Mitt is on the money

It is final now: Mitt Romney is the official presidential candidate of the Republican Party for 2012.  This is in itself a little miracle. To begin with, given the strength of Christian fundamentalists in the GOP – from Evangelicals to Catholics – it is still remarkable that a Mormon has finally made it to the top of the ticket. Given the history of Mormonism in the US and its longstanding antagonism from ‘mainstream’ Christian groups this is probably the clearest indicator of the magnitude of resentment towards Obama. To Tea Party fundamentalists, even an apostate is more acceptable than – I guess – a black person in the White House. Those two delegates who threw nuts at a black CNN camerawoman with the comment "this is how we feed the animals" are probably – despite the political correctness of the official reaction - just an indicator of the Republican Zeitgeist.

There is though another reason why this is even more interesting. After all, this is the first election where private corporations (or rich business owners through their companies) are able to basically fund the campaigns of their preferred candidates without any limits. We saw this clearly in the primaries, where candidates such as Herman Cain, Newt Gingrich or Rick Santorum were all able to stay in the race far beyond what their paltry successes in the primaries would traditionally suggest. It was ironic, that the Citizens United ruling by a Republican-leaning Supreme Court in 2010 reared its predictably ugly head first to the detriment of the Republican frontrunner Mitt Romney himself. Newt Gingrich was probably the best example: not only did his philandering past made him unpalatable for even the most ideological GOP supporters at the base, but also his success in the primaries was dismal –he could not even win his home state Georgia. He stayed in the race though because his ‘sugardaddy’ Sheldon Adelson poured limitless amounts of cash into his campaign. Adelson, the owner of a global Casino empire, is currently investigated for breach of the Foreign- and Corrupt Practices Act by the US Justice Authorities and has good reasons to make sure whoever ends up in the White House has some loyalties to him.

The Republican primaries have shown that rich individuals, after the Citizens United ruling, basically can buy elections. It will be exciting to watch how this will now impact the presidential campaigns in the fall in the US. Mind you, four years ago it was Obama who had the biggest coffers. And still today, if one just analyzes the funds of the actual campaigns of Obama and Romney, where donations are capped at $5,000, Obama is still leading Romney (according to a recent report in The New Yorker). However, what the Citizen United ruling has allowed is the creation of so called ‘Super PACs’ (as in political action committee), which can advertise on behalf and in the interest of a candidate and can accept unlimited amounts of donations.

The effect is fairly impressive. Already now, if we look at the Super PACs around both candidates, Romney with $120m in donations leads Obama by factor four. Adelson alone has pledged $100m to get rid of Obama and other rich republican donors such as the Koch brothers are willing to donate whatever it takes. Estimates suggest that Romney (and his entourage) by November may have been able to spent some mindboggling $1.2bn dollars!

The interesting thing here then is that for some reasons, the Obama campaign is not playing the same game. This not so much due to a lack of potential donors (according to the cited article); there are enough rich business people who are leaning towards the Democrats. It appears that Obama himself is not too keen on becoming too close and dependant from wealthy individuals and interests. Another factor appears also to be that some of the individuals who potentially could play the game of the Koch’s and Adelsons’ on the other side feel that this trend in politics is not desirable: “I don’t want to see democracy go in that direction”, Warren Buffett (a longstanding Obama supporter) is quoted in The New Yorker.

There are many people among the Democrats who are worried about this. After all, come fall it may well be possible that most advertising time on TV and radio has already been bought by Republican Super-PACs. And indeed, as we have frequently discussed here on this blog, the current situation in the US lifts the entire debate of corporate influence on the political process to a truly new level. There is now only a little and mostly cosmetic difference between how ‘third world’ dictators can buy elections and the way the sheer financial backing of a candidate and his capacity to spend on his campaign will decide the US Presidential election.

