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Tuesday, December 31, 2013

Mandela’s Courage as Politicized Forgiveness

Whereas we grasp the interior sense in which Ghandhi forgave, the media has promoted a false, politicized forgiveness as the real thing in Mandela’s case. I am impugning the aggrandizing press here, rather than Mandela himself.
 
 
In claiming that Mandela “insisted on forgiveness,” John Mahaha uses the following quote from the man himself: “To go to prison because of your convictions and be prepared to suffer for what you believe in, is something worthwhile. It is an achievement for a man to do his duty on earth irrespective of the consequences.”[1] The suffering being referred to here is neither suffering for its own sake nor suffering unnecessarily. With regard to being willing to suffer for what he believed in, Mandela had Gandhi as a role model, though (and this is crucial) Gandhi's social moral principle of nonviolence cannot be reconciled with Mandela's prescription of violence. To the extent that advocating armed rather than passive resistance legitimated even just a portion of Mandela's prison time, the Father of South Africa could not have considered his own suffering in prison as strong morally as that of the Father of India. By moral strength, I have in mind a sort of power that had escaped Nietzsche's grasp. Even so, both Mandela and Gandhi endured great suffering to be true to their respective principles and see them realized in a more just world. This is not to say that both men forgave in the same sense.
 
 
I submit that what Mahaha takes to be forgiveness is actually something else. In philosophical terms, he unknowingly committed a category mistake in writing his op-ed piece. To be willing to suffer for one’s convictions is indeed laudable, but forgiveness is not necessarily entailed or even implied. I suspect that Mandela himself would admit that he did not feel any sense of forgiveness during the 27 years of imprisonment. I have seen video-taped footage of him on the prison-island refusing to speak with a group of people passing by while he was outdoors. His stiff glance and held silence belies any hint of forgiveness.
 
 
Lest it be claimed that Mandela forgave his former oppressors once he had regained his freedom, his second wife insisted on a television interview following her husband's death that Mandela had drew on an incredible strength of self-discipline and fortitude, rather than the interior sort of forgiveness that Gandhi preached and felt. Sadly, commentators and both print and broadcast journalists marveled in saccharine platitudes at Mandela's amazing forgiveness after suffering for nearly three decades in prison. Clearly, the journalists and pontificators had not done their research.
 
 
The research could have started with topical statements from Mandela himself. “If you want to make peace with your enemy,” he once said, “you have to work with your enemy. Then he becomes your partner.”[2] Insisting that such advice is none other than felt forgiveness artfully “gilds the lily,” as if dipping Mandela’s heart in gold with the benefit of hindsight. The working peace is political rather than interior; accordingly, any forgiveness would be likewise, for Mandela would not have said “you have to work with your enemy” were the enemy already forgiven. Instead, he might have said, “you must get to the point of caring about and for your enemy.” Although the term political forgiveness applies, the operative virtue here is actually closer to political courage than forgiveness. According to his second wife, Mandela used great self-discipline rather than forgiveness to resist the impulse to retaliate and instead work with the bastards.
 
Nelson Mandela reaching out to a former enemy. Political or religious forgiveness? (Image Source: Wikimedia Commons)
 
 
It takes interior courage to muster political courage, to deny oneself the convenient route politically. Mandela drew on his mighty courage in not only risking imprisonment by urging armed resistance, but also pushing himself to work with the party of his former oppressors. I suspect that humility, even if only in a political use, played a role after his arduous suffering in prison. Elongated pain has a way of resizing a man’s estimation of his own powers and proper stature. Interestingly, endured suffering may also rarify courage, for the downside is no longer of the unknown. While more difficult to unpack than saccharine forgiveness so often bandied about by dandies, tremendous self-discipline applied as courage as political forgiveness more closely fits the man who saved South Africa from itself.





1.  John Dramani Mahama, “Mandela Taught a Continent to Forgive,” The New York Times, December 5, 2013.
2. William Welch, “South Africa’s Leader Transformed Nation, Self,” USA Today, December 27, 2013.

