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

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.