States take action against ‘woke CEOs’
Five big Wall Street firms woke up to a headache yesterday, and the ailment seems to be spreading fast. Riley Moore, the outspoken treasurer of West Virginia, announced that Goldman Sachs, JPMorgan, BlackRock, Morgan Stanley and Wells Fargo were banned from doing business with the state because they had stopped supporting the coal industry, reports The Times’s David Gelles.
The banks have sharply reduced financing for new coal projects, While BlackRock has been reducing its actively managed holdings in coal companies since 2020. Coal, the most polluting fossil fuel, has become less profitable in recent years.
Some of the firms do business with West Virginia in various ways. JPMorgan, for example, handles some banking services for West Virginia’s public university. But the dollar figures are relatively small, and the law does not affect the holdings of the state’s pension fund.
The development is yet another step toward a politicized world of red brands and blue brands. In these hyperpartisan times, companies are being caught between conservatives and progressives, and some brands are being typecast as Republican or Democratic. The timing of the announcement was striking, coming just hours after Senator Joe Manchin of West Virginia, who had been the chief holdout on climate legislation, relented and agreed to sign on.
Meanwhile in Florida, Gov. Ron DeSantis unloaded on the supposedly “woke” ideology of some financial services firms, criticizing ESG investing and announcing plans for legislation that would “prohibit big banks, credit card companies and money transmitters from discriminating against customers for their religious, political or social beliefs.” At a news conference this week, he also said he wanted to prohibit the state’s pension fund managers from considering environmental factors when making investment decisions. Instead, he said, they need to be focusing only on “maximizing the return on investment.”
Businesses now “marginalize” people because of political disagreements, DeSantis said. “That is not the way you can run an economy effectively.” He singled out PayPal, which has cut off accounts associated with far-right groups that participated in the Jan. 6 Capitol riot, and GoFundMe, which blocked donations to a group supporting truckers who occupied Ottawa this year.
HERE’S WHAT’S HAPPENING
Amazon’s shares soar as the company says consumer demand remains strong. The positive comments from CEO Andrew Jassy and other top executives caused investors to shrug off the fact that the giant internet retailer reported its slowest quarterly sales growth in two decades, and has cut nearly 100,000 workers. Apple’s quarterly results were also better than expected, as Big Tech’s profits have been resilient even as the economy has slowed.
The eurozone economy grew faster than expected, but so did inflation. Positive GDP growth for the region, a day after the US reported that economic growth slumped for the second quarter in a row, relieved some worries about growing stagflation. Still, inflation in the eurozone hit 8.9 percent in July compared with a year ago, a fresh record.
The Biden administration plans to offer updated booster shots in September. With reformulated shots from Pfizer and Moderna on the horizon, the FDA has decided that Americans under 50 should wait to receive second boosters.
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A new book reignsites a debate about how LA Times editors handled a 2017 expo. Paul Pringle, a veteran reporter at the LA Times, writes in his book “Bad City” that top editors tried to slow-walk the paper’s initial groundbreaking article, which detailed how the dean of the University of Southern California’s medical school used drugs with young people.
Trader Joe’s workers at a Massachusetts store form a union. It is the only one of the supermarket chain’s more than 500 stores with a formal union, but similar moves are afoot elsewhere, just as the union campaign has spread at Starbucks. Trader Joe’s will face at least one more union vote soon, at a Minneapolis store next month, and workers at a store in Colorado filed an election petition this week.
Big oil’s big profits
Oil companies are reporting surging profits, even as consumers and world leaders are dealing with the hardships caused by higher energy prices.
Buoyed by high oil and gas prices, the energy sector is expected to have swelled earnings by more than 250 percent in the second quarter. Exxon Mobil and Chevron, the US’s two largest oil companies, reported record profits this morning, with Exxon’s profit more than tripling from a year ago. Europe’s biggest oil companies, Shell and TotalEnergies, reported yesterday a combined $21 billion in profits.
The fallout from Russia’s invasion of Ukraine has led to significant financial benefits for energy companies and their investors. The pain of rising energy prices and shortages, though, has been particularly strongly felt by consumers and businesses in Europe, which received roughly half of Russia’s oil exports before the invasion. In Asia and Africa, higher energy prices could push millions of people back into energy poverty, the International Energy Agency warned last month.
It’s also led to claims of profiteering. President Biden said last month that oil companies were benefiting from their own underinvestment in refining capacity. In Britain, Boris Johnson, the outgoing prime minister, imposed a windfall tax on major oil and gas companies. But a top contender to replace him, Liz Truss, said that she opposed the tax because it would send “the wrong signal to the world,” and that Shell should be encouraged to invest in Britain.
Oil companies have pointed the finger back at politicians. Ben van Beurden, Shell’s chief executive, said yesterday that energy prices were high in part because of government policies that discouraged investment in oil and natural gas in recent years.
Gas prices in the US have fallen over the last month, and there are some indications that more relief could be ahead. Citigroup said in a research note today that it expected growth in the supply of oil to outpace weaker demand. Still, geopolitical factors and the weather could change the trajectory of prices, particularly if the US has an active hurricane season that disrupts refining capacity. “Just a few of these risks materializing could work up a continued perfect storm of high volatility,” Citigroup said.
“There is a principle at stake. What can you buy if you have unlimited cash? Can you bend every rule? Can you take apart monuments?”
— Stefan Lewis, a former member of Rotterdam’s City Council, explaining the outrage over the city’s decision, which has since been reversed, to temporarily dismantle a bridge to accommodate Jeff Bezos and his superyacht.
The dark secrets of corporate subsidy deals
Every year, state and local officials negotiate about $95 billion in economic development deals, competing with one another to recruit companies to their communities with lucrative subsides in exchange for their business.
But some corporations are becoming increasingly aggressive about forcing officials to sign nondisclosure agreements that could end up hurting the communities that the businesses were supposed to help, according to a new report by the American Economic Liberties Project, a progressive antitrust advocacy group. The NDAs sometimes prohibit officials from disclosing basic information about a corporation, like its name and the type of business it’s building, Pat Garofalo, an author of the report, told DealBook.
These NDAs prevent community members, like workers and local businesses, from sharing their input on the deal until after it is completed. One recent example is the $4 billion battery factory that Panasonic will build in Kansas, which will get nearly $1 billion in subsides. Before the deal was completed, Panasonic was also negotiating with Oklahoma, and the states were in a bidding war over the electronics giant’s business. But lawmakers could not talk about the corporation on the other side of the bargaining table in public — and sometimes didn’t even know its name. In April, Oklahoma officials complained that they had two hours to contemplate a complex incentive package worth $700 million, or about 8 percent of the state budget. “How am I supposed to go back to my constituents and say, ‘I gave away three-quarters of a billion dollars to a company that I don’t even know their name?’ Is that responsible?” State Representative Collin Walke said during an appropriations meeting.
Some states have introduced bills to ban these NDAs, which the report calls “an extremely common tactic” in development deals. This year, such legislation was introduced in New York, Michigan, Illinois, and Florida. New York’s State Senate voted unanimously to approve a ban. Garofalo thinks the New York lawmakers were galvanized by the Amazon HQ2 bid that fell apart in 2019. But he notes that communities don’t have to wait for politicians to fix the problem. Engaged citizens have used public meeting and records laws to solve subsidy mysteries, and sometimes a little transparency is all it takes, Garofalo said. “When the public does get a say,” he told DealBook, “The deals are better, or bad deals are knocked off right away.”
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