"The greatness and the genuine trait of your thought and writings lie on the fact that you positively and interestingly make use of philosophical thoughts and thoughtfulness in order to deeply and concretely cogitate about America's social issues. . . . This does not mean that your thought is reducible to your era: your thought, being inspired by issues characterizing your era . . . , overcomes your era and will still likely be up to date even after your era, for future generations." Bruno Valentin

Sunday, October 14, 2018

Steve Jobs: A Unique Societal and Organizational Visionary

Typically as a company transitions from an enterprising, creative new venture to a large organization to be managed, a staid CEO replaces a visionary founder. In the case of Steve Jobs at Apple, the very nature of the man’s vision was not only inherently at odds with the status-quo underpinning of a large organization with a budget, but also essential to the company’s business model. Hence, the company, including its shareholders, paid a price for years for jettisoning Jobs. The film, Jobs (2013), is centered on the distinctiveness of Jobs’ vision. Although the film also hints at why this distinctiveness is such that the company would (and did) lose as a large organization after making the typical founder-to-CEO transition.


The full essay is at "Jobs."

Friday, October 5, 2018

BP's Criminal Guilt in the Deepwater Horizon Oil Rig Disaster

More than two years after the worst oil disaster in U.S. history, BP agreed in 2012 “to accept criminal responsibility for the . . . disaster that killed 11 workers.” What does it mean for an association to “accept criminal responsibility”? The notion seems unwholesomely anthropomorphic, if not chimeric in nature. Taken even just practically, holding a corporation itself criminally responsible may not be make sense, even as a deterrent. I contend that the notion of criminality applies only to human beings, whereas civil charges are suitable for associations including corporations.


