10 Notable Business Events in the Last Decade
Russian Invasion of Ukraine (2022)
On Thursday, February 24, 2022, Russia invaded Ukraine, sending shock throughout the entire world. The deep entrenchment of social media in our culture meant that Ukranians could tweet, post, and share first-hand POVS of the atrocities that they were facing. Politicians, actors, athletes and peoples from all backgrounds took to social media to condemn Putin and his actions.
The effects of the war were felt throughout economies across the world. The war raised oil to record high prices, putting strain on American consumers’ wallets, who were already suffering from record-high inflation.
In response to the war, over 300 U.S companies pulled out of Russia including giants such as McDonald’s, Starbucks, and Heineken. Several companies, as a consequence of Globalization, faced steep losses as a result of the war. Blackrock took over a 17 billion dollar loss from exposure to Russia. On the other hand, several companies decided to remain in the country including Marriott Hotels and Citrix Systems.
Additionally, several countries, including the United States brought upon a level of sanctions that had never been seen before on the Russian economy. The sanctions include: bans on dual-use military goods, Russian flights, and luxury goods. Additionally many prominent Russian oligarchs had their assets seized, most notably Chelsea FC owner Roman Abramovich.
Our economy is intertwined more than ever. Russia’s invasion raises an important question: When a country violates the very rules that dictate Global Peace, what is the correct way to punish the offender, protect your citizens, and ensure stability of the global economy?
The Little Engine that Could: Engine No.1 Wins Board Seats at ExxonMobil (2021)
Engine No.1 owned just a 0.02% stake in giant corporation ExxonMobil. However, by the end of May of 2021, Hedge Fund Engine was able to nominate three members to Exxon’s board. All the while, they spent only 12.5 million dollars on their proxy campaign- impressive, considering Exxon was valued at over 250 billion at the time.
Throughout the contest, Engine argued that Exxon’s management had failed in several ways. But one of their main arguments was that Exxon failed to implement long-term business plans involving renewable energy sources. In a world that has moved away from Carbonization, Engine argued that not exploring clean energy had reduced Shareholder returns and posed a greater risk for the future.
Institutional Investors in Exxon such as Blackrock and Vanguard, who own around 15% of Exxon, supported Engine and were critical in winning the proxy contest. Why is this all important? Engine No.1 has set a precedent for the entire industry. Gas and Oil companies can no longer avoid the climate crisis and must have sound plans in place. Otherwise, they run the risk of institutional investors pulling their support and losing board seats to an activist investor.
An Order of Expansionary Policy with a Side of Scandal: The Fed During Covid (2020)
With the Coronavirus pandemic spanning 3 years and accumulating over 80 million cases, the COVID pandemic ravaged American citizens and businesses alike. In order to protect the United States economy from total devastation, the Federal Reserve eased monetary policy in an unprecedented way. What steps did they take and what effects did they have?
One notable action the Fed took was lowering the Federal Funds Rate. Cutting the FFR sets a benchmark for short-term interest rates throughout the country. Lower interest rates stimulate economic activity by incentivizing consumers to spend money.
The second tool used was Quantitative Easing. The Fed purchased large amounts of securities, stating that they would buy at least $500 billion Treasuries and $200 billion government-secured mortgage backed securities. They announced plans to taper asset purchases in November of 2021, nearly a year and half after the pandemic started.
But the Federal Reserve had its fair share of scandals during the pandemic too. In 2021, two top officials, Eric Rosengren of the Boston Reserve and Robert Kaplan of the Dallas Fed both resigned. They had previously come under scrutiny for extensive stock trading during a time where the Federal reserve was attempting to stabilize and boost the economy. Many wondered whether the officials had profited from the Fed’s actions. Their actions yielded criticism from notable politicians such as Elizabeth Warren and put pressure on Chairman Jerome Powell to change their ethical policies around Fed official’s participation in the market.
So here we are now in 2022 with the economy experiencing record high inflation. The federal reserve has already raised rates once and aims to increase them six more times throughout the year. It raises the question, how will the Federal Reserve walk the tight line between controlling inflation and choking economic growth in the years?
He Said, She Said, You Said: The United States China Trade War (2019)
In 2019, the United States-China trade war which had begun a year prior, intensified causing intense volatility on Wall Street. Specifically on May 5th, 2019 the United States increases tariffs on Chinese Goods worth a total of 200 billion dollars. China then responded by saying they would increase tariffs on 60 billion dollars of US Goods.
As a result, the U.S. Stock Market suffered the worst day since the start of the year. The Dow Jones dropped 2.4%. What followed were a series of moves by both governments to punish the other. Both countries created “unreliable entity lists” with the United States famously listing Huawei as one of the companies. Only in January 2020, when both sides signed the Phase One trade deal, did there seem to be an end in sight. In the elections that followed, putting pressure on China was one of the hotly debated issues for all candidates.
