A round up of some of the week’s most significant corporate events and news stories.
United pledges never again to eject seated passengers
United Continental was hit with outrage this week after the forcible removal of a passenger from an overbooked flight, damaging the US carrier’s reputation, writes Tanya Powley.
The incident, captured on video, saw a Vietnamese-American doctor suffer bruises and bleeding after being removed, screaming, from the aircraft by law enforcement officers to make room for four United employees.
United has spent the week making attempts to mitigate the brand damage done by the video of the ejection last Sunday, which went viral on social media.
Oscar Munoz, chief executive, has been criticised for his initial response after he first apologised only for having to “re-accommodate” passengers.
But he became more apologetic as public outrage grew and spread to countries such as China, where United is a leading transcontinental carrier.
Mr Munoz subsequently promised that the airline would never again eject a passenger who had paid for a ticket and was seated, while offering to compensate all passengers on the flight as the company sought to draw a line under the public relations crisis.
The chief executive told ABC’s Good Morning America TV programme: “This can, this will, never happen again on a United Airlines flight. That’s my premise, that’s my promise.”
Mr Munoz said that he would not resign as chief executive.
“I was hired to make United better and we’ve been doing that, and that’s what I’ll continue to do.”
● Andrew Hill: United Continental’s shaming shows saying sorry is never enough
Shell under pressure over disputed Nigerian oilfield
Royal Dutch Shell admitted dealing with a convicted money launderer during negotiations over a disputed oilfield in Nigeria which has left the Anglo-Dutch group facing corruption probes in at least three countries, writes Andrew Ward.
Thousands of Shell emails seized by Dutch investigators revealed that the group wooed Dan Etete, Nigeria’s disgraced former oil minister, with “lunch and lots of iced champagne” before a $1.3bn deal in 2011 involving a prized offshore oil block.
Anti-corruption activists seized on the leaked emails to back their claim that Shell’s acquisition of the OPL 245 licence, with Eni of Italy, delivered an illicit windfall to Mr Etete and other Nigerian politicians.
Shell says the deal was a legitimate settlement of an ownership dispute over OPL 245, in which the group invested a decade earlier alongside a Nigerian company linked to Mr Etete. He was convicted in France of money laundering in 2007 in a separate case.
In one email, a Shell official said that Mr Etete could “smell the money” as the deal neared in 2011. Shell and Eni are under investigation over OPL 245 in Nigeria, Italy and the Netherlands. A leaked recording of a phone call intercepted by Dutch investigators revealed that Ben van Beurden, Shell chief executive, was worried that the case could also interest the US justice department.
In a statement, Shell said it had “to engage with Etete” but only paid money to the Nigerian government and the transaction was “fully legal”. Eni denied wrongdoing. Mr Etete could not be reached for comment.
Tesco sales rise but accounts penalty takes toll on profit
Tesco, the UK’s largest supermarket chain, reported its first full-year rise in like-for-like sales in its home market in seven years on Wednesday, but profits were dragged down by a record payment related to its 2014 accounting scandal, writes Mark Vandevelde.
“We have stabilised the business . . . in a way that builds profitability and will return value to our shareholders,” said Dave Lewis, chief executive, who has faced investor opposition to his proposed acquisition of Booker Group, a food wholesaler.
Same-store revenues at its core UK business rose 0.9 per cent, with food rising 1.3 per cent, the first full-year growth since 2010. Sales were helped by the first signs of food price inflation after a ferocious price war.
Mr Lewis said that buying costs had increased by as much as 6 per cent in the second half of 2016, as the weak pound pushed up import costs and commodities prices.
Tesco’s adjusted operating profit was slightly better than expected at the start of the year, rising 30 per cent to £1.28bn. The group cut net debt by 27 per cent in the year, paying back £1.9bn.
Bruno Monteyne, an analyst at Bernstein, said that the results were “a solid beat on all parts of the business”.
Pre-tax profit fell 39 per cent, to £145m, because of £235m of exceptional charges to cover payments to the Financial Conduct Authority and Serious Fraud Office. A judge this week approved a deferred prosecution deal between a division of Tesco and the SFO, in which the supermarket will pay a £129m penalty to avoid prosecution over its 2014 accounting scandal.
● Lex: Tesco — trolleyed
● Fast FT: Tesco’s difficult recovery in 4 charts
Toshiba voices ‘substantial doubt’ over its viability
The outlook for one of Japan’s most famous industrial names darkened further this week after Toshiba warned of “substantial doubt” about its ability to continue as a going concern, writes Kana Inagaki.
Analysts say that the chances of Toshiba remaining a listed company are much bleaker after it shocked investors by taking the unprecedented step of releasing its third-quarter accounts without a sign-off from its auditor.
Toshiba’s financial crisis stems from far-reaching problems at its nuclear unit Westinghouse, which filed for Chapter 11 bankruptcy protection last month because of mounting costs of completing two flagship nuclear projects in the US.
The Tokyo Stock Exchange is investigating Toshiba for the quality of its internal controls which were found to be inadequate in the wake of a $1.3bn accounting scandal in 2015. After twice missing its accounting deadlines, the publication of unaudited third-quarter results would make it difficult for Toshiba to convince the bourse that its internal controls have improved, which could lead to the delisting of its shares.
In a further sign of trouble, Toshiba faced another setback after its US chip partner, Western Digital, voiced opposition to the sale of its NAND flash memory business, alleging that it violated its joint-venture contract.
The planned sale of Toshiba’s chip division, which is valued at more than $18bn, is considered essential to restoring its balance sheet that was severely damaged by a $6.3bn writedown on Westinghouse. People close to the group say the auction will go ahead.
● Lex: Toshiba — fool me once
● Henny Sender: Question mark over Toshiba shows Japan Inc strains
Elliott’s activist campaign turns into war of words
It was both a busy and acrimonious week for the US activist hedge fund Elliott in Europe as two of its ongoing battles with companies escalated into a public war of words, writes Miles Johnson.
BHP Billiton, the Anglo-Australian miner, hit back at Elliott’s call on it to unify its corporate structure and sell its US oil assets, describing the hedge fund’s plans as having “major flaws” and being “financial engineering”.
Then the Dutch paint and coatings company Akzo Nobel, which Elliott is pressing to enter into merger talks with US rival PPG and sack its chairman, accused the hedge fund of improperly seeking to share potentially price-sensitive information.
Elliott, a New York-based fund with operations in London and Asia, which has built a reputation over more than three decades as both a highly aggressive and shrewd investor, hit back at both companies.
It argued that BHP’s comments were “dismissive and premature”, and in a separate response noted that Akzo Nobel’s concerns over sharing information with PPG were not merited as the US suitor communicated with the Dutch company’s large investors “as a matter of course”.
Although both campaigns are in theory targeting companies listed in Europe (BHP has a dual London and Australian share listing Elliott wants to restructure) the campaign against the miner is not being run from the hedge fund’s London office.
However, the ramp-up in activity shows specialised investors are still spotting opportunities to exert pressure on companies in spite of years of significant increases in share prices on both sides of the Atlantic.
The exchanges between the fund and its target companies also mark a departure from the more conciliatory stance it took in one of its largest European activist campaigns against Alliance Trust starting in 2015. In that case, although there were demands put on Alliance Trust by Elliott, the fund used a “softly, softly” approach to press its agenda.
● Lex: BHP Billiton — frankly speaking
● Lex: Akzo Nobel — brushed off
● Rana Foroohar: BHP Billiton takes the high ground in battle against Elliott