Category: Politics

Corporations, Morality, and the Bottom Line

Here’s a discussion I got into on /. today. This is the post I responded to.

quote:
they are legally required to put profits for their shareholders above all other considerations

No. You’re wrong. Why do so many people think this? They are responsible to their shareholders in that they cannot willfully or illegally lose their shareholders money. They do no have to forsake their values.

No, you’re naive. The basic naivete comes from your language, in fact. “They do not have to forsake their values.” Sure, they don’t. But there’s a lot of pressure to do so.

Do you really believe people think this because they are whacky? Take a look at this passage from an article from the Harvard Business School:

Generating corporate virtue

By now, the story of Malden Mills and its owner, Aaron Feuerstein, is so familiar that the company name has become a sort of shorthand for corporate benevolence. The tale briefly told: In 1995, a fire destroyed Malden Mills’ textile plant in Lawrence, an economically depressed town in northeastern Massachusetts. With an insurance settlement of close to $300 million in hand, Feuerstein could have, for example, moved operations to a country with a lower wage base, or he could have retired. Instead, he rebuilt in Lawrence and continued to pay his employees while the new plant was under construction.

“Why don’t more companies act that way?” is a common reaction when people first hear the story. It is much too simplistic to reply that Feuerstein is a better person than most. Whatever Feuerstein’s relative level of virtue, he had far fewer shareholders to answer to than the average CEO. Feuerstein’s only shareholders are himself and several members of his family, who presumably share his willingness to sacrifice profits for the sake of the employees’ wellbeing. (Feuerstein was perhaps too willing�Malden Mills filed for bankruptcy protection last November.) The typical CEO of a publicly held corporation, by contrast, is accountable to thousands of shareholders.

My purpose here is not to denigrate the share-owned corporation, which is a fundamental building block of democratic capitalism, but to acknowledge that its legal structure imposes certain priorities on its senior leaders. If they fail to maximize earnings for shareholders, managers risk removal by the equity holders to whom they report. Worse, failure to serve shareholders’ interests puts the corporation in jeopardy of being acquired by a stronger company or losing access to capital markets. In theory at least, self-interest and self-preservation ensure that no rational executive will engage in activities that clearly erode shareholder value.

To which he responded:

quote:
At no point did you refute that it is legal to do so, you just said that there are pressures.

Of course there are pressures to gain shareholder value! That’s blatantly obvious.

The act of going public means that you give up control over your company. At any moment when the shareholders think someone else can do a better job of making them money, they kick you out, along with your executive-size salary.

The bottom line is this: you can only be charitable and giving with your OWN MONEY. You can’t donate all the shareholder’s money to your pet cause without expecting them to get a new board.

So, if you want to be a charitable business, simply keep the business private, and don’t make an IPO. Make sure any investors are in agreement with your values. I am my business, and I occasionally give my money to the PostgreSQL project (and other projects to a lesser extent).

And I responded:

I know this thread is dead already, but I just had to respond to this absurdity.

The bottom line is this: you can only be charitable and giving with your OWN MONEY. You can’t donate all the shareholder’s money to your pet cause without expecting them to get a new board.

We are talking about a corporation being morally and socially responsible. That does not mean the corporation has to “donate shareholder money,” although from the sound of it, you hold the typical (and stupid) business mentality that you can just “throw money at things” to solve problems. What I and most people who worry about this stuff are talking about are the actions the corporation takes. Will the corporation’s manufacturing practice adversely affect the environment of the surrounding community? Will closing down a factory in a small town where the company was born, only in order to move to cheaper overseas markets and save some cash, ruin the economy of that town? Is the corporation treating its employees with dignity and respect?

I’m not saying CEO Joe Schmo has to donate his shareholder’s money to Make-a-Wish. I’m saying when he makes decisions, he has to think about things OTHER than the bottom line. And that, increasingly, isn’t the case. CEOs feel pressure from their shareholders due to the legal structure of corporations, which allows a group of shareholders to remove a CEO at the slightest performance dip (when earnings go flat). And a CEO has to worry so much about keeping his own job that he doesn’t let moral and social concerns enter into his corporate decision-making.

Yes, you’re really, really naive.

