Business

Business issues and decision making.

Trouble with definitions

AustralianActuary Business

If you can’t define what a woman is, how can you define “gender pay gap”?

I’m going to hazard a guess here: those acquaintances of yours who claim that there is a gender pay gap in Australia will be unable to define a woman when asked. You try it out for yourself.

There are two ways of defining gender pay gap. One is correct and the other isn’t. The incorrect way is to add up total earnings of men and women separately then divide by the total number of men and women respectively and compare the two answers. They will be different. That allows the unscrupulous and the unthinking to cry “gender pay gap!” very loudly. Just like how today’s story in The Age reports.

However, the above calculations merely represent average earnings of men and women. Nothing can be inferred about whether men and women are paid equally by looking at averages.

The correct way to test for a gender pay gap is to look at pay for equivalent work. Then you will find that Australian business does not pay different rates for men vs women.

CEO employment prospects for middle aged white straight men are on the up

AustralianActuary Business

I’m in a sunny mood today as I have become convinced that my employment prospects as a business CEO are on the rise. In the event that I should need to come out of retirement and get back in the workforce, perhaps because the expense of keeping a wooden ocean going yacht has gone beyond eye watering levels, then I can see opportunities opening up aplenty. The reason is simple. Boards of directors appoint CEOs. Boards also sack CEOs. Boards are increasingly fearful of sacking a CEO who happens to belong to a protected species. Middle aged, white straight men are not a protected species. Everyone else is. So, the obvious conclusion is: appoint someone who, if they turn out to be hopeless, we can sack! Times are good, even for hopeless middle aged white straight men!

In the business pages

AustralianActuary Business ,

It’s sometimes refreshing to get a laugh out of the business press, especially when much news is rather gloomy. 

First up today is James Glynn (writing in the Australian) who attempts to defend the Reserve Bank of Australia. His headline says it is unfair to rage against the RBA. Long time readers of this blog will know that I have been a harsh critic of the RBA for many years, so I naturally expected this piece to start my day on a humorous note. James did not disappoint. 

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Corporate wokeism

AustralianActuary Business

Many people working in large corporations feel the same frustration as does Dr Jordan Peterson, well expressed in this monologue “Message to CEOs”. Corporate wokeism has been getting worse for a number of years and business leaders have been broadly weak and fearful in its face. Instead of pushing out the nonsense because it is damaging to customers and staff and therefore shareholders, they have en masse waved it through.

I am perhaps a little more optimistic than Dr Peterson is. I suspect that with hard economic times unfolding, corporate wokeism will become subserviant to corporate survival. The big business bottom line has been relatively easy to keep black for the last 10 years. But from here, red ink may be needed with increasing frequency. CEOs faced with the choice of being turfed out of their contract for missing financial targets vs giving more succour to diversity, equity and inclusion maniacs will see things more clearly. Ask yourself why wokeism has not infected small business. It’s because small business must focus on survival at all times.

Market failure?

AustralianActuary Business ,

Oh dear. The Australian Energy Market Operator has suspended the market. The Operator says the market was “impossible to operate”. Does this constitute a market failure? It’s definitely a failure of something.

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I say it’s not a market failure. That’s because it’s not a real market. The authoritarian left often decries market failure as reason for Government intervention in all manner of ways. Well, here’s an example of a highly restricted and distorted pseudo market failure right in front of our eyes at a time when the energy supply is tottering on the verge of blackouts.

The reason for this failure is precisely due to years of Government intervention, mismanagement and lies. Goodness knows what happens from here, but mark June 2022 as the month in which the creaking facade masquerading as an energy system in Australia crumbled.

Stock markets

AustralianActuary Business ,

Price inflation data for May 2022 was released yesterday in the US. Over the full year to end May, the consumer price index increased by 8.6%. The AFR reports that this is the highest 1 year increase in 40 years. The stock markets reacted badly. The Dow Jones industrial average lost 2.7% and the NASDAQ lost 3.5% in value.

That stocks have been broadly overvalued is well accepted. Part of the reason supporting high valuations was low discount rates. A year ago, the average P/E ratio on stocks in the S&P500 was over 37. Today, it is 21.5. That reduction will have been largely driven by recent market sell offs and revaluations with higher discount rates as yields on debt markets increase. But 21 still looks expensive. I’m not sure I want to pay $21 to buy a future earnings stream of $1pa. With the high likelihood of further increases in discount rates plus risks to underlying earnings owing to economic malaise, the P/E ratios are under pressure both on the top line and bottom line.

I’d expect there is more red ink to come.

Give the customers what they want

AustralianActuary Business

The best way to succeed in business is to give the customers what they want. This announcement from Rio Tinto clearly pleases one campaigner from the Conservation Foundation, but I’d be surprised if she is a Rio customer.

Source: Australian Financial Review

Rio customers looking for a supply of aluminium that is high quality, reliable and low cost are unlikely to be pleased with the outcome of this decision.