On the Value of Creating a Hybrid Industry by Appropriating High Tech: The Case of Borders and Amazon

From the ten-year chart of Amazon.com's stock, a clear upward trajectory can be discerned from the days of financial panic in the last quarter of 2008 even in spite of the plateau in mid-2010. On May 10, 2011, AMZN was trading at around $204 a share. At the time, Amazon's new "cloud music" service was said to be behind the surge. In general, the general uplift since late 2008 can be ascribed to the company being on the right side of the computer technology changes that were transforming not only industries, but modern society itself. As Amazon.com was benefiting from its move into music, Microsoft was buying Skype for $8.4 billion in order to get into communications. The hefty price tag can itself be taken as a confidence vote in the continuance of the technological shift as well as the value in moving to a new, hybrid industry model rather than limiting the company to its existent industry model. In other words, even in companies facing a serious technological threat in the business-environment, even top managers can fail to adopt a broader perspective within which the threat can be seen as an opportunity to change the company and even its own "micro-climate," or immediate industry. Hence by 2019, Borders no longer existed whereas Amazon was still profiting. Even the dinosaur McDonalds had tried to shift into a hybrid coffee-shop/restaurant industry model. 



10 year Amazon.com stock chart from Investorguide.com

The full essay is at "Borders: A Hybrid Industry?"

The Founder

Tension between the founder of a business and the managers that eventually assume control is perhaps unavoidable. Such tension can be cut with a knife in the film, The Founder (2016), which tells the story of how McDonalds went from Dick and Mac McDonald’s restaurant in San Bernardino, California to a nationwide corporation headed by Ray Kroc. From an ethical standpoint, I submit that both the McDonald brothers and Kroc come out as less than salubrious.

The full essay is at "The Founder."

FIFA’s Corporate Sponsors: Reliable Ethical Change-Agents?

In the wake of the U.S. Justice Department’s initial arrests of FIFA officials in May 2015 on corruption charges, could the public reasonably expect FIFA’s corporate sponsors to pressure the international governing body of footfall (soccer in the U.S., where “football” is reserved for “subconcussions being inherent to a sport”)? If so, would the pressure be sufficient to rid the powerful international organization of its squalid officials and practices? I contend that these questions come down to how the power was divided at the time between the sponsors and the organization, rather than to the sponsors’ respective ethical positions or even how strongly the executives feel about ethics in business, including FIFA. 

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

Opportunity and Income Inequality at McDonalds

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.

The full essay is at "McDonalds and Income Inequality: The Role of Opportunity"

McDonald’s Strategic Use of Its Charity: Clowning around with Ethics?

Corporations have undoubtedly oriented their philanthropy to take advantage of the potential synergy with marketing their products and services. This “revelation” should not surprise anyone in modernity. Even so, overdoing any convergence to maximize profits is certainly open to ethical critique, even if leaning excessively on strategic interest at the expense of reputational capital is perfectly legal. This point ought to impress itself on the frontal lobe of any dean who hires lawyers to teach business ethics. In this essay, I focus on McDonald’s funding of its own charitable organization, McDonald House Charities. Has the corporation’s financial contribution been sufficient, ethically speaking, to justify the resulting reputational capital, marketing synergies, and long-term profitability?


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

Bank Profits Hit Record as Wages Stagnate in the U.S.: A Tale of Two Cities

In the United States, executives have been compensated much more than their own non-supervisory workers. This has been so in not only absolute terms, but also relative to other countries. As a first step to getting to an explanation, the sheer magnitude of the gap in the U.S. must be digested.

