Showing posts with label Dairy Queen. Show all posts

Tuesday, October 8, 2019

Strategic CSR - Warren Buffett

I am not normally a fan of Warren Buffett as I think many of the companies he invests in (e.g., Wells Fargo, Coca-Cola, Kraft/Heinz, Dairy Queen, See's Candies, etc., etc.) and even the companies he partners with (e.g., 3G Capital) are hurting, rather than helping, society progress. I also think his investment decisions are luck as much as anything else, given his ill-judged support for CEO pay policies at Coke (that do not reflect performance), his strong support for the train company BNSF (when some 40% of rail freight in the U.S. is coal), or his aversion to investing in IT stock (he only got into Apple by mistake). All of this might somewhat explain why the WSJ recently noted that "Berkshire Hathaway Inc. has underperformed the S&P 500 for a decade … during a historic bull market." Like many executives that have run out of ideas, his main response appears to be to buy back his own firm's shares. But, that is not to say that the man has no idea what he is talking about. In the article in the url below, at least, he is on solid ground by proudly advocating in favor of capitalism:

"The most prominent face of capitalism — Warren Buffett, the avuncular founder of Berkshire and the fourth wealthiest person in the world, worth some $89 billion — appeared to distance himself from many of his peers, who have been apologizing for capitalism of late. 'I'm a card-carrying capitalist,' Mr. Buffett said. 'I believe we wouldn't be sitting here except for the market system,' he added, extolling the state of the economy. 'I don't think the country will go into socialism in 2020 or 2040 or 2060.'"

The author notes that this frank statement stands in contrast to some business leaders who profess statements on controversial issues that go with popular sentiment, only to quickly reverse their position when the spotlight has moved on:

"Some billionaires agonize about inequality and the education system, for example, but don't push for higher taxes on the wealthy to help pay for fixes (one of Mr. Buffett's preferred remedies). A raft of chief executives who boycotted going to Saudi Arabia after the murder of Jamal Khashoggi last year quickly returned to doing business with the kingdom when the headlines died down."

I am not convinced that Buffett thinks any more about the detail of advancing society than other business leaders—he is simply convinced that capitalism is the most direct way of getting there:

"… at his core, [Buffett] believes that the pursuit of capitalism is fundamentally moral — that it creates and produces prosperity and progress even when there are immoral actors and even when it creates inequality."

In this sense, he is following a strategic CSR perspective. In his investment decisions, however, he consistently veers off-track.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

Instructor Teaching and Student Study Site: http://studysites.sagepub.comstudy.sagepub.com/chandler5e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Warren Buffett's Case for Capitalism

By Andrew Ross Sorkin

May 6, 2019

The New York Times

Late Edition – Final

https://www.nytimes.com/2019/05/05/business/warren-buffett-capitalism.html

Thursday, April 11, 2019

Strategic CSR - McDonald's (II)

The article in the url below shows how fast food in the U.S. has evolved over the past 30 years. Of course, the term "evolved" sounds inherently progressive – in that fast food evolved in a way that promotes health. In reality, the opposite is closer to reality. While it is true that menu options have expanded and often include salads (which are healthier only as long as you don't drown them in dressing), it is the size of the portions and their makeup of fat and salt that caught my attention in this article:

"But as menus swelled over the past three decades with grilled chicken wraps (McDonald's) and 'fresco' burritos (Taco Bell), many options grew in size and the calories and sodium in them surged, according to new study from researchers at Boston University and Tufts."

The research was recently published in The Journal of the Academy of Nutrition and Dietetics and consisted of a study of multiple fast-food chains over 30 years:

"The researchers studied 1,787 entrees, sides and desserts at 10 chains — Arby's, Burger King, Carl's Jr., Dairy Queen, Hardee's, Jack in the Box, KFC, Long John Silver's, McDonald's and Wendy's — from 1986 to 2016. In that time, the number of items in those three categories rose 226 percent."

The results are not encouraging:

"Across the 10 chains, the researchers found, the average entree weighed 39 grams more in 2016 than in 1986 and had 90 more calories. It also had 41.6 percent of the recommended daily allotment of sodium, up from 27.8 percent."

