tag:theconversation.com,2011:/africa/topics/private-company-33050/articlesprivate company – The Conversation2023-11-20T05:51:39Ztag:theconversation.com,2011:article/2181092023-11-20T05:51:39Z2023-11-20T05:51:39ZThe Optus chief was right to quit but real change is unlikely at the telco until bigger issues are fixed<p>Optus chief executive Kelly Bayer Rosmarin bowed to the inevitable on Monday and <a href="https://www.singtel.com/about-us/media-centre/news-releases/leadership-changes-at-optus--ceo-kelly-bayer-rosmarin-resigns">resigned</a> as chief executive of Australia’s second largest telecommunications company.</p>
<p>Why inevitable? <a href="https://www.news.com.au/technology/online/hacking/optus-slammed-for-lack-of-communication-with-customers-government/news-story/a8a2d8ce1c40b3c5b847ea67a2e153be">Poor communication</a> and a lacklustre response during a major system outage is bad enough. Then things got worse when Bayer Rosmarin and the director of Optus networks <a href="https://www.afr.com/chanticleer/optus-planning-failure-will-hang-over-kelly-bayer-rosmarin-20231117-p5eksv">admitted at a Senate hearing on Friday</a> they had no disaster management plan for the kind of national outage experienced two weeks earlier.</p>
<p>Someone was always going to have to take the blame. Now, two critical questions emerge. First, will the resignation of the chief executive be sufficient to stem the tide of <a href="https://www.theaustralian.com.au/business/technology/communication-failure-as-optus-opts-out-after-blackout/news-story/b194a05f11aad186c9fb665ff85d1339">bad publicity from Optus’ outage</a> debacle? Second, is this yet another instance of a female chief at a prominent Australian company being pushed over the “glass cliff”? </p>
<h2>Quitting is only a Band-Aid fix</h2>
<p>The resignation of a chief executive following a national fiasco has become something of a ritual for big Australian corporations. This happened <a href="https://www.qantasnewsroom.com.au/media-releases/announcement-on-qantas-ceo-succession/">at Qantas</a>, too. </p>
<p>Such actions calm public anger, making it appear someone is taking responsibility. Yet, is this truly effective? Not necessarily. This is because problems are deeply ingrained within these corporations, which removing the current leader will not necessarily resolve. Again, the Qantas example <a href="https://www.theguardian.com/business/2023/sep/06/qantas-in-crisis-alan-joyce-has-departed-but-the-airline-still-has-plenty-of-baggage">illustrates this point</a>.</p>
<p>Optus’ challenges are notably linked to its operational model as a subsidiary of Singtel Ltd, a Singapore-based company. A review of its website shows Optus has a very lean corporate structure in Australia. </p>
<p>Remarkably, Optus doesn’t have a traditional board of directors within Australia to oversee its management. The website lists <a href="https://www.optus.com.au/about/corporate/executive-profiles">Paul O’Sullivan as the chairman</a>, but it’s unclear what exactly he chairs. Surprisingly, O’Sullivan maintains a low public profile, despite Optus being Australia’s second-largest telecommunications carrier. At best, it appears he chairs a board of senior executives including the chief executive.</p>
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Read more:
<a href="https://theconversation.com/the-optus-outage-shows-us-the-perils-of-having-vital-networks-in-private-hands-217660">The Optus outage shows us the perils of having vital networks in private hands</a>
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<p>Even within the ranks of the nominated executives, no one is specifically responsible for the company’s risk management. While Optus claims to have such systems in place, the recent national outage points to a significant lapse in disaster planning. This is a major failure of risk management. </p>
<p>The likelihood of such an outage might have appeared remote to Bayer Rosmarin, yet given the potentially severe consequences, comprehensive planning and scenario testing would seem essential for the telco giant. Like the inevitability of cyber hacking, a national outage could be considered a matter of when, not if.</p>
<h2>Optus needs robust governance</h2>
<p>In a typical scenario, a board of directors would scrutinise the executive team’s oversight and accountability functions as the catastrophe unfolded. With no Australian board, those tasks are apparently the responsibility of Optus’ parent, Singtel.</p>
<p>It is easy to imagine systemic risk concerns at Optus might be too far removed from the Singapore-based board. But that is not much consolation for Australian consumers and agencies who depend on Optus for telecommunication services, including the emergency triple-zero number.</p>
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Read more:
<a href="https://theconversation.com/optus-has-revealed-the-cause-of-the-major-outage-could-it-happen-again-217564">Optus has revealed the cause of the major outage. Could it happen again?</a>
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<p>Optus’ lack of strong governance in Australia is and remains a major concern for the company, regardless of who’s in charge. Optus urgently needs a properly constituted local board of directors with clear accountability for its local operations.</p>
<p>This includes a chairperson ready to front the media and share responsibility with the chief executive. It also requires more transparent governance, particularly regarding risk management and remuneration. Optus can handle some of these issues, but the cost overlay will no doubt be a factor in the mode of the remedy.</p>
<p>That is where the federal government, through its regulatory agency, the <a href="https://www.acma.gov.au/">Australian Communications and Media Authority</a>, must come in and tighten up the governance requirements of companies with a <a href="https://www.acma.gov.au/sites/default/files/2019-11/Carrier%20licensing%20guide.pdf">carrier licence</a>.</p>
<h2>The short-lived tenure of women at the top</h2>
<p>The resignation of Bayer Rosmarin from Optus arguably becomes a classic case of the “glass cliff” phenomenon, where women are installed in leadership roles only to be blamed for failing to fix a crisis. Her stint as chief executive was brief, <a href="https://en.wikipedia.org/wiki/Optus">starting in April 2020</a> after joining Optus in March 2019. Her time at the helm will likely be remembered for two national scandals: a cyber hack and a national outage.</p>
<p><a href="https://www.theguardian.com/business/2023/nov/05/over-the-glass-cliff-female-chief-executives-have-shorter-tenure-than-men-due-to-crisis-management-roles">Studies</a> looking at women in leadership suggest women who take on such roles in turbulent times are likely to endure a shorter tenure than their male counterparts. One scandal might be overlooked, but two? It seems the outcome was inevitable. </p>
<p>Michael Venter, the interim chief executive, may well succeed where Bayer-Rosmarin failed. However, unless Optus takes the time to properly resolve systemic risk issues and bolster its governance arrangements, it should expect more trouble ahead.</p>
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<a href="https://theconversation.com/optus-said-it-didnt-have-the-soundbite-to-explain-the-crisis-we-should-expect-better-217302">Optus said it didn't have the 'soundbite' to explain the crisis. We should expect better</a>
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<p class="fine-print"><em><span>Helen Bird does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Embattled Optus chief Kelly Bayer Rosmarin who oversaw two network outages in the last year has resigned after admitting her company had no disaster management plan.Helen Bird, DIscipline Leader, Corporate Governance & Senior Lecturer, Swinburne Law School, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2176602023-11-15T03:56:00Z2023-11-15T03:56:00ZThe Optus outage shows us the perils of having vital networks in private hands<p>Optus chief executive Kelly Bayer Rosmarin is set to front a <a href="https://www.smh.com.au/technology/optus-reveals-cause-of-mass-outage-20231113-p5ejnk.html#">Senate inquiry</a> this week, probing last week’s colossal outage which left millions stranded without internet or mobile phone connectivity for a staggering 14 hours.</p>
<p>The company has faced severe <a href="https://www.afr.com/companies/telecommunications/optus-public-response-to-the-system-crash-didn-t-work-20231109-p5eiop">criticism</a> for its handling of the outage, including for its lack of urgency in updating the public.</p>
<p>Loss of trust and confidence aside, if the national outage has taught us anything, it is there are real dangers in leaving the management of critical national infrastructure to a 100% privately owned company, in this case, a subsidiary of Singapore Telecommunications Limited, or <a href="https://en.wikipedia.org/wiki/Singtel">Singtel</a> as it is better known.</p>
<p>As a private company, Optus has no legal obligations to report publicly on its financial statements or governance arrangements, unlike its competitor, Telstra Ltd. They don’t even have to report to government, despite holding a licence to be a carrier under federal legislation.</p>
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<a href="https://images.theconversation.com/files/559499/original/file-20231115-23-jz48j1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Image of one of the Singapore based telecommunications company Singtel's storefronts" src="https://images.theconversation.com/files/559499/original/file-20231115-23-jz48j1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/559499/original/file-20231115-23-jz48j1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/559499/original/file-20231115-23-jz48j1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/559499/original/file-20231115-23-jz48j1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/559499/original/file-20231115-23-jz48j1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/559499/original/file-20231115-23-jz48j1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/559499/original/file-20231115-23-jz48j1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Optus is Australia’s second largest communications carrier but is privately owned by Singtel.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/singapore-27-jul-2019-customers-visit-1464421670">Tang Yan Song/Shutterstock</a></span>
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<p>Optus is the second largest supplier after Telstra of national carrier infrastructure in Australia. Its services are critical to the operation of our economy and community wellbeing. An illustration of this was the failure of the emergency 000 service during the outage. People with Optus couldn’t contact emergency services for up to 14 hours.</p>
<h2>The obligations of listed companies</h2>
<p>If Optus was a publicly listed company, like Telstra, it would have to comply with the <a href="https://www.asx.com.au/about/regulation/rules-guidance-notes-and-waivers/asx-listing-rules-guidance-notes-and-waivers">listing rules</a> of the Australian Stock Exchange (ASX). This means it would have to disclose any information that could reasonably be expected to <a href="https://www.asx.com.au/documents/rules/Chapter03.pdf">affect the price or value of the entity’s shares</a>.</p>
