Unsustainable corporate profits

According to Global Witness, ‘excess profits’ are sudden and significant increases in a company’s financial returns that are due not to their own actions but to external events. The EU says profits count as ‘excess’ when they are more than 20% above the average return of the previous four years.

The 2022 annual profits of the five largest integrated private sector oil and gas companies – Chevron, ExxonMobil, Shell, BP and TotalEnergies – were $195 billion; up by almost 120% on 2021 and the highest level in the industry’s history. This means that these companies made $134 billion in excess profits.

Centrica, the company that owns British Gas, reports record profits for 2022. Operating profits of £3.3bn were recorded, up from £948m in 2021. This surpassed its previous highest ever yearly profit of £2.7bn in 2012.

In 1996, the thirty U.S. corporations whose stock prices comprise the basis of the Dow Jones Industrial Average averaged total returns to their shareholders of 28.2 percent for the year, a substantial increase from the five year average of 18.3 percent. Each such increase in annual returns to shareholders further lifts the floor under investor expectations and increases the pressure on top managers to maintain such returns in the future – by any means.