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Packers was acquired by Blackstone in 2018. The company was just fined only $1.5 million by the DOL for having 102 children as young as 13 working hazardous overnight jobs cleaning slaughterhouses in eight states. This in my view makes such fines just a cost of doing business. BlackStone's stock is already up 27% year-to-date, despite this announcement. Meanwhile, workers in general at the slaughterhouses have said conditions have been unsafe since Blackstone acquired it:Federal officials say more than 100 children worked in dangerous jobs for slaughterhouse cleaning firm....The Labor Department says the children who were working overnight shifts used “caustic chemicals to clean razor-sharp saws.”
Again, the fact that the stock is up strongly this year indicates Wall Street doesn't care.
• In July 2021, the US Department of Labor’s Occupational Safety and Health Administration (OSHA) cited PackersSanitation Services Inc, and three other companies in connection with a nitrogen leak that tragically caused the deaths of six workers and injured almost a dozen others at a Georgia poultry processing plant.
• OSHA’s 2021 investigation found 17 serious and two repeat violations by Packers at the plant.
• Packers Sanitation Solutions Inc. has been acquired by four different private equity firms since 2007.
• Blackstone and Leonard Green/ AlpInvest extracted hundreds of millions of dollars from PSSI through
transactions known as dividend recapitalizations, in which the private equity firms added debt to Packers
Sanitation’s balance sheet in order to collect dividends for themselves.
• According to a 2017 report by the National Employment Law Project (NELP) looking at OSHA severe injury data, PSSI stood out as a particularly dangerous workplace with one of the highest numbers of serious injury reports compared to its relatively small number of employees.
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https://morningstar.com/stocks/xnys/bx/sustainability
https://morningstar.com/stocks/xnys/nsc/sustainability
The answer to these problems I would say in the investment world is true stakeholder capitalism, a term that has become anathema to the right-wing: https://investopedia.com/stakeholder-capitalism-4774323
Are there money managers who truly care about stakeholder capitalism? There are some. Most, though, merely play lip service to the idea. I would say one of the best fund shops that considers other stakeholders is Green Century Funds, especially when it comes to environmental issues:
https://greencentury.com/about-us/ But the money management industry, especially in the U.S., has a long way to go before it takes what stakeholder capitalism means seriously. Shareholders will need to demand that it does for things to truly change. But also, there must be pressure outside the investment world on government to truly regulate business again, to give our regulators teeth, and insist they be utterly separate from industry with regard to influence.
I would add that Teddy Roosevelt basically had the roots of stakeholder capitalism way back when he gave his State of the Union I linked previously:https://let.rug.nl/usa/presidents/theodore-roosevelt/state-of-the-union-1902.php The notion that these companies will do what's best for society, consumers, labor and the environment, if they're unregulated is absurd to me. In reality, unregulated business isn't even just bad for labor, consumers, communities and the environment. It's bad for every stakeholder, even shareholders and capitalism itself. Unregulated businesses cut corners, do things for short-term profits and bonuses for executives at the expense of long-term shareholder value and brand value when the scandals are revealed. And CEOs are sometimes comfortable hurting every stakeholder, including investors, as well as the general public.
Not just to you, sir... not just to you. Not by a long shot.
@Dutch- No sir, you haven't misinterpreted anything... he is what he is. Making money rules all. Not uncommon, actually.
@Baseball_Fan It is not far-left socialism to believe the capitalist game should have rules and be played fair for all stakeholders--shareholders, employees, consumers, communities, the environment. There are still winners and losers, and wealthy people. It is only the propagandists who believe that the system should have no rules, and, in reality, everybody but executives loses in a completely deregulated system, even shareholders. We had stricter regulation once and America still thrived. The pendulum has swung too far in one direction.
What could go wrong?
As a prime example I give you ABBV who has played the patent system to control Humira for decades, making billions.
The only goals of most CEOs is to increase their salaries and perks and stay in the job as long as they can. The average CEO compensation has increased 1322% since 1978 and they make 350 times the average worker.
True capitalism would have forced Merrill Lynch, Citi etc to go bankrupt in 2008, and sent their CEOs to jail for fraud, and many companies would have shut their doors forever in the pandemic.
@baseballfan
A Democratic socialist system would have the State control these excesses, partly though ownership of essential industries and partly though effective regulation. We have none of that.
Can't wait to see how "free enterprise" handles the PFAS contamination of drinking water throughout the US. Anybody think 3M will go bankrupt and it's CEOs all go to jail?
Thanks for tip on Green Century. Quick look shows they have about matched SP500 while avoiding fossil fuel etc. As 2% is ABBV and MRK 1.5% they are not too focused on inflated drug costs as a social issue.
Their fees are rather high. Do you know how much of their "profit" they have sent to the Public Interest Research Groups? Another idea would be to find a similar cheaper fund and donate the fee difference to pubic interest groups or environmental organizations.