Drink Your Water Mark: The Facebook Cambridge Analytica Scandal (2018)
In April 2018, Mark Zuckerberg appeared in front of Congress for the first time in a series of hearings regarding the company’s data handling policies. The catalyst for these hearings? It was found that Facebook unknowingly exposed the data of 87 million Facebook users to Cambridge Analytica: a political consulting company who did work on the Trump Campaign. The question is, how did Facebook, one of the world’s largest tech giants, manage to let their users’ data get exposed in the first place? The answer lies with Aleksandr Kogan, a Russian American who used to work at Cambridge Analytica.
Kogan built a quiz app on Facebook, exposing a loophole in Facebook’s Application Programming Interface (API). Not only was Kogan able to collect the data of 270,000 quiz-takers, but he was also able to collect the data of each individual person’s friend network.
In 2019, the FTC handed Facebook a 5 Billion dollar penalty. According to the Federal Trade Commission’s website, the penalty is:
…the largest ever imposed on any company for violating consumers’ privacy and almost 20 times greater than the largest privacy or data security penalty ever imposed worldwide. It is one of the largest penalties ever assessed by the U.S. government for any violation.
The effects of the scandal are still relevant today. Companies, including Facebook, made several changes to their business models. Several 3rd party apps had access taken away to Facebook, reducing their ability to harvest data. Twitter, alongside Facebook, introduced measures to allow users to see, edit and delete data.
But there was a lot left unresolved. Important questions were raised that still cloud consumers’ minds. How much can we trust Facebook with our private information? How many loopholes in Facebook’s API are they unaware of? How will businesses protect themselves from similar scandals in the future?
Inflating (and Popping) the Bitcoin Balloon (2017)
In December of 2017, Bitcoin’s price nearly touched 20,000. Its price 12 months earlier? 900. 2017 marked the defining year of growth for Bitcoin. But 2017 was a story about volatility for Bitcoin, just as much as it was about growth.
When the SEC announced that they rejected Cameron and Tyler Winklevoss’s proposed Bitcoin Exchange-Traded Fund (ETF), the price for Bitcoin dropped more than 30%. However, within days of the SEC announcement, the price rallied back to over 1,000 dollars.
This was not the only steep price drop that Bitcoin experienced throughout the year. Just a day after Bitcoin passed the 3,000 dollar landmark, the price dropped 300 dollars in an hour. The most dramatic drop of 2017 occurred in September. The price surpassed 5000 dollars at the beginning of the month, but by September 14th, the price was down below 3000 dollars. Despite these drops and blows by regulation, Bitcoin’s price rallied to a then all-time high of 19,783.21. The Bitcoin Balloon was fully inflated.
But by the end of the 2018 trading year, the price of Bitcoin was a mere 3729.31: far from the impressive highs it faced in 2017. Many people can attribute the rise to investor fervor and irrationality, but perhaps there were other forces at play. University of Texas Professor John Griffin and graduate student Amin Shams studied transactions on Bitfinex, a crypto exchange. From their research, they found that Tether, a cryptocurrency whose value is theoretically always worth 1 dollar, was used to buy Bitcoin after dramatic price drops. It raises the question, how much of Bitcoin’s price increase could be attributed to investor speculation, and how much to market manipulation?
Beginning of the End: Brexit Talks Begin (2016)
On June 23rd, 2016, The United Kingdom Voted to leave the European Union. The vote was extremely close with 52% voting to leave, and 48% choosing to remain. Additionally, a majority of English and Welsh voters chose leave while Scotland and Northern Ireland chose to stay. 18 days after the initial vote, Theresa May became prime minister and promised to follow through with Brexit. 2016 Ended with the UK High Court ruling that the British Government could not trigger Article 50 without the approval of parliament, unlike May had promised.
The Brexit fight would slog on for four more years, seeing an eventual change in leadership with Boris Johnson of the Tory party becoming the new prime minister. After a series of laws, campaign pauses, the UK officially left on January 31st.
No one really knows the exact long-term effects of Brexit on the British economy, but there is a general consensus that it will negatively affect them in the long term. The UK government’s own internal report was leaked in 2018, where it stated that economic growth would be hampered anywhere from 2-8% for the next 15 years. But this report was released before the Coronavirus pandemic. As the years go by, how are economists going to isolate and measure the economic effects of Brexit from the other factors?
Pay Up: Greece’s Sovereign Debt Default (2015)
In 2015, Greece missed a payment of 1.6 billion Euros to the International Monetary Fund, the first developed country to do so. Unable to remedy structural issues that marred the country for years, the economy would later collapse.
Concerns of a default were expressed in 2009, when the government deficit exceeded more than 15% of its national GDP. Fears of a default increased the 10 year Bond Yield, with interest rates reaching above 35% in 2012. This would cripple, and then completely collapse, the Greek Bond Market, leaving the Government with no way to repay their debt.
