971229 Ethics

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971229 Ethics

  1. 1. Corporate Management in Turbulent Times By Dr. Allen Yeh, Dec 29th, 2008/12/28
  2. 2. “ In turbulent times, an enterprise has to be managed both to withstand sudden blow and to avail itself of sudden unexpected opportunities. This means that in turbulent times, the fundamentals have to be managed, and managed well” --Peter F. Drucker, Managing in Turbulent Times”-1980
  3. 3. <ul><li>The Year 2008 will go down in history as one of the most turbulent period since WWII, if not since the 1930 “ Great Depression” </li></ul><ul><li>-Just look at some examples: </li></ul><ul><ul><li>In July 2008, oil was trading at an all time high of 147USDs/barrel-and is around 40USDs at the moment-projected to go down to mid 30’s in early 09 </li></ul></ul><ul><ul><li>Daily chartered rate for large bulk cargo ship a few months ago, was close to 240,000USDs/D, and is now only about 1% of this-a reduction of 99% in less than 6 months </li></ul></ul><ul><ul><li>In stock markets, the decline is also un-unprecedented -if you buy 1,000USDs of Delta Airline a year ago, you would have 49.0USDs left today; -If you had purchased 1,000USDs worth of AIG one year ago, you would have 33.0USDs today </li></ul></ul><ul><ul><li>The prices of world’s major commodities, such as steel, aluminum, etc are also declined by more than 50% in a short 6 months span </li></ul></ul><ul><li>How can an organization cope with changes of such magnitudes? How does “Corporate Manager” manages during time of extreme “Volatilities” and “Turbulent” </li></ul>
  4. 4. The Five Key Fundamental Forces I. The emergence of the new world order/regional economic blocks II. The Environmental Impacts on Industrial Development /Cross Boarder Trade-How to Manage “Sustainability”? III. The Transition from Petroleum based economy to “Renewable/Bio Energy”?? IV. The global warming/impact to industrial development/ cross border trade V. The re-structuring of world financial system
  5. 5. <ul><li>The emergence of a new world order/regional economic blocks. </li></ul><ul><ul><li>The 21th century will over turn many of our basic assumptions about economic life </li></ul></ul><ul><ul><li>The end of European domance of global politics and economics </li></ul></ul><ul><ul><li>The decline of America as a economic super power </li></ul></ul><ul><ul><li>Emergence of the new economic powers: China, India, Russia and Brazil etc. </li></ul></ul>
  6. 6. World Population from AD 1 to 2001 <ul><li>The emergence of a new world order/regional economic blocks. </li></ul>
  7. 7. Population Growth from 1950 to 2050 <ul><li>The emergence of a new world order/regional economic blocks. </li></ul>
  8. 8. Human Population in the Developed and Developing Countries from 1950 to 2005 <ul><li>The emergence of a new world order/regional economic blocks. </li></ul>
  9. 9. Economic Activity by Region in 2000 and 2050 (projected) <ul><li>The emergence of a new world order/regional economic blocks. </li></ul>
  10. 10. Annual Growth Rates from 1990 to 2005 vs. Income Level in 1990 <ul><li>The emergence of a new world order/regional economic blocks. </li></ul>
  11. 11. <ul><li>The current trajectory of human activity is not subatainable </li></ul><ul><li>Population growth and consumption of resources such as farmland, water, commodities will put severe strains on the world’s eco-system. </li></ul><ul><li>Rapid rate of consumption in energy resources, particularly oil—the emerging of large population centers such as China, India, Brazil etc will put further strain on world’s energy sources- </li></ul><ul><li>Environmental Mandates, such as restriction on use of hazardous chemicals in manufacturing processes and the EU’s WEEE recycling mandates etc are all measures to regulate cross border trade. </li></ul><ul><li>The emergence of “CO 2 abatements” are an important economic and industrial policies </li></ul><ul><li>Globally, the trends of production and retail trades increasingly focusing on issues such as : </li></ul><ul><li>-Global Warming; </li></ul><ul><li>-Sustainability </li></ul><ul><li>-CO 2 labeling </li></ul>II. The Environmental Impacts on Industrial Development / Cross Border Trade