<p>An unexplained system-wide outage of carrier services would arguably warrant this. If these rules applied to Optus, it would have had to issue regular market updates on developments during the outage. The odd, unannounced <a href="https://www.9news.com.au/national/optus-year-from-hell-from-the-data-breach-hack-to-australias-biggest-network-outage/487356fb-c52f-4eab-9b44-cb8f2669d067">phone call by the Optus CEO</a> to a radio program would be unsatisfactory. </p>
<p>A quick review of the Optus website’s “<a href="https://www.optus.com.au/about">About Us</a>” section suggests a number of apparent shortcomings. Contrary to the recommendations of the <a href="https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-fourth-edn.pdf">ASX corporate governance rules</a> not a single member of the Optus executive board of directors qualifies as an independent director, that is, a director with no apparent ties to the company.</p>
<p>The idea of the independent director is to help a company board break out of its group think. In a crisis, for example, this would mean asking hard questions of executive management. While ASX governance rules technically only apply to public companies, they are a role model for all corporates, including large proprietary companies like Optus.</p>
<p>No details of the company’s risk-management arrangements are given either, including the chief risk officer. This is extraordinary for a company whose recent history (cyber hack, system outage) shows its exposure to extremely high levels of risk.</p>
<p>There are also no details of who monitors the executive management of Optus. It is important to see this for what it is - Optus <a href="https://www.optus.com.au/about/media-centre/annual-reports">devolves its corporate governance responsibilities</a> to Singtel and runs a very lean operation in Australia.</p>
<p>This is seemingly good for Optus from a cost management viewpoint, but bad for Australia because we are leaving the governance of critical national infrastructure to a company with no direct accountability to the public and minimal accountability to the federal government. </p>
<h2>Poorly prepared for a crisis</h2>
<p>The absence of a comprehensive crisis management plan was obvious during last week’s outage. Despite experiencing a <a href="https://www.afr.com/technology/inside-the-optus-hack-that-woke-up-australia-20221123-p5c0lm">wide-scale cyber hack in 2022</a> Optus seemed ill-prepared to handle the system outage. You have to ask: why wasn’t a plan prepared well in advance of any such crisis? </p>
<p>Crisis management should entail a communication hierarchy and a systematic response. It is a key part of a company’s risk management system. This means knowing who needs to be notified and when to notify them. Presumably, high on that list would be the government. Instead, Bayer Rosmarin phoned radio programs revealing snippets of information in an ad-hoc way. </p>
<p>As part of crisis management, system fixes should be prioritised and companies obliged to tell the public the order in which these will be tackled. For example, the first fix should be health and hospital services. This did not happen. Instead, the absence of a clear plan only fuelled public anger. </p>
<h2>Optus likes to control the narrative</h2>
<p>Optus likes to tightly control its communication narrative. It refused to publicly release the Deloitte report on its 2022 cyber hack, <a href="https://www.theguardian.com/business/2023/nov/10/optus-cyber-attack-report-released-secret-court-case-deloitte">until late last week</a> when it was ordered to make it available to litigants in a class action.</p>
<p>Similarly, the chief executive was reluctant to explain the current system outage, effectively asserting that there was no point until they had “<a href="https://www.afr.com/technology/optus-ceo-says-no-soundbite-to-explain-phone-outage-20231108-p5eid1">bottomed out the root cause</a>” and could make it more digestible to the public.</p>
<p>Optus held all the power, yet when it did finally explain the failure days later, it was described as caused by <a href="https://ia.acs.org.au/article/2023/optus-reveals-cause-of-nationwide-outage.html#:%7E:text=Five%20days%20after%20the%20outage,a%20%E2%80%9Croutine%20software%20upgrade%E2%80%9D.">a system upgrade and a failure of routers</a>. Hardly more digestible than the system failure we already knew it to be. </p>
<p>In an increasingly digitised world, technology failures and system outages have become a fact of life. ASX Ltd, the licensed operator of Australia’s equity market, experienced a bad one in 2022, known as the <a href="https://www.afr.com/companies/financial-services/asx-ignored-warnings-made-unworkable-demands-on-chess-inquiry-hears-20230608-p5dezh">collapse</a> of the Clearing House Electronic Subregister System replacement project. </p>
<h2>Knowing less than we would like</h2>
<p>We know more about that failure than we will ever know about the Optus crisis because the ASX is a public company and was required to make continuous disclosure to the market.</p>
<p>In addition, ASX is also accountable for the management and governance of its critical infrastructure on an annual basis under licence arrangements overseen by the Reserve Bank and the Australian Securities and Investment Commission .</p>
<p>Like Optus, these failures have been the subject of hearings before parliament. However, there are no equivalent accountability requirements for Optus. Surely, the national telecommunications infrastructure managed by Optus is every bit as important as ASX’s clearing house infrastructure?</p>
<p>It is time to ask what accountability mechanisms should be in place for companies like Optus, whether they are enough and who watches over them. Where are the yearly assessments of that infrastructure by government agencies? The <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Environment_and_Communications/OptusNetworkOutage">Senate inquiry</a>, which was announced the day after the outage, will hopefully tackle these issues with the serious attention they deserve.</p><img src="https://counter.theconversation.com/content/217660/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Helen Bird is a member of ASIC's corporate governance panel. She has received funding from the Criminology Research Council and the Australian Research Council in the past.</span></em></p>The Optus chief will face some tough questions about the company’s poor handling of last week’s catastrophic network outage when she appears before a Senate inquiry.Helen Bird, DIscipline Leader, Corporate Governance & Senior Lecturer, Swinburne Law School, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1927992022-10-27T12:28:35Z2022-10-27T12:28:35ZElon Musk takes Twitter private – here’s what that means for the company and its chances of success<figure><img src="https://images.theconversation.com/files/491994/original/file-20221026-19-1q1c4p.jpg?ixlib=rb-1.1.0&rect=40%2C62%2C2955%2C1931&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Elon Musk has said he intends to complete his purchase of Twitter after earlier trying to wriggle out of the deal. </span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/VaticanMusk/2f4d17cc351b4e52aa8558ae7304a946/photo?Query=elon%20musk&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=1321&currentItemNo=62">Patrick Pleul/Pool via AP</a></span></figcaption></figure><p>Elon Musk <a href="https://www.bloomberg.com/news/articles/2022-10-28/musk-completes-44-billion-twitter-deal-ending-months-of-enmity?srnd=premium&sref=Hjm5biAW">has finally completed</a> his US$44 billion deal to acquire Twitter and take it private. </p>
<p>The <a href="https://www.bloomberg.com/billionaires/">world’s richest man</a> has already begun putting his imprint on the social network by <a href="https://www.wsj.com/articles/elon-musk-completes-twitter-takeover-11666918031?mod=hp_lead_pos1">firing four of its top executives</a>.</p>
<p>While most people are likely familiar with the idea of <a href="https://www.statista.com/statistics/270290/number-of-ipos-in-the-us-since-1999/">taking a private company public</a> – the process that allows individuals to buy and sell a company’s shares in the stock market – the reverse process is not as well understood and <a href="https://corpgov.law.harvard.edu/2022/08/14/should-your-company-go-private/">happens far less often</a>. </p>
<p>As a <a href="https://michiganross.umich.edu/faculty-research/faculty/erik-gordon">business and law professor</a>, I have been analyzing mergers, privatizations and other corporate deals for over two decades. The most common question I have been getting from students and faculty colleagues is why would Musk want to take Twitter private? Or more simply, what does it mean to go private? </p>
<p>The answers to these question help address a more interesting one: Will he succeed? </p>
<h2>Public vs. private</h2>
<p>Let’s start with the basic differences between a public and private company.</p>
<p>For starters, a <a href="https://www.cooleygo.com/glossary/public-company">public company is widely held</a>, meaning it has a lot of shareholders. Anyone can buy shares of most public companies, their shares trade on stock exchanges, and their market price is widely available on websites and apps. </p>
<p><a href="https://www.sec.gov/education/smallbusiness/goingpublic/exchangeactreporting">Federal securities law requires</a> public companies to disclose a lot of information about their operations and financial condition in <a href="https://www.sec.gov/files/form10-k.pdf">reports that are posted on the Security and Exchange Commission website</a>. Basically, anything that happens to a public company that’s of consequence to investors must be disclosed publicly. </p>
<p>A private company, on the other hand, <a href="https://corporatefinanceinstitute.com/resources/knowledge/finance/private-company/">is closely held</a>. It has few shareholders – sometimes just one. It usually is impossible to buy shares of a private company. When it is possible, it is difficult because shares don’t trade on exchanges. You have to find someone who is willing and able under restrictive securities laws to sell you their shares.</p>
<p>In addition, a private company is not required to file disclosures or anything else with the SEC.</p>
<p>Another key difference is the power the chief executive has. While public company CEOs have a lot of power, that power is constrained by things like a board of directors and rules on compensation. </p>
<p>Private companies have no meddlesome boards or rules governing compensation or other issues. And with few or no pesky outside shareholders, leaders of private companies don’t have to worry about the effect their decisions might have on the share price. </p>
<h2>Going private</h2>
<p>Many, if not most, companies begin their lives as a private company – perhaps in a family garage, as <a href="https://www.businessinsider.com/google-apple-hp-microsoft-amazon-started-in-garages-photos-2019-12">seems to be the case in so many startup origin stories</a>. </p>
<p>As a young company grows, <a href="https://www.forbes.com/advisor/investing/initial-public-offering-ipo">it needs more funding</a>, a problem often solved by doing an initial public offering that pulls in a lot of cash and opens up ownership to anyone. </p>