Saturday, December 28, 2013

Target’s Senior Managers in Damage Control Mode: A Forensic Appraisal

The number of transactions at Target, a major American retailer, during the weekend before Christmas in 2013 came in at between 3 to 4 percent lower than for the same weekend in 2012.[1] That the number of shopping days between Thanksgiving and Christmas in 2013 are five less than in the previous year and number of transactions at other retailers during the weekend in 2013 is slightly higher than for the previous year suggests that Target did indeed take a financial hit due to the massive breach in electronic security. The debit and credit-card numbers of up to 40 million customers (between November 27th and December 15th) could have been compromised by hackers who immediately began selling the “secured” information from abroad.[2] Lest this lesson in the downsides of electronic commerce and globalization be enough bitter medicine to swallow, Target’s damage control gives us a rare opportunity to glimpse the mentality of the company’s corporate-level managers by inference.

The first piece of evidence concerns the customers’ PIN numbers—the four digits you enter after swiping your card. During the final days before Christmas, Target’s management denied that the PIN numbers had been compromised. “We continue to have no reason to believe that PIN data, whether encrypted or unencrypted, was compromised,” Molly Snyder, a company spokeswoman, said, no doubt in anticipation of a hoped-for frenzy just before Christmas; to minimize continuing damage, existing and potential understandably nervous customers would need to be assuaged and pacified, lest the company lose its shirt (without payment!)[3]


Woefully convenient, a Target spokesperson “confirmed” two days after Christmas that encrypted PIN data had indeed been stolen. “While we previously shared that encrypted data was obtained, this morning through additional forensics we were able to confirm that strongly encrypted PIN data was removed. We remain confident that PIN numbers are safe and secure. The PIN information was fully encrypted at the keypad, remained encrypted within our system, and remained encrypted when it was removed from our systems.”[4] Because the company did at the time store information that hackers would need to decrypt the PIN numbers, the debit card accounts had “not been compromised due to the encrypted PIN numbers being taken.”[5] The key word here is compromised, for in Molly’s pre-Christmas mollifying and no doubt legally-crafted words, “We continue to have no reason to believe that PIN data, whether encrypted or unencrypted, was compromised.”[6] Parsing the “before and after” company statements, it becomes clear that just because the PIN numbers were stolen after all does not mean this theft compromised the debit cards. That is to say, in terms of legalese, the second statement does not contradict the first.[7]

The narrow mountain pass was likely dug before Christmas in order to assuage customer fears before Christmas by holding off on as much of the bad news as possible until after even the day after Christmas—not a light retail day to be sure. For support, I submit for your esteemed consideration Reuters’s report that a senior payment executive at Target said a few days before Christmas, as Molly was mollifying, that the hackers had indeed taken PIN data.[8] We can thus deduce that Target’s senior managers were aware of the PIN thefts even as the spokeswoman was assuring the public that the PIN data had not been compromised.

The asseveration is at the very least misleading. To be stolen is a sort of compromised condition. Perhaps the hackers had gotten their hands on some software that would decrypt the numbers without the company’s management’s knowledge. After all, it had taken managers until December 15th just to realize that the debit and credit-card numbers were being lifted.  Furthermore, Molly could easily have said “stolen but not compromised.” The fact that she did not include “stolen” indicates an intent to withhold the additional information that Target’s managers would undoubtedly have presumed would hurt sales leading up to Christmas and the day after that. The sin of omission often reveals more than what meets the eye.

Besides being liars intent on manipulating actual and potential customers, Target’s senior managers minimized what they would give up pricewise to stem the exodus of weary customers. As though misers, the corporate managers showed themselves to be selfishly cheap, or niggardly, even in making up for their own mistakes.

Specifically, the strategists conveniently presumed that a measly 10% discount would be sufficient, or good enough, to bring back in any timid buyers. To be sure, many in Target's market segment may indeed be inclined to overreact, swallowing the company line on a 10 percent discount being a big deal. The company's corporate managers undoubtedly had a sense of the makeup of their typical shopper. Playing on the herd mentality may have kept the 3 or 4 percent reduction in transactions from being something like 15 or even 20 percent.
 
It is important, however, to put the managerial decision to go with only 10 percent into perspective. The truncated "shopping season," still-stubborn real unemployment rate, and two immobilizing winter storms were putting pressure on retailers to offer steep discounts, albeit on selected items. "The real economy spoke this holiday season," lamented Brian Sozzi of Belus Capital Advisors just after Christmas. "Consumers are not financially strong enough to go out there and spend willy-nilly. . . . If the customer didn't need to shop, they didn't go out and shop."[9] Accordingly, retailers extended selective, well advertised sales well beyond the day after Thanksgiving, stretching even through the weekend before Christmas. As if Target's trumped up 10 percent were not sufficiently dwarfed by these deals, retailors tried desperately to draw shoppers in on the day after Christmas by offering still deeper discounts (on selected items). Old Navy, H&M, and Forever 21 brandished 75% Off signs, Armani Exchange and Abercrombie came in at 60 percent, and the Gap went with half off.[10] Who would not naturally look back by then on Target's "redemptive" discount as a slap on the face, given the managerial lapse at the customers' expense (both literally and figuratively)?

