In this week’s edition of the BryghtCast Weekly Podcast, Bray Wheeler, Consultant, and Bryan Strawser, Principal and Chief Executive discuss three recent events and their potential impact on private sector organizations.
- Axios: The China challenge stumps the 2020 candidates
- Axios: BlackRock’s new climate strategy
- NPR: In the Philippines, Volcano is quieter, but officials renew warnings for people to leave
Bray Wheeler: Hi and welcome to BryghtCast Weekly or the week of January 13th, 2020. This is our first one for 2020.
Bryan Strawser: It’s our first one for a little bit.
Bray Wheeler: It has, we’ve taken a little break during the holidays and such as well as just kind of-
Bryan Strawser: There really wasn’t a whole lot of significant stuff that was going on.
Bray Wheeler: Yeah, there’s only probably so much you people want to hear about either impeachment or sports or all sorts of different things. You had put out an episode on Iran as well.
Bryan Strawser: So we did an episode of the Managing Uncertainty Podcast yesterday, where I talked a little about Iran and some of the things happen there and what companies should consider and do.
Bray Wheeler: Yeah, so this is Bray Wheeler. I’m a consultant here at Bryghtpath.
Bryan Strawser: And this is Bryan Strawser, principal and chief executive here at Bryghtpath.
Bray Wheeler: We like to do, our intro is a little delayed here on BryghtCast. So this week we’re going to try, and keep it just a little bit short and sweet and focus on a couple of different things. One kind the major kind of global conversation or global moment that’s happened here in the last few days is the volcano eruption in the Philippines. That started occurring on Sunday. The volcano erupted Sunday sending ash about nine miles into the sky. Prompted warnings from Philippine officials in terms of hey, this could be a lot worse. This could really be a catastrophic explosion. So far that hasn’t necessarily been the case. It’s certainly kind of continued to rumble and spew ash and lava.
Bray Wheeler: However, kind of the major impact from this so far has been kind of an ash cloud that was initially sent, that initial one that disrupted flights and operations within Manila. So this volcano is located about 37 miles south of Manila, the Philippines Capitol. And so this ash cloud on Sunday really started to kind of disrupt air operations and that’s usually the kind of real critical thing with a lot of the volcanic eruptions. There’s not a whole lot of major technology bases or industry things kind of at the foothills of a volcano for probably obvious reasons. But certainly is having an impact on the folks that do live near there. There are thousands of people who have been evacuated around the volcano, but that disruption to Manila and major cities kind of around that area is certainly the big thing for travelers.
Bray Wheeler: So flights were disrupted Sunday. That continued into really today when operations kind of resumed normally. So for right now for companies, it sounds like Manila is … The airport is open, Manila is available, it is not under lava, it is not at risk for some kind of awful-
Bryan Strawser: This is not Pompeii.
Bray Wheeler: Yeah, awful, awful, awful kind of situation. However, there is a major backlog from those flights being delayed here in the last couple of days. There’s a lot of people that are just trying to leave the area in addition to that. So there is a lot of travel disruption at the airport in general, but for businesses in Manila, it is important to make sure that you’re accounting for your folks you’re looking at your business continuity plans. You’re monitoring, kind of the air quality, the travel ability within the area. Just kind of really your basics for monitoring those different things.
Bryan Strawser: Yeah. I think yesterday when we had a couple of clients that were impacted by this, I think it was kind of a known how long of a problem this was going to be. Of course, the Philippines government doesn’t do the best job of kind of communicating what’s happening with these things either. But yeah, I think Bray’s got it right. I would monitor carefully what’s going on. Travel disruption is probably the biggest risk and that would become reality before there was any real disruption in … I started to say Hong Kong. Many real disruptions in Manila in terms of regular business operations. It’s air quality and transportation, particularly air travel issues I think are the biggest issues to keep an eye on, for right now.
