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Copyright 2015, Chuck Dorris, all rights reserved.

Copyright 2015, Chuck Dorris, all rights reserved.

There are times good actually does come from bad. And then there are times when bad begets more bad, but it’s not immediately visible because at first it resembles good.

Consider two recent developments in the energy sector. In the first instance, shareholders in oil-producing giant Chevron (ticker: CVX) voted to give the largest amongst themselves (those lucky few owning 3% or more shares for three years minimum) the ability to nominate directors for up to 25% of the seats on the board.

[1] Supporters of the vote declared this an important measure in future industry support of climate change, a sentiment echoed by no less luminary an authority on the subject than the comptroller of New York City, Scott Stringer.[2] Critical board votes can make for strange bedfellows.

In the second instance, the biggest gorilla in the energy sector, ExxonMobil (ticker: XOM), now finds itself in the indelicate position of choosing between risky growth (perish the thought!) or the relatively riskless tactic of maintaining share value (and shareholders’ good graces) through stock buybacks and dividends (the only alternative being the large-scale acquisition of a competitor).[3] Ubi ibimus?

Both examples cited here demonstrate a larger trend being harped on by financial news-media harpies, to wit: companies are turning away from investing in innovation and improvement in favor of the quick fix of share buybacks and dividends.[4] This strategy, crow its critics, trades long-term gain for immediate gratification.[5] Those in the cheering section, meanwhile, hold that this is the safest bet in a world of low growth and interest rates, and that “activist investors” (read: the aforementioned large shareholders, or Big Fish) can kick an unprofitable (or otherwise inept) management team into line.[6]

Amidst all this, perhaps it pays to step back and take a look beyond the macro to the meta. That is, both corporate examples illustrate corporations which effectively dominate their entire industry going off the same playbook. Which happens to be the manual for allowing the decisions affecting large multinational corporations, industry leaders, sector bellwethers—global market pillars—to concentrate critical decision-making ability affecting millions into the hands of a dwindling few who, increasingly, hold all the cards.

The technical term for this is oligarchy. And it has at best a mixed record of success. When the last chocks are removed, who will be able to stop the wheels from rolling right off the flight deck?

* Featured Image Copyright 2015, Chuck Dorris, all rights reserved.

[1] “Chevron sea-change on voting rights” by Ed Crooks, Financial Times, 5/28/15.

[2] Ibid.

[3] “Exxon’s crude choice: Drift along or buy a rival” by Ed Crooks, Financial Times, 6/4/15.

[4] “Firms send more cash back to shareholders” by Vipal Monga, David Benoit and Theo Francis, Wall Street Journal, 5/27/15.

[5] “The Real Deal: M&A” by Randall W. Forsyth, Barron’s, 6/1/15.

[6] Ibid.

2017-07-13T16:53:51+00:00