From a corporate perspective, criminality would of course be viewed in financial terms, ideally from the standpoint of the financial welfare of the stockholders. Accordingly, the “criminal responsibility” translates into $4.5 billion in “fines and restitution.” The figure includes nearly $1.3 billion in criminal fines. The settlement includes payments of $2.394 billion to the National Fish and Wildlife Foundation, $350 million to the National Academy of Sciences over five years, and $525 million to the Securities and Exchange Commission for having misled investors by lying to Congress. The fines relate to BP pleading guilty on 11 felony counts of misconduct or neglect of ships officers, one felony count of obstruction of Congress and one misdemeanor count each under the Migratory Bird Treaty Act and the Clean Water Act. The 11 counts related to the workers' deaths are under a provision of the Seaman's Manslaughter Act.
It is the outflow of cash, rather than “pleading guilty” to 11 felony counts of “seaman’s manslaughter” relating to the deaths of the 11 workers onboard the rig and one felony count of obstruction of Congress in providing false information on the rate that oil was gushing from the deep-water well, that “translates” directly into corporate terms. During the three months in which the well was gushing uncontrollably into the Gulf, the U.S. Government relied on BP for accurate information on the rate of output, and the company executives in turn were aware of this reliance and yet chose to lie—misleading investors as well as the U.S. Government. It could be argued that the fines are essentially the same as pleading guilty, but then such fines are generally perceived as qualitatively different than those in the civil cases against BP. It is this qualitative distinction that does not translate into a business calculus other than in terms of the negative financial impact in terms of reduced reputational capital from headlines such as, “Oil Giant to . . . Plead Guilty to Criminal Charges.” What really registers in the bewindowed albeit closed offices at BP is the “to Pay $4.5 Billion” part of the headline.
Fundamentally, a company’s management is geared in its very perspective to the interest of the company, and ideally its stockholders, rather than to the business environment, even when the company has created harm to the latter. How does a corporation even accept responsibility for something like manslaughter or lying? It is not as though an organization has a mind, much less a conscience. A business mindset is more like that of a shark—a feeding machine. It does not make sense to hold a shark responsible; it can only be kept out of Sydney’s swimming areas, for example, by nets.
Organizations are basically the people who run and operate them. “Company” is actually a plural noun, as in “a company of men.” Accordingly, the individuals who formulate, sign off on, and implement a policy, procedure or decision that results in harm to others (or the environment) can and should be held criminally responsible. Put another way, human beings rather than associations can feel punishment and thus can be subject to it.
Fortunately, besides the criminal settlement, “three former BP employees were charged by a federal grand jury with felonies in the incident, two of them for allegedly failing to carry out a critical safety test properly” and “to alert onshore engineers to problems with the drilling.” The two oil well supervisors were charged with 11 counts of “seaman’s manslaughter,” 11 counts of involuntary manslaughter and one violation of the Clean Water Act. The third, “David Rainey, BP’s former head of Gulf of Mexico exploration, who took a lead role in the disaster response, was charged with obstruction of Congress and making false statements to a law enforcement officer for allegedly lying about how much crude was spewing from the well.” Unless decided on his own to lie, others at BP should have been charged criminally too.
The fact that criminal charges were made against particular persons at BP is extremely important, both in itself (i.e., justice) and as a deterrent. Two years after the disaster, BP was still the largest oil producer in the Gulf of Mexico. Additionally, the oil giant was exploring for oil and gas in Texas, Oklahoma, Arkansas, Louisiana, and Ohio. The company would likely have to send executives to the Hill to testify in the future, and those executives should know that they could go to prison for deciding to lie or even “just following orders” to mislead Congress.
As for the criminal fines, they may actually be insufficient financially, given the wealth of the oil giant. The $4.5 billion is merely 17% of the company's profit in 2011 alone. To cover most of the cost of the criminal fines, the company simply sold its Texas City, Texas refinery—where fifteen people had been killed in an accident in 2005—for $2.5 billion. Meanwhile, the multinational company was able to maintain “strategically important” refineries in Washington, Ohio and Indiana in the U.S. alone. Although “leaner,” the well-publicized company might even benefit in terms of public relations in the future from being rid of the sordid refinery in Texas.
To be sure, the civil claims pending at the time could include up to $20 billion under the Clean Water Act if the company is held grossly negligent (i.e., “conscious and voluntary disregard”). Additionally, the company has spent about $14 billion on spill response and clean-up and more than $9 billion in claims to business and individuals. A related claim was up to $7.8 billion when BP announced the criminal settlement in late 2012. Also, Louisiana, Mississippi, and Florida were suing BP for civil fines. Clearly, these fines dwarf the monetary element of criminality. I contend that the other elements of criminality do not register at the company level.
In spite of having agreed to have BP plead guilty, the company’s executives did not seem particularly interested in admitting guilt. "We believe this resolution is in the best interest of BP and its shareholders," said Carl-Henric Svanberg, BP's Chairman. "It removes two significant legal risks and allows us to vigorously defend the company against the remaining civil claims and to contest allegations of gross negligence in those cases." This is hardly an acknowledgement of criminal guilt. Rather, it is a statement of how the settlement benefits the company! This is like boy sent to his room as a punishment bragging about being able to play video-games from his bed. Surely his mother hearing this would wonder whether she had in fact just punished her son or rewarded him for bad behavior.
From BP’s standpoint, the decision to plead guilty on criminal charges was done in the best interest of the shareholders by reducing legal risk. This is not to accept and acknowledge being blameworthy in a criminal sense. Accordingly, on the day in which the criminal settlement was announced, shares of BP actually rose 14 cents, ending the day at $40.30. Relatedly, the Journal reports that analysts “reacted positively to BP’s settlement of its criminal liability.” There is no sense in this reaction of how you or I might react to a person who “pleads guilty to criminal charges.” We would not exactly buy stock in that person. A company is different—it is a financial machine wherein a settlement that provides a ceiling on the cash to be spent translates as “limiting legal risk.”
In my view, the various civil fines are what must have registered at the company level at BP because of the sheer amount of cash involved. It can be asked from this case whether it even makes sense to hold a company criminally guilty. “Fighting crime” could be more focused against the persons involved—expanding what counts as who is “in the know” on a given policy or a decision that harms others—while the monetary aspect to a company is in civil crimes.
Alternatively, if a corporation truly is to be held criminally guilty in a given country, then it would seem to me that “going to prison” would mean that the company could not do business inside or even with that country or its businesses during the length of its sentence. Lest it be answered that an oil giant would hardly agree to a settlement under those terms, I answer that criminals don’t necessarily agree to plead guilty and there is, after all, the alternative of a criminal trial and verdict. A company being found guilty rather than agreeing to plead guilty deprives it of its share of control while still implying the ethical obligation to admit rather than deny the guilt implied in the verdict. In short, either being criminally guilty should mean something besides reducing legal risk (i.e., something bad ) or concept should not apply at all—to companies, that is.

