Corporate Governance and Political Activism: The Case of Ben & Jerry's

When a company’s management decides to take a partisan position publicly on a political issue, especially one that is contentious, decreased revenue, whether from potential or actual consumers individually who disagree with the company’s position, or from an organized boycott from groups that stand against the position. Anger may be a stronger motivator than ideological agreement, in which case any increase in purchases would be less than the lost revenue. This asymmetry itself is interesting from the standpoint of human nature, and strongly suggests that CEO’s steer their respective companies, which managements operate on behalf of the stockholders anyway, away from taking controversial positions on social or political issues that do not directly and significantly pertain to the bottom-line (i.e., profitability) in the short- or medium-term. In short, wading into societal issues is, generally speaking, not good for business. What then about a company like the ice-cream manufacturer, Ben & Jerry’s, which from its inception had social/political activism as a salient part of the company’s mission?

The full essay is at "Corporate Governance and Political Activism."

On the Reputational Capital of a Business Leader on a Societal Stage

Is it better that companies be publicly or privately held? Such a question is of such magnitude that glossy, simplistic answers should be eschewed. This is not to say that the answer is situational in nature. Rather, it is more likely that each comes with pluses and minuses from the perspective of an economic system as a whole. As business “leaders” give their advice, it is important to keep in mind whether any personal or institutional conflicts of interest exist and thus could warp the space itself of the advice. Yes, I am intimating Einstein’s theory of general relativity here. Rather than provide an answer without having studied the matter sufficiently, I will provide a way to look at the advice given by Jamie Dimon, CEO of JPMorgan Chase.

The full essay is at "Reputational Capital of a Business Leader."

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.

Bank Bonuses and Dividends After the Financial Crisis: On the Power of Banks in European and American Government and Society

Dividends are typically based on how much a bank (or company, moreover) has profited, less whatever capital is needed from the profit. Similarly, bonuses are based, at least theoretically, on how the managers and the nonsupervisory employees alike perform as well as how the bank performs. In their respective ways of shoring up banks amid the financial crisis of 2008, the E.U. and U.S. differed on how easy it would be for banks to pay dividends and bonuses, as well as to have access to governmental funding. These differences reflect both the relative power of the financial sector in the governmental sector and the cultural attitudes toward business.

The full essay is at "Bank Bonuses and Dividends After the Financial Crisis." 

CSR and Corporate Governance Reform: An Opporunity for BlackRock as an Activist Shareholder

In 2019, BlackRock’s management and board publically fired two executives in the Hong Kong office for breaching company rules on dating subordinates. The firings demonstrated to employees that the company would enforce its employee policies and sent the message that employees would be “free to point out problems in the workplace.”[1] This would not be so extraordinarily significant but for the fact that BlackRock is the “world’s largest money manager with $7.4 trillion under management,” which enables the company, through the funds it runs, to be “one of the five largest shareholders in nearly every corporation in the S&P 500.”[2] So BlackRock “can cast votes and pressure boardrooms to effect change.”[3] The company would be hypocritical in using its power as a major stockholder to get managements to have and enforce good workplace policies if the company were not doing so itself. From the standpoint of self-regulatory capitalism in society, BlackRock could make a significant contribution far beyond improving workplace policies.

The full essay is at "CSR and Corporate Governance Reform."

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[1] Dawn Lim, Steven Russolillo, and Jing Yang, “At BlackRock, Public Firings, Overseas Probe Send Message About Office Misbehavior,” The Wall Street Journal, February 3, 2020.

[2] Ibid.

[3] Ibid.

Managing Externalities in Business: Heliogen’s Breakthrough in Combatting Climate Change

A company’s values and norms can resonate to some extent with their societal counterparts by the company providing goods and services of value to customers resulting in a reduction of their suffering or increase in their happiness. Providing a net-value (the value to the customer less the price) to people can resonate with societal values and norms that esteem happiness and frown on suffering from want. Indeed, a utilitarian ethic can apply to the provision of as much value as possible in the form of goods and services that reduce the suffering or increase the happiness of as many people as possible. Legitimate wealth can “result from having provided a significant amount of value to a significant number of people.”[1] Even fortunes, according to this ethic, are justified by the provision of “a very unusual form of value to a very unusual number of people.”[2] Utilitarianism is popularly known from the expression, the greatest good to the greatest number (i.e., of people). Of course, an ethic justifies what should be, whereas the extent to which a company’s values and norms approach those of society is a descriptive matter. Describing the degree of fit is not to say that a company’s values and norms should (i.e., normatively) have that degree of fit, or even more. Ethical reasoning would be needed to supply the normative contention; such reasoning involves argumentation that the extant societal values and norms should be held generally speaking and specifically by companies. The fact that the values and norms of many German companies in the NAZI era resonated with societal values and norms is not to say that the managements should have sought to fit organizational values and norms with NAZI values and norms. The field of business & society, which is oriented to the degree of fit that exists descriptively between a company (or the business sector) and a society (or internationally-held values and norms), is thus distinct from business ethics, which is oriented to providing ethical justification for what managers and companies should do. With regard to the former field, companies can orient themselves even closer to societal values and norms than by providing value to customers and even taking other stakeholder interests into account by being primarily oriented to taking on a serious societal or global problem. In terms of business ethics, such an orientation can be said to be one that a company should have because an unusual number of people (even beyond customers and other stakeholders) could receive an unusual amount of value. Climate-change is such a problem, and Heliogen’s breakthrough exemplifies such an extraordinary mission.

