Did discourse push Glencore to go public?
June 7, 2012 § Leave a Comment
After contemplating yesterday’s post on discourse and its impact on conflict transformation, I questioned the final line of a Foreign Policy article I read recently, “A Giant Among Giants” about Glencore, the biggest commodity trading firm in the world. Glencore (background info at the bottom of the post) is somewhat notorious for their dubious business practices but recently went public, shedding light on transactions that could turn the public against them – so why go public? The article concludes thusly:
Still, like all good business even Glencore has to keep up with the times. Marc Rich* seems to agree: “Discretion is an important factor of success in the commodity business,” he told an interview when Glencore announced it would go public. “They probably didn’t have a choice. Transparency is requested today. It limits your activity, to be sure, but its just a new strategy to which they have to adapt.”
I want to believe that the public push for better business practice was the central impetus for Glencore going public, but even if the company shed light on their operations, I can’t see any indication of their business practices being impacted by the IPO.
So if the point of discourse is to change how companies operate and make them more accountable to the public, Marc Rich’s quote indicates that effort has been successful. But if transparency has resulted in companies hiding activities behind complicated sales, shell companies, offshore accounts and buy-outs existing on the fringes of legality – has anything actually changed? Or are private companies just getting better at finding new ways to avoid scrutiny?
Even when Glencore appears to be helping out a country, such as providing oil to Greece when no other suppliers will, the ‘goodwill’ comes at a steep cost: to keep oil flowing, Greece is tied to 50 cents a barrel as a risk premium. (Though I’d suspect the obvious response to this is that it’s good business. But why do we give food aid and not energy aid in these situations? Too much money in energy products).
Some background on Glencore
Glencore went public in May 2011, revealing a number of morally and legally questionable practices in their 30+ year corporate history. A few quick highlights:
- Buying oil from Iran during the hostage crisis;
- Commodity swaps that included uranium for oil between South Africa, Iran and Russia in the 1970s; and
- Props up repressive regimes with impunity and forms close ties with authoritarian leaders, including Gaddafi’s Libya, the president of Kazakhstan, and the Congo.
To give an idea of how big Glencore is, it controls, according to it’s IPO prospectus, a third of the world’s seaborne coal, exported nine percent of the global grain market, controls half the market in zinc and copper and handles three percent of daily global oil consumption.
*Marc Rich is the brains behind Glencore. He started the firm in 1974 and was controversially pardoned by Clinton for tax evasion, racketeering and illegal trading with Iran.