Following a great year for Berkshire Hathaway, the investment conglomerate bought back nearly $1 billion of its own stock in the third quarter of this year. Previously a critic of share repurchases, Chairman Warren Buffett and his board removed limits at a board meeting in July that prohibited share repurchases — opening the door for a big boost to shareholder earnings.

Over the past year, Berkshire Hathaway’s net income jumped from $4.1 to $18.5 billion. Available cash followed suit, soaring from $25.5 billion to $36.5 billion at the end of September. Shares are up more than 4%. Apple, the most valuable stock Berkshire owns (an investment totaling $57.6 billion), naturally played a big part in Berkshire’s portfolio earnings. Cash flow from Duracell, Geico, and BNSF Railway did not hurt either. It also goes without saying that the new U.S. tax code gave an enormous boost to massive corporations like Berkshire, whose effective tax rate is down from 27.2% in 2017 to 19.2% this year.

The last time Berkshire did a share repurchase was in December 2012, when it bought back nearly $1.3 billion worth of stock, mostly from one longtime shareholder. This time, the overall consensus is that a share repurchase is a net/net win for shareholders and Berkshire. While fewer shares mean higher earnings per share for investors, this share repurchase also indicates that Berkshire’s stock is as good an investment as any that the company could buy in the market. As put by Valuewalk, the decision signals that Berkshire is “one of the best investment opportunities available on the market.” With an average share price of $312,806.74 per A share and $207.09 per B share, Berkshire remains one of the most exclusive and profitable investments around.

Warren Buffet is known for his belief that investments are a better way to increase shareholder value than buybacks or dividends. Berkshire’s previous buyback policy allowed share repurchases only if the stock price was below 120% of book value. While the decision to eliminate this restriction represents a shift in how Buffet gives value to his shareholders, many critics believe that cash could be better spent on capital expenses or wages. Nevertheless, Buffett remains a catalyst for trends in the broader market: Predictably, stock repurchases by S&P 500 companies hit a record high in the second quarter of this year.

One thing is for certain: Warren Buffet knows investment opportunities. Any decision to repurchase shares indicates that the Chairman is less than impressed with other investment options in the market. This may be a signal to companies to align themselves more with attractive options like Apple…if they didn’t know that already.

Good News is Good News

A dispute over immunity for the International Finance Corporation (IFC) made its way to the Supreme Court in late October, after a power plant in India (financed in part by funds from the IFC) caused environmental harm to a group of farmers and fishermen living near it. Under the International Organizations Act of 1945, international organizations headquartered in the United States like the IFC have immunity from all forms of judicial process in the U.S. similar to that enjoyed by foreign governments.

Concerns over this particular suit include whether U.S. law gives absolute immunity to the IFC, the private lending arm of the World Bank, and whether allowing this type of suit to proceed would open the floodgates to more lawsuits. Supporters of the IFC highlight that it often loans money where private capital will not go, such as in developing countries. Due to the fact that commercial activity is the organization’s sole purpose, some worry that placing blame when others have failed to meet standards will hamper their ability to promote sustainable private sector investment in the developing world.

Beyond the obvious question of whether the IFC should have complete immunity, an underlying question remains about whether this immunity diminishes intentional accountability. If these types of organizations are meant to help reduce poverty and promote economic development, a chief precaution might include protecting vulnerable communities and the environment. Moreover, if an organization, one with immense influence over a project given its financial backing, is briefed and knows about the plausibility of harmful impacts, it may follow that one should minimize such impact or compensate those harmed.

What happens when we give certain organizations the opportunity to be above law? What is the social value of the privilege of immunity and does it depend critically on the extent to which its existence encourages these organizations to fulfill their missions? How can international organizations stay true to their mission while ensuring projects they fund meet environmental and social standards? The answers to these questions, undoubtedly complex and multifaceted, lie in a reconsideration of the balancing of these values against the pursuit of justice through legal accountability.

Does Immunity Outweigh Accountability for International Finance Organizations?

Washington, Colorado, and Arizona recently rejected initiatives that would have limited the use of fossil fuels. In Washington, voters rejected what would have been the nation’s first tax on carbon emissions. In Colorado, 57 percent of voters said “no” to a proposal that would have prohibited drilling close to densely populated or environmentally vulnerable sites. In Arizona, voters rejected a proposal that would have required electricity providers to use renewable energy to meet half of their needs by 2030.