Besides the sheer cheapness, the 10 percent figure may intimate an underlying refusal to fully admit being responsible for one's mistakes. The management’s smallness may also imply a certain, rather disparaging, and thus insulting, attitude toward Target's customers—that they are only worth getting 10 percent off even when the management is at fault.

Moreover, how Target’s senior managers view the company’s customers may be much worse than disrespect; a subterranean level of passive aggression may silently undergird the squalid mentality. browsing through a Target store a few days before Thanksgiving, thus within the period in which the card and PIN numbers were being stolen, I could not but notice two college-student aged guys wearing what looked like police uniforms, complete with badges and American flags.  The clincher came as I noticed handcuffs in black leather containers hanging off the belts.  Concluding that the two guys, one of whom sported the already out-of-date “Justin Bieber” pre-teen "wind sheer" hairstyle, were indeed police officers, I was perplexed as to why one was lifting a product off a shelf to a waiting customer while the other officer was ringing up sales at the department’s cash register. The managerial overkill dressed up in false pretense felt like naked aggression poised to spring into the open at any provocation, real or imagined. At the very least, I felt the store manager had been a bit excessive in anticipating a riot in the electronics department after Black Friday.  

As it happened, the cashier in the store’s cashier area who rung up my purchase of underwear had been a police woman for fourteen years before she had an operation on her knees. She informed me that the two “officers” were actually sales associates. They could not actually use the handcuffs; the props were meant to intimidate customers. Not exactly the best in customer service.

At the time, I just assumed that store's manager must have invented the heavy-handed and deceitful ploy. Hesitating just before swiping my card, I just could not ignore the store manager's  presumptuousness in having two young employees impersonate police officers as though even the law were merely an obstacle to be dismissed as applying only to others. I suppose my disgust, nay anger, made me think of the latent passive aggression that must have been sourced in the store manager's psyche. As though coming out of a momentary daze, I found myself thinking out loud to the cashier. "I would be an utter hypocrite, were I, being an ethicist, to complete this purchase." As it turned out, standing on principle saved me from being one of up to 40 million victims of the electronic theft. In hindsight, I wish I had told the sympathetic cashier that I could not in right mind buy clean underwear from a company with so much dirty underwear behind the scenes.
 
A month later, a banker no doubt with much experience in business told me that the police-impersonate-intimidation decision must have come from Target’s corporate level. He also had no doubt whatsoever that Target’s senior management had known of the PIN numbers thefts well before Christmas and were therefore lying about the “additional forensics” conveniently done the day after the day after Christmas.

With the additional information, I could then put together the pieces of the bizarre puzzle to glimpse a truly sordid corporate-level culture consisting of too many creatures all too willing to let a greedy instinctual urge, aided by egocentricity and arrogance, get out of control, all to ready to lie, manipulate, and even inflict passive aggression as if with utter impunity and thus no ethical or legal delimiting constraints. Perceiving the external world selectively, only those things or people who appear as potential props or easy marks to be manipulated for gain, greed is utterly impervious to the restraint that comes out of conscience. Put another way, greed does not recognize should. Nor does it recognize itself as being subject to rules or the law. The indifference to ethics and criminal law can even become sociopathic. Moreover, greed assumes that any possible hindrance is a semi-permeable membrane allowing avarice to pass through with ease.

Perhaps the dirty underwear at Target has enjoyed a shelf-life far beyond the expiration date, and therefore should be summarily thrown away so it will not be inflicted on the unsuspecting customers in the future. Easier said than done.
 



1. The figures come from the retail consultancy, Customer Growth Partners.
2. Reuters, “Target Inevitably Loses Shoppers in Wake of Data Breach,” December 23, 2013.
3. The Huffington Post, “Target Confirms Encrypted PIN Data Was Stolen in Data Breach,” December 27, 2013.
4.  Ibid.
5. Ibid.
6. Ibid, emphasis added.
7. Bill Clinton’s “I did not have sexual relations” might come to mind here.
8. The Huffington Post, “Target Confirms Encrypted PIN Data Was Stolen in Data Breach,” December 27, 2013.
9. Natalie BiBlasio, "Deal Hunters' Adrenaline Hits Peak," USA Today, December 27, 2013.
10. Ibid.

