Why some people have power over companies and others don’t

HENRY KISSINGER was guilty of understatement when he said that power is the ultimate aphrodisiac. In fact, power is the ultimate life-improver tout court. Powerful people not only have more friends than the rest of us. They also enjoy better health. Numerous studies demonstrate that low status is more strongly associated with heart disease than physical hazards like obesity and high blood pressure.

The benefits of power have grown dramatically in recent years. CEOs and other C-suite types have seen their salaries surge at a time when the median wage has either stagnated (in the United States) or grown slowly (in Europe). Politicians have learned how to monetise their pull. The Clintons earned $109m in the eight years after they left the White House. Tony Blair has turned himself into a wealthy man in the three years since his retirement from national politics. …

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E-commerce is becoming more social and more connected to the offline world

THOSE who cherish privacy will recoil in horror, but for digital exhibitionists it is a dream. At Swipely, a web start-up, users can now publish their purchases. Whenever they swipe their credit or debit card (hence the service’s name), the transaction is listed on the site—to be discussed by other users. “Turn purchases into conversations” is the firm’s mantra.

Swipely is among the latest entrants in the growing field of social commerce. Firms in this market combine e-commerce with social networks and other online group activities. They aim to transform shopping both online and off. Angus Davis, Swipely’s boss, points out that the internet has already disrupted the content industry. Commerce will be next, he says. …

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Facing heavy-handed government regulation, America’s for-profit colleges are reforming themselves

“EGREGIOUS, outrageous, violated everything we stand for”: Don Graham’s denunciation of recent activities by some employees of his own firm is stark. On August 4th a report by the Government Accountability Office (GAO) found evidence of deceptive recruitment tactics by 15 of America’s leading for-profit colleges, including one operated by Kaplan, which accounts for the bulk of the profits of Mr Graham’s Washington Post Company. Some of the colleges, which also included the giant University of Phoenix, insisted that the incidents—which ranged from misleading potential students about tuition costs and likely post-graduation salaries to encouraging them to file fraudulent loan applications—were isolated. But the mood is turning against them.

For-profit colleges, which range from beauty schools to institutions that resemble traditional universities, were already under attack. In June Steve Eisman, a hedge-fund manager who made a lot of money during the financial crisis by shorting bank shares, told Congress that the for-profit education business was as destructive as the subprime mortgage industry. Congress already seems eager to add to regulations that the government plans to introduce in November. …

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Two technology titans squabble over HP’s former boss

LARRY ELLISON, the chief executive of Oracle, likes a fight. Shortly after Hewlett-Packard (HP) parted company with its then CEO, Mark Hurd, last month amid claims he had filed inaccurate expense reports that appeared to conceal a relationship with a female contractor, Mr Ellison blasted its board for making what he dubbed “the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago”. Now Mr Ellison’s bid to profit from HP’s loss has triggered both a lawsuit and a fresh bout of mudslinging.

On September 6th Oracle announced it had hired Mr Hurd and given him a seat on the software behemoth’s board. The following day HP launched a lawsuit in California against Mr Hurd, seeking to block his move to Oracle on the ground that he would inevitably disclose HP’s trade secrets to his new employer. As well as giving Mr Ellison another reason to lambast HP’s behaviour, the suit is also a sign of growing tension between technology firms as they venture beyond their traditional markets. …

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Why expensive consultancy firms are giving away more research

IN THE run-up to the climate-change conference in Copenhagen last year, a curvy graph was passed around by policymakers and NGOs. It showed various options for cutting carbon-dioxide emissions. At one end of the chart were simple efficiency improvements which would both cut CO2 and save money; at the other end were costly technologies like nuclear power and carbon capture. Climate-watchers found the graph useful for demonstrating how many money-saving or cheap technologies there were. As one veteran put it, “We all speak McKinsey’s language now.” The graph was indeed put together not by a tree-hugging NGO, but by the for-profit consultancy.