<p><a href="https://www.investor.gov/introduction-investing/investing-basics/glossary/going-private">Taking a company private</a>, as Musk did, reverses the IPO. The Tesla billionaire paid Twitter shareholders $54.20 a share, which is a 64% premium over the price Twitter stock was trading at a few weeks before Musk’s offer was disclosed on April 14, 2022.</p>
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<img alt="A white man in a suit sits in front of an old computer in a dorm room, as two others in street clothes stand in the door opening" src="https://images.theconversation.com/files/491992/original/file-20221026-6305-el39uc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/491992/original/file-20221026-6305-el39uc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/491992/original/file-20221026-6305-el39uc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/491992/original/file-20221026-6305-el39uc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/491992/original/file-20221026-6305-el39uc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/491992/original/file-20221026-6305-el39uc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/491992/original/file-20221026-6305-el39uc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Michael Dell, pictured wearing a suit in 1999 in the dorm where he started his eponymous computer company, took it private in 2013, later taking it public again for a huge profit.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/RiseandFall/cf82774133a94ecabd3db2427cb2673c/photo?Query=Michael%20dell%20computer&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=28&currentItemNo=9">AP Photo/Harry Cabluck</a></span>
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<h2>A success story</h2>
<p>So why would Musk or anyone want to take a company private? One key reason is control, which allows a buyer to impose his or her vision and singular strategy. </p>
<p>Now the shares have changed hands, Twitter is Musk’s to do with as he pleases – from reopening the accounts of <a href="https://www.cnbc.com/2022/05/10/elon-musk-says-he-would-lift-twitter-ban-on-donald-trump-after-deal-closes.html">former President Donald Trump</a> and Ye, <a href="https://techcrunch.com/2022/10/09/kanye-west-twitter-elon-musk">the artist formally known as Kanye West</a>, to <a href="https://techcrunch.com/2022/10/20/elon-musk-twitter-layoffs-wapo/">slashing the workforce</a> and firing executives.</p>
<p>That’s why Michael Dell decided to take the computer <a href="https://www.reuters.com/article/us-dell-buyout/dell-to-go-private-in-landmark-24-4-billion-deal-idUSBRE9140NF20130206">company that bears his name private in 2013</a>. </p>
<p>At the time, the <a href="https://www.investopedia.com/articles/markets/110915/dell-stock-doesnt-exist-here-why.asp">company was struggling</a> as personal computer sales slumped amid the rise of the smartphone. As <a href="https://www.sec.gov/Archives/edgar/data/826083/000119312513266621/d558010ddfan14a.htm">he explained in a securities filing</a>, Dell believed it was essential to quickly transform the company from primarily a PC maker to one focused on providing large organizations with entire information technology systems and managing them. </p>
<p>He said he couldn’t make the transformation as a public company because it would hurt short-term profits, which would likely cause the share price to fall. That in turn could harm consumers’ perception of Dell and lead to employee turnover.</p>
<p>In other words, Dell’s plan was perhaps too bold for a public company. But the strategy paid off – for him, his fellow investors and his company. </p>
<p>Dell himself <a href="https://www.forbes.com/sites/connieguglielmo/2013/10/30/you-wont-have-michael-dell-to-kick-around-anymore/">chipped in $750 million in cash</a> and over $3 billion in the form of his 16% stake in the company, with about $3.4 billion coming from other investors and $16 billion in debt.</p>
<p>By 2018, when the company went public for the second time, Dell’s <a href="https://www.ft.com/content/73ab2020-906c-11e8-b639-7680cedcc421">stake was worth $32 billion</a>, with similar large payouts for his co-investors. The <a href="https://www.statista.com/statistics/264911/dells-net-revenue-since-1996/">company thrived as well</a>, with sales and profits soaring after a period of low growth, as Dell predicted. Workforces often fall when a company goes private, but <a href="https://www.statista.com/statistics/264917/number-of-employees-at-dell-since-1996">Dell’s was up about 50%</a> in 2020 compared with 2013.</p>
<figure class="align-center ">
<img alt="a person in a coat walks past the front of a store with a Toys r Us sign over glass doors and signs reading clearance sale" src="https://images.theconversation.com/files/491993/original/file-20221026-23824-5gbu7p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/491993/original/file-20221026-23824-5gbu7p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/491993/original/file-20221026-23824-5gbu7p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/491993/original/file-20221026-23824-5gbu7p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/491993/original/file-20221026-23824-5gbu7p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/491993/original/file-20221026-23824-5gbu7p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/491993/original/file-20221026-23824-5gbu7p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Toys R Us went bankrupt in 2017.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/ToysRUsNewStake/fd082ebecdc643b78ff837b1e51bfd4a/photo?Query=toys%20r%20us&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=684&currentItemNo=17">AP Photo/Julio Cortez</a></span>
</figcaption>
</figure>
<h2>A classic fail</h2>
<p>But it doesn’t always end well. </p>
<p>In the early 2000s, Toys R Us <a href="https://www.latimes.com/business/la-fi-toys-r-us-leveraged-buyout-20180316-story.html">was in serious trouble</a>. Although e-commerce was still in its infancy, it was beginning to disrupt brick-and-mortar retailers, <a href="https://www.nytimes.com/2018/03/15/business/toys-r-us-bankruptcy.html">increasing competition</a> – especially in the market for children’s toys. A <a href="https://www.wsj.com/articles/SB113798030922653260">plan to sell its wares online via Amazon fizzled</a>, leaving Toys R Us way behind in e-commerce. Meanwhile, <a href="https://knowledge.wharton.upenn.edu/article/the-demise-of-toys-r-us/">its stores were growing old and shabby</a>, customer service was lousy and Target and Walmart were gaining market share.</p>
<p>In 2005, two buyout firms and a real estate trust <a href="https://www.businessinsider.com/the-tumultuous-history-of-toys-r-us-photos-2020-8#the-mounting-competition-led-to-the-eventual-closure-of-kids-r-us-14">won the bidding to take Toys R Us private</a> for $6.6 billion, using $5 billion in debt. Unlike Dell, who knew his business cold, Bain Capital, KKR & Co. and Vornado Realty Trust didn’t have much experience in the toy industry. And <a href="https://www.nytimes.com/2005/03/17/business/three-firms-are-said-to-buy-toys-r-us-for-6-billion.html">they followed a classic private equity strategy</a> of consolidation, closing marginal stores and cutting costs.</p>
<p>Also unlike Dell, Toys R Us never recovered. The <a href="https://www.theatlantic.com/magazine/archive/2018/07/toys-r-us-bankruptcy-private-equity/561758/">significant debt incurred</a> in the buyout saddled the company with large interest payments that <a href="https://www.washingtonpost.com/business/economy/analysts-toys-r-us-might-have-survived-if-it-did-not-have-to-deal-with-so-much-debt/2018/03/15/42752326-286a-11e8-874b-d517e912f125_story.html">left little money to invest</a> in remodeling stores or building a competitive online business. Toys R Us <a href="https://www.theatlantic.com/magazine/archive/2018/07/toys-r-us-bankruptcy-private-equity/561758/">filed for bankruptcy in 2017</a>, 12 years after going private.</p>
<p>As I see it, Dell had a plan that fit his company’s environment – a <a href="https://www.researchgate.net/publication/313924776_Strategic_Fit">key concept</a> in the study of business strategy. Toys R Us’ buyers did not. </p>
<p>**</p>
<figure class="align-center ">
<img alt="the Twitter bird logo appears in white on a large dark screen as people making trades at a stock exchange wander underneath" src="https://images.theconversation.com/files/491991/original/file-20221026-23859-h5s605.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/491991/original/file-20221026-23859-h5s605.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/491991/original/file-20221026-23859-h5s605.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/491991/original/file-20221026-23859-h5s605.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/491991/original/file-20221026-23859-h5s605.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/491991/original/file-20221026-23859-h5s605.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/491991/original/file-20221026-23859-h5s605.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Shares of Twitter had been trading far below Musk’s offering price until recently, with many believing it wouldn’t happen.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/Musk-Twitter/bde3554cd27b43a79f448eb61f2e4b23/photo?Query=twitter&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=6361&currentItemNo=18">AP Photo/Seth Wenig</a></span>
</figcaption>
</figure>
<p>**</p>
<h2>Does Musk have a vision?</h2>
<p>So what does this all mean for Musk’s potential success at Twitter? </p>
<p>We still don’t know a lot about what he plans to do. </p>
<p>In <a href="https://www.sec.gov/Archives/edgar/data/1418091/000110465922045641/tm2212748d1_sc13da.htm">his April letter to Twitter shareholders</a>, he said, “I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy.” One could ask whether that is a business model or a statement of sociopolitical philosophy.</p>
<p>In any case, he said Twitter can’t “thrive nor serve this societal imperative” as a public company. He’s also tweeted that he would fight bots on the social network, let Trump and others rejoin and potentially let users <a href="https://thehill.com/homenews/ap/ap-technology/ap-musk-has-a-super-app-plan-for-twitter-its-super-vague">pay bills via tweet</a> – part of his <a href="https://evannex.com/blogs/news/elon-musk-s-long-term-goal-to-turn-twitter-into-a-super-app">“Project X” super app idea</a>. </p>
<p>More recently, The Washington Post <a href="https://www.washingtonpost.com/technology/2022/10/20/musk-twitter-acquisition-staff-cuts/">reported that Musk plans</a> to cut Twitter’s 7,500 employees by about 75% – though on Oct. 26 <a href="https://www.bloomberg.com/news/articles/2022-10-27/musk-tells-twitter-employees-he-doesn-t-plan-to-cut-75-of-jobs?srnd=premium&sref=Hjm5biAW">he told Twitter employees in San Francisco</a> that he wouldn’t get rid of that many. He also promised Twitter <a href="https://www.wsj.com/articles/elon-musk-will-face-an-early-twitter-challenge-preventing-advertiser-flight-11666871828">wouldn’t turn into</a> a “free-for-all hellscape.”</p>
<p>Musk understands the physics of launching rockets and the engineering behind building an electric car, but he doesn’t have deep experience running a social media platform or in building super apps. I believe he doesn’t have a thoroughly thought-out strategy that fits Twitter’s difficult environment.</p>