  12. 12. “ Oil is the world’s biggest and most pervasive business, the greatest of the great industries that arose in the decades of 19 th century. As we look toward the 21th century, it is clear that mastery will certainly come as much as from a computer chip as from a barrel of oil…Until some alternative source of energy is found, oil will have far reaching effects on the global economy; major price movements can fuel economic growth, or contrarily drive inflation and kick off recession.” “ Daniel Yergin” – President, Cambridge Energy Research Associates III. The Transition from Petroleum based economy to “Renewable/Bio Energy”
  13. 13. The drilling of oil from black rock for the making of “Kerosene” in a small town called “Titusville” western pennsylvania in 1850’s served as the origin of modern petroleum industry, with Standard Oil Co then dominated not only the US but the world’s petroleum production and trade for many decades. Up until 1970’s US was the largest oil producer in the world with daily outputs exceeding 10 MM barrels/D. III. The Transition from Petroleum based economy to “Renewable/Bio Energy”
  14. 14. <ul><li>The Oil Shocks: </li></ul><ul><li>“ In 1861 oil was selling for 10USDs/barell, and quickly dropped to 0.5USDs due to lack of demand. </li></ul><ul><ul><li>1. The 6 days war of 1967 -the 3 rd Arab-Israeli War-oil flow was cut by more than 60%,-Arab oil producers using “Oil” as weapon </li></ul></ul><ul><ul><li>2. The second Arab-Israeli War of 1973-the Oil Embargo, oil prices went from 5-6USDs/barrel to over 20 USDs as a result of the supply disruption. </li></ul></ul><ul><ul><li>3. The 3 rd Oil Shock: Oil price peaked around Nov 1985 to 31.75USDs/ barrel to 10.0USDs/barrel. </li></ul></ul><ul><ul><li>4. The 4 th Oil Shock: 2008-in July oil hit the historical height of 147USDs/ barrel and quickly dropped to around mid 30’s by Dec 08. </li></ul></ul>III. The Transition from Petroleum based economy to “Renewable/Bio Energy”
  15. 15. Crude Oil Discoveries III. The Transition from Petroleum based economy to “Renewable/Bio Energy”
  16. 16. Crude Projections of World Oil Production III. The Transition from Petroleum based economy to “Renewable/Bio Energy”
  17. 17. Crude Oil Pricing Trend III. The Transition from Petroleum based economy to “Renewable/Bio Energy”
  18. 18. <ul><li>Fundamental questions: </li></ul><ul><ul><li>1. Are we running out of oil? How long before the oil stocks is depleted? -what are the alternatives? </li></ul></ul><ul><ul><li>2. What would be the long term price level of crude oil-and its impact to the global economy? </li></ul></ul><ul><ul><li>3. Is this transition from the petroleum based economy to an global economic order based on Renewable /Bio energy”? </li></ul></ul>III. The Transition from Petroleum based economy to “Renewable/Bio Energy”
  19. 19. IV. The global warming/impact to industrial development/ cross border trade <ul><li>The long term trend of “Global Near Surface Temperatures” increases- from 1850-2005 </li></ul><ul><li>The rapid rise of “Atmospheric Carbon Dioxide” </li></ul><ul><li>Human activities have greatly increased emissions of some greenhouse gases (called “Anthropogenic Greenhouse Gases”). </li></ul><ul><li>Global warming causes polar ice to thaw, sea levels to rise, and increases the severity of extreme climate events (droughts, floods, tropical storms). </li></ul><ul><li>The main anthropogenic GHGs are: </li></ul><ul><ul><li>-carbon dioxide (CO 2 ) </li></ul></ul><ul><ul><li>-methane (CH 4 ) </li></ul></ul><ul><ul><li>-nitrous oxide (NO 2 ) </li></ul></ul><ul><ul><li>-hydrofluorocarbons (HFC) </li></ul></ul><ul><ul><li>-perfluorocarbons (PFC) </li></ul></ul><ul><ul><li>-sulfur hexafluoride (SF 6 ) </li></ul></ul>
