradshaw, Financial Times, 24 January 2016

The iPhone is one of the most profitable products the technology industry has produced. Apple’s profits are expected to hit $18.2 billion when it reports its quarterly profits this week. Although this figure is expected to set a new record for the most profitable quarter in US corporate history, it is just 1 per cent above the record it set a year ago. Analysts expect iPhone sales to rise slightly compared with its fiscal first quarter a year ago, however investors are beginning to question what the situation will be for the remainder of 2016. Morgan Stanley analyst Katy Huberty believes iPhone sales could fall below 50m units, down from 61m a year ago. For more information see:

Google strikes £130m back tax dealND

Jon Gapper, Financial Times, 23 January 2016

Google’s agreement with the UK to pay £130m in back taxes and higher taxes in the future may have implications for it and other multinational’s accused of aggressive tax avoidance. The deal traces back over a decade in the UK and comes after a multiyear audit by HMRC, Britain’s revenue service, of whether Google avoided tax by allocating profits to Ireland, where its European operations are based. Margaret Hodge, former chair of the UK parliamentary public accounts committee, accused Google of being “immoral” after it was revealed that Google paid only £20.5m in tax in 2013 based on attributed UK profits despite raising $5.6bn in UK revenues. For more information see:

Business will shrug off our loss of trustND

Michael Skapinker, Financial Times, 6 November 2015

Business continues to be mistrusted by the public, and recurrent corporate scandals seem to justify this. The recent scandal with Volkswagen comes after the 2008 financial crisis, banks’ exchange rate manipulation and the growing gap between top executive pay and that of the rest of society. The most recent Edelman trust barometer discovered that trust in business declined last year in 16 of the 27 countries surveyed. This mistrust is not new. Recent mistrust can be traced back to the insider dealing scandals of the 1980s, and with the collapse of Enron and Arthur Andersen in 2001-2. Others trace mistrust of business back millennia. Recent scandals have done little to limit business’ ability to bounce back. Consumer boycotts rarely impart much damage on corporations and the main impact comes from government clampdowns and increased regulation. Each time new regulations are implemented business starts lobbying against them, with the typical argument that proposed regulations will damage jobs or lead to companies moving abroad. For more information see:

Volkswagen’s deception tarnishes big business ND

FT Opinion, Financial Times, September 26 2015

Volkswagen’s use of a software device to hide the amount of pollution some of it diesel engines emit is a corporate fiasco comparable to the collapse of Enron, BP’s oil rig explosion in the Gulf of Mexico and the scandals that have engulfed the financial industry. It will inevitably lead to renewed doubts as to whether large corporations can be trusted to act ethically and honestly. Considering the enormity of the offence, and the fact that its actions were approved at a high level, the €6.5bn that Volkswagen has set aside to deal with the issue is unlikely to be sufficient. Large corporations face major challenges to gain the trust of their stakeholders. Milton Friedman wrote that the only social responsibility of a company is to increase its profits “so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”. For more information see:

The madness of drinking bottled water shipped halfway round the worldND

Oliver Balch, Guardian Sustainable Business, 9 July 2015

The bottled water industry continues to thrive. It is driven in the developing world by consumers who fear the consequences of drinking tap water and in the developed world by consumers who are increasingly conscious of the ill-health implications of drinking sugary drinks. Globally we now consume as much packaged water as we do milk, 30 litres per person per year, with global sales expected to reach 233 billion litres this year. The most obvious sustainability issue against the bottled water industry relates to imports. In the UK 22 per cent of bottled water is imported. Nestlé, Danone, Coca-Cola and Pepsi, the major players in the industry, are pursuing efforts to increase recycled content but progress remains slow. Coca-Cola introduced a plastic bottle with up to 30 per cent organic material and expects that a new generation of the technology could bring the organic content up to 100 per cent. However, it would appear that the optimal solution is to make community water systems safe, inexpensive and reliable. For more information see:

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