The Financial Times Global 500 and the proposed mining super profits tax

Last month, the Financial Times released its annual Global 500 list of the top 500 corporations around the world by market capitalisation.[i] The 14^th edition of this list has chronicled China’s rise with PetroChina the planet’s most valuable at $329B, with its nearest rival the US’ Exxon at $316B into second place.

The list also provides clues of the economic shifts in power with 23 mainland Chinese companies (excluding Hong Kong) being represented while Japan’s most valuable company, Toyota, only making the list at 32. However, there were more Japanese companies in the list in the mid-rankings though not at the top 100. The notable exclusions in this list are of course the privately-held companies such as Cargill with listed rivals Monsanto at 177 and Nestle at 12.

Australian entries were well represented with 12 companies making the list: BHP Billiton (No.6, mining), RioTinto (No.35, mining), Commonwealth Bank (No.67), Westpac Bank (No.70), ANZ Bank (No.100), National Australia Bank (No.118), Telstra (No.217, telecoms), Wesfarmers (No.222, diversified), Woodside (No.224, petroleum), Woolworths (No.232, retail), QBE (No.402, insurance) and CSL (No.405, pharmaceuticals).

The planet’s reliance on energy also was evident on the list with the following companies being the most valuable in their respective countries:

BHP Billiton’s growth has seen it jump up from No.19 in the Global500 list last year to No.6 with a $209B market value. It remains Australia’s only top 10 entry in the Global 500.

The wealth generated by Australian mining companies has become a source of contention. The Australian Treasurer, Wayne Swan, recently announced proposals to charge a tax on the excess or super profits created by the resource companies. The Resource Super Profits Tax (RSPT) proposes to impose a levy of 40% on excess profits generated by mining companies in order to fund superannuation (pension) funds, to lower company tax and fund infrastructure needs.[ii] Arguably, the tax proposes to spread the country’s “common wealth” for the “common good” – a Robin Hood tax for the resources sector.

Not surprisingly, the powerful Australian mining lobby, the Minerals Council of Australia, is vehemently opposed to the proposal with a “Keep Mining Strong” campaign in all forms of media[iii] including a social media presence on Twitter.[iv] The government of the state that will be most affected, Western Australia, is immovable against its implementation. The Western Australian government is the only state government not sharing the same political party leanings with the current Federal Government.

The RSPT is shaping to be a pivotal election issue with the Federal opposition political party supporting the Minerals Council in its stance.

Keywords: resources, revenue, regulatory environment, government-business relationship

Conduct unbecoming: a CEO resigns

Unprecedented in Australian corporate history, the CEO of publicly-listed high-end retailer David Jones Limited, Mark McInnes, resigned on 18 June 2010 after being accused of sexually harassing a 25 year old female employee on two separate occasions. McInnes admitted his conduct was unbecoming in his resignation statement[v]. A highly successful CEO who turned around the retailer’s fortunes during the 2000s, McInnes was one of the youngest CEOs in the country appointed at age 37 to head the company.

The Chair of David Jones, Robert Savage fronted a hurriedly organised press conference expressing his and the board’s deep disappointment at the CEO’s conduct. David Jones Limited has two female board members and around 80% of its workforce is comprised of women. The board has awarded the former CEO a $2 million severance package.

Keywords: crisis management, succession, CEO

Plane crash in the Congo: a company’s entire board disappears

On 21 June 2010, a plane chartered by Sundance Resources, an iron ore company with exploration interests in the region crashed “on the western ridge of the Avima Range in the Republic of Congo, near the Gabonese border.[vi]” The plane contained nearly all members of the board and company’s senior management including its Chair, MD and CEO, company secretary and three non-executive directors.[vii]

Keywords: crisis management, succession, board, management