Sources:

Michael Kunzelman, “BP Oil Spill Settlement Announced,” The Huffington Post, November 15, 2012.
Tom Fowler, “BP Slapped With Record Fine,” The Wall Street Journal, November 16, 2012.
Angel Gonzalez and Daniel Gilbert, “Accident Fails to Dent British Firm’s Ambitions in U.S.,” The Wall Street Journal, November 16, 2012.



Connecting the Dots: Zuckerberg's Facebook Stock

Why did Mark Zuckerberg unload $2.3 billion of his Facebook stock? The complete answer likely involves more than meets the eye, at least relative to what business reporters and editors had to say publicly in 2013. What was not said is itself a story worth publishing. Beyond Zuckerberg’s stratagem, what the media didn't say might be more significant than what made it through the filters.
Part of the answer concerning Zuckerberg’s sell-off involves his need for cash at the time to pay taxes that would be due from his exercising an option to purchase 60 million Class B shares in 2013. This move likely implies a belief that Facebook stock would not go much higher. Had Zuckerberg strongly believed at the time that Facebook was yet to cash in on advertising revenue beyond that which the market had already factored into the company’s stock price, the CEO would not have exercised the options in expectation of a wider spread. Even with the taxes coming due, the billionaire could probably have found an alternative way to come up with the cash. 
Like a deer frozen in an oncoming car’s headlights, the media did not analyze Zuckerberg’s motives beyond his public statements. Instead, the herd animals let themselves be led along, prancing in the tracks of positive correlation, which is does not in itself connote causation. That two things tend to occur together does not necessarily mean that one caused the other to act some way. For instance, we see umbrellas on rainy days. This does not mean that umbrellas cause rain, or that rain rather than manufacturing causes umbrellas. To assume causation from two things tending to occur at the same time is to commit what David Hume calls the naturalistic fallacy. 
So the media’s report that Zuckerberg’s stock sale and exercise came as the CEO was donating $1 billion worth of shares to the Silicon Valley Community Foundation to “boost his philanthropic efforts in education,” and Facebook was selling 27 million shares to raise an expected $1.46 billion for general purposes all count only as positive correlation; causation cannot be assumed.[1] In other words, we cannot conclude that Zuckerberg decided to sell off a chunk of his stock and exercise an option because he had decided to donate some stock and Facebook was raising more capital. In other words, the additional information conveniently provided does not get us any closer to a full answer. Worse still, Zuckerberg and his PR staff might have been throwing the media a tantalizing, diverting bone. This would have been in keeping with claims that Facebook's management was unethical.
One reporter took the bait, writing that with cash and marketable securities of $9.3 billion as of September 30, 2013, Facebook may not have needed another $1.46 billion.[2] Off reporter’s radar screen was the possibility that Zuckerberg had designed his philanthropy and the company’s additional stock offering as luring camouflage that would use even criticism of his company to keep the eye off his own trades and especially what they imply about his view of the company’s future. That shares of Facebook dropped only 1% to $55.05 in trading on the news suggests that investors were swallowing what Zuckerberg and the media were serving as dessert.
What of the market insiders? Were they also biting? As John Shinal puts it, “More important, insiders have detailed knowledge of a public company’s near-term prospects and thus are in a better position to know when to sell.”[3] I suspect that “people in the know” may have connected the dots. Two months earlier, a poll revealed that as the most important social media site for teenagers, Facebook fell from 42% in the autumn of 2012 to 23% a year later.[4] Can we suppose this poll somehow missed Zuckerberg’s attention? The media certainly did not connect the dots.
The theory behind my analysis is not financial; rather, I consider Mintzberg’s theory of the organizational life-cycle to be more revealing in this particular case. The theory suggests that just as empires rise and fall, so too do companies. Once past their peak, a “hardening of the arteries” sets in.
The organizational lifecycle. When Zuckerberg decided to sell a block of shares and exercise options, he already had a picture of Facebook already on the downward slope without much chance of revitalization. Image Source: www.sourcingideas.blogspot.com
The aging (i.e., a decreasing willingness or ability to adapt to a changing environment, and increasing dead weight internally) can be delayed as the downward slope bides its time; but like entropy as a final destination, the end is inevitable for humans and our organizational artifices. I suspect that Zuckerberg had come to view his company as past its prime, given the leading indicator shown in the poll. If I am right, the game has already changed to keeping the illusion alive long enough for the Facebook insiders to get out under the black shimmering cover of the Styx.