 

Friday, December 27, 2013

An Interfaith Declaration of Business (Ethics)

Released in 1994, “An Interfaith Declaration: A Code of Ethics on International Business for Christians, Muslims, and Jews” is comprised of two parts: principles and guidelines. The four principles (justice, mutual respect/love, stewardship and honesty) are described predominantly in religious terms, devoid of any connection to business. In contrast, the guidelines invoke the principles in their ethical sense, devoid of any religious connotation. The disconnect in applying religious ethics to business is not merely in books; the heavenly and earthly cities are as though separated by a great ocean of time.

                                                                                        Are these religions applicable to business?    Wikipedia

To be sure, the text refers to business in discussing the ethical principles of love, stewardship and honesty, however briefly. Love in the business world is to extend out from corporate boundaries to  stakeholders. Stewardship applies to a business’s use of resources such that ownership itself is qualified beyond the reach of regulation. Lastly, honesty includes the use of “true scales.” The honest are said to get a religious reward (i.e., resurrection), presumably to compensate for any monetary loss in being honest in business.

Turning to the guidelines for business, they are portrayed predominately in the text mostly as a defense of corporate capitalism. Strangely, the reference to the principles is devoid of any religious association. The following guideline is typical: “The efficient use of scarce resources will be ensured by the business” (A.7). Another guideline adds a reference to an ethical principle: “Competition between businesses has generally been shown to be the most effective way to ensure that resources are not wasted, costs are minimized and prices fair” (A.2). To be sure, fairness is indeed an ethical principle, which John Rawls applies in his Theory of Justice. However, fairness is not among the religious ethical principles. Furthermore, no religious content is referenced in the guideline, as well as still another: “The basis of the relationship with the principal stakeholders shall be honesty and fairness, by which is meant integrity” (B.3). The reader is left to ponder what integrity looks like in terms of the three Abrahamic religions.

A major problem in relating monotheism and business ethics comes down to the enigma that God’s omnipotence cannot be limited by a human ethical system, and yet divine decrees that violate secular ethical principles are untenable and thus typically considered to be invalid. For example, killing people who refuse to convert because God says rankles the modern conscience into seemingly rebelling against the Ultimate. The question naturally flairs up regarding whether God really decrees the sordid practice. Looking out of a smoked window in this earthly realm, we mortals tend to conceptualize or sense God as extending beyond the limits of human perception and cognition. This means that we cannot rely on any firm answer in justifying a divine decree above a social ethic. 

For example, insisting that employees keep the Sabbath, whether on Friday, Saturday, or Sunday, may not be fair to the workers who do not recognize the validity of the Ten Commandments. Given the limitations discussed above that preempt religious intuition, belief, and experience from being recognized as factual knowledge, an employer cannot justifiably treat the revelation as though a fact that an objecting employee has no cause to ignore. The question of the revelation's divine validity is ultimately at stake here, and no answer can possibly settle the matter in dispute.

In conclusion, it follows that throwing monotheism into the mix of business and ethics cannot reduce to a simplistic list of determinate guidelines. Getting beyond the “oil and water” of the sacred and profane turns out to be a whale of a challenge to religious business practitioners. In Christian terms, the problem can be put in terms of whether the "fully human and fully divine" Christology devoid of blending is a sufficient basis to cross the ocean of time between Sunday and Monday.  


Source:


Related paper: "Religion in Strategic Leadership: A Positivistic, Normative/Theological and Strategic Analysis," Journal of Business Ethics (2005) 57: 221-239.

Does Greed Have a Bright Side in Christian Theology?

In Business Ethics for Dummies (p. 123), greed is defined as a basic desire for more. The authors posit a “reasonable greed,” which in business “fuels growth,” which in turn “creates jobs and adds value to a society [and] economy” (p. 124). The authors conclude that “in terms of this social and economic growth at least, greed is a good thing” (p. 124). This sounds like a partial affirmation of Gordon Gekko’s claim that “greed, for lack of a better word, is good” (Wall Street). As long as greed proffers good consequences—the greatest good for the greatest number—the desire for more is ethical, or “reasonable.”