<p>What he does have a huge amount of debt. Last year, Twitter owed about $51 million in interest on its debt. After going private, the estimates are that Twitter will <a href="https://www.barrons.com/articles/things-to-know-today-51666781185">owe at least a billion dollars</a> annually on <a href="https://www.forbes.com/sites/dereksaul/2022/10/25/elon-musk-reportedly-tells-bankers-hell-buy-twitter-by-friday-deadline/?sh=72147cae4a4c">about $13 billion in new debt</a>. </p>
<p>In 2021, the <a href="https://www.sec.gov/ix?doc=/Archives/edgar/data/1418091/000141809122000029/twtr-20211231.htm#i2ad918c563304a7eb6717a12dcfcee58_76">company generated just $630 million</a> in cash from operations. That means Musk won’t have much cash to fund a super app or any other big ideas, unless he is able to attract additional investment in the company.</p>
<p>With the company in his hands, Musk can, of course, do what he likes. He can implement any free speech policy that suits his fancy. He can let Trump and Ye tweet. He can ban Tesla short sellers and anyone who questions his <a href="https://www.npr.org/2022/10/04/1126714896/elon-musk-ukraine-peace-plan-zelenskyy">foreign policy initiatives</a>. He can fire 75% of his staff in a heartbeat – something a public CEO would have a very hard time doing.</p>
<p>It’s too soon to tell if taking Twitter private will be a Dell-like success or a Toys R Us disaster. But <a href="https://techcrunch.com/2022/04/14/elon-musk-buying-twitter-ted-talk/">given Musk has said</a> he “doesn’t care about the economics,” it may not matter.</p>
<p><em>This article was updated to reflect deal was completed.</em></p><img src="https://counter.theconversation.com/content/192799/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Erik Gordon does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Completing the $44 billion deal, following six months of turmoil, may be the easy part.Erik Gordon, Professor of Business, University of MichiganLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1906122022-09-15T12:30:41Z2022-09-15T12:30:41ZRussia’s reliance on mercenaries in Ukraine points to the weakness of its military – and Putin’s strategy of deflecting blame<figure><img src="https://images.theconversation.com/files/484698/original/file-20220914-1785-zhul74.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Russian soldiers patrol a theater in Mariupol, Ukraine, on April 12, 2022. </span> <span class="attribution"><a class="source" href="https://media.gettyimages.com/photos/russian-soldiers-patrol-at-the-mariupol-drama-theatre-bombed-last-16-picture-id1239934899">Alexander Nemenov/AFP via Getty Images </a></span></figcaption></figure><p>Ukrainian forces are gaining ground in the war against Russia. Since early September 2022, they have launched a massive counteroffensive in Ukraine’s northeast region of Kharkiv, <a href="https://www.nytimes.com/interactive/2022/world/europe/ukraine-maps.html">reclaiming large swaths of territory</a>. </p>
<p>The sudden offensive – likely the result of several factors, including <a href="https://www.nytimes.com/2022/09/13/us/politics/ukraine-russia-pentagon.html">effective war gaming</a> and <a href="https://ecfr.eu/article/lessons-for-the-west-russias-military-failures-in-ukraine/">Russian military</a> incompetence – has prompted <a href="https://www.nytimes.com/2022/09/11/world/europe/ukraine-kharkiv-russian-retreat.html">optimism about Ukraine’s ability to push Russia</a> back from Ukrainian territory.</p>
<p>Russia is now <a href="https://www.defense.gov/News/News-Stories/Article/Article/3157239/ukraines-success-was-a-surprise-only-to-the-russians/">on the defensive</a> in Ukraine’s northeast. And one important dynamic in the lead-up to Ukraine’s counteroffensive was Russia’s <a href="https://www.npr.org/2022/08/22/1118843617/a-kremlin-linked-mercenary-group-is-now-openly-recruiting-for-the-war-in-ukraine">growing reliance</a> on private military companies in the war. It’s clear that Russia is increasing its use of these groups, but it’s not known by exactly how much. </p>
<p>Like many other countries, including the U.S., Russia has used <a href="https://www.csis.org/analysis/russias-corporate-soldiers-global-expansion-russias-private-military-companies">private military companies</a>, which are for-profit organizations that provide military services during war, for years. It has increasingly relied on these mercenaries to help fight wars and participate in counterterrorism efforts in places <a href="https://www.csis.org/npfp/russian-private-military-companies-syria-and-beyond">like Syria</a>, <a href="https://www.theguardian.com/world/2022/may/25/russian-mercenaries-accused-over-use-of-mines-and-booby-traps-in-libya">Libya</a> and the <a href="https://www.bbc.com/news/world-africa-61311272">Central African Republic</a>. </p>
<p>As a <a href="https://scholar.google.com/citations?hl=en&user=RrvwWKMAAAAJ&view_op=list_works">scholar</a> who researches private military companies, I think <a href="https://www.washingtonpost.com/world/2022/08/17/ukraine-russia-wagner-group-mercenaries/">these groups’ increasing visibility in Ukraine</a> reveals the tenuous status of Russia’s military efforts, as well as Moscow’s shaky domestic political situation. </p>
<p>Ultimately, the use of these groups shows that Russia’s manpower shortages have become a liability in its war in Ukraine. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/484699/original/file-20220914-19-itrzkc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A middle aged man with salt and pepper facial hair looks at the camera with his hands on his hips." src="https://images.theconversation.com/files/484699/original/file-20220914-19-itrzkc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/484699/original/file-20220914-19-itrzkc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/484699/original/file-20220914-19-itrzkc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/484699/original/file-20220914-19-itrzkc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/484699/original/file-20220914-19-itrzkc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/484699/original/file-20220914-19-itrzkc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/484699/original/file-20220914-19-itrzkc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Marat Gabidullin, a former member of the private military company the Wagner Group, poses in 2022.</span>
<span class="attribution"><a class="source" href="https://media.gettyimages.com/photos/former-russian-mercenary-of-the-wagner-group-marat-gabidullin-poses-picture-id1240597504">Stephane De Sakutin/AFP via Getty Images</a></span>
</figcaption>
</figure>
<h2>How private military companies work</h2>
<p>It’s not a new phenomenon for governments like Russia and the U.S. to use private military companies to help enhance their power during conflict.</p>
<p>These groups, generally speaking, are <a href="https://global.oup.com/academic/product/the-modern-mercenary-9780190621087?cc=us&lang=en&">“conflict entrepreneurs”</a> seeking to profit during war by offering a variety of services to the highest bidders.</p>
<p>Governments are most often the ones contracting these groups to strengthen their war capabilities and assist in a multitude of military tasks, from providing intelligence to fighting in front-line operations. At times, private military companies are used because they are cheaper over the long term, not requiring governments to pay for soldiers’ retirements and health benefits, for example.</p>
<p>In other cases, governments like Russia contract private military companies because their armies either lack enough power to fight a war or because they see strategic value in doing so.</p>
<p>Yet, Russian private military companies – <a href="https://csis-website-prod.s3.amazonaws.com/s3fs-public/publication/210721_Jones_Russia%27s_Corporate_Soldiers.pdf?7fy3TGV3HqDtRKoe8vDq2J2GGVz7N586">groups like</a> the Wagner Group and similar organizations <a href="https://warsawinstitute.org/wagner-versus-patriot-fighting-mercenary-control/">like Patriot</a> – are somewhat of an anomaly in the larger private security market. </p>
<p>One key reason is that <a href="https://www.fpri.org/wp-content/uploads/2019/12/rfp4-borshchevskaya-final.pdf">private military companies are technically illegal</a> in Russia. They are only able to operate given their <a href="https://csis-website-prod.s3.amazonaws.com/s3fs-public/publication/210721_Jones_Russia%27s_Corporate_Soldiers.pdf?7fy3TGV3HqDtRKoe8vDq2J2GGVz7N586">direct connections to the Kremlin</a>.</p>
<p>For example, the Wagner Group – Russia’s most notorious private military company – is bankrolled by a wealthy Russian oligarch, <a href="https://www.state.gov/disarming-disinformation/wagner-group-yevgeniy-prigozhin-and-russias-disinformation-in-africa/">Yevgeny Prigozhin</a>, who has deep ties to the Kremlin. The Wagner Group’s main base in Russia is also <a href="https://www.csis.org/blogs/post-soviet-post/band-brothers-wagner-group-and-russian-state">shared with Russian special forces units</a>.</p>
<p>Russia’s use of the Wagner Group in Ukraine dates back to when Russia forcibly <a href="https://www.brookings.edu/blog/order-from-chaos/2020/03/17/crimea-six-years-after-illegal-annexation/">annexed Crimea</a> in 2014. While the Wagner Group formed around this time, <a href="https://www.tandfonline.com/doi/full/10.1080/23296151.2020.1740528">the Russian private military industry</a> has been on the rise since the early 1990s.</p>
<p>Now, the group’s enhanced visibility in Russia’s “special military operation,” as Russian President Vladimir Putin <a href="https://www.reuters.com/world/europe/russias-putin-authorises-military-operations-donbass-domestic-media-2022-02-24/">has called it</a>, signals an important shift in the Ukraine war. </p>
<h2>Filling a gap for Russian soldiers</h2>
<p>Russia’s armed forces have simply been less effective in combat than many expected – a byproduct of <a href="https://warontherocks.com/2022/05/what-the-experts-got-wrong-and-right-about-russian-military-power/">poor training</a>, <a href="https://warontherocks.com/2022/06/not-built-for-purpose-the-russian-militarys-ill-fated-force-design/">logistics and strategy</a>.</p>
<p>Many Russian soldiers have also been wounded or killed. Overall, “<a href="https://www.defense.gov/News/Transcripts/Transcript/Article/3120707/usd-policy-dr-kahl-press-conference/">Russians have probably taken 70,000 or 80,000 casualties in less than six months,”</a> Colin Kahl, U.S. undersecretary of defense for policy, <a href="https://www.nytimes.com/2022/08/11/us/politics/russian-casualties-ukraine.html">said in</a> August 2022.</p>
<p>U.S. military and intelligence community assessments also note that in early August 2022, Russia was losing upward of <a href="https://www.nytimes.com/2022/08/11/us/politics/russian-casualties-ukraine.html">500 soldiers per day</a>. Ukrainian officials, meanwhile, <a href="https://www.forbes.com/sites/davidaxe/2022/08/25/9000-dead-soldiers-weigh-on-ukraines-ability-to-wage-war/?sh=134a129927aa">reported losing 100 to 200 soldiers per day</a> around this time.</p>
<p>Battlefield losses have put pressure on Putin, who recently <a href="https://www.nytimes.com/2022/08/25/world/europe/putin-russia-military-expansion.html">ordered more military recruiting</a> in Russia. Russia is trying to add nearly 140,000 new troops to its existing <a href="https://www.reuters.com/world/europe/putin-signs-decree-increase-size-russian-armed-forces-2022-08-25/">900,000 active-duty troops</a> by the start of 2023. </p>