Sources:

1. Scott Martin, “Zuckerberg’s in Mood to Sell,” USA Today, December 20, 2013; John Shinal, “Facebook Shares May Underperform,” USA Today, December 20, 2013.
2. John Shinal, “Facebook Shares May Underperform,” USA Today, December 20, 2013.
3.Ibid.
4. Bianca Bosker, “Facebook’s Rapidly Declining Popularity with Teens in 1 Chart,” The Huffington Post, October 23, 2013.

Friday, September 28, 2018

Off-Shore Drilling off Virginia’s Coast: The Stakeholder Framework Applied

By the early 1990’s, the U.S. had banned drilling off the Atlantic coast. In the wake of BP’s deep-water-drilling disaster in the Gulf of Mexico in 2010, President Obama cancelled his go-ahead of drilling leases off Virginia’s shore. A few years later, Doug Domenech, the Secretary of Natural Resources in Virginia, and that republic’s head of state, Bob McDonnell, teamed up with Virginia’s two delegates in the U.S. Senate to “put Virginia’s coast on the energy map through an act of Congress.” Domenech said, “I personally believe that the East Coast of the U.S. does have the ability to be the prolific economic basin.” The Bureau of Ocean Energy Management estimated based on two-dimensional seismic surveys that 3.3 billion barrels of recoverable oil exist under the Atlantic’s outer continental shelf and 31.1 trillion cubic feet, or 886.3 million cubic meters, of natural gas. However, the executive arm of the U.S. Government alone is more than that bureau. Moreover, lest this conflict over drilling be viewed as primarily between Virginia and the U.S. Government, it should be noted that the East Coast is not exclusive to Virginia.
Although the dispute would seem to be based on federalism, the opposing interests involved were really those of seven oil companies, including Global Geo Services in Texas, up against the U.S. Navy in Norfolk and some endangered whales fervently represented by some environmental groups. The oil companies may even have been behind Virginia’s role. “The energy industry, eager to find out how much oil and natural gas exists under the Atlantic sea floor,” was “pushing the [Obama] administration to allow seismic companies to survey the area.” Strangely omitting the matter of his company’s profit, a spokesperson for Exxon Mobil said, “With the right policies, development of those resources can provide substantial new energy supplies to power our economy while supporting millions of new jobs.” Even though Virginia was “a vocal supporter of drilling,” hoping it “could become the gateway for Atlantic production,” the oil companies were likely in the driver’s seat in pushing the Obama administration to allow seismic tests at the very least. In other words, the question of federal encroachment on Virginia’s vested or residual sovereignty is not particularly salient in the dispute. Rather than being centered on conflicting interests between a state and a federal union, the question of allowing drilling leases off the east coast of the United States pitted big business against the U.S. military and environmental groups—plus a federal president doubtlessly determined that something like the BP explosion in the Gulf not be repeated, at least under his watch.
Accordingly, the stakeholder framework used by business is a closer fit to this case study than is federalism. This does not necessarily open the flood-gate to “shared decision-making,” even as particular stakeholders are identified in the process. Pointing to one major stakeholder, the New York Times observed, “Virginia is home to Naval Station Norfolk, the world’s largest naval base, with 75 ships and 134 aircraft. A February 2010 Defense Department report said oil drilling in the area off Virginia that had been designated for leasing would interfere with military operations.” The U.S. military is thus a stakeholder. Also, “(a)dvocates for marine mammals” wrote “thousands of letters and testified at public hearings, arguing that seismic surveys of the outer continental shelf would hurt endangered whales.” A major oil gusher obviously would not do the animals any good either. Therefore, environmentalists constitute still another stakeholder.
To get at the societal relations between the stakeholders, the stakeholder framework from strategic management must be modified structurally to remove the focal firm at the hub to occupying instead one of the spokes. Concerning societal problems, a web-like framework wherein several entities, including corporations, governments, interest groups, the military, and even whales, is more fitting than the stakeholder model that has a firm in the center. Next, I discuss the stakeholder concept after which I relate the stakeholder framework used in societal leadership to the stakeholder framework in strategic management. Lastly, I apply the resulting model, which can be regarded as one of societal and strategic leadership, to the case study of off-shore drilling.
Stakeholder entities are those which can either materially affect, or would be affected by, the U.S. Government granting of drilling leases off the Atlantic coast. This definition is not perfect, as it could invite a seemingly endless list of groups that are indirectly affected or could have at least some impact on the leases. Adding “directly” to the definition would exclude groups that are affected greatly, albeit indirectly. Perhaps it is advisable to add to the definition that a stakeholder is an entity of significant importance to the decision as well as the decision-maker using the framework. Although most advocates of the stakeholder framework who come from the standpoint of corporate social responsibility assume (or prescribe) that consensus or a right of co-decision is implied in the framework or even the very notion of stakeholder as if having a stake in something includes a sort of power-sharing right, the model itself implies no such prescriptions and could therefore be used by a person or group that has exclusive decision-making authority on the problem.