Regarding the percentage of their profits that goes to non-profit environmental groups, my understanding is it is 100%, perhaps the most interesting fact of all: https://greencentury.com/about-us/ Regarding investing in a different lower-cost fund and donating the difference to a charity, I doubt a different fund would do this: https://greencentury.com/wp-content/uploads/2022/10/NEW-SA-2-pager-season-higlights-9.30.22.pdf Engagement campaigns cost money. I agree the fees are high here, but I find some of their campaigns impressive, particularly the Apple one:
The ratings are generally vague and rather opaque, unfortunately. Many things that would really upset some people are of little concern to others. The dramatic increase in health care costs and medical debt is driven to a significant extent by the private equity take over of hospitals and ambulances, and manipulation of the patent system but Big Pharma yet it is unclear if these companies practices have any impact on their "ESG" ratings.
There is also the problem of "watch what I do not what I say". Many corporations have lots of nice policy statements about gender equality, abortion rights, gay rights etc but contribute heavily to politicians who vehemently oppose all of this.
Impressive results from Green Century.
Also interesting and impressive is "Engine No 1" a hedge fund that manages ETFs focused on "decarbonization" NETZ and influencing better practices among SP500 companies VOTE
They are the group that got three activists on the board of Exxon to force Exxon to deal with climate change, and are now working to stop methane leaks.
https://nytimes.com/2023/02/25/us/unaccompanied-migrant-child-workers-exploitation.html Note like the Packers company owned by Blackstone above, Hearthside is owned by a private equity fund shop, this one called Charlesbank Capital Partners.
"Behind every great fortune there lies a great crime"
He also was the third largest individual donor to GOP "election deniers" in 2020, and earlier equated Obama's plan to eliminate carried interest to the Nazi invasion of Poland
I wonder if Yale and Oxford and the NY Public Library will now return the millions he has given them?
Sure seems like that in many cases. Slave labor, child labor, locking employees into the factory, union busting, fighting minimal train safety requirements and climate change, supporting human rights abuses etc.
I wonder if Warren Buffett told his railroad to install electric brakes?
Benefit corps can and are actually supposed to put each stakeholder on equal footing, including labor and consumers. But traditional C Corps have a legal fiduciary duty to always prioritize shareholder profits, even at the expense of labor, consumers or the environment.
There is however an important nuance even within C Corps. If a company has a significant brand value and pricing power over its products, it is advantageous long-term to shareholders to consider the other stakeholders. It is for instance damaging to Apple’s brand for consumers to discover that Apple is mistreating its employees in China or here as has been the case in the past. Consumers can opt for a different phone. If Apple cleans up its act, it can boast of this and say see we treat labor well, and that makes more consumers likely to pay the extra money for a premier brand. It benefits all parties including shareholders of companies with premium luxury products to treat labor and consumers well. Otherwise, the brand is damaged.
Now consider a commoditized business with thin profit margins like, say, making cotton undershirts, or “fast fashion.” The margins are thin, there is no brand value, so the executives in charge will do whatever they can to produce profits, including abusing labor in sweatshops. It becomes a race to the bottom of what is legal, and, often, illegal to produce profits.
The executives who are enlightened in such commoditized industries and try to treat their employees well end up being driven out of business in many cases as less scrupulous competitors undercut them on price. Moreover, they have a fiduciary legal duty to maximize profits any way they can.
Without appropriate regulation, such low margin businesses inevitably become hotspots for abuse that goes beyond individual executive cruelty. It’s systemic in nature.
I should add, in this admittedly long post, that the difference between executives who think of long- term profitability and ones who only think short-term is a vital one, even within the luxury goods industries. The short-term thinkers only care about the next quarter’s profits even if their actions damage the brand and profits consequently long-term. Private equity firms are notorious for thinking short-term, looking for exit strategies to boost profits before they sell that sometimes in the long- term destroy companies. I don’t think it’s an accident that some of these abuses with labor are associated with private equity.
Geoff Bennett had a discussion with the New York Times reporter (Hannah Drier)
who recently broke the story about this.
Video
I agree, at least in theory that commoditized product producers are probably more easily rewarded for such abuses if they improve the bottom line. But for companies with brand vale and pricing power to be different requires that their customers expect they will be different, are a tuned to the scandals and are ready to vote with their feet.
Apple's Foxconn factories abuses where well publicized, and I abhorred them, but I didn't switch to Android because of the switching costs etc. Ford was recently shown to sourcing their aluminum for the F-150 electric truck from an awful bauxite mine in Brazil with terrible human rights and environmental record. This may dent the stock a bit temporarily, but how many customers are likely to notice?
I think a big source of this abuse is the focus on pushing up the short term stock price, so all of the options based compensation management gets ( as an off the balance sheet expense BTW ) is vested. The buy backs people think are supporting their dividends and earnings do little to decrease the number of shares in most cases because of the volume of new shares created.
Oh and if your options still turn out to be underwater, we will just re-price them, as Apple did.