Bray Wheeler: Yep. So moving on. The next topic we have for this week is BlackRock. The kind of major investments group made an announcement this week that they’re going to be holding companies to higher environmental standards. And really the implications here are, this is kind of a conversation long time kind coming and BlackRock has kind of made similar statements in similar positions on some different issues. But really, they’ve issued an overt threat as we get into the kind of proxy season and board meeting season and shareholder meeting season.
Bray Wheeler: They’re threatening to vote against management boards that aren’t disclosing kind of climate change risks in the fashion that they would like to see them or having those plans kind of associated with those be in line to key industry standards. So standards like CAFE standards, which are really around car emissions or the gold standard for carbon or the IS 14,000 kind of family of standards around kind of climate environmental policies. Those are kind of some of the kind of the major ones that are out there. But really for companies, BlackRock is a huge, huge player in the game. As probably most companies know, but to have a position on climate change risks, climate change plans, that narrative is becoming a bigger and bigger topic just in general.
Bray Wheeler: And when some of these bigger players like BlackRock or if Vanguard steps into it or some of these others, companies are going to have to do something about them and start implementing some of those things and having those conversations if they aren’t already taking place. And if they are already taking place, making sure that they are aligned to something substantial because these players will not back off of that. And they control big votes.
Bryan Strawser: Yeah, I mean I’ve been down this road, I mean in the previous employer, dealing with activists, investors at various levels of aggression and influence. And then we’ve had consulting clients that have been the subject of activist investor campaigns including large private equity firms of which BlackRock is pretty much, I think the largest PE firm and portfolio management company that’s out there. It’s tough to … I don’t want to overemphasize the importance of this play that BlackRock is making. It’s going to make some publicly traded companies very uncomfortable to have to address some of these issues. At the same time in less BlackRock is willing to go in and attempt a proxy fight for majority control over this issue. It’s not going to have a huge amount of influence on companies that choose to resist them.
Bray Wheeler: No, I think though the one-piece with a BlackRock versus kind of more the kind of activist hedge fund managers is oftentimes groups like BlackRock or Vanguard or things like that are seen as active investors. This means they’re actively having a dialogue with those corporations and they’re actively engaged. There’s more of a kind of a partnership kind of approach there. And so I think to your point, BlackRock isn’t going to probably issue too many proxy fights against it, but their influence and their vote in the general conversation and with other investors to say, “You know what, you didn’t do enough there. And we’re choosing to make company X an example here, And we’re going to vote against management proposals on whatever or we’re going to vote against these board members because they’re members of the committee that’s charged with overseeing some of these things.” That could have an impact in terms of the dialogue and the ability for companies to kind of adjust.
Bray Wheeler: And I don’t think that they’re looking for every company to kind of save the world, but I think they are looking for companies to start being a little bit more frontal. And a little bit more strategic in kind of … Trying to think of the right word. A little bit more overt in terms of how they’re playing within kind of this sphere and what influence they do have kind of on the overall kind of issue itself.
Bryan Strawser: I would agree with that.
Bray Wheeler: So with that kind of our last topic, and it should be a relatively quick one because of course, they’ll probably be more to play out here, but because it has to do with China. Which has been one of our favorite frequent topics here over the last few months? But ironically doesn’t have a whole lot to do with Hong Kong, fortunately, but does have to do with Taiwan. Another kind of satellite geographic location within a kind of China’s sphere of influence or in this case not influence.
Bray Wheeler: So China has always viewed Taiwan as part of China. Taiwan has always in the rest of the world, has always viewed Taiwan as generally independent of China for the most part. There’s probably a few kinds of geopolitical exceptions with different countries, but everybody’s seen Taiwan as a separate independent country. China very much wants to bring it back to China. They recently had an election over the weekend. It was-
Bryan Strawser: It didn’t go the way that China thought it was going to.
Bray Wheeler: It did not. And actually it surprised quite a few people in terms of how decisive it was against China. So the pro kind of independent President Tsai, and I apologize if I get this wrong. Tsai Ing-wen won decisively. It wasn’t too close. Of course, China then responded with their typical bluster of there were hands in the pot, it was rigged. The United States may have had some influence. We don’t believe it kind of conversation and narrative that China typically puts out, but in the face of what they’re dealing with, Hong Kong and the decisiveness of this Taiwan election. China’s kind of in a weird kind of awkward spot for the moment of trying to figure out is this policy and this plan that Xi Jinping has put forth, is that actually bearing fruit?
