Are Corporate Bullies Bad Investments?: Chevron Corporation (CVX) and More

Page 1 of 2

Doing business is hard. Mistakes are inevitable. What can investors learn from how a company handles its failures? Does it tell you something if one company reacts to its critics with malicious aggression and suspicion, while another views criticism as an opportunity for improvement? I’m obviously asking rhetorical questions, because I think response to criticism reveals a lot about management quality.

Free Range on persecution
Range Resources Corp. (NYSE:RRC)
has taken a shock-and-awe approach to dealing with anyone who questions the safety of its fracking operations. According to an excellent Bloomberg article, Range has sued or intimidated activists, homeowners, and public officials, sometimes for little more than asking questions.

Chevron Corporation (NYSE:CVX)

1). A homeowner near a Range’s drilling well was concerned about the methane leaking from his water well: He could light it on fire. When he had his water independently tested and took the results to EPA, Range sued him for defamation.

2). When Range filed drilling applications with Pennsylvania’s Robinson Township, local residents had questions about fracking’s health effects. Range preciously complained that the resultant delay in the approval process violated the company’s due-process rights, and stopped answering questions. Robinson subsequently denied Range’s applications.

3). Range has subpoenaed and issued legal warnings to Calvin Tillman, an activist and former mayor of Dish, Texas, who has questioned the company’s practices. “Range Resources is different from its peers in that it chooses to severely punish its critics,” Tillman said in an interview.

Range should pick on someone its own size. Naturally, the company calls this characterization unfair. Matt Pitzarella, a Range spokesman, offers this mystifying retort: “It’s fair to say that we may take a different approach from others from time to time, but no different than a lot of individuals or businesses. It’s just in a different light given the work we do. We accept that and embrace it.” What does that even mean?

Lucia von Reusner, Shareholder Advocate at Green Century Capital Management, told me that Range is “really undermining itself by not responding to very valid investor concerns.” She offers the following support.

1). In 2011, the SEC sided with Green Century’s investor campaign to push Range and other companies to provide more detailed information about their fracking operations and their impact, agreeing that this is a very real investor concern.

2). The Department of Energy’s Shale Gas Production Subcommittee produced a report (link opens a PDF) finding that “if action is not taken to reduce the environmental impact accompanying the very considerable expansion of shale gas production…there is a real risk of serious environmental consequences causing a loss of public confidence that could delay or stop this activity.”

3). The International Energy Agency, in its 2012 report, “Golden Rules for a Golden Age of Gas,” addressed the energy industry’s need to maintain or earn its social license to operate: “Full transparency, measuring and monitoring of environmental impacts and engagement with local communities are critical to addressing public concerns.”

Not coincidentally, the city of Fort Collins, Colo. – part of the Niobrara Shale – banned fracking this week. Fracking isn’t inherently bad, but if companies don’t get out in front of the social and environmental risks, they will lose.

Chevron Corporation (NYSE:CVX) will crush you
I’m reluctant to start in on Chevron Corporation (NYSE:CVX), because a full accounting of its shenanigans would make James Joyce’s novels look terse. Suffice it to say that, in what analysts call an unprecedented move, the company is suing its own investors for challenging Chevron to improve its environmental management and corporate governance. Chevron has subpoenaed all records related to “Chevron litigations and shareholder actions” concerning a $19 billion judgment against the company in Ecuador for its wanton trashing of the rainforest.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!