Managerial Capitalism: Being and Becoming

At first glance, Friedrich Nietzsche’s pro-capitalist stance on private property and the process of accumulating profit (or wealth) may seem to extend a vote of confidence to the business manager as a type. After all, managers manage the private property of stockholders (which can include themselves) with a fiduciary duty to do so to increase shareholder value by maximizing profit. The notion of profit-seeking by maximizing revenue and minimizing cost is arguably too simplistic. Squeezing a workforce too much, for example, can backfire in the long term. Nietzsche was concerned about such a thing happening even though he claims that the vast majority of laborers must be kept to subsistence wages for culture to be possible. He castigates petty, short-sighted managers who do not look out for the spiritual and economic welfare of workers, and yet holds that those workers must be slavish in the sense of being exploited by employers so culture can emerge and be sustained by the rich. To be for such exploitation and yet against petty cost-cutting managers renders Nietzsche’s socioeconomic philosophy interesting as well as useful in terms of keeping a capitalist economy from being reduced to the mentality of its bottom-feeder producers. I first discuss the matter of exploitation and then turn to how Nietzsche addresses his wider socio-economic philosophy more specifically to human-resource management. Within the wider subject-heading of exploitation, very different approaches, or mentalities, to human resource management can be discerned. In dichotomous terms, there can be said to be a pathos of distance between enlightened self-interest and selfish, short-sighted greed.

The full essay is at "Managerial Capitalism."

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."

The U.S. Supreme Court: Free Speech Trumps Public Accommodations Law

I contend as a matter of reasoned opinion rather than infallible fact that the Free Speech protection in the U.S. Constitution applies to not only human beings, rather than to non-human legal “persons” (e.g., corporations), but also to speech where the purpose is speech rather than something else. I have written elsewhere on the mistake in treating corporations as if they were human beings, so I treat only the second claim here. I reference the first claim only as context for my broader claim that the U.S. Supreme Court has tended to over-extend applications of the free-speech clause not only beyond its original intent, but also common sense. The latter violation is particularly astonishing. 

The full essay is at "Free Speech and Public-Accommodations Law"

Stockholder Activism at DuPont: A Conflict of Interest for Management

In American corporate governance law, the business judgment rule gives management expertise the benefit of the doubt over stockholder proposals. Compared with executive skill, they look rather populist and thus potentially irrational in nature. Nevertheless, with the rule chaffing up against the property-rights foundation of corporate capitalism, the managerial prerogative can be said to be dubious. Indeed, a strict private-property basis justifies displacing the default profit-maximization mission for a given corporation. Alternatively, stockholders may want to use their concentrated, collective wealth for other purposes, such as to alleviate hunger. Once enough profit has been made for the business to be sustained for another year or two, any additional surplus would be spent on food pantries, for example, rather than going out as dividends or being retained by the corporation. Because managerial skill is premised on the profit-maximization goal and its associated strategies, corporate executives intrinsically resist alternatives proposed by stockholders. The managers face a conflict of interest in providing their recommendation for stockholders. Even when the proposal assumes profit-maximization but differs from a current strategy (i.e., adopted by management), a conflict of interest exists should the management seek to provide a recommendation for the stockholders. In this essay, I use the activism of Trian Fund Management at DuPont to illustrate this point.

The full essay is at “Stockholder Activism at DuPont.”

Mergers and Acquisitions: What about the Stockholders?

Why do companies merge and acquire other companies? Synergy is the textbook answer. Typically, the stockholders of the target company see an appreciation in the value of their stock, while stockholders in the initiating firm see a downtick. The reason why is simple: corporations typically overpay. The value-added of the anticipated synergy must be greater than not only any overpayment, but also the intangible costs in aligning the corporate cultures. Yet another factor—an opportunity cost, really—is frequently overlooked: that of whether the extra cash on hand should be returned to the stockholders as dividends.

The complete essay is at “Mergers and Acquisitions”