<p>In the meantime, Russia’s reliance on private military companies, which were <a href="https://meduza.io/en/feature/2022/07/14/a-mercenaries-war">successful in capturing Ukrainian territory where other forces could not</a>, provides the Kremlin with a short-term and partial remedy to its personnel shortcomings.</p>
<h2>A cover for Moscow</h2>
<p>Moscow employing Wagner Group soldiers also appears to be a politically strategic move. </p>
<p>Private military group fighters, who are often paid better than the regular army, can “allow the Kremlin to assemble more soldiers without upsetting <a href="https://meduza.io/en/feature/2022/07/14/a-mercenaries-war">the country’s domestic situation”</a>, meaning political order and support for Putin. It allows Putin to further the false narrative that this is not a war. This is important because the continued loss of Russian soldiers poses political risks to Putin – for example, when <a href="https://www.washingtonpost.com/world/2022/08/07/russia-ukraine-war-deaths-toll/">dead Russian soldiers come back in body bags from Ukraine</a>.</p>
<p>Putin wants to maintain positive public sentiment about the war and <a href="https://www.nytimes.com/2022/08/31/world/europe/russia-putin-ukraine-war-draft.html">to avoid a draft</a>, which would be very unpopular in Russia. The Kremlin has not elaborated on <a href="https://www.nytimes.com/2022/08/31/world/europe/russia-putin-ukraine-war-draft.html">how it plans</a> to increase its troops without a draft. </p>
<p>Research also shows that people are <a href="https://www.washingtonpost.com/national-security/2020/06/30/military-contractor-study/">generally less sensitive to contractor casualties than military personnel dying</a>. </p>
<p>Finally, relying on auxiliary forces like private military companies gives Moscow some potential cover as more independent reports show Russian soldiers have committed <a href="https://www.cbsnews.com/news/bellingcat-russia-putin-ukraine-60-minutes-2022-08-21/">human rights abuses</a> in Ukraine.</p>
<p><a href="https://www.tandfonline.com/doi/full/10.1080/03050629.2014.932783">Research shows</a> that governments can use auxiliary forces like the Wagner Group to deflect responsibility <a href="https://journals.sagepub.com/doi/full/10.1177/0022002715576748">for sexual violence</a> and other war atrocities that happen during conflict. </p>
<p>This is the exact playbook the Kremlin is using in the Central African Republic and Mali, <a href="https://acleddata.com/2022/08/30/wagner-group-operations-in-africa-civilian-targeting-trends-in-the-central-african-republic-and-mali/">where violence against civilians has soared</a> since <a href="https://ctc.westpoint.edu/undermining-democracy-and-exploiting-clients-the-wagner-groups-nefarious-activities-in-africa/">Wagner forces arrived</a> to support Russia’s counterterrorism efforts in these countries in 2017 and 2021, respectively.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/484700/original/file-20220914-14325-spyrev.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A white van drives over a dirt road and bridge. Under it a military vehicle is turned upside down, with its four wheels pointing up." src="https://images.theconversation.com/files/484700/original/file-20220914-14325-spyrev.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/484700/original/file-20220914-14325-spyrev.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/484700/original/file-20220914-14325-spyrev.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/484700/original/file-20220914-14325-spyrev.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/484700/original/file-20220914-14325-spyrev.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/484700/original/file-20220914-14325-spyrev.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/484700/original/file-20220914-14325-spyrev.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">A van drives over a bridge, past a destroyed Russian military vehicle in the Kharkiv region of northeastern Ukraine on Sept. 13, 2022.</span>
<span class="attribution"><a class="source" href="https://media.gettyimages.com/photos/van-moves-along-a-bridge-as-a-destroyed-russian-military-vehicle-is-picture-id1243215099">Vyacheslav Madiyevskyy/ Ukrinform/Future Publishing via Getty Images</a></span>
</figcaption>
</figure>
<h2>Caught in the crosshairs</h2>
<p>Ukraine <a href="https://www.theguardian.com/world/2022/may/25/wagner-group-fighters-accused-murdering-civilians-ukraine-war-crimes-belarus">accused Wagner mercenaries of murdering civilians</a> in May 2022. German intelligence also intercepted radio communications <a href="https://www.spiegel.de/international/germany/possible-evidence-of-russian-atrocities-german-intelligence-intercepts-radio-traffic-discussing-the-murder-of-civilians-in-bucha-a-0a191c96-634f-4d07-8c5c-c4a772315b0d">implicating the Wagner Group in the Bucha massacre</a> in late March 2022. </p>
<p>Wagner’s recent recruitment efforts, which now include dipping into <a href="https://en.zona.media/article/2022/08/10/prigozhin">prison populations</a> from dozens of Russian penal colonies, have heightened fears that war crimes will increase, including violence against civilians. </p>
<p>Observers <a href="https://twitter.com/maryilyushina/status/1570103416935923714">estimate some 7,000 to 10,000 convicts</a> have been recruited since June, and <a href="https://twitter.com/yarotrof/status/1570098854942445571">video recently surfaced</a> showing Prigozhin personally appealing to prisoners to join the Wagner ranks. Increasing numbers of criminals and people with limited training joining Wagner will almost certainly impact its operational effectiveness. </p>
<p>However, for the time being – and particularly given Ukraine’s recent counteroffensive – it appears that Russia will continue to rely on Wagner to supplement its armed forces. </p>
<p>This strategy has risks, including <a href="https://twitter.com/DefenceHQ/status/1548913656410226688">exacerbating grievances</a> across the Russian army where <a href="https://www.voanews.com/a/ukraine-surprise-victories-hurting-russian-soldiers-morale-experts-say-/6744702.html">morale continues to decline</a>. Such friction may be good for Ukraine’s war effort, but Russia’s continued reliance on private military companies could make the war worse for those civilians caught in the crosshairs.</p><img src="https://counter.theconversation.com/content/190612/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The views expressed are the author's own and do not necessarily represent those of any U.S. government agency.</span></em></p>As Ukraine retakes parts of its northeastern region from Russia, the Kremlin continues to increasingly look to private military companies to fill in military power gaps.Christopher Michael Faulkner, Assistant Professor of National Security Affairs in the College of Distance Education, US Naval War CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1028342018-09-10T10:38:54Z2018-09-10T10:38:54ZIf Trump were a CEO, his board would have fired him by now<p>The Trump White House has endured a lot of bad publicity in its short lifespan, but recent disclosures may be among the worst. </p>
<p>On Sept. 4, an <a href="https://www.washingtonpost.com/politics/bob-woodwards-new-book-reveals-a-nervous-breakdown-of-trumps-presidency/2018/09/04/b27a389e-ac60-11e8-a8d7-0f63ab8b1370_story.html?utm_term=.a39684b9e878">early account</a> of Bob Woodward’s new <a href="http://www.simonandschuster.com/books/Fear/Bob-Woodward/9781501175510">book</a> revealed the “nervous breakdown” unfolding within the Trump administration. Then, the next afternoon, a “senior official” went public – albeit anonymously – with an op-ed piece in <a href="https://www.nytimes.com/2018/09/05/opinion/trump-white-house-anonymous-resistance.html?action=click&module=Opinion&pgtype=Homepage">The New York Times</a>. </p>
<p>What we’ve learned is that many of the president’s top aides “are working diligently from within to frustrate parts of his agenda and his worst inclinations,” such as by stealing a document from his desk. A “quiet resistance” is trying to prevent Trump from taking actions “detrimental to the health of our republic.” </p>
<p>As a <a href="http://www.damore-mckim.northeastern.edu/faculty/s/spector-bert">business professor</a>, I find myself wondering how this might play out in the highest ranks of a public corporation if they were anywhere near this chaotic. In my view, its board, faced with similar behaviors, would say to its CEO: “You’re fired!”</p>
<h2>Off the rails?</h2>
<p>The latest insights into this apparently “off-the-rails” administration are entirely consistent with revelations offered from <a href="https://us.macmillan.com/books/9781250158062">other</a> <a href="http://www.simonandschuster.com/books/Unhinged/Omarosa-Manigault-Newman/9781982109707">less credible</a> sources. </p>
<p>While they are certainly shocking and cause for intense concern, no one should be surprised given Trump’s background.</p>
<p>In the first month of Trump’s term, I wrote an article for The Conversation noting how Trump’s experience as the head of a private, family-owned business <a href="https://theconversation.com/white-house-in-turmoil-shows-why-trumps-no-ceo-72393">ill-prepared him</a> for the demands of the presidency. </p>
<p>That’s because leaders of privately held companies do not face the governance constraints that impose limits on the behaviors of CEOs who run public corporations. Private company CEOs have no independent board of directors to answer to, no requirements of transparency imposed by the Securities and Exchange Commission and no requirement for outside accounting oversight. </p>
<p>While private, family-run businesses can be models of effective governance, we know little of real substance about the Trump Organization. His <a href="https://www.npr.org/2018/03/19/595025070/sworn-to-secrecy-trumps-history-of-using-nondisclosure-agreements">obsession with secrecy</a> makes any true assessment impossible. </p>
<p>We do know Trump was accountable to no one. He surrounded himself with his children and people – including his once-loyal “fixer” <a href="https://www.nytimes.com/2018/05/05/business/michael-cohen-lawyer-trump.html">Michael Cohen</a> – who served only him. </p>
<p>His one attempt at leading a public corporation, operating within the governance constraints imposed by law and regulation, proved to be an <a href="https://www.washingtonpost.com/business/economy/as-its-stock-collapsed-trumps-firm-gave-him-huge-bonuses-and-paid-for-his-jet/2016/06/12/58458918-2766-11e6-b989-4e5479715b54_story.html">unmitigated disaster</a> – for public investors, anyway. </p>
<h2>The board steps in</h2>
<p>Public companies are governed differently. And boards of directors, half of whose members must be independent, take their <a href="https://files.arnoldporter.com/practica_lawyer_skinner.pdf">legally established responsibilities</a> seriously. </p>
<p>For example, their fiduciary responsibility requires directors to act in the best interests of the corporation. Their supervisory role involves oversight of the CEO and other officers. And their duty of care obligates close and regular attention to the functioning of the corporation. </p>