Ultimately, activists could not convince voters to “go green” at the cost of higher energy prices. Scientists and environmental advocates projected that Washington’s initiative would have substantially decreased greenhouse gas emissions in the state. Voters who supported Colorado’s initiative believed it was necessary to reduce potential health risks from nearby oil drilling sites. Those who supported Arizona’s initiative hoped that a shift to cleaner energy sources would both improve public health as well as create green jobs in the state. On the other hand, the proposals’ opponents feared that they would result in higher energy prices and fewer jobs.

The voters’ decision should not be surprising. Although environmentalists were able to garner significant support, their opponents had large oil and gas industries at their backs. They were able to raise a fund several times larger than that of the initiatives’ supporters. In Washington, the Clean Air, Clean Energy coalition was able to raise more than $15 million to advocate for the carbon fee. However, the Western States Petroleum Association poured more than $31 million into the opposition. Similarly, Colorado Rising for Health and Safety raised about $1 million, but the industry-backed group Protect Colorado raised roughly $38 million to defeat the measure.

Behind the scenes, it is money that matters. Large oil industries were able to invest more into winning the ballot fight. However, environmentalists were able to push back hard — the vote was relatively close in all three states. Who will win in the end is still unclear. But, industry support — and spending — will surely be crucial to the outcome.

Voters in Three States Embrace Fossil Fuel Use

General Electric Company (GE) released its third quarter results on October 30, showing a loss of $22.8 billion where $21 billion was attributed to a goodwill write-down of its power division. The company plans to restructure its power unit to help recover.

Companies are required to test their goodwill for impairment at least annually. GE tests its goodwill for impairment each year at the end of the third quarter and uses data as of July 1 of that year. According to its 10Q, fair values for each of its reporting units exceeded the carrying values except for the Power Generation and Grid Solutions reporting units within their power segment. Most goodwill in the power segment was recognized because of the Alstom acquisition, which contributed an astonishing $15.8 billion to goodwill.

GE closed the Alstom acquisition in November 2015 as it was eager to enhance its position as the most competitive infrastructure company with a financial service business. As part of its closing conditions, GE made promises to the French Government, one of which was to add 1,000 jobs by the end of 2018.

GE unwittingly touted to its investors that the deal was struck at an opportune moment. It entered the natural gas power market only to face increased competition from renewable energy and cheaper oil and gas prices. GE made these matters worse when it ramped up production in an already waning market, which created a backlog of inventory. This misjudgment severely affected cash flows, and GE was forced to lay off 12,000 people from its power business in December 2017, none of whom were in France due to the deal GE struck with the French Government.

The combination of a challenging market and poor management already impaired the expected returns from the Alstom deal. The commitment with the French Government further exacerbated this since GE could not alter its cost structure to mitigate its expected loss of income. These conditions resulted in the downward revision of future projected earnings on the Alstom deal, which was the primary cause of the $21 billion Goodwill write-down of GE’s power division.

What Caused General Electrics Third Quarter Loss

Fox and Disney agreed to a $71.3 billion merger in July. Fox was eager to divest parts of the company that had shed earnings in light of online streaming, while Disney hoped to strengthen an upcoming streaming service intended to rival Hulu and Netflix.

Ultimately, Disney defeated Comcast’s $65 billion all-cash offer with a $71.3 billion bid. Fox thereby sold Disney the rights to Fox’s movie studios, television productions, regional sports networks, and international businesses, including Star and Europe-based Sky.

Consequently, Fox parted with a massive amount of the original company and retained only a post-merger organizational structure of “New Fox.” New Fox will have a myopic focus on live sports entertainment and news in hopes of resistance to a changing media landscape.

In spite of near-unanimous shareholder approval, the Department of Justice concluded that Disney must divest itself of Fox’s twenty-two regional sports networks. The Department feared that consumers would be hurt by the deal, as Fox and Disney had previously competed for viewership of regional sports programming. Without such competition, cable prices could climb to consumers’ detriment. As a result, Disney must now find potential acquirers of the twenty-two regional sports networks.