  20. 20. <ul><li>With the objective of mitigating climate change, most of the world’s countries signed the United Nations Framework Convention on Climate Change (UNFCCC) in 1992, and the Kyoto Protocol in 1997. </li></ul><ul><li>Two types of market: </li></ul><ul><ul><li>A regulated market has greenhouse gas (GHG) emission limits set by a regulatory body. Emitters have emission reduction targets and can buy carbon credits to meet such targets. </li></ul></ul><ul><ul><li>A voluntary emission reduction market exists outside of any regulatory mandate (e.g. the Kyoto Protocol), but there are common understandings regarding project types, documentation to be presented, etc. </li></ul></ul>IV. The global warming/impact to industrial development/ cross border trade
  21. 21. Global Average Near-Surface Temperatures from 1850 to 2005 IV. The global warming/impact to industrial development/ cross border trade
  22. 22. Atmospheric Carbon Dioxide IV. The global warming/impact to industrial development/ cross border trade
  23. 23. Human Dominance or Alteration of Several Major Components of the Earth System IV. The global warming/impact to industrial development/ cross border trade
  24. 24. 1033 as of May 2008 Registered CDM Projects By Industry: Source: UNEP Risoe CDM Pipeline, March 2008 By GHG: IV. The global warming/impact to industrial development/ cross border trade
  25. 25. Source: State of the Voluntary Carbon Market, 2008, p. 7 IV. The global warming/impact to industrial development/ cross border trade
  26. 26. <ul><li>Benefits of GHG Redaction to Corporation </li></ul><ul><li>Contribution to climate change mitigation, society & sustainable development </li></ul><ul><li>Generate extra income for projects that reduce GHG emissions and lead to achieve sustainable development goals </li></ul><ul><li>May improve process </li></ul><ul><li>May reduce costs </li></ul><ul><li>May demonstrate leadership </li></ul><ul><li>May fulfill corporate objectives </li></ul>IV. The global warming/impact to industrial development/ cross border trade
  27. 27. V. The re-structuring of world financial system <ul><li>The global financial impacts to the US sub-prime sector and the subsequent demises of some of the world’s first tier investment firms and banks, such as Bear Stern, Lehman Brothers, AIG, Fortis and many others have resulted in hundreds of billions of loses across all sectors </li></ul><ul><li>The sever impact of “liquidies” of financial institutions not only cause the strain of the entire financial world, but also severely impacting sectors that are highly dependent on “Financing” such as housing, auto, leasing, large purchases, leverage buyouts, hedging, M/A transitions, etc. For instance, in the US it is believed that between 20-30% of the decline in auto sales can be attributed to the shortage of “Financing Facilities”. </li></ul><ul><li>During the past 12 months, investor confident of financial service industries have reached all time low, which are severely impacting the future of many of the financial products promoted by world’s financial institutions. </li></ul><ul><li>Longer term, it is inevitable that a “Restructing” and “New Mode of Operations” and “Higher Regulatory Standards” will be instituted to ensure a much transparent and accountable financial system throughout the world. </li></ul>
  28. 28. <ul><li>Recommended Reading List </li></ul><ul><li>Jeffrey D. Sachs Common Wealth-Economic For a Crowed Planet, the Penguin Press (NY), 2008 </li></ul><ul><li>Ethan S. Harris, Bem Bernanke's Fed, the Federal Reserve After Greenspan, Harvard Business Press, 2008 </li></ul><ul><li>Daniel Yergin, The Epic Quest for Oil, Money & Power, the Free Press (NY), 1992 </li></ul><ul><li>Al Gore, Earth In The Balance: Ecology and the Human Spirit, Houghton Mifflin Co, 1992 </li></ul><ul><li>Lester C. Thurow, Dangerous Current: The State of Economics, The Ramdom House, NY, 1983 </li></ul><ul><li>Peter F. Drucker, Managing in Turbulent Times, Harper Business Press, 1980 </li></ul><ul><li>MT: E Neumayer, Weak versus Strong Sustainability: Exploring the Limits of Two Opposing Paradigms, 2nd edn; J Kahn, The Economic Approach to Environmental Resource Economics, Dryden Press, 2005 </li></ul><ul><li>A Hoffman, Competitive Environmental Strategy: A Guide to the Changing Business Landscape, Island Press, 2000 </li></ul>

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