In terms of Christianity even where the religious thought has allowed for profit-seeking and the holding of wealth (e.g., for the virtues of liberality and magnificence), greed itself has been excoriated as sin. That is to say, even though Christianity contains different takes on the relationship between wealth and greed, the religion has never approved of the desire for more.

Theologians have typically assumed that the fundamental desire for more is for lower goods, such as wealth, rather than for higher ones, such as God. Greed thus represents misordered concupiscence: the placing of a lower good over a higher one. Such greed is thus desire in excess to what the object deserves. According to Business Ethics for Dummies, the Merriam-Webster Dictionary defines greed as “a selfish and excessive desire for more of something than is needed” (p. 316). The desire is thus sordid in that it is selfish and excessive, regardless of the object being desired or any beneficial consequences for others.

Undoubtedly, the basic desire for more can be directed to many objects. According to Business Ethics for Dummies, people can be greedy “for power, status, influence, or anything else they desire in excess” (p. 316). One might ask whether a desire for God can possibly be selfish and in excess.

Augustine, for instance, writes of his yearning for God as though a lover pining after a beloved. His language evinces an obsession of sorts, hence possibly capable of excess. “You are my God, and I sigh for you day and night,” Augustine declares in Confessions (7.10.171). “You have sent forth fragrance, and I have drawn in my breath, and I pant after you. I have tasted you and I hunger and I thirst for you. You have touched me and I have burned for your peace” (Confessions, 10.27.254-55). If it is the limitless nature of the desire for more that is responsible for Christianity’s long-held aversion to greed, then what of Augustine’s sighing and burning for God?  If Augustine’s higher passion is akin to lust, is not selfishness and excess possible? Augustine’s more may be higher, but it is still more, and he wants the object without limit.

To be sure, God is without limit, being omnipotent and omniscient as well as omnipresent, so it could be argued that a desire for God can be unlimited without being excessive (given the nature of the object). If so, Augustine’s sublimated eros being directed to God can be carved out as an exception and labeled as “holy greed” to distinguish it from the commercial “reasonable greed” that issues in economic growth and jobs. The nature of the object and beneficial consequences are the respective justifiers of these two manifestations of greed. However, this path of carving out exceptions can lead to greed itself being deemed good in itself.

I contend that the desire for more is troubling even if the desire evinces a proclivity to vindicate more and more of itself. In being selfish and subject to excess, the desire for more can be said to resemble an addiction, regardless of the object and unintentional beneficial impacts on others.

In terms of excess, the desire innately sets aside any possible restraints such as a desire for equilibrium (e.g., “enough is enough!”). Furthermore, in being self-centered, the desire warps one’s perception to enable still more. For instance, something just ascertained is suddenly viewed as a given, and thus to be augmented rather than accepted as sufficient. If the amount gained had been a good deal, this is taken for granted as an even better deal is sought. Hence, the desire does not diminish out of a sense that enough has been gained. Lest a declining marginal utility arrest the desire in terms of consumption, still more is desired in terms of savings either because 1) you can never be certain that you won’t be able to use the still more or 2) the addiction to more is too captivating. The question is perhaps whether the human desire for more is itself subject to declining marginal utility as a motivation.  Does one become tired of feeling it or is it self-perpetuating?

Even though the desire is innate and self-perpetuating, it need not dominate a person’s motivation and behavior. I suspect that the key to setting aside the desire for still more is seeing it for what it is—that is, being able to recognize it as one is in its grip. A person noticing the cycle can instantly see that the good deal one has just achieved as sufficient. In other words, once the desire is recognized, a bracketing counter-motive can be applied. The promise of freedom from the otherwise all-consuming desire for more is superior to even “reasonable” and “holy” greed.  

Source:

Norman Bowie and Meg Schneider, Business Ethics for Dummies (Hoboken, NJ: Wiley, 2011).

Thursday, December 26, 2013

Connecting the Dots: Zuckerberg on Facebook

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 publically. What is not said is itself a story worth publishing. Beyond Zuckerberg’s stratagem, what the media doesn’t say might be more significant that what has made it through the filters.
Part of the answer concerning Zuckerberg’s sell-off involves his need for cash to pay taxes that would be due from his exercising an option to purchase 60 million Class B shares. 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 tracks of positive correlation. This concept essentially means that two things tend to occur together. 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. Just because two things happen at the same time does not mean that one caused the other.
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 is simply 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 yet, Zuckerberg and his PR staff might have been throwing the media a tantalizing, and thus distractive, bone. 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 lifecycle 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.