Respecting the integrity (i.e., valid claims) of both frameworks requires integrity, or self-discipline.  (Source: Skip Worden) 


The web-like adaption of the stakeholder framework comes from shifting the “unit of analysis” (i.e., scale) from that of a firm to the societal level. Whereas an oil company would use the “hub and spokes” structure, a government official, being oriented to a societal level (e.g., Virginia, or the U.S.), would want to view the players arranged as they are in society (i.e., without a focal organization at the “hub”) to get a sense of the political forces and interests involved and how they interact as well as how they would interact under alternative decisions. At the same time, the government official would want to keep an eye of his own interests, as well as that of the government of which he is a part. For this purpose, the “hub and spoke” structure works well, with the government at the “hub.”
Strategic leadership attends to the interests of the decision maker’s organization (or organizations where decision-making is shared) while also providing a view of the societal interplay of the contending interests without the distortions of one’s own position being “front and center.” In other words, both frameworks should be used where strategic leadership has a societal component. This can apply not only to governments. A CEO, for instance, may find that taking a societal rather than firm-centric perspective—bracketing it off from, while relating it to, the firm’s strategic “hub” interests—can result in a balancing of societal credibility, a long-term intangible asset, with more immediately-pressing strategic interests. While not relevant to every decision, this “dualistic” approach, depicted structurally in my diagram below, is most valuable where a decision involves a problem that is salient at the societal level. 
In the off-shore oil-lease decision, the White House or a member of Congress could use the “societal leadership” framework to identify more stakeholders and assess how they relate to each other politically (the government being included among them, but merely as one, rather than being focal). Ideally, a vision of the society itself, improved in a way touching on the dispute, can come out of this “non-distorted” perspective. Abstractly speaking, a structural framework is merely the basic contours of a perspective. A perspective that reflects society in its own terms is consistent with, and perhaps can even trigger, a societal vision of the sort that is in visionary leadership. 
A government official oriented exclusively to a societal vision that is “undistorted” by his or her own political interests and those of the government risks not being around long enough to “preach the vision.” Strategic interests must also be considered. Hence, the official(s) would want to use the traditional “hub and spokes” stakeholder framework.  In assessing how each stakeholder can affect or be affected by the government (and the official) politically, the self-protective and aggrandizing instincts of the decision-maker kick in even at the expense of a societal vision. In this regard, stakeholder management in government is actually a way of systematizing a political calculation akin to a position paper that lists the pros and cons on a particular piece of legislation, associating particular stakeholders to the various arguments for and against the legislation. Although the political relationships between the stakeholders can be considered, the primary emphasis here is on the bilateral relationships of power where the official or government is on one end—hence “the hub.”
After taking both perspectives—societal and strategic—the decision-maker optimizes the approach by weighing the importance of the societal vision (as well as the undistorted political relationships) against strategic imperatives of the official and/or the government. The vision is not merely societal implications of a government’s or corporation’s strategic interests. Rather, societal leadership is based in society’s own terms, and is thus not merely an implication or aspect of a firm- or government-centric perspective. Which level is given more weight by the government official or corporate executive can be expected to differ from decision to decision. Problems have different degrees of importance at the societal level. Additionally, a government’s or firm’s need for reputational capital or societal credibility relative to satisfying strategic interests can change both temporally and in terms of the matter under consideration. In short, the two frameworks can be managed such that both societal and strategic leadership are given their due—without viewing the former as a mere implication or aspect of the latter. Serving as a societal leader and tending after one’s own strategic interests are both legitimate; moreover, they can be managed such that an overall optimality can be achieved with respect to reputational capital and power or profit.
In the case of the off-shore drilling leases in the Atlantic off the U.S. east coast, including but not limited to Virginia, the White House could use the stakeholder frameworks as a basis to craft a policy that both improves society (even beyond “the sum of the parts”) and protects and perhaps even enhances the White House’s political power.
For instance, the U.S. Navy indicated it would allow drilling on a case-by-case basis. The White House could use this position as leverage to gain political power with the oil companies by accommodating them (and Virginia’s government officials) without compromising influence with the military chiefs, the cooperation of whom the White House would need to implement military policy. The case-by-case basis would take some of the wind out of the oil industry’s lobby and Virginia’s delegation pushing on Capitol Hill for legislation to allow unfettered drilling. Societally speaking, such drilling would introduce too much risk of catastrophe, including to the whales, and could make the U.S. less inclined to shift to cleaner sources of energy. At the other extreme, forbidding drilling altogether would work against the U.S. achieving less reliance on foreign oil-producing governments. A societal vision that represents an improvement for the society as a whole would thus be more in keeping with a case-by-case method to be decided by the military or a regulatory agency depending on the area at sea at issue.
Lest it be observed that I gave the environmental groups relatively little consideration, the political calculation of a second-term Democrat in the White House might play for more influence outside of his base instead of placating groups already in the fold. Here we can see a leaning on the strategic framework perhaps at the expense of that of societal leadership. Such a weighing has been implicit, however, throughout this example of the analysis. The resulting decision, while not shared, is apt to be hybrid of sorts that reflects at least some influence from each framework—that is, of societal and strategic leadership.