Interestingly, Fox is among the potential acquirers. The company’s executives have discussed the possibility of buying back the networks. Fox was willing to sell the networks as part of the merger with Disney because their value had significantly declined. Millions of consumers had cut their cable cords, and cable companies had increasingly treated regional sports networks as “add-ons.” Nevertheless, Fox was able to sell these networks at a premium when Comcast sparked a bidding war with Disney. Therefore, Fox may be able to buy back the networks for less than the amount paid by Disney.

The potential addition of the regional sports networks seemingly fits New Fox’s refined focus on sports and news. And, of course, Fox’s buyback of the regional sports networks will likely result in substantial tax benefits related to tax-deductible amortization.

Fox Poised to Repurchase Regional Sports Networks

Saudi Arabian journalist and political dissident Jamal Khashoggi was likely murdered by his own government. The Saudi government has more or less admitted its involvement in Khashoggi’s death. In response, many startups have declined to attend a major investment summit in Saudi Arabia. However, some startups have continued to accept money from an investment fund backed by Saudi Arabia’s sovereign wealth.

Is Saudi money tainted cash? Is it wrong for Silicon Valley to receive this money?

Saudi money is not tainted in the way something like conflict diamonds might be. The country’s wealth is the product of legitimate oil exports. But, the revenue from the petroleum trade no doubt supports the Saudi regime. A reasonable argument can be made that doing business with the Saudi regime is akin to condoning its evil conduct.

The human rights violations of the Saudis, however, did not start yesterday. If reports are to be believed, the Saudi government routinely targets dissidents and murders LGBT people. Thus, there is little moral distinction between Silicon Valley taking Saudi cash and Americans consuming Saudi oil.

One might argue that Jamal Khashoggi’s cold-blooded murder was particularly egregious compared to the garden-variety human rights violations that occur in Saudi Arabia. Even then, it is not clear whether there is a moral difference between a Saudi monarch sanctioning the killing of its dissident journalist and an American president ordering a drone strike against an American citizen abroad without due process (not to mention the collateral damage).

Whether Silicon Valley should accept tainted cash is not a question of right or wrong. This point is beyond debate. The real question is this: Are we willing to hold ourselves to the same moral standard?

Silicon Valley’s Tainted Cash

Under Armour (UA) has come under attack due to a recent report alleging a hostile work environment for women. The report, conducted through dozens of interviews with current and former employees, exposed UA officials for charging strip club visits and gambling excursions onto company credit cards. Further, the report found many women felt demeaned in the workplace. In response to the report, UA emailed employees in February to advise them that UA would no longer reimburse adult entertainment or gambling. However, there was no mention that they were not allowed to attend such events with perspective clients.

This is not the first time that the company has been under public scrutiny. Just last year, UA CEO, Kevin Plank, notoriously joined President Trump’s American Manufacturing Council (AMC) and stated that Trump was “a real asset for the country.” Plank’s open support of Trump caused a backlash on social media, as many consumers felt UA had become aligned with the same xenophobic, racist, and fear mongering rhetoric that helped propel Trump to the Presidency. While Plank quickly tried to distance himself from the political Pandora’s box which he had opened, he refused to name Trump when Plank denounced of the Charlottesville White Supremacy rally. Though, Plank later dropped out of the AMC without comment. Many saw Plank’s actions as particularly egregious considering he only changed his tune after strong public outcry. This public pushback included a biting tweet from UA’s own most profitable athlete, Stephen Curry, and an online boycott.

While UA claims that the company culture has begun its overhaul already, it seems as though much more is needed and the damage has already been done. Analysts are predicting that the company will face long term negative effects as the report was just one among other practices which women found demeaning. As the #MeToo movement continues to swell across the country, and consumers become more aware of the political leanings of the manufacturers of their favorite products, UA may face an increased backlash compared to what it may have experienced in years past. Further, a major company’s stance regarding hotly debated topics amongst consumers can pay major dividends, as seen with NIKE’s stock increase post Kaepernick gamble. It remains to be seen what will happen to companies, like UA, that make a major mistake.

