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North American Edition
30th September 2022
 
THE HOT STORY
Smoking costs U.S. economy almost $900bn a year
Smoking cost the U.S. economy $891bn in 2020 - almost 10 times the cigarette industry's $92bn revenue, according to the authors of a new American Cancer Society study. "Economic losses from cigarette smoking far outweigh any economic benefit from the tobacco industry - wages, and salaries of those employed by the industry, tax revenue and industry profit combined," said Dr. Nigar Nargis, senior scientific director of tobacco control research at the cancer society. States lost $1,100 income per person annually (per capita) on average from cigarette smoking, the study found. The largest losses were in Kentucky, which lost $1,674 per capita, West Virginia with $1,605 and Arkansas at $1,603. States with the smallest losses were Utah at $331, Idaho at $680 and Arizona at $701. "As a society, we can mitigate these economic losses through coordinated and comprehensive evidence-based tobacco control measures, which encourage people to quit smoking and prevent people from starting to smoke in the first place," Nargis said in a cancer society news release.
ECONOMY
U.S. economy shrank 0.6% in Q2
Battered by surging consumer prices and rising interest rates, the U.S. economy shrank at a 0.6% annual rate from April through June, the Commerce Department announced Thursday, unchanged from its previous estimate. It marked the second consecutive quarter of economic contraction, meeting the technical definition of a recession. However, another data point known as gross domestic income, which is an alternative measure of economic growth, actually increased by 0.1% in the second quarter. The Commerce Department also released revised numbers for past years’ GDP. The update showed that the economy performed slightly better in 2020 and 2021 than previously reported. GDP rose 5.9% last year, up from the previously reported 5.7%, and, pounded by the coronavirus pandemic, it shrank 2.8% in 2020, not as bad as the 3.4% previously on record. GDP remained unchanged for 2018 (2.9%) and 2019 (2.3%). Growth for 2017 was downgraded slightly - to 2.2% from 2.3%.
TAX
Yellen urged to reject corporate lobbying on minimum corporate tax
Congressional Democrats are urging the Treasury Department to ignore appeals by lobbyists to weaken the 15% minimum levy on domestic corporations. Sens. Elizabeth Warren (D-MA), Angus King (D-ME), Michael Bennett (D-CO), and Representative Don Beyer (D-VA), have asked Treasury Secretary Janet Yellen and her staff to take an aggressive stance against companies that seek carve-outs or other modifications to the minimum levy. “Strong implementation necessitates standing firm against requests to dilute the regulations in such a way as to undermine the clear intent of the law,” the lawmakers wrote. “The legislation also makes clear that the starting point for determining the profits subject to the corporate minimum tax are those listed in annual financial statements, most importantly those used for reporting to shareholders, such as a 10-K form.” The request comes after several modifications were made to the 15% tax on corporations earning at least $1 billion in profits. As the provision moved through Congress, several changes were made to the levy to make it more valuable to manufacturers and private equity companies.
EU nations urged to take their time on minimum tax
Irish finance minister Paschal Donohoe says European Union countries should take their time to achieve unanimous support for the global minimum corporate tax, and disregard moves for fast-track implementation among a smaller group of nations, including Germany and France, that are seeking to quickly bring the minimum levy into force as Hungary continues to block an EU directive. “The appropriate way for this to be implemented is via a directive, which is the way law is equally applied across all of the EU,” Donohoe said. “I’m confident with a little bit more time and continued efforts on all our behalf, we’ll find a way to ensure that it’s commonly implemented across the EU.”  Finance ministers from five of the largest EU economies said at a meeting in Prague earlier this month that they are prepared to use national provisions or a mechanism known as “enhanced cooperation” between a select number of nations.
SUSTAINABILITY
Climate pay links for CEOs do little to cut emissions
Analysis by activist group As You Sow shows that while more large U.S. companies have tied their CEO pay to climate goals, few give executives much incentive to make significant emissions cuts. Pay disclosures from 47 firms found that just one, electric utility Xcel Energy, gave its CEO a goal tied to measurable cuts in greenhouse gas emissions. Four other companies tied their executive pay to climate metrics, though they were not as strict about reducing emissions. As You Sow's study examined the 47 U.S. companies targeted by the Climate Action 100+ global investor initiative to reduce industrial greenhouse gas emissions. Among these firms, more than half did not directly tie their pay to climate actions, the study shows.
CORPORATE GOVERNANCE
Tyson’s CFO choice ’raises potential conflicts of interest concerns’
Corporate governance experts say Tyson Foods’ move to elevate the 32-year-old son of its board chairman to chief financial officer raises particular concerns around potential conflicts of interest. The company says the appointment is in line with its history of putting members of the namesake founding family in positions of power. John R. Tyson, who currently serves as executive vice president of strategy and chief sustainability officer, will succeed Stewart Glendinning, who was named CFO in 2017 and will remain with the company. “It is concerning [that] they appointed a 32-year-old with minimal financial experience, but that is the risk that minority shareholders take on when they purchase shares of a family-owned company,” said Rebecca Scheuneman, a senior equity analyst at financial services firm Morningstar. There is no conflict of interest, a spokesman for the company said of Mr. Tyson’s appointment.
