McDonalds and Income Inequality: The Role of Opportunity

In his text, Capital in the Twenty-First Century, Thomas Piketty claims that economic inequality increases societally when the rate of return on capital exceeds the growth rate in national income or GNP. Rather than being an aberration, this condition tends to be the case, the economist contends. To be sure, expanding opportunity can mitigate the increasing inequality, but the “floorboard” is slanted and thus is bound to favor capital over labor. Whereas Marx thought the tendency is unlimited in extent, Piketty argues that at some point the inequality of wealth will stop worsening. This idea seems like Einstein’s thesis that nothing can go faster than the speed of light.  In the light of Piketty’s theory, we can perhaps read more into Don Thompson’s response as workers were protesting the company’s shareholder meeting on May 22, 2014. In short, the CEO illustrates not only a preference for capital over labor in line with ROI>income-increase, but also the weakness in increased opportunity as a mitigating factor.

Thomas Piketty, a European economist specializing on inequality 

(Image Source: The Guardian)

With 800 protesters outside vocalizing their $15-per-hour proposal (“demand” is too strong, and, frankly, rather presumptuous), Thompson told the shareholders, “We respect the fact that they want to challenge us relative to wages.”[1] This rather odd statement essentially relativizes the pressure as “challenging.” In other words, the language is euphemistic. Similarly, it could be said that the CEO is challenged by the English language. Consider, for example, “relative to wages.” How about: “We respect the fact that our hard-working workers want a raise.” Instead, Thompson tried to make the issue about opportunity, as if that effectively counters the inequality. Again being challenged by English, the native speaker told stockholders, “We pay fair and competitive wages and we provide opportunity, and we provide job opportunities and training for those entering the workforce.”[2] McDonalds provides opportunity and job opportunities. How much is Thompson’s total annual compensation?

Even if opening the labor-force up were a sufficient justification for paying $7.25 an hour, only one-third of the company’s non-supervisory employees were on their first job.[3] As one of the protesting workers put it, “McDonalds can keep on saying that we are teenagers, but saying it over and over again doesn’t make it true.”[4] The patina of rhetoric is a rather pallid recipe for reputational capital, particularly if the words run up against the brick wall of actual circumstance. That worker had been working at a McDonald’s restaurant for 10 years at $7.25 per hour. The matter of opportunity was exogenous to her case. Ironically, expanding opportunity could actually be expected to put downward pressure on her wage, or at least keep it from increasing even with experience. That is, even a real push for greater opportunity in terms of opening up the job-force to new aspirants could increase the economic inequality between the corporate managers at the headquarters and the workers in the restaurants.

Put in terms of Piketty’s theory, might it be that greater opportunity might increase the economic inequality in some unforeseen ways? At the very least, Thompson’s attempted pivot to opportunity suggests that it may actually be in line with the interests of capital over labor. The fact that an employee had been kept at $7.25 for ten years even as the company enabled teenagers to enter the workforce hints of the underlying existence of a slanted relationship between capital and labor wherein the rate of return can be expected to exceed the rate of increase in income generally and especially at the non-supervisory levels. Leveling the playing field may be more difficult than Piketty supposes.

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[1] Bruce Horovitz, “McDonalds Plays Offense on Wages,” USA Today, May 23, 2014.

[2] Ibid.

[3] Ibid.

[4] Ibid.

Google in the E.U. and U.S: Privacy Rights and Obligations

The European Court of Justice, the E.U. Supreme Court, ruled on May 13, 2014 that Google must defer to the right of users to have links about themselves deleted. Google’s management had sought to obviate any obligation to act on such requests. The New York Times points out that the decision indicates “that such companies must operate in a fundamentally different way than they do in the United States.”[1] The ring of fundamentality has implications for the international strategies of internet companies and affords us a better look at how business plays out in society differently in different societies.

Depending on the impact of cultural differences between a given company’s home and host markets impact the management of the company as a whole, either a global (i.e., one-size-fits-all) or multidomestic (culture-specific managements) international-business strategy is optimal. Although it might seem that a “market-making” function like providing a search engine or social-media medium would naturally fit the global approach to international strategy, the impact of differing societal values bearing on relevant rights and obligations can render the multi-domestic approach superior. The ECJ’s decision may push Google’s management further in this direction—the root cause being the differing power and attitude toward business in the E.U. and U.S.

Mina Andreeva, a spokesperson for the E.U. Government’s executive branch, noted that the court’s decision switches the obligation from users to the internet companies like Google and Facebook to prove that user-data is still needed to be kept online. “Today, it’s up to consumers to prove this, but this is not very easy or effective,” she said. “We have reversed the burden of proof.”[2] Put another way, consumers face the uphill battle in the U.S. whereas managers do in the E.U. This difference reflects a basic, or fundamental, difference societally in terms of how much business is valued in society.