<p>With these duties in mind, boards have ousted CEOs – or, more commonly, forced them to resign. </p>
<p>Often, boards simply lose faith in the strategy the CEO is pursuing. That’s <a href="https://www.crn.com/news/mobility/231601009/the-hp-compaq-merger-partners-reflect-10-years-later.htm">what happened</a> at Hewlett Packard when the board fired Carly Fiorina in 2005, a few years after the disastrous acquisition of rival computer maker Compaq <a href="https://www.politico.com/magazine/story/2015/09/carly-fiorina-ceo-jeffrey-sonnenfeld-2016-213163">destroyed half</a> of HP’s market value. </p>
<p>But boards have also been known to step in – and <a href="https://www.strategy-business.com/feature/Are-CEOs-Less-Ethical-Than-in-the-Past?gko=50774">are doing so at an increasing pace</a> – when the personal behavior of the CEO crosses a line and threatens to harm the company’s well-being. </p>
<p>For example, in early 2017, Uber’s financial performance under founder Travis Kalanick seemed just fine. But board members <a href="https://www.bloomberg.com/news/features/2018-01-18/the-fall-of-travis-kalanick-was-a-lot-weirder-and-darker-than-you-thought">were growing alarmed</a> by the results of an internal employee attitude survey and shocked when a smartphone video captured Kalanick shouting at his Uber driver. By March he was gone – not fired but clearly forced to step down.</p>
<p>And just a few months ago, the tenure of another iconic founder, Papa John’s very own John Schnatter, <a href="https://money.cnn.com/2018/07/11/news/companies/papa-johns-pizza-john-schnatter/index.html">came to a similar end</a>. There were no complaints about business performance. The issue was his use of racially charged language, which led the board to force him out of the chairman’s seat – only a year after he lost the CEO role for other disruptive behavior.</p>
<p>A key point in these examples is that even though the executive’s behavior triggered the removal, the company’s financial performance was still at the top of directors’ minds. For example, Papa John’s <a href="https://www.cnbc.com/2018/08/07/papa-johns-reports-2q-2018-earnings.html">sales plunged</a> when word spread of his use of a racial slur. Bad behaviors by the CEO will eventually reflect poorly on the company and hurt its performance.</p>
<p>The reality is that boards can lose confidence in their CEOs for many reasons. When that happens, governance rules demand that they take action in the best interests of the corporation.</p>
<p>And this is where the importance of <a href="https://www.sec.gov/rules/sro/nasdaq/2013/34-68640-ex5.pdf">independent board members</a> – who have no ties to the CEO or another employee of the company – comes in. They regularly review the CEO’s performance and are responsible for hiring <a href="https://www.sec.gov/rules/final/33-7919.htm">outside auditors</a> to ensure appropriate and reliance internal control systems. </p>
<p>Finally, even when a a board fails in its duties, <a href="https://corpgov.law.harvard.edu/2018/02/01/the-changing-face-of-shareholder-activism/">shareholder activists</a> and large institutional investors can – and <a href="https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-activist-investors-are-transforming-the-role-of-public-company-boards">increasingly do</a> – demand accountability.</p>
<h2>The real surprise</h2>
<p>What is stunning to me in light of recent disclosures is what they reveal about the apparent weakness of governance mechanisms within the federal government. </p>
<p>That’s not to say such mechanisms don’t exist. The Founding Fathers wrote explicit <a href="https://nccs.net/blogs/our-ageless-constitution/checks-and-balances">checks and balances</a> into the U.S. Constitution. Congress was meant to act as a <a href="https://www.press.uchicago.edu/Misc/Chicago/749396.html">co-equal branch</a> to mitigate possible overstepping and abuses by the chief executive. But there has been a complete <a href="https://www.theatlantic.com/politics/archive/2017/10/republicans-in-congress-youve-got-another-chance/544466/">collapse of constitutional oversight by Congress</a>. </p>
<p>Presidents cannot be fired, exactly. But in extreme cases, they can be removed. The U.S. Constitution offers two mechanisms to do just that. Article 3, Section 3, Clause 1 says a president can be impeached by the House and removed by the Senate for “<a href="http://www.crf-usa.org/impeachment/high-crimes-and-misdemeanors.html">high crimes and misdemeanors</a>” – however lawmakers choose to define them. </p>
<p>And the <a href="https://theconversation.com/what-the-25th-amendment-says-about-presidents-who-are-unable-to-serve-102825">25th Amendment</a> allows the vice president and a majority of the Cabinet to declare the president “unable to discharge the powers and duties of his office,” which would ultimately require two-thirds majorities of both houses of Congress to sustain – an extraordinarily high hurdle, for good reason.</p>
<p>These mechanisms, however, ultimately depend on the willingness of Congress to accept something like a corporate board’s fiduciary and care responsibilities. Even without going through the slow process of impeachment, presidents can also be pressured to resign, in the same way a board insists that a CEO “voluntarily” leave. <a href="https://www.washingtonpost.com/wp-srv/national/longterm/watergate/articles/080974-3.htm">That’s what happened</a> to Richard Nixon in 1974 when impeachment and conviction became a virtual inevitability. </p>
<p>A last mechanism the U.S. has is something like the independent auditor. His name is Robert Mueller. And in my view, it’s the only institutional governance mechanism working – so long as Mueller is not summarily fired, as the <a href="https://www.nytimes.com/2018/04/10/us/politics/trump-sought-to-fire-mueller-in-december.html">president wishes</a>. </p>
<h2>The importance of rules</h2>
<p>I don’t want to suggest that public corporate governance is perfect. </p>
<p>Too often, the <a href="https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1009&context=fisch_2016">interests of private investors</a> are placed above the many other stakeholders whose communities and lives are affected by corporate decisions. Safeguards are too often evaded.</p>
<p>But my point is the rules are there, and they do often work. </p>
<p>And much is at stake. When the governance of a corporation goes off the rails, millions, perhaps even billions of dollars can be lost, jobs destroyed, retirement funds wiped out. When it concerns the governance of a country, particularly one with a nuclear arsenal, then the dangers are real and present.</p>
<p>
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<header></header>
<p><a href="http://aom.org/">Bert Spector is an Academy of Management Scholar</a></p>
<footer>The academy is a funding partner of The Conversation US.</footer>
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</p><img src="https://counter.theconversation.com/content/102834/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bert Spector is an Academy of Management scholar.</span></em></p>The allegations raised in a book on the Trump administration by Bob Woodward and an anonymous op-ed would be enough to get most CEOs fired.Bert Spector, Associate Professor of International Business and Strategy at the D'Amore-McKim School of Business, Northeastern UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/865712017-10-31T14:49:32Z2017-10-31T14:49:32ZCareRooms initiative is another assault on domestic labour<figure><img src="https://images.theconversation.com/files/192638/original/file-20171031-18738-1wcge17.jpg?ixlib=rb-1.1.0&rect=52%2C10%2C3466%2C1915&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/partial-view-woman-taking-care-sick-675391042?src=NbB2hpCr9zbXlXxz-ROhlw-1-38">LightField Studios/Shutterstock</a></span></figcaption></figure><p>A proposed scheme to tackle bed shortages <a href="https://www.theguardian.com/society/2017/oct/25/nhs-to-pilot-airbnb-type-scheme-for-patients-recovering-from-surgery">in British hospitals</a> has sparked a rash of criticism. This privately-run project, being piloted in Essex <a href="https://carerooms.com/">by the company CareRooms</a>, places patients who are recovering from surgery away from hospital and into the homes of members of the public.</p>
<p>CareRooms was quickly branded “Airbnb NHS” and lambasted by <a href="http://www.dailymail.co.uk/health/article-5020489/Carebnb-plans-offer-homeowners-1-000-month-scrapped.html">some in the media</a>, <a href="https://www.theguardian.com/commentisfree/2017/oct/27/carerooms-nhs-staff-beds-airbnb">medics</a> and <a href="http://www.huffingtonpost.co.uk/entry/airbnb-style-scheme-hospital-beds_uk_59f1a754e4b07d838d323cc9">politicians from across the spectrum</a>, for a lack of concern about patient safety. This is of crucial importance. What attracted less commentary, however, is that the scheme is also hugely exploitative, relying on the re-domestication of care to cheapen the labour of carers.</p>
<p>On the CareRooms website care-providers are described as “hosts” who rent out a spare room or annexe. CareRooms explicitly differentiates “hosts” (defined by their provision of space), from carers regulated by the <a href="http://www.cqc.org.uk/">Care Quality Commission</a> who will be on call to provide care in response to various automated alarms. Further examination, however, blurs this divide.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/192616/original/file-20171031-18689-ubohfi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/192616/original/file-20171031-18689-ubohfi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/192616/original/file-20171031-18689-ubohfi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/192616/original/file-20171031-18689-ubohfi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/192616/original/file-20171031-18689-ubohfi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/192616/original/file-20171031-18689-ubohfi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/192616/original/file-20171031-18689-ubohfi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/192616/original/file-20171031-18689-ubohfi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Caring for the carers.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/smiling-volunteer-spending-time-happy-elder-740531938?src=1DBowCDx0hkdtsLq8ZnfDg-1-10">Photographee.eu/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Labour relations</h2>
<p><a href="https://carerooms.com/help-support/">CareRooms claim</a> that all hosts will receive training and resources “for any scenarios that may arise”. Before being accepted, they will be tested on hygiene, food safety, social care law and mental capacity. Hosts are required to prepare and, presumably, clear away three meals a day, provide non-alcoholic refreshments, and engage in conversation. They are also expected to “meet and greet” as well as “discharge” patients, and most likely welcome visitors too. </p>
<p>In addition, there is the cleaning required before and during a stay, to say nothing of help with toileting. The CareRooms website says nothing about this, yet it seems unlikely that an external carer will arrive on the doorstep every time nature calls.</p>
