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.

ICE Bought NYSE: Profiting from the Rules?

“Tell me what the rules are, and I’ll make money with them.” This statement, made by Jeffrey Sprecher of Intercontinental Exchange, captures well the attitude that business practitioners should have toward government regulation in a republic. That is to say, businesses should be regulation-takers rather than makers. For the regulatees to make regulation to which they themselves would be subject is an oxymoron, or contradiction in terms. At the very least, it involves a conflict of interest. At the macro level, business as “regulation-maker” effectively turns a democracy into a plutocracy. Accordingly, the strategic use of regulation should pertain to the use side, rather than the regulating side. Crafting regulations—essentially dictating them to legislators or regulators—in order to make money from them takes the strategic use of regulation too far.

 The full essay is at "Profiting from the Rules on Wall Street."

Strategic Thinking Beyond the Business Plan

“When smart people came up with ideas for well-conceived business opportunities, we said go for it. As always, organizational charts, management consultants, and business plans played virtually no role in any of this. My own strategic thinking I did mostly while showering or shaving.”

—Alan C. Greenberg, former Chairman and CEO of Bear Stearns

The full essay is at "Strategic Thinking Beyond Plans."

Presidential Leadership

In the wake of the failure of the joint congressional committee that was tasked with coming up with a proposal to reduce federal deficits over a decade by $1.2 trillion, Michael Bloomberg, mayor of New York City, said at a news conference, “It’s the chief executive’s job to bring people together and to provide leadership. I don’t see that happening.” The mayor may have been wrong. Take the word executive: literally it is to execute, or implement, which implies management rather than leadership. Put another way, implementation depends on a goal already established, presumably by a leader. To lead is to formulate a vision of social reality that is an ideal, and thus consisting of goals rather than actualities, and then to persuade others to accept that social reality. Once the directionality is established, the means, or strategies, can be executed by managers (i.e., those who manage the implementation).

The full essay is at "Presidential Leadership."

Occupying Wall Street: A Self-Regulated Protest?

The right to protest as a manifestation of freedom of speech is held societally as sacred the United States, but the question of how far protest goes before it becomes simply living in a park is one of those gray areas that tend to be decided by the judiciary far from the tarps and sleeping bags. The protesters’ premise that living in a public space eventuates in the achievement of their goals is tenuous where the goals are broad. Undergoing a hunger strike to get a certain anti-corruption bill voted on by India’s parliament is far different than camping out in Zuccotti Park in New York City until corporate capitalism is ended in the U.S. In short, the tactics used should be oriented to the sort of objective being sought. Moreover, the tactics and indeed the objectives themselves require a protest group to self-police such that it does not wander too far off course or spread itself too thin. Protest movements may be too prone to die a slow death from self-inflicted wounds without even the slightest recognition of the cause of death. The Occupy Wall Street protest movement had the capacity to self-regulate, but fell well short of that which was necessary for the group to achieve its anti-corporate goals.

The full essay is at "Occupy Wall Street Protests." 

Pandora: An IPO Eclipsing Fiscal Gravity?

Pandora, an internet-based radio company oriented to music, sold its initial public offering at $16 per share late on June 14, 2011. The shares opened the next day at $20 and rose as high as $26, only to fall into the teens before market close. At $26, the company had a market value of $4.2 billion, more than the value of AOL at the time. Just two weeks earlier, Pandora’s management had been looking at the $7 to $9 range.  Despite offering only 9 percent of its shares to the public, the company raised twice as much money as it had expected.

The full essay is at Pandora

Hedge Fund Set to Hack Nestlé Up: A Case of Sensationalistic Over-Kill

Does the fact that an earnings-per-share figure has not meaningfully improved over, say, five years justify an overhaul pushed by a hedge-fund activist investor?  Put another way, is a steady earnings-per-share tantamount to failure? Especially for an established company, steady numbers do not evince bad performance. An airline would only foolishly fire a pilot for not climbing once having attained a cruising altitude. Maintaining such an altitude during a flight is hardly a reason to turn a plane around or set it in a radically different direction. 

Dan Loeb of Third Point. Relax, Dan, Nestle is not on a nose-dive.

The full essay is at "Hedge Fund Activist."

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."