 



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

Friday, December 20, 2013

The Underbelly of Corporate Charity as Corporate Social Responsibility

Why do corporate managements spend corporate money on charities? The obvious reason is to reduce the amount of corporate income tax due. Yet another motive, not as transparent, has to do with reputational capital, and that motive may also explain corporate social responsibility.
At the end of 2013, the American news media reported that Bernie Madoff had donated a lot of money to charity. In 2004, the Ponzi man claimed $3,918,347 as “gifts to charity” in 2004. His taxable income for the year was $12,912,498.[1] He owed just $2.8 million in income taxes, a 12.6% tax rate on his adjusted gross income of $22.2 million. “That’s really low by anyone’s standards,” Adam Fayne, a lawyer practicing in Chicago, said.[2]
  Bernie Madoff, surrounded by police, after having been arrested. Wikimedia Commons

Achieving the low 12.6% effective tax rate was undoubtedly on Madoff’s mind in making his charitable contributions. This rationale was by no means unusual at the time.  Additionally, Madoff would not have been above using charity in order to display himself as a very wealthy person. According to Martin Press, a tax attorney, “If [Madoff] actually gave the money to charity, it is a common theme of Ponzi scheme people to make large charitable contributions to show people how wealthy they are.”[3] The perception of Madoff as a financially successful personally rendered him trustworthy in being capable of making investors rich, and the apparent charitable giving gives the impression of trustworthiness in its normative sense (e.g., honesty and integrity).
Similarly, moreover, corporate strategies may include programs under the rubric of corporate social responsibility as a means of cultivating the impression that the corporation itself is financially successful and trustworthy both in terms of competence and fairness. In other words, corporate social responsibility may be more about amassing reputational capital for the corporation than any acknowledged responsibility to society (other than to provide consumers with effective products). Perhaps the real question is why we are so gullible.



1.  John Waggoner, “Madoff ‘Donated’ a Lot to Charity,” USA Today, December 13, 2013.
2. Ibid.
3. Ibid.

Tuesday, December 17, 2013

Obama and Goldman Sachs: A Quid Pro Quo?

Obama nominated Timothy Geithner to be Secretary of the Treasury. While president of the New York Federal Reserve Bank, he had played a key role in forcing AIG to pay Goldman Sachs’ claims dollar for dollar. Put another way, Geithner, as well as Henry Paulson, Goldman’s ex-CEO serving as Secretary of the Treasury as the financial crisis unfolded, stopped AIG from using the leverage in its bankrupt condition to pay claimants much less than full value. At Treasury, Mark Patterson was Geithner’s chief of staff. Patterson had been a lobbyist for Goldman Sachs.
To head the Commodity Futures Trading Commission—the regulatory agency that Born had headed during the previous administration—Obama picked Gary Gensler, a former Goldman Sachs executive who had helped ban the regulation of derivatives in 1999. Born had pushed for the securities to be regulated, only to be bullied by Alan Greenspan (Chairman of the Federal Revere) and Larry Summers, whom Obama would have as his chief economic advisor. To head the SEC, Obama nominated Mary Shapiro, the former CEO of FINRA, the financial industry’s self-regulatory body.
In short, Obama stacked his financial appointees during his first term with people who had played a role in or at least benefitted financially from financial bubble that came crashing down in September 2008. Put another way, Obama selected people who had taken down the barriers to spreading systemic risk to fix the problem. Why would he have done so? Could it have been part of the quid pro quo the president had agreed to when he accepted the $1 million campaign contribution from Goldman Sachs (the largest contribution to Obama in 2007)? Might Goldman’s executives have wanted to hedge their bets in case the Democrat wins. Getting Goldman alums in high positions of government would essentially make the U.S. Government a Wall Street Government—that is, a plutocracy with the outward look of a democracy. It is no accident, we can conclude, that the spiraling economic inequality increased during the Democrat’s first term of office.

Source:

Inside Job, directed by Charles Ferguson

Thursday, December 12, 2013

Opportunism at Mandela Memorial: Sign of the Times?