Sources:
Alison Fitzgerald, “Virginia Tries to Circumvent Obama to Allow Energy Drilling,” The New York Times, November 14, 2012.
Tennille Tracy, “Oil Industry Renews Push For Drilling in the Atlantic,” The Wall Street Journal, November 20, 2012.
Skip Worden, “The Role of Integrity as a Mediator in Strategic Leadership: A Recipe for Reputational Capital,” Journal of Business Ethics, 46, no.1 (2003): 31-44.

Sunday, September 9, 2018

Greed Eclipsing Ethical Awareness

Lest it commonly be assumed that greed facilitates or results in unethical policies out of conscious choice, I submit that a focus on maximizing revenue can eclipse even the recognition of a policy being unethical. To the extent that this is so, correcting for unethical policies in business (and government) is more difficult that typically thought. I have in mind as a case in point the policies of bars regarding karaoke singing. 
While some bars sport a first come, first served method whereby singers sign onto a list without having to worry about newcomers "butting in line" (i.e., retroactively being inserted into the list rather than at its end), other bars--and I suspect most--put ANY newcomers wanting to sing BEFORE most of signers already on the list. The reason for the latter, sordid policy is because managers believe that people will spend more if they get to sing as close as possible to the time when they arrive. The managers dismiss, thereby, the angst of the existing karaoke customers who must wait even over an hour to sing a second song because they are perpetually pushed back as newcomers are inserted before them. In the jargon of karaoke, the next round is pushed back as the current round is stretched out. Even the singers at the end of the current round are pushed back! 
I submit that an excessive focus on profit keeps the bar managers at issue from even recognizing that the squalid policy is unethical. Such managers are so focused on the impact on revenue from the newcomers (i.e., customers entering the bar) that the unfairness done to the other singing customers is not even recognized as such. Greed can have such mass that space itself is bent such that associated unfairness is no longer observable. 