AT&T Buys Time Warner: An Expansive Strategy Amid Industry Uncertainty

After Comcast’s $30 billion takeover of NBCUniversal and Verizon’s acquisitions of the Huffington Post and Yahoo, AT&T agreed on October 22, 2016 to buy Time Warner for $85.4 billion. The ability to produce content and deliver it to millions of viewers “with wireless phones, broadband subscriptions and satellite TV connections was not lost on either board.[1] At the time, AT&T sold “wireless service in a saturated market, while Time Warner [was] a content company whose primary assets, networks like CNN and HBO, [faced] tougher times in a cord-cutting world.”[2] Although AT&T’s board could be accused of empire-building wherein bigger is better (i.e., more powerful), the stabilizing impact of combining wireless service and content could hardly be ignored in a business-environment so full of change and uncertainty. In other words, with the traditional television industry facing such dire threats to its revenue-structure due to the proliferation of high-tech substitutes, having the wherewithal to formulate and experiment with different distribution means and even content was at the time a fitting strategy.

The full essay is at "AT&T Buys Time Warner."

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1. Michael J. de la Merced, “AT&T Pledges $85 Billion To Acquire Time Warner,” The New York Times, October 23, 2016.

2. Farhad Manjoo, “AT&T-Time Warner Deal Is a Strike in the Dark,” The New York Times, October 24, 2016.

Business Implications of Power in Mergers: The Case of the New United Airlines

Ideally, a merger combines the best features of one company with those of another company such that the whole is of greater value than the sum of the two parts. Optimal combination as such may imply or at least depend on a rough power-balance between the two adjoining companies, for otherwise distended dominance could translate into the worst of one company (i.e., the dominate one) being foisted onto the merged entity. The opportunity cost, or benefit lost in going with the worst of the dominant company, could be measured by the extent to which the same function in the other company is better than that of the dominant company. Put another way, it would make no sense to go into a merger planning to let each company continue to do what it does worse than the other. Sadly, power can eclipse economic criteria even in a company. The merger of Continental Airlines and United Airlines provides a case in point.

The complete essay is at “Power over Business Effectiveness in the United Merger.” 

United's "Love in the Air" promotion highlighting couples who met in the air. The case of the winning couple pictured here just happens to involve an "upgrade." The love in the air does not refer here to the employees on board or at the gate, even though the impression intended may be that flying United is a loving experience. (United Airlines)

Dismembering Time Inc: Delimiting Management

Typically, management is assumed to be a skill or practice that enables a person so trained to work in virtually any company, regardless of what the sector happens to be. A manager is presumed fully able to go from managing a bank to managing a restaurant. Organizing is the common thread; passion for the particular output is not. Yet surely product-specific knowledge and indeed fascination must count for something. This point struck me as I read the ideas of one journalist regarding what should come of Time Inc. once separated from the mother-ship of Time Warner. If the parts of Time Inc. are indeed worth more as parts of different companies than as remaining as a whole, then it is worth asking whether it makes sense to assign each part to a company oriented to the same theme or domain. If so, then the particular theme of a publication, or business moreover, should have some bearing on a manager.

From: “DismemberingTime Inc.: A Critique of the Conglomerate Strategy” 

Corporate Social Responsibility at Walmart

Is it not an outright oxymoron for a company such as Walmart to pinch pennies when it comes to its non-supervisory employees even as it is oriented to the social good of society through its "corporate social responsibility" (CSR) programs? Leslie Dach, a former executive at Walmart who had been behind several such initiatives liked to make the point that striving to make a dent in societal problems can dovetail with a company’s own financial interests. The two need not conflict. I submit that this is not good enough for a company's management authentically into "giving something back." Specifically, the social-good initiatives should be integrated with company operations. Walmart can indeed be criticized from this standpoint, particular since Sam Walton's sons cut non-supervisory employee sickness and vacation days. I suspect that the illusion foisted on the general public is likely to burst one day as the bones of the stores' operations are laid bare (i.e., the curtain is pulled back to reveal for the public the proverbial man behind the curtain). Let's hope that other companies can learn from, and thus improve on Walmart's dual strategies.

The full essay is at "Walmart: Beneath the Corporate Social Responsibility."

Taoist Business Leadership

Leadership from the standpoint of Taoist teachings is paradoxical or even oxymoronic in nature. A leader intending to apply the teachings should therefore be willing to tolerate the co-existence as apparent opposites, or at the very least be willing to lead in ways not typically thought to be consistent with leadership. If this seems too taxing, one might consider the potential benefits. For one thing, leading in unanticipated and unusual ways may give one a sustainable competitive advantage both in terms of alternative leaders below and competitors leading other organizations. Put another way, going down the rarely trodden path opens one up to being able to use something of value unknown to other people. One could “corner the market” on that asset.

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