The Republican primaries though have left us with a glimmer of hope – albeit in a somewhat twisted way. After all, despite the corporate backers of several candidates, in the end the Republican base by persistently not voting, for instance for Gingrich, finally got to speak the last word. The assumption that money can buy an election then rests on a simple assumption: that the majority of the electorate, in fact: the few millions of swing voters in some ten states of the US who effectively have decided elections in the last decades are stupid enough to fall for a bombardment of advertising (for which most of the funds are used these days) and just succumb to these formidable means of manipulation. Or is it still also true, as the Republican base has shown, that voters still have some minimal set of convictions and the ability to see through all the veneer of a political campaign – and decide for themselves. One way or the other, these specific circumstances have added an ingredient to this presidential campaign which might actually make it a slightly more interesting spectacle to watch.

Artwork from DonkeyHotey, reproduced under the Creative Commons License.

Are Americans working too much?

With many people currently enjoying or looking forward to their summer holidays it is sobering to consider some of the differences in expectation that workers in different countries will have about how much paid time off they can enjoy. Statutory minimum leave varies enormously by country, from zero days in the US, through to 5 working days in China, 10 working days in Canada, and all the way up to 25 working days plus public holidays in countries like Denmark and Norway. Of course, variations in legislated minimums give plenty of scope for more explicit CSR type policies in low-regulation countries such as the US, but even looking at the average leave taken across countries, Scandinavia and most of Europe far outpace North America. Sure, a lot of the talk now is about Americans not having enough jobs, but another way of looking at it is maybe some Americans are simply working too much.

We have been interested in debates about working hours, flexible work arrangements, forced overtime and the like for some time. In the first two editions of our Business Ethics textbook we included cases on young professionals and excessive working hours.  In the most recent 3rd edition, this changed to a case about forced labor, which is a related but quite different issue. These are complicated problems, especially when much of the excessive hours worked by professionals is, in principle, voluntary. Even in sweatshops, some argue that workers choose to work long hours for low pay, because it is better than the alternative - which is no job and no pay.

Anyway, arriving in the inbox today was a nice infographic from onlinemba.com, the fruits of whose labors we've featured before in our survey of the best and worst corporate responsibility infographics. It tells an interesting, and well documented, story of the problems of excessive working hours in the US. We're not sure the call for a return of a 40 hour week will be heeded in the current climate, but it certainly helps start an important conversation. And with many in the CSR world apparently uninterested in working hours in the developed world as a relevant topic, it provides a decent business case for changing that perspective.




Infographic source: OnlineMBA.com
Photo by LaPrimaDonna. Reproduced under Creative Commons Licence

Who really should resign for the Barclays interest rate scandal?

The banking sector needs another scandal like a hole in the head. Or maybe that's the wrong metaphor. Because a quick death from a headshot might be more preferable to the excruciating, but likely never fatal, torture of interminable crises that we seem to be constantly enduring.

The latest bout of banking misery comes from the UK, where Barclays, the retail and investment banking giant has fallen foul of regulators for manipulating the interbank interest rate over a number of years during the mid 2000s.  It's a huge scandal that looks set to engulf not just Barclays, but potentially also a slew of other banks, and even maybe the Bank of England and the UK Government.

One of the more interesting facets has been the reaction from Barclays. What a week it has been. First a number of senior executives including the CEO Bob Diamond reacted to the media criticism by announcing they would forgo their bonuses. Then, as the scandal escalated, the Barclays Chairman, Marcus Agius announced his resignation. In a dramatic turnaround, the following day Agius was reinstated and CEO Diamond announced his resignation, along with his right hand man, Jerry del Missier.

So the big question is: who really should go in a scandal like this? The Chairman, the CEO, or someone else? The answer, of course, depends on the type of scandal, the level of knowledge of the activity that the senior leadership had (or should of had) as the events unfolded, the likely best route to reform, and of course the likely reaction of stakeholders. With Barclays it seems right that Agius, the Chairman, has (on second thoughts) decided to stay. The Board is unlikely to know about an activity such as the interest rate rigging, and so cannot be held culpable in their overseeing function. It is different from, say, the role of the Board in something like Enron's accounting fraud, which is directly related to the Board's role, and relates to accounts that they must have seen and approved.

With Barclays, you would expect the Board and its Chairman to take a central role in dealing with the problem once it has been revealed to them, which apparently was only days ago. As one member of the House of Lords scathingly remarked upon Agius's resignation: "The board is so hopeless they've just shot the head of the firing squad and missed the prisoner." By resigning Agius was signalling that the Board was unfit to be a "firing squad" and instigate the kind of change necessary at the bank.

