Talisman In Ethical No Man's Land - Financial Post, November 12
A few weeks ago, Madeleine Albright, the U.S. Secretary of State, criticized
Calgary-based Talisman Energy over its investment in Sudan. She suggested
the company might be subject to sanctions as a result. Talisman had already
come under attack from church groups, non-governmental organizations
(NGOs) and the U.N. Secretary General on Internally Displaced Persons for
its Sudanese investment. Lloyd Axworthy's response to Ms. Albright was:
"Hey, don't you threaten our corporations with sanctions, that's my job!"
ow, anybody under attack from Lloyd Axworthy, church groups, NGOs and
the U.N. might usually be worth defending, but there are a lot of serious
questions about the wisdom -- not to mention the ethics -- of Talisman's
investment in Sudan.
The history of the international oil business is a catalogue of dealings with
unsavoury regimes. Arab-ruled states where huge amounts of oil have been
found have a human rights record that has been called "uniformly dismal."
Sudan is no exception. Sudan's ruling National Islamic Front achieved power
via a coup 10 years ago, and received just 5% of the vote in the last free
election, in 1986. It allegedly condones slavery and has been engaged in a
civil war throughout its dictatorship.
What has put Sudan in the limelight, however, is that the country's southern
rebels are largely black Christians. Opponents of Talisman point out that
funds from oil development might tip the civil war balance in favour of the
national government. These attacks have turned out to have painful
consequences for Talisman, the company built by British-born and
Oxford-educated astrophysicist Jim Buckee. His Sudanese investment --
acquired last year along with Vancouver-based Arakis -- has turned into a
stock market disaster.
Whatever the ethics of the situation, Talisman has clearly misjudged the
potential impact of activist power and the perception of political risks. These
have knocked perhaps as much as a billion dollars off Talisman's market
capitalization, possibly far more than the Sudanese investment is worth.
The very fact that Talisman has performed so well and grown so large has
made it attractive to institutional investors. However, institutions have also
proved uniquely vulnerable to activist pressure, and are inevitably concerned
about the impact of a forced divestment if the U.S. government decides to get
nasty. One institution, the Texas Teachers' Retirement Fund, has already
ditched its Talisman holdings.
Mr. Buckee has claimed that if an "ethical" company such as Talisman pulls
out of Sudan, then something worse might take its place. This argument may
make rational sense, but it is certainly not ethically based. Working on the
basis that you should be known by your friends, Talisman's partners in Sudan
-- China and Malaysia -- make one wonder about the scope for Talisman's
ethical input. Moreover, one's ethics are judged not by one's intentions but by
one's actions.
Mr. Buckee has defended his position by suggesting that neither the U.S. nor
Canada has representatives in Sudan, and thus neither really knows what's
going on. European nations, he maintains, take a different and more positive
attitude, particularly France. But few governments can be counted upon to
provide moral leadership, let alone the magnificently perverse French, whose
idea of responding to activists' concerns is to place plastic explosives on their
hulls.
Canada could invoke sanctions against Talisman under the Special Economic
Measures Act, and apparently Ottawa officials have told activist groups it is
prepared to do so. This may be taken with a pinch of salt. Nevertheless,
Talisman is now welcoming the concerns of Mr. Axworthy -- so famous for his
moral stand in favour of trade with Cuba -- and has signed his bafflegab
International Code of Ethics for Canadian Business. Meanwhile, a government
fact-finding mission has been sent to Sudan, led by John Harker, an alleged
expert on Africa from that well-known Third World think-tank, the Canadian
Labour Congress.
Mr. Buckee has pointed out that businesses in countries such as Sudan
operate by the grace of the governments in power, but nobody forced Talisman
to invest in Sudan. People have a marvellous ability to justify whatever is to
their advantage, and Mr. Buckee has also pointed out that economic
development is the route to greater respect for human rights. In the broadest
perspective, that is true. However, there are circumstances -- certainly in
present-day Cuba, possibly in Sudan -- where investment may increase
repression.
Ultimately, Talisman's investment is a matter for the consciences of its
management and shareholders. The fall in its share price -- if recent political
posturing has no policy fallout -- may represent a magnificent buying
opportunity. But it is also a reminder that morally questionable investments
usually turn out to be financially questionable too. |