The full essay is at "Externalities Management and Climate Change."

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1. Rod Burylo, The Wealthy Buddhist: Buddhist Ethics, Right Livelihood, and the Value of Money (Nepean, Canada: The Sumeru Press, 2018).

2. Ibid.

An Institutional Conflict of Interest in Corporate Governance: The Case of Goldman Sachs

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 of the board. 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.”[1]

Analysis is at "An Institutional Conflict of Interest in Corporate Governance: The Case of Goldman Sachs."

1. “Goldman Should Strip Blankfein of Chairmanship, Pension Fund Says,” Reuters, September 14, 2011. 

Getting More For Doing Less: Bank Board Directors

Executive compensation is an art rather than a science. It is not as if numbers are fed into a computer and the correct compensation pops out. More discretion is involved than meets the eye. “Since the financial crisis,” The New York Times reported in 2013, “compensation for the directors of [America’s] biggest banks has continued to rise even as the banks themselves, facing difficult markets and regulatory pressures, are reining in bonuses and pay.” [1] Just five years after the financial crisis, it is interesting how the banks' respective managements decided to spend the TARP money from Congress and even more money from the Federal Reserve Bank. Also of note, board and upper management compensations seemed to be going in different directions in spite of both being presumably tied to the same firm performance. Even a performance-incentive approach tied to firm-performance can accommodate a lot of latitude, such that banks differ in how much they pay their respective boards. The discretion permits inside collusion and even outlandish demands by "celebrity" members whose advice does not necessarily come up to celebrity status. 

The full essay is at "Bank Boards Getting More for Doing Less."

1. Susanne Craig, “At Banks, Board Pay Soars Amid Cutbacks,” The New York Times, April 1, 2013.

Weak Corporate Governance at UBS Amid a $2.3 Billion Trading Loss in 2011

UBS chief executive Oswald Gruebel resigned on September 24, 2011 over the $2.3 billion trading loss by one of the Swiss bank’s traders, Kweku Adoboli. Kaspar Villiger, UBS's president, said the board regretted Gruebel's decision but had decided to accept it. "Oswald Gruebel feels that it is his duty to assume responsibility for the recent unauthorized trading incident," Villiger was quoted as saying in the statement. "It is testimony to his uncompromising principles and integrity."[1] In presumably not pushing for the CEO’s resignation because of the magnitude in the lapse of risk management in the system, the bank’s board of directors did not take the initiative in holding the management accountable. Accordingly, shareholders have reason to be concerned about the protection of their owner’s equity, at least in terms of corporate governance providing accountability on the management. The culprit may be corporate governance itself, which as structured may proffer too much power to the CEO.

The full essay is at "Weak Governance at UBS."

1. “UBS CEO Oswald Gruebel Resigns Over Rogue Trading Loss,” The Huffington Post, September 24, 2011. 

Protecting Minority Stockholder Rights: On a Conflict of Interest at Revlon

The principle of majority rule is a staple of democratic theory. Typically the victor of a close election is quick to proclaim that “the people” have spoken. That “the people” corresponds to 51% of those who voted is beside the point. What about the 49% who voted against the victor? What about the minority’s rights? In the U.S. Senate, the fact that it takes 60 out of 100 votes to end a filibuster means that a large minority can halt a majority’s bill. In the European Council, the qualified majority rule means that for a bill to pass, the states in the majority must be at least 55% of the total number of states and must have at least 55% of the E.U.’s population between them.  A large minority can therefore stop a small majority. In both of these “intergovernmental” bodies, the implication is that 51% of a vote is not as significant as the principle of majority rule suggests. What about the rights of a minority of shares of stock in corporate governance? When a majority stockholder has control of management, the interests of the minority stockholders can be shirked. This is particularly true when a majority stockholder proposes a going-private transaction with the aid of management.