Under Armour- Long Stemming Issues Rise to the Surface

When the clock hit 11 a.m. on November 2^nd, almost 17,000 Google employees around the world walked out of their offices to protest the company’s poor handling of what seemed to be a pattern of sexual misconduct allegations against employees. The walkout, which commenced in Singapore and traveled its way to Google’s headquarters in California, was the first of its kind at a major tech firm.

The protest followed a New York Times article delineating Google’s haphazard responses to a host of employee misconduct allegations against senior executives and management. The most shocking revelation was Google’s silence about a credible misconduct claim brought against Andy Rubin, the “Father of Android.” The company had continued to praise Mr. Rubin and agreed to a $90 million exit package for the executive when he left the company in 2014. In addition to the walkout, protesting Google employees also demanded a list of changes to the tech giant’s internal policy, which included “an end to forced arbitration in cases of harassment and discrimination” and “a clear, uniform, globally inclusive process for reporting sexual misconduct safely and anonymously”.

Incidents of sexual misconduct and mishandling of employee allegations have long plagued Silicon Valley, and the Google protest further heightens the need for tangible policy changes. However, the grassroots movement that grew within Google to call for concrete company changes suggests that non-government actors like employees themselves may be the source of change needed to finally circumscribe a sense of accountability, responsibility, and consequences for abusers of power and the entities behind them.

The role and power of non-government actors should not be understated. In fact, they are responsible for initiating and perpetuating some of history’s biggest social, political, and cultural movements, such as the global fight to end AIDS/HIV stigma. Where U.S. labor laws might be deficient, thousands of employees in one of the world’s biggest technology companies have successfully sounded the alarm and voiced grievances to Sundar Pichai, Google’s chief executive, and Larry Page, a co-founder of Google and the chief executive of its parent company, Alphabet.

The Day Google Stopped Working

On October 26^th Facebook removed 82 “Pages, Groups and accounts” that originated primarily in Iran. These Pages, Groups and accounts represented an organized effort to spread disinformation in the United States as a means of influencing public opinion and US midterm election results. While this particular network was seemingly minor, Facebook revealed that about 1 million accounts followed these Pages, 25,000 accounts joined one of the Groups, and 28,000 accounts followed one of the Instagram accounts. These figures indicate that these efforts may have affected a far wider swath of the American population than the limited number of Pages and Groups would suggest.

This coordinated effort is only the latest instance of the social media behemoth’s war on the weaponization by foreign agents seeking to subvert or undermine the US democratic process. Facebook similarly deleted 652 accounts, Pages and Groups originating primarily in Iran and Russia in late August of this year for similar reasons. Such policing is largely conducted by Facebook’s new misinformation “war room.” The “war room,” led by Facebook head of cyber security Nathaniel Gleicher, seeks to root out such “false content.”

Facebook’s new unit aims to counteract the use of its platform to “sow discord” through circulating false information and disruptive or divisive content. Facebook’s “war room” also seeks to make political advertising more transparent and to eliminate fake or “spam” accounts. All of Facebook’s efforts serve a role in preventing the use of Facebook as a weapon designed to achieve dubious political objectives through propaganda and misinformation. Further, Facebook’s “war room” personnel work in conjunction with the FBI, Homeland Security and the Associated Press to curb abuses arising from domestic and foreign attempts to influence public opinion and action.

The impetus of Facebook’s “war room” is largely a response to the particular revelations following the 2016 presidential elections. One revelation was the large-scale Russian influence in the campaign which lasted at least two years prior to the election. These efforts have since been linked to Russian Intelligence. In conjunction with the indictments carried out by the Department of Justice following Russian attempts to commit election fraud, Facebook revealed that Russian backed companies with ties to the Kremlin used more than $100,000 to develop false or misleading advertising. The purpose of the ads was to tamper with US election results, cause chaos and disseminate Russian propaganda.

In a press release in September 2017, Facebook’s CEO Mark Zuckerberg also revealed that the Kremlin-linked Internet Research Agency (IRA) had influence over American campaigns. Such influence included a number of designs to harm Secretary Clinton’s candidacythrough fake  or “troll” accounts, fictional news and purposely misleading advertisements. This media was  estimated to have been viewed by 150 million Americans. Further, although it is difficult to determine the impact this media had on the 2016 election results, it is clear that this information manipulation was far from immaterial.