Tuesday, September 4, 2018

Nike Takes a Controversial Stand on NFL-Player Protests: A Foray into Unnecessary Risk


“Nike became Nike because it was built on the idea of rebellion,” Jemele Hill, a sports journalist wrote. “This is the same company that dealt w/ the NBA banning Air Jordans. They made [Michael] Jordan the face of the company at a time when black men were considered to be a huge risk as pitch men.”[1] Just days before the 2018-2019 NFL football season got underway, Nike threw “its weight behind one of the most polarizing figures in football, and America: former San Francisco 49ers quarterback Colin Kaepernick.”[2] He had been a leader in the black players’ movement to protest, by kneeling during the national anthem, the recurring abuse of power by police. The element of financial risk in Nike’s decision to include Kaepernick in an advertising campaign brings up the question: should businesses take sides on political issues—particularly, on contentious ones?
The matter of race at the time of Nike’s announcement in 2018 can be likened to a hot potato. In fact, the issue pertaining to Black Americans was sizzling, especially in the Arizona heat. On the Labor Day weekend, I witnessed two racial fights in Phoenix. One, on bus on the West side, began as a young Black mother of two thought a Caucasian had used the n-word; in fact, the man had stated that it is racist to permit Black-only use of the word. The substance of his assertion was borne out as the woman stirred up three Black men in the back of the bus, who because verbally abusive and threatening to the Caucasian man. As a bystander, I felt very uncomfortable. Even so, the driver ignored the aggressiveness and kept driving—that is, until the Black woman accused him of being a racist for not having thrown the accused “N-word” man off the bus. The driver pulled over and called the police, who removed that man from the bus and yet allowed the verbally aggressive passengers to remain. Not even the Caucasian driver had them removed, in spite of the fact that the Black mother had shouted “You’re a racist!” at him! The result was that the threatening and verbally abusive passengers felt emboldened, and thus likely to pounce again.
The very next day, in fact, on the city’s light rail, a Black man called a Hispanic man the N-word. That man objected, insisting that he was not Black. “Don’t call me that!” he insisted. Even though he was correct, several Black passengers pounced, as if they were justified. To be verbally and physically aggressive is two degrees of separation from apologizing. No security was on that train, and the driver did not hear the noise. Fortunately, a key person got off just before the fight would likely have gone to blows. Yet even so, that the ganging up on the offended man could go on effectively emboldened the activity. Hence I could predict there would be more of it. This was something new in American society, I thought after the second incident. I had witnessed many Black people under 40 regularly ignoring a myriad of local laws; I wondered if that sense of entitlement was then grounding a herd-like aggression that paid little heed to being morally justified (i.e., unlike the civil rights movement). One effect, I surmised at the time, was that the race would become increasingly avoided in big cities. I do not mean to suggest that this phenomenon can or should be generalized to an entire race—that would be racist. Yet it is entirely reasonable to instinctively avoid potentially threatening situations. Hence I took the decision to avoid certain bus routes in Phoenix. With so much meanness among strangers in that city, I wanted to be able to avoid that city itself, for on top of the incivility is a police-state that does not comprehend the concept of excessiveness, or “over-kill”-such as in police wearing bullet-proof vests regularly patrolling down the aisles of several Fry’s grocery stores. Just a week before the race fights described above, I heard a report of police having beaten up an unarmed Black man in Mesa. I suppose this could be looked at as “what goes around comes around” stemming from the sordid lawless and aggressive/racist mentalities I witnessed on public transportation, or as the indirect (and thus inappropriate) cause of the herd-aggression on the bus and rail.
In the context of unresolved racial issues centered around the Black race in America, Nike was indeed taking a financial risk in taking sides, in effect, on the NFL players’ protest against police brutality. The company could count on the supporters of the protests and even the gray area wherein both the Black aggression/racism/lawlessness and the police abuse of power are eschewed. The question was how far the “defend the flag” supporters and Caucasian racists would go in opposing the company. Why not stay out of controversial political issues if that means not risking any ideological group? Why not stick to the knitting? Surely large businesses have enough to deal with in being large organizations, and a given product or product-line always stands in need of improvement. To divert from these tasks and go so far as to risk the loss of part of a customer base without the approval of stockholders strikes me as an impious, or presumptuous, managerial move.


1. Nathaniel Meyersohn, “Nike Takes Sides, Tapping Colin Kaepernick for New ‘Just Do It’ Ad,” CNN Money, September 4, 2018 (accessed same day).
2. Ibid.

Thursday, May 31, 2018

Google Executives Evaded Jail Time in Brazil: Is Business Too Powerful?