          The magnitude of the difference between the U.S. and all the other countries listed here suggests that the ratio of 475 to 1 is artificial rather than natural.  Moreover, the different ratios point to differences in underlying cultural values. Image Source: www.politifact.com

According to the Associated Press, American “banks earned more from April through June [2013] than during any quarter on record, aided by a steep drop in losses from bad loans.”[1] The Federal Deposit Insurance Corp. reported that the banking industry earned $42.2 billion in that quarter, up 23 percent from the second quarter of 2012. Banks' losses on loans decreased 30.7% from a year earlier to $14.2 billion, the lowest in six years, and lending increased 1 percent from the first quarter. Losses on loans fell to the lowest level since the third quarter of 2007. Home equity loans showed the greatest declines in losses.[2]

CNNMoney reported that the nation’s biggest banks were expected to hand out more in compensation (including $23 billion in bonuses) in 2013 than they had done in 2009. The total compensation of CEOs had increased by 876 percent between 1978 and 2012.[3] The FDIC report shows that the largest banks continued to drive the industry's profits while smaller institutions have struggled. Banks with assets exceeding $10 billion, including Bank of AmericaCorp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo, accounted for about 82 percent of the industry's earnings in the second quarter of 2013. Most of them had recovered in part from federal bailout money and record-low borrowing rates—neither one warranting higher compensation. For instance, the Fed’s bond purchases had been keeping long-term interest rates low.

On the very same day the FDIC announced the record profits, fast food workers across the U.S. walked off the job to protest low wages and poor treatment. Roughly “200 protesters including employees from McDonald's and Wal-Mart and members of the Chicago Teachers Union and the Service Employees International Union gathered outside the Rock N' Roll in downtown Chicago. Sixty cities joined in with their own protests. "It's not livable," Tyree Johnson, who said he's been a McDonald's employee for 21 years, charged. "I've been dedicated to McDonald's for the past 21 years. I still make $8 an hour. "I'm tired of choosing between paying rent and eating," said worker Tamara Best-Watkins to the crowd. "I'm tired of choosing between taking my daughter out and paying rent." Speaking at the protest, U.S. House representative Jan Schakowsky (D-Ill.) noted that McDonald’s CEO “makes in two or three hours at work what his employees make in a year.”[4]

With the federal minimum wage of $7.25 per hour having remained unchanged since 2009,  the demonstrators demanded a $15-per-hour minimum wage and protections against retaliation for joining a union.[6]  Hourly wages for nonfarm workers had fallen 3.8 percent in the first quarter of 2013; that drop surpassed any other since the Bureau of Labor Statistics began keeping track of wages in 1947.[7] Hourly worker pay had risen just 1.9 percent in 2012, even as the consumer price index increased 1.8 percent. That was the third-weakest annual increase in hourly pay since 1947, topping only the 1.4 percent gain in 2009 and a 1.8 percent gain in 1994.[8]

Jean-Jacques Rousseau, an eighteenth-century European philosopher, would label such fiscal inequality as artificial, rather than natural. Even though artificial inequalities are not hard-wired into human nature, we may have made them virtually impossible to expunge from the American political economy. Perhaps just viewing the widening gap as artificial could be a first step back from the brink of social instability and maybe even revolution, in spite of the odds established and enforced by the military-industrial complex.

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1. The Associated Press, “Bank Profits Hit Record $42.2 Billion in Second Quarter,” The Huffington Post, August 29, 2013.

2. Ibid.

3. Ibid.
4. Kim Bellware, “Fast Food Workers Protest in Chicago for Living Wages, Better Treatment Amid Nationwide Strikes,” The Huffington Post, August 29, 2013.

5. The Associated Press, “Bank Profits Hit Record $42.2 Billion in Second Quarter,” The Huffington Post, August 29, 2013.

6. Mark Gongloff, “U.S. Suffers Biggest Pay Drop on Record, as Workers Squeezed Tighter,” The Huffington Post, June 5, 2013.

7. The Associated Press, “Bank Profits Hit Record $42.2 Billion in Second Quarter,” The Huffington Post, August 29, 2013.

8. Mark Gongloff, “U.S. Suffers Biggest Pay Drop on Record, as Workers Squeezed Tighter,” The Huffington Post, June 5, 2013.