The same pattern is evident in the desserts on offer:

"In 2016, the average fast food dessert weighed an extra 71 grams and had 186 more calories than the average dessert 30 years earlier, the researchers found."

And don't forget the sides:

"The researchers found that there were 42 more calories on average in items like chips, soups and French fries in 2016 than there were in 1986. Sodium content rose to 23.2 percent of the recommended daily allotment from 11.6 percent, even though portion size did not grow substantially."

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Bigger, Saltier, Heavier: How Fast Food Changed Over 30 Years

By Tiffany Hsu

March 4, 2019

The New York Times

Late Edition – Final

https://www.nytimes.com/2019/03/03/business/fast-food-health-salt-calories-portions.html

Thursday, October 13, 2016

Strategic CSR - Warren Buffett

If you are an active investor, you are likely aware that Warren Buffett releases an annual letter to Berkshire Hathaway's shareholders. In this year's letter (released in March), he addressed the issue of climate change. In particular, he analyzed the issue in relation to Berkshire Hathaway's sizeable holdings in the insurance industry. Perhaps surprisingly, he was very bullish on the prospect of widespread environmental degradation:

"As a citizen, you may understandably find climate change keeping you up nights. As a homeowner in a low-lying area, you may wish to consider moving. But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries."

His reasoning rests on the somewhat ignorant argument that climate change has yet to produce any change in the number of extreme weather events:

"Up to now, climate change has not produced more frequent nor more costly hurricanes nor other weather-related events covered by insurance. As a consequence, U.S. super-cat rates have fallen steadily in recent years, which is why we have backed away from that business. If super-cats become costlier and more frequent, the likely – though far from certain – effect on Berkshire's insurance business would be to make it larger and more profitable."

As the article in the url below notes, however, this view contradicts the current scientific consensus. I imagine it is also not consistent with those in the north-east of the U.S. who were standing in the way of Hurricane Sandy when it hit in 2012:

"This claim flies in the face of growing scientific evidence. In 2014, the federally funded National Climate Assessment stated that: 'Certain types of extreme weather events with links to climate change have become more frequent and/or intense, including prolonged periods of heat, heavy downpours, and, in some regions, floods and droughts.'"

Moreover:

"Other insurers have already expressed concern about these changes. Carl Hedde, head of risk accumulation for insurer Munich Re America, says: 'The number of loss-relevant, weather-related natural catastrophes worldwide has almost tripled since 1980 […] we do think that the warming climate – depending on region and peril concerned – does play a certain role.'"

What is even more striking is the contrast between what Buffett said in this year's letter and what he has said in previous year's letters (as noted in the article in the second url below):

"Buffett certainly understands the danger of miscalculating risks. In his 2007 shareholder letter, he wrote that 'devastating storms' like Hurricane Katrina could 'rock the insurance industry.' 'We do know it would be a huge mistake to bet that evolving atmospheric changes are benign in their implications for insurers,' Buffett said then."

Buffett has demonstrated similar insensitivity to shifts that are occurring in other industries, too. He has recently reiterated his strong support for the railroad industry (in particular, Burlington Northern Santa Fe), even though between 30 and 40% of revenues in this industry come from the transportation of coal. In banking, I have not seen or heard any demonstrable comments about the recent behavior at Wells Fargo, which has now resulted in the CEO's resignation. And in the food industry, by doubling down on his support for Coca-Cola, not to mention Dairy Queen and last year's merger between Kraft and Heinz, he appears willing to squeeze as much revenue out of these fading brands, irrespective of the healthcare consequences of the salt, sugar, and fat that are stuffed into each of the company's products.

As a European living in the U.S., it seems counter-intuitive to me that Buffett should be praised for doing so much good with the fortune he has amassed (by pledging it to the Gates Foundation), without some comment on the social consequences incurred during the accumulation of that fortune. To me at least, doing good with a fortune once you have it does not justify the methods used to build that fortune.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

The big flaw in Warren Buffett's view of climate change

By Thomas P Lyon

March 7, 2016

The Guardian

http://www.theguardian.com/sustainable-business/2016/mar/07/warren-buffett-climate-change-insurance-policy-berkshire-hathaway-shareholder-letter

Warren Buffett to shareholders: Climate change is nothing to worry about

By Alison Moodie