Greece wanted the EU to forgive the debt, but other countries such as Germany pushed for Austerity measures. According to Brittanica, an Austerity Measure is:
a set of economic policies, usually consisting of tax increases, spending cuts, or a combination of the two, used by governments to reduce budget deficits.
One such measure was refinement to the country’s pension system. Greece’s pension payments as a percentage of GDP was miles above other countries in the EU. It prevented early retirement and forced employees to contribute more capital to pension plans.
Additionally, the measures required the country to cut their spending and increase their taxes. This led to even more distress in the country. The proposals came at an immense cost of 72 billion Euros, and as a result, GDP shrunk by 25%. In 2015, the unemployment rate was at 24.9%.
However, the news is not all bad. In 2018, Greece completed their final bailout program. In 2019, the 10 year yield dropped down to 0.9%, an incredible downturn from what it was just seven years ago. Confidence in the markets was rising, as a return to normalcy seemed incredibly possible.
But Greece was hit hard by the pandemic, putting a pause on their otherwise strong economic recovery. The country experienced a deep recession in 2020, but is slowly coming back. Unemployment rates have dropped down to 12.8% indicating that progress has been made, but there is still a long way to go with new geopolitical tensions arising everyday. With the Russian Ukraine war crumbling the tourism economy, how will Greece, who’s economy relies on tourism for one fifth of the economy’s value, navigate the economic comeback in the years to come?
The Start of Monster IPOs: Alibaba Goes Public (2014)
In 2014, Alibaba went public and set the record (at the time) of the largest IPO ever at a valuation of 25 billion dollars. Alibaba’s IPO was a symbol for a Chinese business comeback, occurring three years after the New York Stock Exchange expelled over a 100 companies for malpractice and fraud. The Hong Kong Stock Exchange, NYSE, and NASDAQ all fought to list the company. The 2012 Facebook IPO Disaster sunk Nasdaq’s pitch, and the Hong Kong Stock Exchange scrutinized Alibaba’s shareholder protection policy.
Since Alibaba’s IPO in 2014, Saudi Aramco beat their record for the largest IPO ever, having raised 25.6 billion dollars in 2019. However, Jack Ma aimed to beat this record just a year later with Ant Group’s IPO, seeking to raise 30 billion dollars. However, the Chinese regulators eventually canceled the IPO after Jack Ma criticized the government’s position on financial risk. He stated:
“Without risk, no innovation can happen in this world,”
However, not all hope is lost. Business Insider reported on September 1st, 2021 that Ant Group’s 35 billion dollar IPO could once again happen. Out of the four companies set to take a state in the joint venture between Ant Group and the government, three are government-backed. If this deal is successful, it will become the largest IPO in history, meaning 2 out of the top 3 were led by Jack Ma.
Cheap Clothes and a High Human Cost: Dhaka Garment Factory Collapse (2013)
In April 2013, the Rana Plaza in Dhaka Bangladesh collapsed. As Grow Ensemble notes:
It took less than ninety seconds for the eight-story building to collapse and kill 1,134 workers and maim more than 2,500 others.
This wasn’t the first workplace tragedy to happen in Bangladesh. Just five months earlier, a fire at the Tazreen Fashion Factory killed at least 112 workers.
The day before the collapse, large cracks were on the building and the workers were concerned. However, workers were threatened with seized pay if they did not show up to work.
As the world looked on with horror, many individuals started to realize the deadly conditions workers abroad faced in order to supply Western demand. The buildings in which Bangladeshis work usually do not meet any safety standards. Additionally at the time, workers were not compensated for any injuries that they received on the job. Even now, the compensation amounts are so low and do not adequately cover workers and their families.
What the Rana Plaza tragedy did was contextualize the means by which developed countries obtain their goods. Brands are attracted to Bangladesh because costs of production (employee benefits and wages) are extremely low. This boosts profit margins, and allows companies to charge lower prices.
Some companies who manufactured clothes in Rana Plaza were Walmart, Primark, JCPenny, Benetton, and The Children’s Place. At the time consumers were outraged, demanding change with movements such as #whomademyclothes which called attention to the faces behind the clothing industry.
But now in 2022, many of the same challenges remain. During March 2020, when stores shut down and sales plummeted, global brands withheld employee payments for an estimated 40 billion dollars worth of clothes. From where will the change come? Will consumers put pressure on companies to ensure their workers’ rights? Will consumers accept higher prices as a result? Or, will companies face inquiries from activist shareholders about their human rights practices, in a manner similar to Disney earlier this year? The answers are unclear, but one thing is for sure. The Rana Plaza disaster is sadly a reality that many workers face in response to the ever growing demand of developed countries.
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