Diamonds: Not this girl's best friend (Part I & II)

 - highly relevant to P1 (GRE) 

PART I : THE EXPENSIVE PROPOSAL

Pic 01: Carroll, CEO of Anglo American Ltd, on business analysis, "Men have lost their romanticism. They are not buying enough diamonds."

Anglo American is one of the world’s largest mining companies. Anglo American portfolio of high-quality mining assets and natural resources spans bulk commodities – iron ore and manganese, metallurgical coal and thermal coal; base metals – copper and nickel; and precious metals and minerals – in which it is a global leader in both platinum and diamonds. Anglo American operate in Africa, Europe, South and North America, Australia and Asia.

Anglo American’s diamond interests are represented by 45% shareholding in De Beers, the world's leading diamond company.

Pic 02: Diamonds are forever!

The current boss CEO of the London-based diamond-mining firm, Cynthia Carroll, has found herself under concerted attack from shareholders who are angry about the company’s most recent financial results, published two weeks ago. According to the Telegraph, they described the latest figures as a ‘coup de grace’ in a letter to chairman John Parker, and voiced concerns that the company could be at risk of an takeover because of its weak position.

Investors’ antics got a tad nastier, after they had their initial complaints rejected the by Parker: they have now gone over his head to the firm’s senior independent director, David Challen, calling for Parker to be overruled.

And the cause of all this aggro? Its most recent half-year figures in which Anglo American posted profits of £3.7bn, down 38% from £6bn in the same period in 2011. This was on revenues down 10% from £18.3bn to £16.4bn, and has rattled shareholders’ cages amid turbulent global commodity markets and the growing threat of rival Glencore after its IPO earlier this year. Shares in the company are around 20% lower than they were when Carroll took the top job back in 2007, and 45% below the top price they reached back in May 2008.

Pic 03: Pre-2007 Economic Crisis Proposals, "Will you be my wholly owned subsidiary?"

Pic 04: Hey, where are the men (customers)?

Obviously a lot of the company’s woes can be put down to recession – decreased demand for commodities in recession-hit countries all over the world makes it difficult to keep profits rising. Add to that, there have been legal challenges to several of its projects in South America, and reduced demand for platinum from a depressed car industry has hit the miner’s bottom line hard. But investors will not be interested in excuses when the value of their stock is at stake. The company is undervalued, and faces even graver threats from the Xstrata/Glencore merger which could take place within the next year.

And on men, if they are still making proposals? Well, there are but its just that there is a cheaper substitute. A substitute threat which is defined as "Similar Function, Different Industry." But that topic belongs to P3 (BA), doesn't it? So we shall not go there for this article.

Inexpensive proposal way, "Honey, I have a surprise. It's bigger than diamonds."

There have been calls from several corners in recent months for Carroll to resign, but this is the first time a co-ordinated attack on her position has been presented to senior management. Losing her job at Anglo American would be a stinger: last year she earned £2.17m in a package consisting of £1.17m basic pay and nearly £1m in her annual performance bonus. 

Yes, due to the disappointing performance, this CEO is certainly facing employment termination. Diamonds can kill her career.  So, who says, that Diamond is girl's best friend?




PART II : THE INEXPENSIVE PROPOSAL
 And on How to make a Proposal - Economically?

Flash mobs are renowned for being anything but romantic - until now.

Jack from Boston, Massachusetts has proposed to his girlfriend Teresa Elsey by arranging for dozens of strangers to present her with a single flower each.

In a video that records his genius August 2 proposal, which includes many of the secret operation's impressive nuts and bolts, the young man is seen leading his wife-to-be to the Institute Of Contemporary Art for an after-work date.

Romantic: A man has proposed to his girlfriend using a flash mob. Strangers, like above, handed flowers to Teresa (above) one at a time before a clan later swarmed her with flowers right before he proposed

The young man, whose surname is unknown, told the Huffington Post that since he 'wasn't too nervous about the question itself', he decided to come up with a 'ridiculously complicated plan to worry about instead'.

The pair had visited the museum on their first date.

Growing: As Jack, her boyfriend (left), joined her, they were filmed collecting further flowers as they walked to an after-work date they had planned at Boston's Institute Of Contemporary Art

A group of operatives are overheard throughout the video communicating with one another as they send coordinate the scattered mob's movements to coincide with those of Teresa, a freelance writer.

She is approached by the first stranger once she has left work for the day, however turns the flower down and continues walking on to meet Jack, as planned.

Growing: Strangers approach her thick and fast as she approaches the museum. Jack, meanwhile, sneaks off

Popular: Teresa is swarmed by a crowd of strangers, each armed with a single flower of their own

Romantic: Teresa's ever-expanding bunch of blooms became so large that she was barely able to hold them all

The big question: Jack then gets down on one knee and proposes to a clearly delighted Teresa, who accepts

As Jack strolls with his girlfriend along the Boston waterfront, the target, as the operatives describe her, is approached by a stream of other strangers, all armed with the pink and white blooms.

The load begins to swell so much so that Jack offers a hand, no doubt allowing her more room to receive others he has planned.
As the couple close in on the dock in front of the museum, the crowd turns into a swarm.

Dozens of strangers gather around the beaming young woman who struggles to hold all of the flowers in her two hands.

Uh...humm,,. this is quite self-explanatory

Victorious in tuxedo, "Thanks guys! Who needs diamonds?!"

And they live happily ever after... (Well, uhh.... not quite. There are bills, diapers, teen kids, but let's not go there, shall we?)

Her answer draws a rousing applause from the mob who witness the couple embrace before Jack leads Teresa on to a private dinner.

Before they vacate the dock, however, they are high-fived by his two brothers, who stand at the end of the dock in tuxedos of their own.

Jack said: 'It's been such a gift to share our joy with family members and friends and strangers - to know that other people are joining us in that moment, and somehow believing in the crazy project.'

Exam Question 

Ok! I think you have fun. Now for the serious stuff. 

Note that the above in red bold words. These are real life case of institutional investors activism. The firm is an outsider dominated with investors intervening when their portfolio company is under-performing.

Now that you have enjoyed the article above, will you be able to answer P1 (GRE) Question on  

"Construct arguments the case on why should Institutional Investors intervene in Anglo American Jewelry Limited after the disappointing financial announcement."  


Well that will be a cool 6 to 8 marks.  Answers were provided for this style of answer in class. 

Tip: There is an exam question which deals with this similar scenario. 

Sources:  

• Michael Northcourt, 2012, Anglo American boss Carroll faces shareholder wrath,http://www.managementtoday.co.uk/news/1145077/Anglo-American-boss-Carroll-faces-shareholder-wrath/, 13th August. 
• Anglo American, 2012, Company's Background, http://www.angloamerican.com/business/diamonds/operate, Visited on 18th August 
• Kristen Au, 2012,, The most romantic wedding proposal ever? http://www.dailymail.co.uk/femail/article-2188877/Woman-stunned-flash-mob-strangers-hand-flowers-boyfriend-pops-question.html#ixzz23hXlOIIJ, August 15