The full essay is at "Protecting Minority Stockholders."

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1. Peter Lattman, “To Perelman’s Failed Revlon Deal, Add Rebuke From S.E.C.,” The New York Times, June 14, 2013.

2. Ibid.

3. Ibid.

4. Ibid.

5. Ibid.

6. Ibid.

Corporate Social Responsibility: Too Often a Weapon

Typically, responsibility is something that people working in a business typically presume applies not to their business, but instead to stakeholders, whether a customer, supplier or distributor. It is not uncommon for retail stores to hang signs indicating that the store is not liable for this and that. What if such a store is nonetheless at fault? To be so and even just claim not being liable for it reeks of selfish disregard for others. The idea, or mentlity, is that the other guy should pay for even problems for with someone working for the store caused.  Responsibility in this twisted sense means “I won’t pay; you must pay even though I'm at fault”  The underlying mentality can be said to come from a point of weakness rather than strength, for healthy companies can afford to shrug off any temptation to be small-minded and inconsiderate. In writing in this way, I am drawing on Friedrich Nietzsche, from whose theory it can be claimed that the store signs are actually weapons used by the weak out of resentment for the strong (i.e., customers). In comparing stores on Nietzsche's strong/weak spectrum, companies that are strong are naturally generous whereas the weak ones relish even being rude or even cruel to the stronger out of resentment. 

For more, see Skip Worden, On the Arrogance of False Entitlement: A Nietzschean Critique of Business Ethics and Management, available at Amazon.

Corporate Ethics Codes: A Waste of Time?

Ethics codes are not enough; that is to say, making applications of ethical principles explicit is not sufficient, even where they are grilled into employees in recurrent training sessions. Indeed, individuals or a dominant coalition can use a code’s existence as window-dressing. For example, in his letter on July 1, 2000 announcing Enron’s new and improved 65 page Code of Ethics, Ken Lay wrote, “Relations with the Company’s many publics . . . will be conducted in honesty, candor, and fairness.” If Ken Lay could get away with trumpeting a code of ethics, who’s to say who is out there now acting unethically in business under the cover of an effervescent code?

The full essay is at "Corporate Ethics Codes: Oxymorons?"

Managing and Presiding: Leading as CEO and President

A manager does not preside. To manage is to be actively engaged in the operations of an organization; it is not to “sit before,” as in representing the organization itself externally and intervening in it only as needed in serving as guardian of its “constitutional” order. For example, if a company’s corporate governance system is about to implode, the President is there to preside as the board (and major stockholders) come to terms. In other words, the President would be oriented to maintaining the meeting foremost—intervening in the discussion only if a key juncture is likely to result in an implosion of the governance system.

Material from this essay has been incorporated into The Essence of Leadership: A Cross-Cultural Foundation, which is available in print and as an ebook at Amazon. 

Executives and Directors Planning to Unload Shares: A Front for Insider-Trading?

The U.S. Securities and Exchange Commission (SEC) initiated preset-trading arrangements known as 10b5-1 plans in 2000 so corporate executives and nonexecutive directors would have a way to announce their plans to sell shares. According to John Nester, a spokesman for the SEC, the 10b5-1 plan was devised “to give executives a way to sell some shares of their own companies despite being exposed to nonpublic information.” Therefore, the plans would have to be set up when the executive or director does not possess inside information, so as to obviate any potential charges of insider trading. The question I address here is whether the plans were subject to abuse by non-executive directors. By abuse, I mean the exploitation of a conflict of interest.

The full essay is in Institutional Conflicts of Interest, a book that is available at Amazon.

Is Corporate Governance Anti-Democratic?

Assuming all the votes cast in an election are accurately tallied, the pronouncement of the winner would seem to be straight-forward. What it means to have won, however, is considerably more complex. Specifically, is winning getting over 50% of the vote, or should a mere plurality of, say, 38% suffice? It could be argued that a super-majority of 60% or two-thirds is necessary for there to be a discernible will of the people behind the winner. To claim that 51% represents the will of the people seems a bit of a stretch, since almost half of the voters cannot be considered to be of that will. Typically, much is read (or projected) into the 1% over the 50% in terms of a mandate. All of a sudden, 51% of the voters become “the people.”  Certainly a winning plurality of 38% cannot be said to stand for or represent the will of the people, for 38% is a minority in the total votes cast. Yet in Delaware’s corporate law, which is binding for most American corporations, a mere plurality is sufficient for a candidate to be elected to a board of directors. While this arrangement is not ideal, it is a legitimate basis even if some stockholder activists beg to differ.