<p>CareRooms presents hosting as “a perfect way to meet others from the area” and characterises the role as being “as simple as providing a cup of tea and some company”. Clearly though, being a host involves considerable work. Importantly, this work is likely to be required across most of the day (and night), even if only sporadically. The £50 room payment does not even cover seven hours at minimum wage.</p>
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<a href="https://images.theconversation.com/files/192640/original/file-20171031-18693-128qbm1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/192640/original/file-20171031-18693-128qbm1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/192640/original/file-20171031-18693-128qbm1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/192640/original/file-20171031-18693-128qbm1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/192640/original/file-20171031-18693-128qbm1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/192640/original/file-20171031-18693-128qbm1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/192640/original/file-20171031-18693-128qbm1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/192640/original/file-20171031-18693-128qbm1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Angelic Hosts?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/chrisinplymouth/3781549100/in/photolist-6LaqNq-9ynKoP-ibU3Gu-cvB7ML-aciRQL-bkSgKe-aDi7hu-9ZCcAn-dEb2yL-cieLub-d1KmDN-8o9hzc-pms3Nz-achF7T-aS33MP-bj3Nfc-aS343D-aZNVwa-9Cxm8Q-mSAAC3-2xtFnG-3huYpQ-aZNUr4-6xw6h2-4TDKMH-67zA4w-dDMJLo-dWCKzr-98FDDN-2zhd41-6udRcB-98YDQE-dDCfbp-do8TLz-eNVjT-dMPC7i-7zSLmu-4swcHX-3SAmp-aS342c-aS33Xp-mSyW2r-aS33UR-4MGKog-5z9UGX-d1KqtY-mSyPs6-3GqMg5-aS33Zn-9GDSR1">Chris/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span>
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<p>Care is expensive to provide and <a href="https://discoversociety.org/2015/01/03/crises-in-care-compassion-and-body-work/">difficult to make cheaper</a>. This is partly because of the unpredictability of the biological and social times when we need care. Put simply, to pay for care sufficient to cover the times that it might be needed requires that often carers are employed but not working. At other times there may still be too few carers for the tasks at hand (for instance at breakfast when everyone needs feeding). </p>
<p>Organising care in a capitalist labour market is tricky because labour is typically employed in time-blocks. CareRooms would circumvent this constraint by placing care work in a domestic setting. This obscures the labour involved and redesignates tasks as an extension of familial, and especially women’s, “natural” domestic labour.</p>
<h2>Non-workers</h2>
<p>Feminists have <a href="https://www.bl.uk/sisterhood/articles/the-domestic-division-of-labour">repeatedly drawn attention to</a> women’s unpaid domestic care work. It is invisible because it occurs in private spaces and, because <a href="https://theconversation.com/why-family-care-isnt-always-the-best-care-for-the-elderly-72808">it is naturalised</a> as a woman’s duty, the work is discounted. This also applies to paid work that occurs in domestic settings. Those who carry it out are categorised as non-workers, beyond the reach of minimum wage and other labour regulation. This can be seen among family carers, au pairs and foster carers.</p>
<p>Family carers are paid a <a href="https://www.gov.uk/carers-allowance">government allowance</a> of £62.70 a week to care for a family member in receipt of health-related benefits for at least 35 hours a week. This is £1.79 per hour for 35 hours of care. Carers working more than 35 hours (anyone providing overnight care) receive a significantly lower hourly rate. Family carers exemplify the ambiguity around domestic care. </p>
<p>The allowance recognises the opportunity costs of care, but the derisory amount and unspecified maximum hours underscore the assumption that family care provision, motivated by love, is limitless.</p>
<p>Au pairs, <a href="https://www.gov.uk/au-pairs-employment-law/au-pairs">the UK government</a> states, should be treated as a member of the family, and get “pocket money” of about £70-85 a week. In return, they are expected to work upwards of 25 hours, plus several evenings, per week, performing childcare, cleaning and cooking duties as well as helping with homework, and music or foreign language tutoring. Because they are deemed “family members”, not workers or employees, their work is unregulated. The designation “family-member” <a href="http://eprints.bbk.ac.uk/4593/1/4593.pdf">goes unscrutinised</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/192644/original/file-20171031-18725-cpjoqq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/192644/original/file-20171031-18725-cpjoqq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/192644/original/file-20171031-18725-cpjoqq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=406&fit=crop&dpr=1 600w, https://images.theconversation.com/files/192644/original/file-20171031-18725-cpjoqq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=406&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/192644/original/file-20171031-18725-cpjoqq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=406&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/192644/original/file-20171031-18725-cpjoqq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=510&fit=crop&dpr=1 754w, https://images.theconversation.com/files/192644/original/file-20171031-18725-cpjoqq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=510&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/192644/original/file-20171031-18725-cpjoqq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=510&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Scraping a domestic living.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/tutor-her-student-doing-homework-48406636?src=spnWt2O7mhZGoNELt0KRgg-1-44">Masterchief_Productions/Shutterstock</a></span>
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<p>Foster carers are paid better, but a recent survey found that the large majority earn <a href="http://www.marilynstowe.co.uk/2017/10/25/foster-carers-struggle-on-poverty-wages/">well below minimum wage</a> and some types of care goes unpaid (for example nights). Formally self-employed, foster carers now work for a single provider, but without employment rights, they cannot claim unfair dismissal if dropped. And, like other self-employed workers in the gig economy, foster carers get no holiday or sick pay. </p>
<p>Austerity and local council cuts have led to worsening conditions for foster carers, and prompted them to <a href="https://www.theguardian.com/society/2016/sep/20/foster-carers-fight-working-rights-trade-unions">organise and demand workers’ rights</a>. This has included unionisation, with the <a href="http://www.gmb.org.uk/newsroom/foster-carers-union">GMB</a> and <a href="https://iwgb.org.uk/foster-care-workers-branch/">IWGB</a> both establishing foster carer branches, and mounting <a href="http://www.bbc.co.uk/news/uk-41543651">legal challenges</a>.</p>
<h2>In the shadows</h2>
<p>These three examples highlight the ways that care performed in domestic settings is made invisible and, by formalising assumptions about family, devalued. In consequence workers performing domestic care work are denied rights, which in the case of foster carers they are now fighting to reclaim.</p>
<p>The language employed by CareRooms suggests that re-domestication is not accidental. Rather, the website seeks to frame hosts as a family-substitute, suggesting that the scheme is intended for people who are “medically fit for discharge but [have] no one to go home to”. The fantasy of familial or home care is evocative and appealing. </p>
<p>But if family becomes a way of enticing poorly-paid and out-of-sight workers to self-exploit, it is time to develop language and practices that more explicitly recognise, and compensate, domestic care work as work. Until that happens, we should remain sceptical of CareRooms, not just because it may provide inadequate and unsafe care, but also because its profitability depends on moving work and workers’ rights into the domestic shadows.</p><img src="https://counter.theconversation.com/content/86571/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rachel Cohen received funding from the ESRC as co-organiser of a seminar series on Body Work in Health and Social Care. </span></em></p>Patient safety grabbed the attention when plans were mooted to move post-op people out of hospital and into private homes. But the project also moves important work into the shadows.Rachel Lara Cohen, Senior Lecturer in Sociology, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/760702017-06-01T01:57:24Z2017-06-01T01:57:24ZPrivate defense companies are here to stay – what does that mean for national security?<p>Share prices of many military and intelligence contractors have risen sharply since President Donald Trump’s election. </p>
<p>Investors are betting that an increase in defense spending will provide a windfall for these firms. For instance, <a href="http://www.generaldynamics.com/our-business/combat-systems/land-systems">General Dynamics</a>, a large contractor that develops combat vehicles and weapons systems for the U.S. military, saw its stock price jump by more than <a href="https://www.google.com/finance?q=NYSE%3AGD&ei=ZcMtWYm4JIO0jAHxy6egDg">30 percent in the months after the election</a>. Likewise, Kratos Defense and Security Services, a smaller firm that builds <a href="http://www.kratosusd.com/capabilities/unmanned-tactical-systems">drones</a> for the U.S. Air Force, saw its shares soar <a href="https://www.google.com/finance?q=Kratos&ei=ZcMtWYm4JIO0jAHxy6egDg">more than 75 percent</a> between November 2016 and May 2017. </p>
<p>This trend may be short-lived. Congress still must decide whether <a href="https://www.nytimes.com/2017/05/22/us/politics/trump-budget-winners-losers.html?_r=0">Trump’s proposed 10 percent increase in defense spending</a> is practical given current budget constraints.</p>
<p>What is certain is that for-profit military and intelligence firms will remain an integral part of U.S. national defense. My <a href="http://www.tandfonline.com/doi/full/10.1080/09636412.2017.1243912">research</a> focuses on the changing nature of the private defense industry. Military contracting <a href="http://archive.defense.gov/news/newsarticle.aspx?id=67440">is still big business</a>, although media coverage of private military firms has diminished since the withdrawal of the U.S. from Iraq in 2011. Today, contractors’ work ranges from assisting in drone missions to analyzing signals intelligence to <a href="http://www.jobs.net/jobs/dyncorp/en-us/job/Afghanistan/Advisor-Embedded-Police/J3J6Y7686BZTPSFRY48/">training police forces</a> in fragile countries like Afghanistan.</p>
<p>Like it or not, government agencies responsible for national security are dependent on private defense firms. These companies are primarily responsible to shareholders rather than the American people. How can they be held accountable to the nation’s interests?</p>
<h1>New frontiers</h1>