The consequences of misinformation are readily apparent from the deaths and mob lynching in India. These actions were sparked by fake stories propagated through WhatsApp, a Facebook subsidiary. Further, consequences were also unveiled in Myanmar. There, an explosion of hate speech on WhatsApp resulted in violence and genocide. In addition, the continued presence of unsubstantiated rumors and innuendo has caused similar harms in Sri Lanka.

Although Zuckerberg has pledged to do better, seeking to head off influence campaigns before they gain traction, many critics feel that Facebook’s recent efforts remain ineffectual. Critics are primarily concerned that other actors have adopted Russia’s strategy of using Facebook and its subsidiaries to spread misinformation and false news stories. The most recent account of this was in Brazil and the UK. During the UK’s exit from the European union, anonymous and factually dubious information was presented through a Facebook based ad campaign. The ads, which have reached up to 11 million British citizens, have continued to be released through this last October and appear to operate with the primary objective of sewing conflict and cementing divisions during a politically precarious time for the UK.

Facebook has already suffered a notable decline in its stock price over the past year due to the unauthorized release of user’s personal data to Cambridge Analytica. This scandal left many analysts and shareholder’s disillusioned with Facebook’s apparent disregard for transparency in its own practices. Further, this scandal caused many investors to question Facebook’s dedication to protecting its users’ privacy and well-being, let alone its dedication to insuring greater transparency. The breach of trust has left many critics asking if Facebook is truly doing everything in its power to root out pernicious false information and political manipulation through suspect ad campaigns and news stories.

Facebook Removes Iranian Based Accounts for Spreading Falsehoods in Misinformation Campaign

Last week, federal prosecutors brought charges against two parties believed to be at the helm of a massive fraud scheme involving Goldman Sachs and 1MDB, a Malaysian sovereign-wealth fund. Prosecutors alleged that the charged parties, one a Goldman Sachs banker and the other a Malaysian businessman/financier, embezzled billions from the fund – the former helping the latter steal funds for lavish, personal use via a bribe and money laundering scheme that began not long after the financial crisis. The same day, federal prosecutors announced that the former head of Goldman’s Southeast Asia banking division, Tim Leissner, plead guilty to his participation in the scheme. Overall, the scheme netted $600 million in fees for Goldman over three bond offerings, facilitated by bribes and pushbacks from the Goldman Sachs bankers and payed out to the private bank accounts of various co-conspirators.

Malaysia’s former Prime Minister and the fund’s overseer, Najib Razak, lost his reelection as a result of the scandal surrounding its misappropriation. When authorities raided his home, they discovered $266 million worth of luxury items, tens of millions of which took the form of jewelry the former Prime Minister purchased for his wife. Tim Leissner, the Senior Goldman banker who plead guilty, has forfeited nearly $44 million he earned from his role in the scheme as part of his plea deal. The starkest and perhaps strangest beneficiary of the scheme, however, was the aforementioned Malaysian businessman/financier and alleged mastermind behind the scheme, Jho Low.

Leissner had on multiple occasions attempted to engage in other business dealings with Jho Low through his capacity as a partner at Goldman Sachs. His efforts, however, were repeatedly rebuffed by Goldman’s compliance group, which harbored serious doubts and concerns about Low, the source of his wealth, and his spending habits. Low was a renowned partier and used the money he stole from the fund to support his over the top lifestyle, purchasing high end real-estate, fine art, gifts for Hollywood celebrities, and, perhaps ironically, poured some of that money into the production of Martin Scorsese’s 2013 The Wolf of Wall Street, a film about, ironically, financial fraud.

Although Goldman Sachs has presented the scandal as a consequence of the actions of rogue players who do not represent the interests or practices of the firm, it may nonetheless damage the image of transparency and responsibility that Goldman has been pursuing since the financial crisis. The apparent intimate relationship between Leissner and Jho Low as well as concerns about a prevailing corporate culture that encourages bankers to prioritize deal-making over honest business practices may warrant further consideration and investigation on the firm’s part, especially as the scandal continues to unfold and additional parties and infractions come to light.

Goldman Sachs – 1MDB Fraud Scandal is a Potential Optical Setback for a Firm Striving to Improve its Post 2008 Image