Sometimes the most obvious and tempting strategy is the stupidest. That applies to Argentina’s decision to seize a majority share in YPF, its biggest oil company, from Repsol, the Spanish energy group.
If mergers of equals are risky and hostile takeovers riskier, where does expropriation rank on the scale of management disruption?
Pretty high, I would guess. So, a day after Argentinian government officials walked into YPF’s headquarters with a list of senior Spanish executives they wanted to expel and an order to renationalise most of Repsol’s majority stake, I feel for the oil company’s staff.
“Petrobras is a very successful company, completely male-dominated,” Maria das Graças Silva Foster told the FT’s Women at the Top Conference in November 2011. “But things are changing and it’s just question of time.”
A question of just two months, in fact. On Monday, the Brazilian company’s gas and energy director was named as the next chief executive of, in the FT’s words, “arguably Latin America’s most important company”.
Her promotion will also make her, by a long shot, the most prominent businesswoman in Latin America, and a symbol of the diversity policy of Brazil’s first woman president Dilma Rousseff – who used to chair Petrobras and is said to be close to Ms Graças Foster. The president appears to be lining up another Brazilian businesswoman - Luiza Helena Trajano Inácio Rodrigues, who heads the retailer Magazine Luiza – to become a minister for small business. But the number of top female CEOs in Brazil still looks low compared with, say, India or China.
I understand why Shell UK plans to close its final salary pension scheme to new recruits, but I hate the justification. The company told the FT that the decision “reflects market trends in the UK”. That’s precisely the sort of reasoning that you hear from companies and their bosses when they wish to award their chief executive a hefty pay increase.
Fraud did not directly trigger Enron’s bankruptcy 10 years ago. The underlying criminal conspiracy was only fully revealed later. Enron’s failure was, initially, due to a classic collapse in counterparty confidence. It was a death spiral – starkly familiar to everyone who watched the 2008 implosion of Lehman Brothers – that ended on December 2 2001.
It is too easy to blame the energy trader’s demise only on bad people doing bad deeds and fail to learn the lessons. Plenty of watchdogs that should have barked in 2001, if not earlier – directors, auditors and regulators, of course, but also rating agencies, Wall Street research analysts, investors and, yes, the media – kept quiet.
Ed Crooks’ fascinating piece in the FT today on the prospect of the US achieving energy independence by exploiting its oil and gas reserves in new ways makes me wonder if it will suffer from the “commodity curse”.
The syndrome of oil-rich countries in the Middle East and Africa having fragile political institutions and oligarch-style rule has never appeared to be a problem for the US until now. As the article notes, the US problem has been different – that it depends on those countries for its energy.
A parallel might be “Dutch disease” – the term coined by The Economist for the troubles faced by the Netherlands in the 1970s when it discovered large reserves of offshore natural gas. The rise in its currency made its manufacturing and other export sectors uncompetitive.
Most companies aim to get bigger. But beyond a certain point, bigness becomes synonymous with badness. Think of Big Pharma, Big Auto, Big Oil.
Worse, if you are regularly described as one of the Big Four, Five or Six in any business sector, you are probably already in the sights of regulators and lawmakers.
This demonisation of corporate girth is nothing new. I can’t find a source for this image – which Marc Gunther uses to illustrate a blogpost about the growing power of US big business – but I’d say it dates from the first half of the last century, and there are plenty more where it comes from.
Apple’s flirtation with the top spot in the list of the world’s largest companies by market capitalisation – which would end a six-year reign by ExxonMobil – is the sort of market trivia that we journalists love.
Perhaps it’s because rankings are so easy to understand, and a ranking voted on every day has added spice. Apple nearly went under a decade ago, which further enlivens this tale of corporate success. But given the capriciousness of markets, the other main point of interest is that Exxon has managed to hold the top position, with brief interruptions, for so long.
The move by ConocoPhillips of the US to split its upstream and downstream operations and become a “super-independent” oil company focussed on exploration feels like one of those turning points beloved by investment bankers.
Industry mergers and demergers tend to progress on a supercycle, in which investment bankers first persuade companies to merge in order to achieve scale and then later tell them they need to demerge to gain focus.