Put in terms of a theorem, the more societal values reflect or value the values that are held in the business sector, the more likely it is that societal institutions place obligations on customers (or the general public) and rights on companies. The case of Google suggests that the E.U. and U.S. societies differ fundamentally in the extent to which business values have stature as societal values.

1. James Kanter and Mark Scott, “Google Must Honor Requests to Delete Some Links, E.U. Court Says,” The New York Times, May 13, 2014.

2. Ibid.

Who Won the Kentucky Derby?

This might seem like a simple question. California Chrome won the race in 2014. That is to say, the horse by that name won. As the Derby is a race, a jockey would have played a decisive part in the win. The aptitude may well be in the horse, but the racing skill lies with the person perched on the animal. So the jockey, Victor Espinoza, won the race. If his role was essentially that of coaching or directing the horse, which unlike a racing car is a living creature with a brain to boot, then could the argument be made that the horse’s trainer—in this case Art Sherman—also won? Although Sherman quipped during a post-race interview that he had felt like he was on the horse for the last 75 years, surely a distinction can be drawn between a player and a coach. After all, Babe Ruth hit all those homeruns—not his coach. To win a race, the winner must presumably be in the race—and not vicariously. Least of all can it be said that the “horse’s owner”—an expression like “slave owner” in that a living being is “owned”—won the race. Otherwise, a person could simply wave money around in lieu of actually running to qualify for an Olympic context in track and field. To give wealth such power—coming at the expense of reason itself—would surely point to a rather distorted set of societal values. I contend that both NBC Sports’ post-race coverage and the Derby’s trophy ceremony reflect and in fact affirm the hegemony of business values in American society.

Just before interviewing the jockey, a NBC Sports journalist prefaced, “We interviewed the owner, then the trainer, and now the jockey.” Lest it be pointed out that the jockey had been busy, the trophy ceremony followed the same pattern. Kentucky’s head of state handed to trophy to Steve Coburn, who with the other owner, Perry Martin, were all too pleased to speak on their win. In fact, the governor made it quite explicit by announcing, “To the Martins, to the Coburns, our victor.” The horse and jockey were not even in the camera shot. Wealth had won the race without breaking a sweat. Next came the trainer’s turn, and then, last and apparently least, the jockey.

Imagine running a race, and winning it only to watch the metal being given to your sponsor. “To Coke, our victor.” In enabling a runner, horse, or jockey to train, a sponsor is not the winner (for otherwise the sponsor would be enabling itself). While it is understandable that wealth is highly esteemed in the business sector, the imposing of this “top dog” in society itself distorts non-business activities into the prism of commerce. In the context of managerial capitalism, particularly where managers style themselves as “coaches,” it is no accident that coaches and trainers in sports come to be treated  as ends rather than means—as the winners rather than as facilitators on the sideline. It is important to remember that Art Sherman was not on the horse that won the Derby in 2014.  

In short, the priorities evinced by NBC Sports and the Derby reflect those in the business world at the expense of the world of sports; overreach can thus be seen rather clearly. Put another way, the horse race provides us with a snapshot of just how much American society has formed around the ideological crucible of Wall Street. At least from the jockey’s standpoint, the over-reach both in terms of ownership and managerialism violates the ethical principle of fairness (i.e., the trophy should have gone to the jockey, as he is the person who actually raced). Sadly, the exaggeration or over-reach was already so engrained in American society even before the race that I bet few if any Americans even noticed how very odd the trophy sequence is.   

The Mega-sized Shopping Mall: A 20th-Century Artifact?

Between 1956 and 2005, fifteen-hundred (indoor) shopping malls popped up across America. Then through 2013 at least, none had been built since 2006. The interstate highway system helped usher in the mammoth malls like Mall of America in Minnesota and Woodfield Mall in Illinois; the cold climes made the indoor expanses of warm air particularly alluring during the long winters. The two landmarks among malls would likely fare better than most in staving off even their own respective stores’ cannibalistic online-sales charms at least for a while, absent an upward-revision on global warming forecasts flashing relentlessly on smartphones, tablets, and laptops. The leap from the pedestrian innovations at Selfridge’s department store in early twentieth-century London to Amazon’s Cyber Monday during the 2010s, a silver century later, would seem to be  all about the computer revolution digitizing distance that had once been viewed in terms of social class and then gradually succumbing to closer physical distance, as in Selfridge’s accommodating store.[1]

Even as housewives on a budget joyfully discovered that bargains could be found even in a service-oriented department store without being thrown out just for browsing, aristocratic women returned to the store to purchase fine gloves or perfume astutely advised by a polite, attentive clerk—an antiquated idyllic image of “shopping” a century later in a world saturated by Walmart’s “warehouse” (or barn) mega-department/grocery stores.[2] Indeed, the king himself requested a private showing of Selfridge’s out of curiosity regarding the new thing known as “shopping” and to show himself to be a man of the people (of various social classes). Few people a century later would pause to ask whether the foray of online purchases would make the term shopping obsolete.[3]

Moreover, the sliding eclipse of the hackneyed American mall harkens back to the truism hardly remembered amid all the technological distractions that the world of yesterday is not nearly as everlasting as implicitly promised in its hay-day.