Watching U.S. President Barak Obama speak of his hero on December 10, 2013, something was distracting me; the rather large man signing used such exaggerated gestures that I had trouble concentrating on what Obama was saying. Little did I know that the interpreter was a “fake,” according to the Deaf Federation of South Africa. “It was horrible; an absolute circus, really, really bad, Nicole Du Toit, an official sign language interpreter, told the AP. “Only he can understand those gestures,” she added.[1]  I suspect that labeling the fiasco a “circus” skates over the underlying mentality in over-reaching and lying to cover it up.
As soon as I read that the interpreter is a fake, I suspected that the South African government fronted the man so to appear sophisticated to the world. I recalled how just hours after Nelson Mandela died, “spontaneous” dancers in formal black dresses preformed outside Mandela’s house. I had the sense of self-aggrandizing people behind the scenes taking advantage of the obvious publicity for South Africa.
To be sure, the interpreter would explain that he had been in a schizophrenic episode while he was signing and that he could not even remember having signed afterward. Hearing this “explanation,” I suspected that with so much on the line, powerful players behind the scenes may have pressured the man to lie. One American news network showed footage of the signer using strange signs at yet another occasion. Perhaps with so many schizophrenic episodes while signing, the man might have picked another profession. In other words, I suspect the mental health explanation is a fake on top of a fraud, both indicative of a broader attempt by government officials or other power brokers in South Africa to “cash in” at the nearest opportunity, regardless of any sense of solemnity in a momentous occasion.




1. Kim Hjelmgaard and Marisol Bello, “Interpreter For Deaf Branded a Fake,” USA Today, December 12, 2013.

Tuesday, December 10, 2013

Two Sizes Fit All: America’s Two-Party-System Stranglehold

A Rasmussen Reports poll conducted in early August 2011 found that “just 17% of likely U.S. voters think that the federal government . . . has the consent of the governed,” while 69% “believe that the government does not have that consent.” Yet an overwhelming number of Congressional incumbents is reelected. Is it that many Americans stay away from the polls on election day, or does the two-party system essentially force a choice? Voting for a third-party candidate risks the defeat of the candidate of the major party closest to one’s views. Such a vote is typically referred to as a protest or throw-away vote. Is it worth driving to the polls to do that?

A poll of 1,000 Americans conducted by Douglas E. Schoen LLC in April 2011 found that a solid majority of Americans were looking for alternatives to the two-party system. A majority of the respondents (57%) said there is a need for a third party. Nearly one-third of the respondents said that having a third party is very important. In the next month, 52% of respondents in a Gallup poll said there is a need for a third party. For the first time in Gallup’s history, a majority of Republicans said so. These readings point to more than simply a desire to vote against the closest major party without merely being a protest or throw-away vote.

Even as Republican and Democratic candidates were at the time in tune with their respective bases, these two segments of the population were becoming two legs of a three-leg stool, rather than remaining as the two defining pillars holding up the American republics. In fact, with the number of independents growing, the two bases combined no longer made up a majority of the citizens able to vote.
 
To be sure, the electoral systems of the American states and the federation itself have been rigged against  aspiring third parties. For example, a Green Party presence in the U.S. House of Representatives would require one of that party’s candidates to snag the highest percentage of the vote in one of the 435 legislative districts. Were fifteen percent of Floridians vote for Green Party candidates in every House district, Florida's delegation would still not include any Green Party presence. In terms of the Electoral College, many of the states have a winner-take-all system in selecting electors. Furthermore, a third-party candidate doing well in electoral votes could keep none of the candidates from getting a majority, in which case the U.S. House of Representatives would elect the U.S. President (each state delegation getting one vote). A third party would have to be dominant in that chamber, or at least in a few of the state delegations, to have any impact. The proverbial deck, ladies and gentlemen, is stacked against any third party, so merely getting one started is not apt to eventuate in much of anything, practically speaking. For fundamental reform, one must think (and act) structurally, and Americans are not very good at that, being more issue- and candidate-oriented.

The real elephant in the room is the fact that the two animals are the only ones allowed in the room. Image Source: Wikimedia Commons

If the American political order has indeed been deteriorating and disintegrating, its artificial and self-perpetuating parchment walls might be too rigid to allow the vacuum to be filled by anything less than whatever would naturally fill the power-void in a complete collapse. The two major political parties, jealously guarding their joint structural advantages, have doubtlessly been all too vigilant in buttressing the very walls that keep real reform—real change—from happening at the expense of the vested interests. As a result, the electorate may be convinced that it is not possible to venture outside of the political realities of the two major parties that stultify movement. If a majority of Americans want a third party, they would have to apply popular political pressure to the two major parties themselves to level the playing field. A huge mass of dispersed political energy would be necessary, however, given the tyranny of the status quo. Indeed, such a feat might require going against the natural laws of power in human affairs. If so, the already-hardened arteries will eventually result to the death of the "perpetual union." Sadly, the determinism is utterly contrived rather than set by the fates.