The full essay is at "Corporate Governance as Anti-Democratic?"

Bank of America: Downsizing From Smallness

Three years after the near-meltdown of Wall Street in September 2008, Bank of America announced that 30,000 jobs would be eliminated. That amounts to nearly 10% of the bank’s total work force. Over all, BOA was planning to cut $5 billion in annual expenses. The reason is transparent: continued losses stemming from the bank’s acquisition of Countrywide in January 2008 in spite of the fall of the U.S. real estate market and the related losses on sub-prime mortgage-backed CDOs. What could Ken Lewis have been thinking? At least in the case of his acquisition of Merrill Lynch, which was agreed to in principle in September 2008, the investment bank had already sold its $30 billion of toxic assets for over $7 billion in July 2008.

The full essay is at "Bank of America."  

Google Executives Evaded Jail Time in Brazil: Is Business Too Powerful?

In late September 2012, the Brazilian state police detained the head of Google’s operations in the state after the company’s management failed to act on an electoral judge’s order to remove videos from its YouTube site criticizing a candidate in a rural county election. Separately, a judge ordered Google to remove a religiously-offensive video, which had sparked riots in the Middle East, within ten days or face fines. Google’s lawyers claim that the company is not responsible for what users upload. Earlier in the year, Brazil’s government threatened the head of Chevron’s operations there with arrest and passport-confiscation after a small leak occurred in the company.

The full essay is at "Are people in international business above national laws?"

The Founder of Theranos: A Flawed Charismatic Vision and Leader

“Theranos rose quickly from being a college dropout’s idea to revolutionize the blood analysis industry to a hot tech bet that accrued $700 million in funding and many famous names for its board.”[1] Elizabeth Holmes, the company’s founder, was stripped of her position at the company in 2018 after the SEC discovered her deep involvement with the fraud at the company. Her “smarts, fierce determination and Steve Jobs-inspired look . . . were critical” to her being able to perpetuate the lie that the company had a device that could do blood tests with just a scant amount of blood, obviating the unpleasant experience of having blood drawn by needle.[2] Although Jack Welsh, Bill Gates, and Steve Jobs accomplished enough to warrant their fame, I submit that companies are too prone to create “champions”—even strangely calling them “rock stars.” In other words, even though charismatic vision is of value to a business, neither such a leader nor his or her vision itself should be overplayed. Business, I submit, has a marked tendency to do just that, and often with impunity.

The full essay is at "Fraudulent Charismatic Vision at Theranos."

On leadership vision, see Skip Worden, The Essence of Leadership: A Cross-Cultural Foundation

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[1] Marco della Cava, “Behind the Scenes of Theranos’ Dramatic Rise, Fall,” USA Today, March 16, 2018.

[2] Ibid.

Upside-Down Corporate Governance at AIG

I contend that Robert Benmosche, CEO of AIG, had an incorrect understanding of corporate governance when he told Harvey Golub, then-chairman of the board, on July 14, 2010, “One of us should stay and one of us should go.” He should have, “Please let me know if the board would like me to go.” Put bluntly, the CEO works for the board, not vice versa. The previous May, Benmosche told Golub, “We can’t work together. I need a partner who I can bounce ideas off and give me advice.” However,a CEO and a chairman do not work together as partners. Rather, the chairman—and the board more generally—act on behalf of the stockholders to oversee the management, which the board has hired. In other words, a CEO is an employee whereas a chairman is not. Benmosche’s comment is actually rather presumptuous.

The full essay is at "Corporate Governance at AIG."

Off Target: Corporate Spending as "Speech" against Gay Rights

In a 5-4 decision on January 21, 2010, the US Supreme Court ruled in Citizens United that federal restrictions on corporate spending in elections constituted a violation of free speech. Critics called it wrong to equate corporate “speech” with individual speech and said the ruling would allow special-interest money to flood election campaigns. The bipartisan nature of the opposition to this ruling is striking in these largely partisan times. The court’s ruling is opposed, respectively, by 76, 81 and 85 percent of Republicans, independents and Democrats; and by 73, 85 and 86 percent of conservatives, moderates and liberals. Majorities in all these groups, ranging from 58 to 73 percent, not only oppose the ruling but feel strongly about it. Even among people who agree at least somewhat with the Tea Party movement, which advocates less government regulation, 73 percent oppose the high court’s rejection of this particular law. In addition to overwhelming opposition to the decision, there’s also bipartisan support for Congress to try to reinstate restrictions on campaign spending by corporations and unions.

The full essay is at "Target's 'Free Speech'."