All consulting firms seek to provide what they annoyingly call “thought leadership”. McKinsey’s rival, the Boston Consulting Group (BCG), became well known in part by distributing its ideas freely. Consultancies now put out short opinionated papers as well as data-laden reports such as BCG’s recent one on wind power in China or PricewaterhouseCooper’s on electronic health records. Fiona Czerniawska of Sourceforconsulting.com says the number of such reports from the top 25 firms has quintupled since 2004. Free reports are expensive to produce: Tom Rodenhauser of Kennedy Information, a firm that monitors consultancies, reckons they cost up to 5% of gross revenues. Are they worth it? …

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BP casts the blame for the Gulf oil spill widely

THE dramatic case study in corporate crisis-management acquired another chapter on September 8th. BP’s report on the causes of the accident that led to the loss of the Deepwater Horizon rig and the biggest oil spill in American history describes a litany of mistakes. Had this sequence of errors been halted, catastrophe might have been averted. Some of those mistakes, the report concludes, were BP’s. But its finger also points at Halliburton, which worked on the cement seal at the bottom of the well, and Transocean, which owned and ran the rig and maintained the “blowout preventer” which so signally failed to live up to its name.

The stakes are high. If BP is found to have been grossly negligent in its role as operator the fines it faces would increase by billions of dollars and its chances of recouping money from its junior partners in the project, Anadarko and Mitsui, would be reduced. BP’s report implies such a finding is unlikely. But it makes a protracted, reputation-damaging series of suits and countersuits between the companies involved seem almost inevitable. …

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A retailer shows Japan how to beat the curse of thriftiness

THE Japanese used to be to conspicuous consumption what the Chinese are to raw materials. When there was a fad in Tokyo for tiramisu in the early 1990s, the world market for mascarpone felt the strain—until a Japanese company invented a synthetic version. But those bubbly days are long gone. Two decades of economic stagnation have produced a generation in their 20s and 30s that Richard May, director of the Japan Consumer Marketing Research Institute, calls kenshohi—people who hate shopping (except on the internet and from thrift stores). But one mainstream firm has defied the trend. It is Yamada Denki, Japan’s largest consumer-electronics retailer.

Yamada Denki’s consolidated sales in the fiscal year ended in March reached YEN2 trillion ($24 billion), double their level of five years ago. It has been growing quickly (see chart). Pre-tax profits doubled over the same period to a record YEN102 billion. The firm’s market share is more than 25%, which makes it, as one analyst puts it, the Wal-Mart of home appliances in Japan. Some of its success last year was thanks to a temporary government stimulus programme, which gives people who buy low-energy appliances discounts on future purchases. Yet the firm’s growth since it was founded in 1973 is largely self-made. Yamada Denki has rewritten the rules of retailing in Japan. It has done so with a loyal following of foreign investors who have helped it more than Japan’s risk-averse banks. “We’ve always been evaluated better abroad than in Japan,” says Tadao Ichimiya, its president. …

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Will Burger King be gobbled up by private equity?

SHARES in Burger King (BK) soared on September 1st on reports that the fast-food company was talking to several private-equity firms interested in buying it. How much beef was behind these stories was unclear. But lately the company famous for the slogan “Have It Your Way” has certainly not been having it its own way. There may be arguments about whether BK or McDonald’s serves the best fries, but there is no doubt which is more popular with stockmarket investors: the maker of the Big Mac has supersized its lead in the past two years.

Recession has favoured McDonald’s over BK, whose share price has fallen by half since the economy was flame-grilled in the summer of 2008. Shares in McDonald’s have risen, reaching an all-time high in August. Same-store sales at BK have fallen for five successive quarters. …

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Renting cars by the hour is becoming big business

CAR clubs, whose members pay an annual fee and then rent a car by the hour on a pay-as-you-go basis, are moving from a fringe fad for greens to a big global business. Carmakers have no choice but to pay attention: one rental car can take the place of 15 owned vehicles.

Car-sharing started in Europe and spread to America in the late 1990s, when the first venture opened in Portland, Oregon, a traditional hangout of tree-huggers. For years it was organised by small co-operatives, often supported by local government. It still has a green tinge. One in five new cars added to club fleets is electric; such cars are good for short-range, urban use. But sharing is no longer small. …

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Brazil’s oil giant may be paying too much to pump the stuff

FOUR years ago Brazil struck oil—up to 350km (220 miles) offshore and buried under deep water and thick layers of rock, sand and corrosive salt. In places, the oil fields are 7km below the surface, so getting the black stuff out was always going to be hard. Now it looks like finding the funding will be tricky too.

On September 1st, two months later than planned, Brazil’s government made public the price it will demand for an estimated 5 billion barrels, mostly in the Franco field off the coast of Rio de Janeiro. Petrobras, the national oil company that was partially privatised in 1997 (Brazil’s government still owns 40% and a majority of voting rights), will have to pay $8.51 a barrel. Analysts frown that $6 would be more reasonable. Oil is $74 a barrel, on the surface, but is worth much less underground. …

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