Not so pacific

Unfortunately, we are contemporary with a company that will be a case study in business schools in the future. PG&E (Pacific Gas & Energy) case has all the ingredients that illustrate how forgetting the rest of stakeholders is the best way of abandoning shareholders and value creation in the long run.

We quote CNBC’s article of this last Friday (25/10/2019) as it perfectly summarizes the shameful impact that a poorly managed company may have in our society (communities, environment, customers, public funds) and its shareholders:

“Shares of PG&E plunged to $5 on Friday, a 30% decline that could hamper the company’s attempt to make its way out of bankruptcy. The stock decline followed reporting that PG&E’s transmission lines were active in the area where the Sonoma County fire sparked. The company’s stock has declined by almost 90% over the past 12 months.

PG&E’s equipment has sparked 19 major fires in 2017 and 2018, and the company was blamed for last year’s Camp Fire that destroyed the town of Paradise and killed 86 people.

The weekend outage is the second major shutoff by PG&E this month, after the company two weeks ago cut power to nearly 2 million people to avoid fires sparked by its electricity lines. Widespread dry, hot and windy weather is expected to affect the utility’s service Saturday evening through Monday.”

News like this one should help us to be more conscious at least about 2 points: On the one hand, the importance of engaging and guiding companies towards good practices, as the cost of not doing it is real and painful for all parties, also shareholders. On the another hand, the fact that most companies are performing according to quite decent standards, being this kind of news just painful outliers to learn from.

Nevertheless, our experience with asset managers, main providers of capital in quoted companies, indicates that there is still an important part of these asset managers that handle ESG risks in the same way as hot potato game. Just expecting not to be the ones invested in the company when the scandal bursts. Clearly, not the best example of sophistication in their investment strategies, as they pompously sell to their investors.