The Divine Right of Capital

Finally got to read the introduction to this book that I’ve had on my shelf for months. (Check it out Amazon.com.) Makes a very strong case for shareholder-controlled corporations, as they are structured now, being much more aristocratic than democratic. Combine this with Chomsky’s view (whose gist is, though we may have a democratic government, we have a purely fascist structure in our businesses, with top-down control, employees are just “human resources,” etc.), and you start to see why letting corporations run the show isn’t such a great idea.

By the way, if you haven’t, please, please, please see: The Corporation.

Socialism is not the abolition of property

If you look up the definition of socialism, like I recently did, it seems to be the same definition given for communism. Socialism is sometimes called the “intermediary stage to communism,” representing the stage in which workers take control of the means of production.

I was talking to my Dad, and explained to him that this is what annoyed me about all the active socialist groups (ISO/SEP) across the country. They all want violent overthrow, and the complete destruction of capitalism. They even want the abolition of property, and this sort of utopian future. But I don’t buy that. I don’t want to eliminate capitalism… I would just prefer a “fair capitalism,” where the government (and thus, the people) still has the power to regulate industry. Where corporations aren’t given the final word on all their decisions, where the people’s interest enters into things.

Wikipedia gives a better definition of socialism, with a lot of the history of the term, but I really don’t care about the terms. I just wish there was some movement that I could easily support that is simply calling for corporate accountability and industry regulation that is sensible and benefits the people at large.

Resignation is not the answer

I watched the election results stream in yesterday and this morning, and my first thought was the same as yours: this is America, like it or not. There is no hope. 1984 is approaching, we might as well resign ourselves to a fate as the mindless “proles.”

However, after seeing Ralph Nader’s energizing speech the night before the election, I came to some important realizations, and I have a different attitude about the years ahead, given this Bush victory. Read on…

There’s Kerry coming around the last bend!

Electoral-Vote.com is now predicting a Kerry victory, but by a “razor-thin” margin in many states.

Meanwhile, Robert Cringely claims it will be a comfortable victory for Kerry, given the unaccounted “P. Diddy Factor.”

Finally, Salon says that Bush has lost traction even with part of his base. David Talbot reports:

quote:
Another worrying sign for the Bush camp: Bush’s evangelical base is not as solid as it was in 2000. “Like other Americans, they are also concerned about health care, jobs and other issues. That’s probably why last week Bush said it was OK with him if the states allow civil unions. In other words, forget the evangelicals and concentrate on the soccer moms in the Midwest who are fairly tolerant of civil unions. Well, that’s politics for you.”

Flippety flop.

It’s gonna be a fun Tuesday!

The new Democratic Party, post-2004?

Olivia just tipped me off to watching Stanley Greenberg, author of “The Two Americas,” on C-SPAN2 BookTV. His final point was really powerful: that the democratic party’s new focus on the economy is pointing at a kernel of a much larger problem: the growing inequality between normal workers and the wealth of the owners of the corporations that employ them. He talked about how over the past three decades, income has barely increased for workers and costs have gone up by orders of magnitude. He talked about how people feel that they cannot even make economic progress, despite being hard workers. I’d write more about this, but I have to let it simmer: I think it’s a key to the arguments I’ve been developing over the past few months.

On the economic “benefits” of globalization

I don’t normally watch The West Wing, but I watched a couple of episodes last night with Olivia. One of them had as a subplot the concern that a tech company was moving 17,000 programmer jobs to India, and a union organization wanted answers from the administration. The initial tone of the episode seems to speak to the concern of the workers, but the “ending moral” is that you can’t please everyone, and that globalization is ultimately “bad in the short-term but good in the long-term.”

I’m not sure if that’s the viewpoint of Aaron Sorkin, or if he simply wanted that viewpoint to show up in his show. But by hearing people talk about globalization so casually, I came to a very vivid realization. When people say, “Yes, 17,000 jobs are lost here, but it’s still good for our economy,” we don’t even realize what that person means when he or she says, “our economy.” Everyone has this different concept of the economy, and what exactly it is. For example, if I were to ask a bunch of people, even bunch of economists, what the economy is, would I get the same answer from each of them? Probably not.

