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Friday, September 16, 2011

Was Obama Anti-Israel?

In a poll days before the special election for the U.S. House seat vacated by Anthony Weiner, only 22% of Jewish voters said they approved of Barak Obama’s handling of Israel. Dan Senor points to the erosion of Obama’s Jewish fund-raising as another sign that the president was losing Jewish support in the United States. A poll by McLaughlin & Associates found that of Jewish donors who donated to Obama in 2008, only 64% had already donated or planned to donate to his re-election campaign of 2012. While a politician would undoubtedly try to placate and mollify the unsatisfied electorate, a statesman acting in the American interest might conclude that those voters were wrong in their assessment that the president’s policy was “anti-Israel.”


In February 2008, Barak Obama said, “There is a strain within the pro-Israel community that says unless you adopt an unwavering pro-Likud approach to Israel that you’re anti-Israel.” In July 2009, the president reported told Jewish leaders at the White House that he sought to put daylight between the U.S. and the state of Israel. In the same meeting, he said that Israel needed “to engage in serious self-reflection.” These comments are hardly anti-Israel.
In fact, in 2011 as the Palestinian foreign minister was insisting that Palestine would apply for membership in the U.N., the American administration was threatening a veto should the application go through the Security Council. According to Ethan Bronner, “The United States has said it will use its veto there because it believes that the only way to Palestinian statehood is through direct negotiations with Israel.” The Palestinians could go through the General Assembly, but they would only get a nonmember state status. That would save the U.S. blowback from the Arab world after exercising the veto.

That the Obama administration would veto a Palestinian membership in the U.N. ought to be a sufficient indication to American pro-Israel voters that Barak Obama is not “anti-Israel.” In fact, the veto threat tells the world that the U.S. is firmly in Israel’s corner rather than being able to take on an “honest broker” role in the conflict. Given that Israel continued building settlements after the U.S. indicated that it did not support it, the American administration’s veto threat looks very pro-Israel. From an American perspective, the threat could even be viewed as too pro-Israel.

It could be that more tough love from the U.S. toward Israel rather than a veto threat could have pushed the peace talks ahead. Rather than having done nothing as Israel continued its settlements’ construction, for instance, the Americans could have withheld aid pending a final peace agreement. Lest that of failed to get Israel’s attention, the aid money ($13 billion annually?) could have been paid to the Palestinians until such time as a peace deal was concluded (being oppressed, the Palestinians would have pressed for a deal even given the loss of the diverted aid).

Along a similar line, the E.U. was considering a pledge to support Palestinian statehood at the U.N. after one year’s time, assuming the Palestinians immediately resumed direct negotiations with Israel. The E.U. would support Palestinian statehood if no peace deal were achieved. That it could easily be presumed unlikely that U.S. Secretary of State Hillary Clinton would agree with her E.U. counterpart, Catherine Ashton, on such a plan suggests that the Obama administration is indeed generally viewed as pro- rather than anti-Israel.

Even if President Obama was regarded as anti-Israel by some American Jews, he could have used his first term to run the end-game for peace by pressuring Israel rather than acquiescing in order to get re-elected by appeasing voters already mischaracterizing his stance as anti-Israel. Of course, ending the game with a peace deal—difficult if not impossible when holding to the status quo—would have done more for the president’s re-election bid than trying to appease skeptical American Jewish voters by threatening a veto at the U.N. The best means of re-election can be quite ironic, while the most political path of least resistance can actually be the worst.

Voters who think they see an “anti-Israel” policy in spite of the veto threat are wrong; they are over-sensitive to any “daylight” and too used to getting everything they want, policy-wise. Appeasing such voters is not in America’s interest. Given the benefit to Israel from a peace deal, the appeasement is not in Israel’s interest either. So it can justifiably be asked whether those voters accusing Barak Obama of being anti-Israel are actually anti-Israel in terms of long term consequences. Fortunately, America’s interest is more pro-Israel.