<p>In recent years, private military companies have adapted to changing demands from U.S. defense agencies. During the wars in Iraq and Afghanistan, the U.S. military relied heavily on contractors to support counterinsurgency operations. However, high-profile incidents of alleged human rights abuses by the company CACI at <a href="https://www.washingtonpost.com/business/economy/us-appeals-court-reinstates-abu-ghraib-prison-abuse-case-against-caci/2016/10/21/e53c43a6-97b5-11e6-bc79-af1cd3d2984b_story.html?utm_term=.6e0a02269e7a">Abu Ghraib Prison</a> in Iraq and Blackwater at <a href="https://www.nytimes.com/2014/10/23/us/blackwater-verdict.html">Nisour Square</a>, Iraq brought to light the difficulty the American military faces monitoring private defense companies. </p>
<p>At the same time, Americans have since become averse to nation-building campaigns in <a href="https://www.thechicagocouncil.org/publication/americans-support-limited-military-action-syria-against-isis">failing states</a>. So, private defense firms have shifted away from supporting “boots on the ground.” Instead, they are increasingly assisting military and intelligence agencies with counterterrorism and cybersecurity.</p>
<p>While the American people generally want to avoid deploying troops to conflict zones, they still demand protection from terrorism. The Pentagon, CIA and other defense agencies receive assistance in these areas from private companies with expertise in drone warfare, special forces operations and analysis of electronic surveillance of potential terrorist threats. These traditionally were duties of <a href="https://academic.oup.com/ejil/article/19/5/1055/505530/We-Can-t-Spy-If-We-Can-t-Buy-The-Privatization-of">public employees</a>.</p>
<p>Cybersecurity is another area in which private military companies see <a href="https://www.washingtonpost.com/news/the-switch/wp/2015/09/29/raytheon-wins-1-billion-cybersecurity-contract-to-battle-attacks-on-u-s-agencies/?utm_term=.f3154e7c2d4d">increasing demand</a>. Information gleaned from hacking government agencies, world leaders and political campaigns can be used by rogue states like Russia and nonstate actors like WikiLeaks to harm American interests.</p>
<p>Governments and multinational corporations realize that protecting classified information and intellectual property is of paramount importance. They are willing to pay top dollar to private defense firms to keep their secrets safe.</p>
<h2>Serving the public interest?</h2>
<p>Most defense analysts now acknowledge that the question is not whether to privatize, but <a href="http://www.mitpressjournals.org/doi/abs/10.1162/DAED_a_00100?journalCode=daed#.WRJ6HxiZO1s">where to draw the line</a>. If the U.S. government is going to work extensively with contractors, it requires a more <a href="https://cybercemetery.unt.edu/archive/cwc/20110929213815/http://www.wartimecontracting.gov/">robust oversight system</a>. Government agencies and courts also need assurances they can hold defense firms accountable if they break the law overseas. </p>
<p>During the Iraq War, this was a point of <a href="http://www.tandfonline.com/doi/abs/10.1080/09636412.2010.480906">serious contention</a>. It was unclear what legal jurisdiction applied to employees of private defense firms. The uncertain legal status of contractors caused significant tension between the U.S. and the government of Iraq and hampered <a href="http://www.nytimes.com/2008/12/01/world/middleeast/01contractors.html?mtrref=undefined&gwh=04E8524B4347957ED094B882F7D70C09&gwt=pay">American counterinsurgency efforts</a>. </p>
<p>Here are three ways Congress could increase accountability for private defense firms as the industry becomes more enmeshed in national security.</p>
<p>First, Congress could create an independent regulatory agency to report on contractors’ performance. While major firms in the industry insist they can <a href="https://www.cambridge.org/core/journals/journal-of-public-policy/article/effectiveness-of-selfregulation-by-the-private-military-and-security-industry/4E7881E8C544004B3F6A8FB5310DD1EE">regulate themselves</a>, an independent oversight agency could more adequately assess how defense contractors perform. </p>
<p>Second, as things stand now, the U.S. government often overlooks bad behavior and renews contracts with companies that have <a href="https://www.nytimes.com/2015/02/05/opinion/will-anyone-pay-for-abu-ghraib.html?_r=0">less than stellar records</a>. Instead, the government could more severely penalize firms that do not fulfill the terms of their agreements.</p>
<p>Third, government employees often transition from public service into lucrative positions at <a href="https://www.washingtonpost.com/politics/pentagon-nominees-ties-to-private-firms-embody-revolving-door-culture-of-washington/2017/01/19/3524e8f4-dcf9-11e6-918c-99ede3c8cafa_story.html?utm_term=.3650925cd8bf">billion-dollar defense corporations</a>. Stricter rules to limit this “revolving door” would make government employees more willing to penalize firms.</p>
<p>Private defense contractors will likely be a major part of U.S. national defense for the foreseeable future. Diligent oversight and regulation of companies in this rapidly evolving industry, I believe, are necessary to ensure that these firms advance the public good of American security.</p><img src="https://counter.theconversation.com/content/76070/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Mahoney does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>For-profit corporations are deeply embedded in US national security infrastructure – and they’re not going anywhere.Charles Mahoney, Professor of Political Science, California State University, Long BeachLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/673732016-11-08T03:53:42Z2016-11-08T03:53:42ZEquity crowdfunding requires a rethink on company structure<p>The <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/8165.0Main+Features1Jun%202011%20to%20Jun%202015?OpenDocument">vast majority</a> of Australian companies are privately held. There are many advantages for this. Private companies face fewer regulations and lower requirements than public companies when it comes to reporting to shareholders, for example. </p>
<p>But new sources of funding are starting to blur the lines between public and private companies. As a result, we should consider introducing an intermediary form of corporation that sits between the two.</p>
<h2>The difference between public and private</h2>
<p>Private companies are not designed to raise funds from a large group of shareholders. In fact, <a href="http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s113.html">two of their key characteristics</a> are that they cannot raise capital from the public and they are limited to having 50 non-employee shareholders.</p>
<p>This is part of the reason why private companies face fewer regulations – they provide very little protection to shareholders. They are <a href="http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s250n.html">not required to hold an annual general meeting</a>, for instance, and <a href="http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s292.html">do not need to provide their shareholders</a> with financial statements or comment on the company’s performance. Further, a shareholder <a href="http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s1072g.html">might find it very difficult to sell their shares in a private company</a> as this may require not only finding a buyer but also getting the board of directors’ approval. </p>
<p>Historically, when a company required more funds than 50 non-employees could provide, they would convert into a public company. Counting on a wider base of investors and owners, public companies are more heavily regulated, addressing many of these concerns.</p>
<h2>In comes crowd equity funding</h2>
<p>A new form of funding has come on the scene – crowd equity funding (CEF). It allows companies to raise funds from a large range of investors through an online portal. Investors receive shares in the company in return for their investment. </p>
<p>CEF has the potential to bridge the gap between private and public: it enables companies to access funds from many investors without going through the traditional fundraising regulation. But the <a href="http://treasury.gov.au/%7E/media/Treasury/Consultations%20and%20Reviews/Consultations/2014/Crowd%20Sourced%20Equity%20Funding/Downloads/PDF/CSEF%20Discussion%20Paper.ashx">current framework</a>, with restrictions like the <a href="http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r5588">prohibition on private companies raising funds from the public</a>, <a href="http://www.camac.gov.au/camac/camac.nsf/0/3dd84175efbad69cca256b6c007fd4e8.html">creates a roadblock</a> to accessing this type of finance.</p>
<p>Recognising this, in 2015, the government <a href="http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r5588">introduced a bill</a> to enshrine CEF in legislation. The bill limited CEF to a select group of public unlisted companies. Ultimately the bill lapsed and a new bill is expected to be introduced this year.</p>
<p>Limiting CEF to public companies does not take into account the important role private companies play in our economy. So the <a href="http://www.treasury.gov.au/%7E/media/Treasury/Consultations%20and%20Reviews/Consultations/2015/Crowd-sourced%20equity%20funding/Key%20Documents/PDF/Crowd-sourced-equity-funding.ashx">government is also assessing</a> whether CEF should be introduced to these types of companies. </p>
<p>But simply extending CEFs to private companies may not be ideal either. </p>
<h2>Why we can’t just extend CEF to private companies</h2>
<p>If the introduction of CEF to private companies is accompanied by raising the ceiling for investors and introducing more accountability in the system, the issue of investor protection will be moot. However, this could mean the death of private companies as we know it. With increased regulation, the cost of running a private company will rise. This type of business may no longer meet the need of people who are currently running closely held companies – which form the bulk of private companies. </p>
<p>Further, there is a need to distinguish between two types of private companies – the one that may never be interested in accessing CEF and the one that may in the future. For instance, a private company may be a useful engine to set up new general, social and environmental enterprises as this type of company is cheap and cost effective to run. However, with the growth of such businesses, access to finance may be problematic and conversion to a public company may not be an ideal either. Something in between could be the solution. </p>
<h2>A new form of company</h2>
<p>Any consideration of CEF should be accompanied with discussion on how to promote small and medium enterprises, and whether to do so may require the establishment of a new form of company. One that allows entrepreneurs to access CEF when they outgrow a private company, while also providing some protection to investors. </p>
<p>Designing such a company form will ensure Australia does not fall behind the rest of the world, and will promote a different type of entrepreneurship.</p><img src="https://counter.theconversation.com/content/67373/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marina Nehme receives funding from Centre for International Finance and Regulation.</span></em></p>New sources of funding are posing a problem to the way we categorise companies.Marina Nehme, Senior Lecturer, Faculty of Law, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.