Bray Wheeler: And this was kind of a direct challenge back to the Chinese premier of yeah, we’re not falling in line. Your influence has clearly waned, at least in this election of what’s going on. So on the heels of continued unrest in Hong Kong, which China has much more control over that situation along with Taiwan. China is kind of in a weird spot right now. Just in kind of in their home area.
Bryan Strawser: Yeah, there’s a pretty good article coming out of the election in Axios yesterday. I think Axios, China is their smaller magazine, smaller online product that looks at just trying to … That said that they think that China has been overestimating and over-communicating their influence and wealth and economic growth and military capacity for some time. And then you start to look at … They were kind of building this off of a couple of different things, but one of the biggest was the Taiwan elections, just not going the way that China was expecting that to go. And really being rebuffed at the polls. And I don’t know, I mean maybe I have an American point of view on this, but I’ve been to Taiwan a couple of times and you walk and talk to folks who live there and folks in Taipei City, I haven’t been outside of Taipei. But around Taipei City and none of them want to be part of China.
Bray Wheeler: No.
Bryan Strawser: They might be interested in a peaceful reconciliation that allows for some easier border movement and some things. But I don’t get the sense that the average Taiwanese man or woman wants to live in China.
Bray Wheeler: No.
Bryan Strawser: Their version of China, Taiwan.
Bray Wheeler: Right.
Bryan Strawser: Not the communist China version of China.
Bray Wheeler: Correct. Yeah. I think that’s kind of a good read because not only in addition to these elections, there’s also the kind of the international and domestic challenges of their kind of their relations with the Muslim minorities within China. And the fallout from some of their policies and things that they’ve been doing. Reeducation or whatever you want to call it. With some of the children and things like that within these Muslim minority populations and in Western China. Really kind of China’s influence over the last few months. It’s kind of just taken some weird kind of hits. And I think that Axios article is probably pretty, pretty interestingly kind of accurate in terms of what China is projecting is not necessarily what is reality or what even people have … Because I think a lot of people kind of internationally probably have some skepticism around China’s bluster, but they don’t overtly kind of challenge a lot of it because there’s a lot of interdependency of where China is interconnected. Whether it’s economically or politically or things like that.
Bray Wheeler: But to kind of see some of these things start to play out in their kind of their rebuffs just in general within the international community. The trade war, things like that, that they’ve kind of just taken some weird kind of hits over the last … Nothing that’s going to destabilize or kind of throw them off orbit. But definitely their influence and their kind of reputation or their brand perception to put it in kind of business terms is definitely not what it was six months ago or a year ago.
Bryan Strawser: Yeah. I mean I think you’re dead on. And we both looked at the article. I thought it was a pretty good summation that China’s perhaps not at the peak of their game in some areas that are commonly thought that they were. That article covered the economy and military and might and projection. I think it was really focused on China’s Naval fleet and some of the challenges China’s had with operating a fleet at the capacity and expertise that the United States and the United Kingdom have. But also just where their foreign policy has perhaps not been as astute in dealing with President Trump and dealing with Taiwan and others in there. And I don’t think this takes away anything from China’s rise to be a pure competitor of the United States in the long haul, but certainly indicates that perhaps not all as well inside the bubble as the Chinese government might portray itself to be.
Bray Wheeler: No, especially post kind of president Xi Jinping election and kind of the expectations that were to come from really kind of that like the lifetime election of him in this role, it’s not really what you want to see right out of the gate. Kind of after an election like that to have kind of these types of hits. China probably wanted to see some of this stuff go a little bit more their way to kind of justify what was going on, and especially after everything that he’s done internally.
Bryan Strawser: Right. That’s it for this edition of BryghtCast. We’ll be back next week or thereafter with another new episode. Be well.