Sources:

Dan Senor, “Why Obama Is Losing the Jewish Vote,” Wall Street Journal, September 14, 2011. http://online.wsj.com/article/SB10001424053111904353504576568710341742174.html

Ethan Bronner, “Palestinians Resist Appeals to Halt U.N. Statehood Bid,” New York Times, September 16, 2011. http://www.nytimes.com/2011/09/16/world/middleeast/palestinians-resist-appeals-to-halt-un-statehood-bid.html

Jay Solomon, “Palestinians Firm on State Vote,” Wall Street Journal, September 19, 2011. http://online.wsj.com/article/SB10001424053111904194604576579082941297682.html










Thursday, September 15, 2011

Blankfein at Goldman: Losing the Chairmanship?

In September 2011, a pension fund representing U.S. government employees filed a shareholder proposal to strip Goldman Sachs CEO Lloyd Blankfein of his other post as chairman. According to Reuters, “The pension plan of the American Federation of State, County & Municipal Employees said on Wednesday an independent chairman would provide checks and balances in the power structure at the largest U.S. investment bank. AFSCME said splitting the roles of CEO and chairman might have prevented Goldman from getting into trouble for its actions leading up to the financial crisis and will improve its stock performance going forward. ‘A strong, independent Board chair would focus Goldman on generating long-term value for its shareholders,’ AFSCME President Gerald McEntee said in a statement.” Goldman spokesman Stephen Cohen responded, “We think we have a robust governance structure in place, with a very effective independent lead director. We always listen to our shareholders, so it is disappointing that AFSCME decided to go to the media before raising the issue with us.”

Analysis:

One of a board of directors’ main functions is to monitor the performance of management, including the chief executive. It follows that for the same person to serve concurrently as CEO and chair of the board constitutes a conflict of interest—leading the group that serves as a check on oneself. There would also be a conflict of interest in AFSCME taking its complaint up with the management itself, as if the latter would be inclined to act contrary to its interest by agreeing with the complaint against itself.

For Goldman’s management to point to a “lead director” as somehow providing a check on the CEO ignores that that director is under the board’s chair, who is the CEO. The management’s claim that the firm has a “robust governance system” thus rings hollow; robust systems do not contain an obvious conflict of interest. Nor should instituting them depend on there having been bad performance although, practically speaking, anything less would be insufficient to prompt the appointment of a new chair at Goldman.

At the time of the proposal, Goldman shares had dropped 38 percent in 2011, compared with a decline of 43 percent for its chief rival, Morgan Stanley. The other four biggest U.S. banks were down 21 percent to 48 percent. Of course, a given change from a larger base is a lower percent, other things equal. Aside from relative financial performance, the hits to Goldman’s reputational capital since September 2008, including paying a settlement on a fraud claim, suggest that Goldman’s shareholders could benefit from a check on the bank’s management. Unfortunately, “AFSCME directly holds 7,101 shares of Goldman, worth $741,000 at current market prices, according to pension fund spokesman Chris Fleming. AFSCME's 1.6 million members own 2.5 percent of Goldman's outstanding shares, worth $1.325 billion.” Other institutional investors would have to be persuaded, and absent bad financial performance, achieving a majority would be difficult.

My point is simply that recognizing the chair of a board as an inherent check on a company’s management ought not depend on the owners of enough shares being persuaded by bad financial performance. That is to say, every company should have the institutional structure of a robust governance system. Given the power of managements on elected representatives through campaign contributions and lobbyists, a law mandating such a structure is unlikely even if it would be in the long term best interest of shareholders regardless of company. If the problem is managements having too much power in corporate governance, using corporate governance or legislation reduce that power is apt to be a non-starter. Going to management for the reform would be sheer insanity. Expecting Lloyd Blankfein to voluntarily give up the chairmanship at Goldman would be tantamount to waking up one morning and expecting people to no longer be concerned with power.  

Source:

Reuters, “Goldman Should Strip Blankfein of Chairmanship, Pension Fund Says,” September 14, 2011. http://www.huffingtonpost.com/2011/09/14/goldman-blankfein_n_962948.html


Monday, September 12, 2011

Fiscal Training-Wheels for the E.U.