Now, if we go down to the individual level, asking one of those programmers whose jobs was offshored what his economy is like, he would probably respond that his economy is quite shitty. And if we went to a community like Silicon Valley, from where the jobs were offshored, most people would say that the people of Silicon Valley are experiencing a rough economy.

But who is actually benefiting from the offshored jobs? Some people say “the corporation benefits,” but that too is an abstraction. The corporation was comprised of those 17,000 jobs (and others), so how could it possibly benefit if those jobs are gone? Definitely it doesn’t seem the corporation benefited from the relocation of 17,000 skilled workers. Do other workers benefit from the relocation of those workers? Probably not, as it creates team fragmentation, lowers morale, etc. So who benefits? Who?

Shareholders.

When people say “the economy gets better in the long-term,” what they mean is that shares of stock for shareholders goes up over time, and the stock market, as a whole, goes up. And shareholders are nothing more then the a privileged class, an elite, of America. So why do we let our economic future (the economic future of the workers) be decided by their wants and needs of the already-privileged shareholders? Why should I accept that 17,000 American jobs lost is worth the 2% increase in share price? And why do we implicitly accept this in our use of language surrounding the “national economy”?

Truly absurd: Assault Weapons Ban Lifted

A few days ago, the assault weapons ban was lifted after its 10-year term set by President Clinton in 1994. The ban enjoys 71% support across the country, and is supported by many peace groups and even police chiefs and police organizations. Nonetheless, the congress, being controlled by Republicans, refused to scheduled a vote for renewal.

Now, I know some people say the ban didn’t achieve much because automatic weapons are still available. This site explains that quite clearly. But that doesn’t mean we should just forget about the ban. It means we should write a better one.

It’s true that criminals who want to use assault rifles to do bad things would find a way to get them anyway, but that’s only the organized, rich criminal. The kind of criminal I’m worried about is the kind who gets laid off from his job and realizes life isn’t worth living, so he goes and buys an AK-47, works into his office building and kills 30 people in 10 minutes.

Furthermore, for those among us who tout the second amendment, let’s remember a couple of things. First of all, that amendment was written with the intention that the civilians who owned weapons needed to do so because this placed a check on the government that said that the people might rise up and cause a revolution if the government became corrupt. Now, I may be making a generalization here, but I think most of the people who own assault weapons don’t want to engage in a popular uprising against this or any other American government. I find that most gun-owners tend to be very [faux] “patriotic”.

But my second point was that even if you wanted to rise up against the government, you couldn’t. Our founding fathers didn’t anticipate tanks, Apache helicopters, not to mention crowd control techniques like tear gas. Even if you could organize a small militia with M-16s and the whole nine, you would be squashed by an enormous military might.

I think it is noble to think that you have the right to overthrow your government, but I think the only way to do that nowadays is by shifting the popular sentiment so that even those in the military don’t want to protect government interests. And you can do that without assault weapons.

But the saddest thing is how little press I think this is getting. I hope Kerry makes it a campaign issue. And I hope Bush is stupid enough to let the ban sit there lifted, proving that he is in the pockets of big campaign contributors like the NRA.

Doing the journalist’s job for him

Well, I just watched the Bush speech. Definitely full of spin, but then again, which politician’s speech isn’t? But my problem isn’t really with the spin; I’m equipped to cut through it. What I’m worried about is the content of the speech. This is something journalists rarely talk about. Post-speech commentary from MSNBC was the same asslicking you’d expect from a delegate on the RNC floor. The “journalists” rated the speech’s performance, not its content.

If I wanted to read performance reviews, I’d go to the A&E section of my newspaper for the latest blockbusters. I don’t care whether George W. Bush was “stiff” when he delivered his speech, or whether he fumbled his lines. I don’t care whether it was eloquent, or whether it was impressive for someone who “let’s face it, is no Winston Churchill.” Yes, there are moments when oration matters. I do love the poetic nature of Shakespeare’s Saint Crispen’s Day speech in Henry V, and I do get a tingle down my spine when I read the line “…We few, we happy few, we band of brothers…”, but we are talking about a platform and set of policies for our country, not some morale-lifting speech to troops before they enter what seems to be a hopeless battle.

For more analysis of the speech, read on….