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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:

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:

Five flashpoints in Singapore’s general electionND

Mark Wembridge, Financial Times, 7 September 2015

Singapore’s election will take place this Friday, September 11, with some commentators suggesting it to be the city-state’s most important election since independence. The People’s Action Party faces a challenge for the first time in its half-century of unbroken rule. All of the country’s 29 electoral divisions are fielding opposition party candidates. The ruling People’s Action Party is virtually certain to retain power however public dissatisfaction is gaining and the opposition is becoming increasingly vocal, as Singapore’s economic model begins to show some signs of weakness and Singapore retains its position as one of the developed world’s most unequal societies. The five flashpoints dominating this poll are immigration, the dominance of the PAP, the economy, pensions and housing, and transport. For more information see:

Uber drivers' lawsuit granted class-action statusND

Fast FT, Financial Times, September 2 2015

A ruling in California has paved the way for the launch of a class-action law suit against ride-sharing app Uber, in an employment law case that will have strong implications for large parts of the “sharing economy”. The case will determine whether California’s 160,000 Uber drivers should be treated as full employees of the company rather than contractors. If Uber were forced to take on the full costs of employing its drivers, it could weaken the economic model of one of the most highly-valued tech start-ups and set a precedent that threatens other companies that rely on organising an army of freelance workers. It is estimated that labour costs for most sharing economy companies would rise by between 25-40 per cent if they were forced to switch from being simple marketplaces to full-service companies. For more information see:

China’s 20 Percent Problem: Millennial Migrants' Discontent ND

Damien Ma, Foreign Affairs, August 25 2015

China has approximately 260 million “domestic migrants”. This equates to roughly 20 per cent of the population. These migrants live as second class citizens because of a system known as hukou which prevents them from settling and easily accessing basic services such as health care, social security, primary education for their children, and decent housing. This system was implemented in the 1950’s to ensure a sufficient labour force was maintained in rural areas to produce food for the populace. The average millennial migrant (about 50 percent of the whole migrant cohort) is under 35 and holds a college degree, yet earning potential is scant when compared with their urban counterparts. A tool to control the population has evolved into a tool which entrenches inequality. Today, what was once viewed as a social stabiliser has become an instrument that could potentially lead to serious social unrest. For more information see:

Do we still need boycotts when you can send an angry tweet?ND

Oliver Balch, the Guardian, July 30 2015

The efficacy of boycotts as a means of influencing corporate and political behaviour has received attention of late. Global consumer action against companies such as The Gap and Nestlé have received considerable attention, as has the BDS Movement targeting Israel. If boycotts are to be effective they need to have a direct impact. For example, the Spanish bank Santander, which was accused earlier this year of financing deforestation in Indonesia, was the victim of a Greenpeace campaign which encouraged supporters to shift their funds from Santander bank accounts. The bank rectified the situation quickly. “Boycotts are most effective when targeting one clearly identifiable product, ideally one which is never a necessity, and where alternatives are easily available”, says Robin Oakley of Greenpeace. Increasingly, “engagement” is gaining traction as a popular alternative to boycotts. Campaign groups are gradually seeking to negotiate directly. Paul Caulfield of Nottingham University Business School claims that the days of mass boycotts are over. He cites a swing from embracing boycotts to expressing grievances on social media. “Boycotts are effective, but they don’t have to happen now”, he says. “Thanks to social media, the fear of a bad hashtag means that damage is done before a boycott actually has to happen.” For more information see:

Twitter: the start-up that never grew upND

Tim Bradshaw and Hannah Kuchler, Financial Times, July 31 2015

When Jack Dorsey recently took over as interim chief executive of Twitter, he asked its leadership to define what Twitter is for. There was little consensus — some suggested it was a media platform, others a community, and others a sanctuary of free speech. When Twitter’s finance Chief said “we have not communicated why people should use Twitter, nor made it easy for them to understand how to use Twitter”, it prompted a 14 per cent fall in its share price. In October 2013, when Twitter filed to go public, it had 218 million monthly active users posting 500 million tweets every day and a quarter-on-quarter growth rate of 7 per cent. By the end of June this year, that quarterly growth rate had slowed to less than 1 per cent. While the overall number of Twitter users has increased in the past two years to 304 million, the number of daily tweets they are all posting remains flat at about 500 million. Facebook on the other hand has continued to grow. In October 2013 it had 1.19 billion users and now has 1.49 billion — adding the equivalent of Twitter’s entire audience in less than two years. Snapchat is one of several social apps to have come up rapidly behind Twitter, including Instagram with its 300 million monthly users and WhatsApp with 800 million. For more information see:

Mobile banking tipped to wipe out 600 branchesND

James Eyers, Sydney Morning Herald, August 2 2015

A recent UBS report titled, "Is a bank in your pocket the next big thing?” has suggested that the use of smartphones for consumer banking will continue to transform the industry. Functions including tap-and-go functionality at the point of sale, image capturing for deposits and payments, and social media banking apps contribute to this transition. Within three years, 46 per cent of all banking transactions were expected to be mobile-related, up from 25 per cent today and 13 per cent two years ago, the survey found. These changes are expected to lead to closures of bank branches globally. In Australia this is expected to lead to the closure of about 600 branches over the coming years. The report said that mobile banking could provide cumulative 10 per cent cost cuts and a 6 per cent revenue boost for banks. It also said that the banks with the best mobile strategies in the world were Spain's BBVA, Bank of America and Fifth Third from the US, Swedbank and Canada's TD Bank. For more information see:

China’s middle class surges, while India’s lags behindND

Rakesh Kochhar, Pew Research Center, July 15 2015

Between 2001 and 2011 both China and India achieved large reductions in poverty. This led to a fast growing middle class in China but it did little to increase the amount of Indians who can be classified as middle income, according to recent research from the Pew Research Center. In that time, the share of Chinese who are considered middle income rose from 3 percent to 18 percent. The share of Indians who are middle income remained barely changed, rising from 1 percent of the population in 2001 to 3 percent in 2011, which is the latest year for which data are available. According to the IMF, China produces 16 percent of the world’s goods and services and India just 7 percent. This contrasts with 1991 when China and India each accounted for 4 percent of global output. For more information see:

Gates to double investment in renewable energy projects ND

Christopher Adams and John Thornhill, Financial Times, 25 June 2015

Bill Gates has announced plans to double his personal investment in innovative green technologies to $2 billion over the next 5 years as part of the wider effort to combat climate change. Gates has already invested approximately $1 billion in early stage companies including battery storage, next-generation nuclear and free air carbon capture — with hopes they will develop “breakthrough” technologies. While supportive of global efforts to raise awareness of climate change, Mr Gates has said that the only way the world can begin to see very positive scenarios is through great innovation. Rejecting calls from environmental campaign groups for shareholders to dump holdings in oil and gas companies, he instead has urged “high-risk” investment in new technologies. He also described the lack of incentives provided by governments to encourage risk and try to develop new technology as is the case in the pharmaceutical industry. For more information see:

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