In late September 2012, the Brazilian state police detained the head of Google’s operations in the state after the company’s management failed to act on an electoral judge’s order to remove videos from its YouTube site criticizing a candidate in a rural county election. Separately, a judge ordered Google to remove a religiously-offensive video, which had sparked riots in the Middle East, within ten days or face fines. Google’s lawyers claim that the company is not responsible for what users upload. Earlier in the year, Brazil’s government threatened the head of Chevron’s operations there with arrest and passport-confiscation after a small leak occurred in the company.

Brazil, the largest South American state.   (World Atlas) 
The Wall Street Journal goes on to note the opinion of legal analysts that no executive at Google or Chevron was likely to “set foot in jail.” Brazil’s appeals process is long, and companies like Google and Chevron have deep pockets for legal defense. Consequently, even business practitioners convicted of major white-collar crimes are rarely, if ever, jailed in Brazil. Even so, the threats could thwart the South American state from being able to attract foreign direct investment. In other words, competition for foreign companies gives governments an incentive to look the other way in enforcing state law. Put another way, the lowest common denominator in terms of holding corporations accountable on the constraint of law and order could be one of the consequences of the spread of capitalism around the world. No public official wants to risk turning a potential “job creator” away.
Especially with the separation of ownership and control in the modern corporation, managerial accountability is crucial to ensuring that corporations abide by judicial orders. In many cases, senior managers can get away with making corporate-policy decisions that essentially ignore the constraints manifesting as judicial orders because deep corporate pockets can pay any resulting fines. Senior executives can be rather “free-wheeling” on corporate policies because the officials themselves—as citizens—are not subject to fines or imprisonment.
Corporations are not citizens; rather, the associations are creatures of the state created for particular purposes. Therefore, it can be said that the citizens operating the associations can and indeed should be held criminally liable for any “corporate” wrong-doing. Put another way, the actual decision-makers should be held accountable criminally for any decisions that violate a law or a judicial order. Otherwise, “corporations” can evade the law while their managers have little incentive to treat it as a constraint on profit-seeking.
Corporations do not act apart from the human beings within. An association just is its members. The people responsible for a “corporate” decision that violates the law can at least in many cases be identified, even if as scratched initials on the margins of a policy proposal. In fact, the police could charge a corporate official whose role the offending policy falls under even if that official had been negligent in not having kept up on the decision made by his or her subordinates. So coverage of responsibility is something that can be applied to particular people within the management of a company. Such coverage, if resulting in real jail time, would doubtless get managers’ attention rather quickly, as opposed to merely fining a company’s treasury. Unfortunately, Brazilian officials had a disincentive to implement such coverage with consequences with teeth, due to the countering pressure to attract businesses rather than repel their decision-makers.
Lest it be thought that creating an international body with the power to imprison executives of MNCs for crimes against an international code, the problem of how to enforce Brazil’s law on an international organization (e.g., Google) would go unanswered. One “consensus” global code would not touch on the regional and local specificities in criminal law. That people in Brazil were offended by a video does not mean that a global consensus would necessarily emerge in favor of criminalizing the video. For one thing, some governments support free speech even on opinions that are offensive to a majority.
The problem can be said to be that of cultural particularity vs. economic globalization. Both are viable and thus must be recognized. Multinational corporations must legally at least be multi-domestic in responding to cultural-legal particulars even while being the instruments of efficient international competition. Both values are legitimate, and yet they are in conflict at least in terms of the enforcement of local law. Statesmanship on behalf of such law even at the risk of losing a potential foreign business investing in local jobs is unfortunately all too rare, given the countervailing greed involved in attracting suitors away from other potential hosts.
All too often, leadership is gloss for greed rather than based on standards and principle. Put another way, the “principle” of efficient comparative advantage is often used by self-promoting governments as a means of obfuscating the real selling-out of the country’s own laws, which in turn ideally reflect moral values that are held by society. The question is perhaps whether governance structures geared to real accountability for business practitioners can be designed to counter the hegemony of greed over principled leadership. The political influence of the practitioners and their respective corporate treasuries over the governance itself—the creature coming to dominate its Creator—compounds the difficulty and suggests that it is no accident that corporate executives rarely see jail time.

Source:

Jeff Fick and John Lyons, “Google’s Brazil ChiefDetained; Court Bans Anti-Islam Video,” The Wall Street Journal, September 27, 2012.