In the last quarter of the twentieth century, the display of Christmas decorations before Thanksgiving, earlier and earlier each year, attested to change in progress. The relative insignificance of this fixation would come to hide the "macro" or "meta" change concerning the mall itself in the first two decades of the next century. 

While the little mall marketers scamper about, scrambling to do the twentieth-century department store one better in terms of a “one stop experience” by highlighting entertainment on top of the “same old, same old” heterogeneous product types being under one roof, no one hardly bothers to imagine the mall itself (not to mention the acutely structured department store) as being of another era—a world already gone—a bygone time somehow vicariously still with us—as if the artifice were a squashed bug mistaking its flinching movements for still being alive. The temporal illusion lies in the extremely slow “squashing” noise of register-less electronic sales. As the niggardly management of Target can attest, the silent killers can be the most devastating, even if the extent of the cyber fingerprints are only fully visible in retrospect.

Amid the wrecking balls eating up memories left and right, the twenty-first century stood wide open for the technological imagination to form. Amid all the excitement, it is no wonder that people who came of age at the mall will look around one day, as if suddenly awakened by nothing in particular, to find that the ‘70s show has indeed gone off air due to low ratings.

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[1] Rejecting the “premium” vs. “cost leadership” business strategies, Selfridge used sales-items to draw in business from cost-conscious consumers (not “guests,” as in the artful lie played out on Target’s stage by functionaries whose superiority over the dictionary gives their stores a rather odious odor). Unlike the managers at Walmart and Target a century later, Selfridge did not view the continued presence of refined yet simple sales clerks as mutually exclusive with extending the product-lines “down” to lower priced items (supplemented by relatively broad sales).

[2] While at a Walmart store to buy underwear, I noticed a few plastic bags containing product had been open. An employee was then passing by me so I asked if she knew about it. “How else are customers going to be able to try them on unless they open the bags?” she replied. The sales associate had no doubt concerning her “knowledge” of retail. Had I pointed out trying on underwear violates OHSA regulations, the employee would in all likelihood have dismissed my “opinion” in favor of her own “knowledge.” Doubtless a European aristocrat would not return to such a store again.

[3] To the extent that “shopping” includes browsing, being able to “google search” a product may mean that searching is already replacing shopping; by implication, going to a “brick and mortar” store to purchase or merely pick up the product does not involve shopping. Yet how hard old ghosts fall; it is as people use terms generally without bothering to verify that the respective meanings still apply. In other words, we may speak without thinking more often than we suppose. In fact, some of the herd animals may succumb in weakness to their urge to “push” their meaning as a weapon of sorts. A young assistant store manager at Target once corrected me in demanding I acknowledge that I’m a guest rather than a customer. The cocktail of ignorance, arrogance, and the primal urge to dominate is as toxic and dangerous as it is ubiquitous in American business of the 2010s (not to mention American society). 

New Birds of Prey in Modern Retail

In a dysfunctional organization, the shared pathology fortifies its defense mechanisms with an obstinacy that appears rock-solid. Lines such as, “Unfortunately, the product cannot be returned” can be seen as part of an egg shell that seems to be durable until it is cracked open. By analogy, cracking the egg entails parsing such lines as are typically dished out to outsiders. Let’s take a look.

First, the word cannot is incorrectly used in the sentence, for a store’s return policy is not a law; whereas a business is subject to a law, no such requirement pertains to a company’s own policies. To treat the latter as tantamount to laws is essentially to vaunt the self-importance of the company, store, and even the employee enunciating the policy-law. “Your policies are not laws; of course you can make an exception, even if your supervisor is the person who can do it.” The word cannot serves the organizational dysfunction by giving the impression externally that the company is more than it is (i.e., a state of sorts with its own laws). At the employee level, the devise is essentially a power-grab—a distended or exaggerated urge to control others being a typical symptom of insecurity borne of underlying weakness.

Substituting may not for cannot gives the customer at least an implied opening that from the standpoint of the organizational pathology could prompt him or her to push through the defense mechanisms and trounce the core weakness. Were an “upper” manager to even consider such a linguistic change, an underling would likely contend that every customer would be returning items. The fallacy in this reasoning goes by the wayside in the mechanizations of the organizational dysfunction. Indeed, ignoring or dismissing logical fallacies is itself one of the defense mechanisms!  This is arguing with such an employee or manager is apt to be an exercise in futility.

