23rd April 2012

The High Lords of Google

The informal corporate motto of Google was originally 'Don't be Evil' - reflecting the young, fresh and enthusiastic tone of the business blowing away the cobwebs of dark corporate halls.  Such attitudes should be congratulated in promoting the right form of behaviour by companies and their employees whatever their seniority.  However, what may have started as an open and transparent style of company has already started to raise the barriers of corporate protection in a manner which has become a more common practice amongst the recent tech company flotations.

Google at their launch brought in a two tier share structure reflecting 'us and them'. 'Us' of course is in fact 'them' - by which I mean the founders who have been able to reserve the voting rights in the company for themselves. 'Them' is, correspondingly, 'us' just dumb investors.  So as an investor and a risk taker you would have no voice or opinion that can be aired to any effect with the company.  Have the young ardent enthusiasts turned into increasingly greedy zealots?

The excuse has been that this protects the company from external and potentially negative influences, which I can understand, but it also smacks of an elitist attitude and not one which fosters longer term confidence. However, as a company, it depends whether you want participative shareholders or acquiescent sheep. Most companies don't make enough use of their shareholders as advocates for their business and products, and this is made even more ludicrous as many may well be staff or ex-staff.  A shareholder base can de designed to support the business, but to just exclude them as silent bovines is, at the very least, short sighted, and is more often just arrogant.

However, Google are now taking this further by introducing a new class of share - also with no voting rights.  In fact this will probably act more as a form of Google Dollars as they can use the 'paper' to carry out acquisitions without diluting the central strength and power of the inner share class sanctum. Welcome to the financial towers of Mordor.

No shareholder democracy here then but rather a new low for corporate governance.

Crying for Argentina

We may complain about the lack of corporate and commercial experience amongst our  'dear leaders', although of course our current crop have at least a passing connection with some wallpaper production and public relations, but for countries like Argentina, its politicians' actions are enough to make you weep - which I suppose could explain the title of that song.

The commercial 'nous of Argentinean President, Cristina Fernandez  is obviously sadly lacking as last week's action against Repsol put the country into a ridiculous position. We must remember that a century ago this nation was one of the wealthiest in the world, primarily due to its valuable beef exports.  Since then it has endured recurring bouts of decline and disaster whether under the misdirection of dictators, military megalomaniacs or just pretentious populist politicians.

The action to renationalise YPF and ousting Repsol, the 51% majority Spanish shareholder, is just the latest in such destructive actions.  The real reasons are no doubt deep within the corrupt world of the political miasma of Buenos Aires, but its effects of alienating the USA, Mexico as well as the EU can hardly be helpful when the economy is already in such a weak position.  Politically Ms Fernandez may be feeling miffed after coming back from the Summit of the Americas early and potentially under threat of being booted out of the elite club that is the G20 leading global economies.  It also looks as though they have prevented the Chinese from buying into the company - which would have quite likely both improved and increased the inward investment into the company and the country.  All she has done is underline the lack of confidence that any inward investor would have in such a country.  So the country loses, Repsol loses and YPF loses - brilliant!

However, just look at the trail of economic damage that has already been caused.  In 2008  President Fernandez attacked tax rates on farm exports, followed a few months later by nationalising the 14 year old private pension funds (always a sign that a country's finances are in deep trouble).  At the end of the year she nationalised the airline Aerolineas Argentinas, owned by a Spanish travel company.  In 2010 she sacked the head of the central bank for refusing to hand over $6.6bn of reserves to pay down debt.  In 2011 she introduced controls on US Dollar purchases and 2012 introduced restriction on imports.  This is a litany of economic failures which will only end up in further chaos. What a waste.

And finally... standby for the latest Summer blockbuster in the movies - no it's neither Rocky 15 'Finally Down & Out', nor 'Losing Nemo'  a piscine slash movie that will tear at your heart strings - but rather 'Cow on the Run'.

Now sit back to watch the thrilling tale of the runaway cow Yvonne, who captivated the nation last year when she bolted from her farm to escape slaughter and roamed free in the Bavarian countryside for three months.

'Cow on the Run', is based on the daring dairy cow's escapades in the wild, and will be produced by Munich-based film company Papa Loewe and American film producer Max Howard, whose previous credits include Walt Disney's 'The Lion King'.

Michael Aufhauser, founder of the Gut Aiderbichl animal sanctuary in southern Germany, which now looks after Yvonne, said the film was going to be "very romantic".

The farmyard fugitive broke through an electric fence on a farm near the Bavarian town of Muehldorf in May last year.  Yvonne lived happily off the land for three months until she landed on a 'most wanted' list after bolting in front of a police car.  Authorities deemed the runaway a security risk and this gave hunters the go ahead to gun her down.

But Yvonne foiled numerous attempts to capture her, and every attempt was made to lure her back to the farmyard including the heart rending calls of her own calf, her friend and a breeding bull named Ernst.

The canny cow was eventually captured in September after receiving a double dose of tranquilisers and was taken to the animal sanctuary after more than 90 days in the wild.  Other film titles could be considered, so any suggestions should be sent directly to the producers.

Possibly - The Great Esteak? Breaking Moos? The Greatest Story Heffer Told? Or the memorable, Born Freesian?

Possibly not.

And another 'and finally' ...... and some new entries for any office 'bulls**t bingo' game:

-"We are going to extract the operating synergies" - in English is of course someone getting fired.

And

-"I will socialise these ideas around the office" - you are going to talk to somebody!

Spare me.

Have a good week.                                                     

Justin Urquhart Stewart
Director
Seven Investment Management Limited
www.7im.co.uk

Pensions, Investments