Source:

Patrick H. Caddell and Douglas E. Schoen, “Expect a Third-Party Candidate in 2012,” Wall Street Journal, August 25, 2011.


Murdoch: Journalism as Vengence

According to Reuters, “News Corp, whose global media interests stretch from movies to newspapers that can make or break political careers, has endured an onslaught of negative press since a phone-hacking scandal at its News of the World tabloid” in 2011. One danger in this mix of private power even over government officials and being publicly criticized is that Rupert Murdoch could use his power in vengeance to retaliate. The public does not often suspect that such a high-profile and financially successful person could act so irresponsibility, but we ought not take what we are shown at face value. There is, after all, a public relations industry.

                                         Rupert Murdoch, owner of News Corp.                                    

As reported by a few government officials and press outfits in the E.U., the News of the World tabloid’s managers had been paying off state police in Britain in order to hack the phones of government officials and celebrities, those managers reacted by retaliating by hiring at least one private detective to follow Tom Watson, a member of the British House of Commons, and Mark Lewis, a lawyer. A biographer who had been in regular contact with Rupert Murdoch over months told Frontline (PBS) that Murdoch had a habit of remarking that he had pictures of this person or another—meaning that if people did not measure up, Murdoch would destroy them publically. His newspapers, which were not that profitable anyway, were for such influence over government officials or otherwise retaliating against "enemies."

After “the British Broadcasting Corporation and the Australian Financial Review newspaper . . .  said [in March 2012] that News Corp's pay-TV smartcard security unit, NDS, had promoted piracy attacks on rivals,” Murdoch tweeted: "Seems every competitor and enemy piling on with lies and libels. So bad, easy to hit back hard, which preparing.” This reply is telling, for it makes Murdoch’s overriding instinct to exact vengeance transparent. Even referring to critics as enemies is excessive, given the possibility that Murdoch’s company had at the very least broken the law in Europe by paying off a police department and hacking into private voicemail accounts.

To claim that someone is an enemy simply for uncovering or reporting illegal or unethical activities merely points back to the source as sordid and perhaps even pathological in nature. "Enemies many different agendas, but worst old toffs and right wingers who still want last century's status quo with their monopolies," he tweeted. “Toff” itself might be a relic of a prior century; I have never heard of the word. Moreover, Murdoch’s squalid approach to business might hopefully be one day relegated to an earlier age, if there is such a thing as progress in terms of business ethics.

The lesson for us goes beyond one newspaper man, whether it be Hearst in the twentieth century or Murdoch in the twenty-first (at least physically). Might it be that we, the general public, assume too much regarding the maturity of people of position, even if the status has come in part from having built up a company from the ground up? Might it be that we ascribe too much to status itself—that we are in a status society wherein position counts for more than is entitled? Consider, for example, the childish mentality and behavior of Richard Fuld, the CEO who brought Lehman Brothers down in 2008 by piling on real estate debt to excess in an effort to catch up to JP Morgan Chase and Goldman Sachs.

If with great power comes great responsibility—a phrase uttered by Cliff Robertson in the film, Spiderman—then what do we do when childish, vengeful people are ensconced in positions of power? Considering the damage such people can wreck out of a sense of being personally wronged, society itself has the right to step in and rid the offenders of such power. I am not suggesting a personality test that they must pass every few years like renewing a driver’s license. Rather, once scandal has broken out in a major company, a government’s justice department should be able to have a presence in the company, keeping the CEO on a firm leash.

Unfortunately, where a society (and government) finds it to be in its interest to allow private power to be amassed to such an extent that the government itself can no longer act as a corrective on a company’s CEO, then the society really is at the mercy of a spoiled child. At the very least, we ought to recognize a CEO such as Fuld or Murdoch as such. If we then look the other way, we have only ourselves to blame for whatever havoc they wreck.

Source:
Georgina Prodhan, “Rupert Murdoch Fights Back Against‘Lies and Libels,’ Declares War,” The Huffington Post, March 29, 2012.