Friday, March 4, 2011

The Bicycle Principle of Business Ethics: Walmart as Mediocre

I once bought a bike at Walmart.  To my chagrin, the bike had very little coasting ability. After riding down into a valley, I looked forward to some momentum on the up side. However, there was very little upside. Shortly after passing the lowest point, I would have to begin pedaling again.  In fact, if the down-hill was not steep, I had to pedal so as not to de-accelerate while going down hill.  In regard to Walmart, it could be concluded that not every product fits into a low-cost strategy (to say “cost-leadership” would gild the lily, besides engage in fad-jargon). While pedaling from the bottom of a hill just after having come down another, I constructed a young theory of business ethics.  Namely, that it was unethical for Walmart to sell the bicycle-brand (which I do not recall) because I deserved some coasting credit. You might say that if I didn’t have to pedal going down hill, I don’t deserve any “credit” in going up hill; the ease going down is paid for by the effort going up. However, even if I had not had to pedal while going downhill, I still would have believed that I deserved some “credit” on the up side. Why should I be exempted from benefiting from the laws of nature?  It is not fair if I am excluded from the phenomenon of mometentum through no fault of my own. Walmart had unwittingly put a wrench between me and momentum by essentially “spending” it by releasing it. So I was left with the impression of an asymetry that was unnatural. Of course, gravity and friction take their toll, so one can not expect to go without any effort on the up side.  But where a product eviscerates the benefits ensuing from a natural law, the product can be reckoned as inferior from the standpoint not only of quality, but as undeserved by any buyer.  There is thus a bicycle principle of ethics, which is a sort of naturalistic ethical theory based on the principles of fairness and desert–namely, that it is unfair to deprive certain people of public goods such as momentum while others indulge. An inferior product can be reckoned in such terms.

The full essay is at Walmart: Bad Management as Unethical, available at Amazon.

Wednesday, March 2, 2011

BP's CEO Tony Hayward: A Golden Parachute Despite Having Failed on Safety

In terms of corporate governance setting executive compensation to align the employee's incentives to the financial interests of the company even beyond his or her term of employment, it is apparently quite easy to go overboard. This can include severance packages for top managers--packages that may not reflect the performance of the executive. At the very least, it would appear that corporate lawyers are not writing very good contracts. Worst yet, insider board-management friendships may mean that the gap between achievement and severance pay may be intentionally wide. Sadly, the innocent non-management investors whose interests are not adequately represented in the board room pay the price, even if they don't perceive it on an individual level.  Even so, the lack of fairness alone calls for an end to the insider luxuriating.  The case of BP, whose rig exploded in the Gulf of Mexico in 2010, provides a good case study.

The full essay is in Cases of Unethical Business, which is available at Amazon.

The ECJ Decision on Gender-Based Insurance: Political, Philosophical and Business Implications

On March 1, 2011, the European Court of Justice, the EU's Supreme Court, declared illegal the widespread practice of charging men and women different rates for insurance, setting in motion an overhaul of how life, auto and health policies are written across Europe. Although tied to commerce, the ruling involves non-economic elements as per the high court's citation of the EU's Charter of Fundamental Rights, which enumerates 14 categories on which discrimination is prohibited; sex is the first. A separate provision states that "equality between men and women must be ensured in all areas." Because fundamental rights go to the core of what a political domain stands for, at least in the case of a republic, an implication is that the EU is indeed a political federal state, rather than simply a WTO for Europe. The fact that the states of the EU must abide by the ECJ's ruling on the fundamental rights means that some governmental sovereignty has indeed shifted from the state governments (and their respective constitutions) to the EU.  Like the US, the EU is a federal system of governance characterized at its core by dual governmental sovereignty, which in turn is sourced in popular sovereignty.  Other, less fundamental, implications can also be drawn from an analysis of the ruling.

The full essay is at Essays on the E.U. Political Economy, available at Amazon.