REGULATORY
Deloitte's China affiliate let clients do their own audit work
The Securities and Exchange Commission (SEC) has fined the Chinese affiliate of Deloitte $20m, having found that the firm let some clients, including foreign companies listed on U.S. exchanges, conduct their own audit work. Deloitte's Chinese affiliate asked some clients to select their own samples for testing and to prepare documentation, giving the appearance that Deloitte-China had tested their financial statements and internal controls. SEC Chair Gary Gensler said: “We find that Deloitte-China fell woefully short of professional auditing requirements in numerous component audits of Chinese operations of U.S. issuers and audits of Chinese companies listed on U.S. exchanges.” He added that the enforcement action underscores the need for the Public Company Accounting Oversight Board to be able to inspect Chinese audit firms.
Barclays to pay $361m over securities error
Barclays has agreed to pay $361m after control failures led the bank to sell $17.7bn of securities it was not allowed to issue. Barclays disclosed in March that it had accidentally oversold complex structured and exchange-traded notes, exceeding by about 75% a $20.8bn limit on such sales it had agreed with the US Securities and Exchange Commission (SEC). The SEC found that the bank failed to implement any internal controls to track such transactions in real time.
LEGAL
Amazon and major publishers win dismissal of antitrust lawsuits
U.S. District Judge Gregory Woods in Manhattan has dismissed two antitrust lawsuits accusing Amazon and five large publishers - Hachette, HarperCollins, Macmillan, Penguin Random House, and Simon & Schuster - of illegally conspiring to fix U.S. prices of electronic and traditional books, causing consumers and bookstores to pay more. Consumers accused the defendants of signing agreements that let the publishers inflate e-book prices by locking in a 30% "agency" fee for Amazon on each sale, and guaranteeing that Amazon's prices would not be undercut. Retail booksellers, meanwhile, alleged that Amazon had been awarded a "discriminatory discount" on hardbacks, paperbacks and mass-produced books, forcing them to pay higher wholesale prices to the publishers and depressing book sales. However, Woods agreed with U.S. Magistrate Judge Valerie Figueredo's recommendation last month that both lawsuits be dismissed, citing a lack of evidence of collusion.
Rohingya seek reparations from Facebook
Meta is facing renewed calls to pay reparations to the Rohingya people for Facebook’s role in inciting ethnic violence in Myanmar. A new report by Amnesty International, which provides what it calls a “first-of-its kind, in-depth human rights analysis” of the role played by Facebook parent Meta in the atrocities perpetrated against the Rohingya in 2017 has found the tech giant’s contribution to the genocide was not merely that of “a passive and neutral platform” which responded inadequately to a major crisis, as the company has sought to claim, but rather that Facebook’s core business model — behavioral ads — was responsible for actively encouraging the hatred for profit.
STRATEGY
Meta pauses hiring and warns of restructuring
Facebook parent Meta Platforms is to pause hiring and further restructure amid an uncertain macroeconomic situation. Meta CEO Mark Zuckerberg said in a communication with employees during a weekly Q&A session: "I had hoped the economy would have more clearly stabilized by now, but from what we're seeing it doesn't yet seem like it has, so we want to plan somewhat conservatively." He also said that Meta would reduce budgets across most teams and that individual teams will have to resolve how to handle headcount changes.
SoftBank cuts about 150 staff globally
Japan's SoftBank is cutting around 150 staff globally at its Vision Fund unit and SoftBank Group International, a source says. The cuts will affect around 30% of employees across the two businesses, the person said, adding that major cost centers including the United States, Britain and China are affected. Softbank CEO Masayoshi Son is currently retrenching following huge losses on his tech bets.
TECHNOLOGY
Software robots are getting better at all kinds of office tasks
Bloomberg reports on how machines are getting better at the white-collar office tasks that were once thought to be the preserve of humans as U.S. businesses race to automate as much as they can amid rapidly rising wages, workers in short supply, and near-record job vacancies. The latest generation of software robots builds on advances in artificial intelligence and machine-learning that enable computers to perform tasks including speech recognition, and make some of the decisions that used to be reserved for employees. Bloomberg observes that the automation of mundane tasks should free up employees for more challenging and satisfying work, but some roles could begin to entirely disappear — without obvious alternatives for the people who earned a living from them.
WORKFORCE
Being forced to ‘get happy’ risks burnout
A new study suggests enforced cheerfulness in the workplace can sap energy, and over time, increase the risk of burnout. "There's been quite a bit of research on emotions at work, but the majority returns the same conclusion that 'being in a good mood is good and, if you're not in one, you should try to get in one,'" said Emma Frank, an assistant professor of management at the University of New Hampshire who led the study during her doctoral work at the University of Georgia. A series of tests conducted in a controlled laboratory setting with 260 college students revealed that "someone improving their emotions - moving from negative to positive - is basically equivalent to someone who started in a bad mood and stayed there," Frank said.
Russian IT workers are moving abroad
IT industry leaders in Russia say sector professionals are heading overseas en masse to avoid military mobilisation, even though the digital ministry said key tech workers will be exempted from being drafted, after some 70,000 IT staff reportedly left in the weeks following Russia’s invasion of Ukraine in February. Nikolai Komlev, director at an IT industry association, told the RBC news outlet that the latest outflow of personnel could soon be two to three times greater than the initial exodus. A survey of more than 500 IT specialists by human resources firm Ventra has indicated that 19% of IT managers had relocated some of their employees overseas in 2022.


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