Turning to Diamond, one of the main reasons forwarded for his resignation has been the "lightening rod" argument, as in the UK newspaper, The Guardian's analysis: "Diamond, under pressure from the banking regulator and the governor of the Bank of England, Sir Mervyn King, quit after he decided he would be the lightning rod for the scandal at the hearing".

It's not the first time we have heard this argument about the resignation of a prominent CEO in recent times;  News International made exactly the same claim regarding the departure of CEO Rebekah Brooks in July last year in the wake of the phone hacking scandal.

Why the lightening rod argument? Well, it enables the CEO to continue to proclaim their innocence, despite stepping down. Their resignation is not due to guilt but is to save their firm from excessive media and political criticism. The idea is that it is supposed to diffuse the storm of negative publicity - the brave leader falling on their sword to save the company.

The problem, which we saw with News International, and which is already happening with Barclays, is that it doesn't really work.  For a start, no one really believes the argument. So the media is just as likely to respond by digging even deeper expecting there to be more secrets that the company is trying to hide by jettisoning the CEO.  Secondly, even if you get rid of one lightening rod, the critics will readily find another .... or they will simply continue targeting the same one in the hope of more revelations. Barclays found this to their cost last week after lightening rod no.1, Agius quit, only to be replaced by lightening rod no.2, Diamond. As The Telegraph put it: "Mr Agius is thought to have hoped his departure would serve as a lightning rod to conduct anger away from the bank and Mr Diamond". No chance.

It seems in this instance Diamond was responding primarily to pressure from politicians and to a lesser extent shareholders. Numerous influential voices were calling for the CEOs resignation and it is no coincidence that the Barclays share price rose on the announcement of Diamond's departure, despite him being up until recently strongly supported by investors. In other words, Diamond's resignation was primarily a symbolic act to appease stakeholders.

This is all very well, especially at a time when trust in big banks is at an all time low. But it is not necessarily the best course of action for actually dealing with the root problem. Mind you, the root problem is not 100% clear at the moment. Whilst Diamond was blaming "a small minority", others were were laying the blame at the culture at the bank or even of the entire sector. So although Diamond's proposed solution  - to “get to the bottom of what happened”, punish those involved, enhance internal controls, and change the bank's culture - may on the face of it make sense, this scandal has all the hallmarks of a more deep-seated systemic problem.

One bank and one CEO can't change an entire sector, especially when no one, not even the guy that's resigning, seems willing to take personal responsibility. Did he symbolise a culture that needed changing, Diamond was asked today. "I don't think so at all," he replied. Institutions like the banking industry are based on taken for granted assumptions that are highly resistant to change. Symbolic resignations are not the answer. But maybe they are a start.

Photo by SomeDriftwood. Reproduced under Creative Commons Licence

Marx is back

Well, this headline only works if Marx was ever gone, if you know what I mean. But no, now he is literally back, and this in no less a becoming space than on the new edition of Mastercard issued by the German savings bank Sparkasse Chemnitz. And this by popular demand, no less. Customers in this East German city were asked to vote on what motive they would like to see on their credit cards – and Karl Marx won hands down!

Now, we have to be correct here. Technically, it is not Marx the philosopher who was voted in. The bank’s customer’s in Chemnitz (for 40 years under communist rule it was actually called ‘Karl-Marx-Stadt’) were given a choice of the city’s landmarks, and the humongous Karl Marx sculpture - that survived the zeal to eradicate the GDR legacy - won the competition. It is impressive; I had a chance to check it out last Christmas (see the picture below).

So here we are, Marx on a Mastercard. For many this is just hilarious, for some it’s a sad sign of how capitalism has now even commoditized and incorporated the very symbol of its critique. For me personally, Marx on a Mastercard is nothing short of a neat symbol that maybe Marx’s real contribution to the world gets slowly appreciated.

Apart from a few intellectuals who wear the brand of being a Marxist on their sleeves, after the fall of the iron curtain Marx was considered by most people as being disposed of to where he belongs: the scrap yard of history.