The government of the E.U. state of Greece announced on September 11, 2011 that its cabinet had decided to impose a new property tax to cover a 2 billion euro ($2.7 billion) projected revenue shortfall for the year. The government expected the state to meet its deficit goals of 17.1 billion euros (8.2% of GDP) in 2011 and 14.9 billion in 2012. Earlier in September, talks between the state government and the E.U. Commission, the European Central Bank, and the International Monetary Fund had broken down in a dispute over whether Greece had done enough to meet its deficit targets. Pressure to assuage the “troika” amid popular protests in Greece apparently trumped questions on the legitimacy of a tax increase enacted by a cabinet without the approval of the state legislature.

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

Sunday, September 11, 2011

Corporate Federalism: AOL

Citing twelve past and present AOL employees, the Wall Street Journal characterizes AOL as a “culture of clashing fiefs and personalities created by a rapid series of acquisitions that haven’t jelled.” Just in managing the likes of Michael Arrington and Arianna Huffington, Tim Armstrong has had his hands full as CEO. Both Arrington and Huffington have been streadfast defenders of editorial independence in their respective units, even as Arrington has started a venture capital firm partly financed by AOL to invest in tech firms even as Arrington’s division at AOL, TechCrunch, writes on technology firms. The problems for AOL go beyond acquiescing in a structural conflict of interest of TechCrunch writing on particular tech companies while investing in some of them but not others. The Journal cites a person familiar with AOL as saying that Armstrong “had a macro vision that was right but didn’t have the right plan to implement it.”

In terms of corporate governance and leadership, vision is determined or decided on by a board of directors while the CEO is charged with devising and implementing a plan or strategy based on the vision. Too often, the vision is associated with the CEO simply because he or she enunciates it. Selling the vision is perhaps better handed by the president, who ideally presides over the management (i.e., representing the board). Even if the CEO is tasked with coming up with and selling a vision, he or she is better suited as chief executive to formulating and implementing a strategy or plan.

At AOL, the board should have focused on changing the corporate vision (and holding the management accountable on devising and implementing a strategy), while Tim Armstrong should have focused less on vision and more on coming up with a better strategy. At some level, the clash of egos that is involved in integrating or coordinating acquired businesses that had been stand-alone is itself a formidable task for any CEO. Reconciling or constraining previously-autonomous editors in the interest of corporate coordination without creating conflicts of interest is a difficult task. Personalities can exacerbate the difficulty involved in the turf wars.

AOL might be a good candidate for a federal system of governance, wherein publishing units need some autonomy from the pressures of corporate coordination. In such a system, each division or acquisition is like a semi-sovereign state with some autonomy from the general government. Editors at TechCrunch and the Huffington Post could use this limited autonomy to protect their respective publishing units from being swayed by financial interests either of another division or AOL as a whole. At the same time, AOL’s enumerated powers could give it the ability to achieve synergy from the otherwise disparate divisions. These domains should be such that conflicts of interest are obviated.

The key to such a corporate federal system of governance would be having a “third party” within the company or perhaps consisting of outside directors to hear contested cases of division or company over-reach. It could be that such a judiciary consists of an equal number from headquarters and the divisions, or of outsiders who are not even on the board—though the problem of aligning incentives to the long-term interest of the company would have to be addressed. 

The federation form—similar to the Japanese conglomerate “family” of businesses centered around a banking division though with each division having some autonomy from headquarter—is perhaps ideally suited to a publishing company in which pressure exists to tailor articles to particular companies favored financially by a division or the publishing company as a whole. In other words, reconciling editorial freedom (and credibility) with the synergy possible from corporate coordination (otherwise why make the acquisitions in the first place?) may be well-suited to the federal form wherein the parts and whole each of some areas of autonomy from the other. The limited autonomy itself must be in the stockholders’ long-term financial interest; this is not difficult, as sacrificing editorial freedom for immediate financial gain is typically detrimental in the long run. AOL’s vision should include such matters as governance structure as long as the company retains separate though related publishing enterprises.


