Corporate Federalism: Did AOL Miss an Opportunity?

Citing twelve past and present AOL employees, The Wall Street Journal characterized AOL in 2011 as a “culture of clashing fiefs and personalities created by a rapid series of acquisitions that haven’t jelled.”[1] Just in managing the likes of Michael Arrington and Arianna Huffington, Tim Armstrong had his hands full as CEO. Both Arrington and Huffington were strong defenders of editorial independence in their respective units. Arrington started a venture capital firm partly financed by AOL to invest in tech firms even as Arrington’s division at AOL, TechCrunch, wrote on technology firms. The problems for AOL went well beyond acquiescing in a structural conflict of interest of TechCrunch writing on particular tech companies while investing in some of them but not others. A person familiar with AOL said that Armstrong “had a macro vision that was right but didn’t have the right plan to implement it.”[2] That is to say, his visionary leadership was good but his strategic management was bad. Strategic leadership demands better. AOL may have been a good candidate for a federal system of governance because the publishing units needed some autonomy even at the cost of foregone corporate cooperation. 

The full essay is at "Corporate Federalism and AOL."

1. Jessica E. Vascellaro and Emily Steel, “Culture Clashes Tear at AOL,” Wall Street Journal, September 10-11, 2011. 

2. Ibid.

Should the E.U. Represent Its States at the UN?

In 2010, it was proposed that the E.U. have an increased role at the UN in order to boost Europe’s profile as major player at the international level. One proposal would have given the E.U. the powers enjoyed by fully-fledged UN members, such as the right to make proposals and submit amendments, the right of reply, the right to raise points of order and the right to circulate documents. While there is no demand in the draft for a more prominent seating position for the EU, it was possible that the E.U. could have been moved to the center of the UN’s assembly chamber. Wherever the E.U. would have been situated, additional seats alongside a new European UN ambassador would have been made available for High Representative Catherine Ashton, the E.U. Foreign Minister, and her staff. Experts believed at the time of the proposal that such a role for the E.U. in the General Assembly would not significantly enhance the E.U.’s ability to influence policy at a UN level; instead, the proposal would have provided an opportunity for the E.U. to portray itself as a unified power on the international stage.

 

The complete essay is at Essays on Two Federal Empires, available at Amazon.

The Franchise: A Flawed Arrangement

The franchise arrangement combines the reach (and efficiency) of central advertising with the ability to respond to local differences. I suspect that the benefit from local flexibility is typically overdrawn, such that the value of the franchise arrangement itself is overstated. Meanwhile, the downside in local autonomy is, I suspect, understated. That downside includes the propensity to engage unethically based in part on lack of character-virtues and on the accurate perception of weak accountability within the franchise arrangement. The downside also comes into greater play than perhaps is realized because management on the local level can be rather bad in quality (from a managerial standpoint). In other words, slim pickings with regard to managerial talent can be a factor at the local level. Without mechanisms of accountability from “higher up,” front-line managers can get away with an astonishing amount of bad (and unethical) managing.

The full essay is at "The Franchise Agreement as Flawed."

ECB Loans: A Backdoor Bailout?

On December 8, 2011, the ECB announced that it would loan 489.2 billion euros (c. $640 billion) at 1% interest to 523 E.U. banks for a three-year term. Carl Weinberg, chief economist at a consulting firm, said that by making the move, the ECB had “shown a path toward averting catastrophic collapse in Europe.” The move has been likened to that of the Federal Reserve after the collapse of Lehman Brothers in 2008. It was hoped that the E.U. banks would use the money to buy state bonds—particularly those of Spain and Italy, which were not able to “directly tap” ECB funds. According to Investor’s Business Daily, however, early signs pointed to bank declining to purchase the riskier debt. While understandable given Angela Merkel’s objections to the ECB serving as a backdoor bailout of profligate states over their heads in debt, the ECB’s refusal to put conditions on how the loans could be used may have undercut the central bank’s effort to relieve bank liquidity (and state debt) problems in the E.U.

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