Notice the "exchanges accepted" instead of "accept exchanges." The passive voice extends to "are revised" and "are shipped," suggesting an underlying mentality of weakness. Also, the forcefulness of the "must" (as one might expect pertains to a law) is belied by the inherent subjectivity in "mint condition." Finally, the blood-red color, as well as the black background color, suggests a certain passive-aggressiveness in line with the use of "must" for what is actually a policy (rather than a law). (Image Source: omgmiamiswimsuits.com)

Second, the use of the passive mood also hints at the underlying weakness in the dysfunctional organization because the action is sidestepped. “We do not accept returned items” highlights the action (i.e., the refusing) of the company’s employees/managers whereas “cannot be returned” omits the actor entirely! The latter phraseology matches the insecurity that naturally manifests out of weakness. Besides implying that the power of the actor to act is in some way compromised or enervated, the passive voice hides the actor and thus protects him or her from being confronted. The actor’s underlying fear here is that a head-to-head clash would not end well for the actor, given his or her own and shared (i.e., organizational) pathology.

Third, just as the choice of the word cannot and the use of the passive voice both involve a manipulatory fabrication (i.e., lying with a hidden agenda), so too does the addition of the unnecessary adverb, unfortunately. For the stealth actor (i.e., the non-supervisory or managerial employee), the policy is hardly unfortunate; otherwise, the policy would not be “on the books.” Lest the adverb is intended to refer to the customer [rather, lest the policy’s formulator or the employee mouthing it is referring to the customers]—as though the fact that the customers would have to keep ill-suited products were unfortunate—the policy itself indicates just how much its formulator and implementers really sympathize, especially since the formulator can change the policy. In other words, the use of the word is a lie designed to give the customer the false impression that “the store” really cares and that unfortunately the policy cannot be changed (and by whom?).

Even the tactic itself in such a line is a lie in that the pathogens are utterly unwilling to tolerate the very same tactic directed back at them. A customer wanting more than a glimpse of the sickness need only reply, “Unfortunately any refusal to accept back the deformed item will have to be turned over to small claims court.” Even though the particular employee would have no involvement in such legal proceedings, and thus no rational reason to bristle at the customer’s stated policy/law, he or she would be too accustomed to dictating terms to customers to let that privilege lapse without at least a spike in anger and attempt to regain the upper hand. “You are free to do so,” an employee might retort, as though he or she were granting or allowing the freedom. In fact, the implication is rather arrogant, again as if the company were akin to a state rather than being a mere counter-party in a commercial exchange. 

The hidden agenda becomes apparent by realizing that the statement is duplicitous or redundant, as the customer obviously already knows that he or she has the liberty to sue. The employee knows this of course, either consciously or unconsciously, and is not really informing the customer that he or she can go to small-claims court. “I don’t need you to tell me I can do what I’ve already told you I know I am free to do,” an astute customer might retort in turn. 

The exchange of words is really a control battle stemming from an organizational pathology’s attempts to defend itself against potentially interlarding intruders. The threat is of course over-stated—hence the exaggerated intent to “nail down the hatches” to weather the perceived storm. Yet the “new birds of prey”—Nietzsche’s label for those among the weak who can’t resist their urge do dominate (even the strong)—are not content to merely defend, for they must have the upper hand in order to feel sufficiently protected. 

India’s Business Environment: Beyond Corruption

In spite of expected growth of 6 or 7 percent for 2012, the economy of India was facing a pessimistic outlook at the time. The underlying cause seems to have been mismanagement by the federal government—in particular, by the ruling Congress Party. In actuality, the problem lies in the Indian business culture, and the society itself. As such, the problem is not so easily fixed as a change of government or policy.

The full essay is in Cases of Unethical Business: A Malignant Mentality of Mendacity, available in print and as an ebook at Amazon.

Facebook’s IPO: Morgan Stanley’s Conflict of Interest

Morgan Stanley’s underwriting of Facebook’s IPO has been thought by some of the bank’s rivals to be incompetently managed.  According to the New York Times, “(r)ival bankers and big investors have complained that Morgan Stanley botched the I.P.O., setting the price too high and selling too many shares to the public.”[1] Interestingly, the incompetence is positively correlated with unethical policy decisions at the bank. Even as the bankers as underwriters were eager to sell lots of shares, they may have given some of their institutional customers—albeit only the most preferred, as per the bank’s other services—some privileged information. If this charge is true, the conflict of interest at the bank should be closely examined by Congress and any relevant regulators.

The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

1. Evelyn Rusli and Michael De La Merced, “Facebook I.P.O. Raises Regulatory Concerns,” The New York Times, May 22, 2012.