Source:

Jessica E. Vascellaro and Emily Steel, “Culture Clashes Tear at AOL,” Wall Street Journal, September 10-11, 2011. http://online.wsj.com/article/SB10001424053111904836104576558993970961586.html?mod=WSJ_hp_LEFTWhatsNewsCollection


Media Hype: September 11th

Before hurricane Irene went over New York City, the storm had been downgraded to a tropical storm. The American news networks were by then too invested in the storyline of Manhattan being flooded to report the downgrade. Instead, the reporters were in high gear, showing even just slight flooding off from beach areas. The story was hyped, and viewers bought into it hook, line and stinker.

The hype for the tenth anniversary of September 11, 2001 began nearly a week before the big day. Not to be undone by the day falling on a Sunday, when most people are not glued to the news networks, the media simply extended the anniversary back to include the day before—hence contriving an anniversary weekend. Even so, people are less invested in the news on weekends. Fortunately, the media could make use of a report by the U.S. Government of security concerns on the anniversary. I found myself wondering if the report had been fabricated simply to counter the fact that the anniversary was to fall on a Sunday and thus was in need of an extra push to garner the desired attention.

Early Saturday evening on September 10, 2011, I found myself developing a rash of utter disgust while briefly watching the beginning of a car race on ABC. The race itself was besides the point, it would seem. The infield was populated with army troops decked out in their battle-field garb as if they were to head immediately thereafter to Afghanistan. Every spectator in the stands was waving a miniature American flag. A singer looking strangely happy to be singing was singing a sad song “of remembrance.”  Then a minister, also not too sad about receiving so much attention, said a solemn prayer presumably for others. Fireworks followed—as if appropriate for a sad day of remembrance of many innocent who were tragically killed. The show disgusted me. I do not know if the festivities ever got to the race, as I turned off the television at the fireworks stage and turned to exercise.

In thinking about the spectacle as I was exercising, I remembered a big sign that read, “WE WILL NEVER FORGET.” I thought of Pearl Harbor, a day which no longer lives in infamy for many Americans under 30 or even 40 even though it was a pivotal event in WWII and thus world history. Besides the relative lack of importance accorded to history itself in American culture, FDR’s claim has been effectively relegated by the importance given to 9/11 even though the latter is not, in my view, as important historically for the world as Pearl Harbor. Had the United States not entered WWII, Europe and Asia would probably look very different. So it is highly probable that either another incident deemed to be important or the sheer passage of a new century will wash away the claim that our time is the most important—that no one following us would ever attempt to relegate our event.

It may be that human beings are hard-wired to presume that we are the center of the universe. Certainly the Catholic Church used whatever theological authority the clerics presumed they had to enforce Earth being said to exist at the center of the physical universe. Similarly, it is incredibly presumptuous to claim that ground zero, which is all too subject to hype ten years later, should never be forgotten. Interestingly, sacred space has a subtle tendency to dissipate with the passage of time. Perhaps we are not as good as we think at deeming things sacred because we are actually deeming ourselves as such.

At the very least, our news media and elected representatives have a vested interest in drawing attention and creating patriotic moments (and images)—particularly in an election year. If I am correct, we, the American people, have been duped again by being suckered in to a contrived social reality by appeals to our emotions. To be sure, the death of thousands of innocent victims is sad, but by ten years out the leader and many of his colleagues had been killed or arrested. Perhaps the lesson is that it is time we move on. As 9/11 itself evinces, life is too short to waste a warm sunny weekend on remembering death. Let the dead bury the dead.

Lest we forget: forgive us our sins, as we forgive those who sin against us. Saying we will never forget is really a coded message that we will never forgive. In other words, saying “WE WILL NEVER FORGET” is actually to wield a club of sorts. Doing so makes us hypocrites rather than somehow virtuous. Forgiveness is about the left hand not knowing what the right hand is doing—not refusing to forget. We would do better were we to ignore the media and politicians when they insist on drawing attention to themselves. Our time is too valuable, as life is short, yet we and the societal opinion leaders we listen to are far too presumptuous in what we designate as important. This is the real lesson on this “anniversary.” Sadly, most Americans are probably too caught up with the festivities to notice.