I am not a Marxist and my education did not give me a chance to study Marx in too much detail. The more though I become acquainted with his thinking I find that Marx today is more relevant and important than ever before. Francis Fukuyama (‘The end of history’) and all those other, mostly conservative, thinkers who gleefully touted the demise of Marx after the collapse of Communism in Eastern Europe in my view were seriously misguided. In fact I happen to believe that the true ‘Marxists’, the people who act like Marx predicted capitalism would make people to behave, are actually in the conservative end, or right wing, of the political spectrum.

An anecdote to this effect from the country of today’s Marx-tercard: in the run-up to Germany’s first election after the reunification in 1990 the opposition leader Oscar Lafontaine called the incumbent Chancellor Kohl ‘the last surviving Marxist’. Why? Kohl believed that the country could only be unified if it got a common currency immediately. Unifying a country for the political right in Germany at the time was all about creating common economic conditions. Exactly this is the core of Marx’ analysis: in a capitalist society the only dimension which governs all social relationships is the economic level. The Left at the time in Germany though saw very clearly what we know now: to unify a nation split apart for 40 years in very different circumstances a host of other policies would be more important than just the economic level.

Here is why I think the people who voted Karl Marx the Millennium’s ‘Greatest Thinker’ in a BBC poll a decade ago were bang on the money: Marx was one of – maybe even the first –political philosopher who understood that modern capitalism, if allowed to prosper and dominate, will render the economic relations between members of a society as the most important and ultimately the only bond that keeps a community together. What keeps a society together in his view are purely the economic ties between the individual actors. For us today that maybe sounds a bit trivial. But at the time of him writing this it was truly a revolutionary thesis – and the fact that we consider this to be so normal just goes to show how correct Marx’ analysis was.

Communism in some ways is a footnote to Marx’s work, I sometimes think. If ownership of the means of production (i.e. capital) is the main bond of a society, a fair society would be like one where this ownership is evenly distributed. Communism did not work because his analysis of human beings as purely economic actors of course is a bit limited. But he came to this conclusion by analyzing the then emergent system of capitalism – and in our current capitalist system we just see how right he was.

His main legacy then is still powerful and visible today though. If Marx were to rise from the dead today I would venture the guess that the places where he would find himself most well understood would be the modern business school. He would not necessarily like what he hears, but he would have no problem to get the language and rationale of the place. Just take the model of the firm as an example: business school orthodoxy still is that firms are purely economic actors and that the only way to explain and to run them is by focusing on economic relations. The core tenets of Agency Theory as the dominating theoretical framework in business schools conceptualize human beings just along these lines: little predators whose only interest in life is the maximization of their economic goals.

The fairly new areas of CSR/Business Ethics/Sustainability etc. have entered the business school agenda just because it has become so blatantly obvious that businesses have other impacts and goals – for better or for worse – than just those economic ones. But even if we look at the CSR literature – the vast majority of it is still focusing on the ‘business case’ for CSR; if you want to do a good job in an MBA class on CSR you have to sell it as a means to sell more stuff, or to reduce cost, or at least as a way to manage risks. In other words, the only ‘correct’ way to be socially responsible is when it actually makes economic sense.

So putting Marx on a Mastercard is actually not so bad a place. Ask an (illegal) immigrant in Europe or North America how important it is to have a credit card: it establishes an economic relation, for sure. But that relation is so important as it is a basis for all other aspects of being a membership in today’s society. A credit card – especially in the age of the internet – is one of the most vital links to membership in the wider community; an economic relationship which crucially shapes all the other social, political or otherwise defined relationships in society. So Karl Marx fiercely staring at us from the Mastercard of the Sparkasse Chemnitz maybe just wants to tell us: ‘I told you so!’

DM

The problem of virtual water

Today we have a guest blog from Jane-Fiona Cumming, A Director at Article 13, on the emerging corporate responsibility issue of 'virtual water'.  

Is water the emerging big issue? It certainly should be, writes Jane-Fiona Cumming. Currently 25% of the world’s population is living in an area of water stress. The combined effects of population growth, increasing urbanisation, and the impact of climate change on upstream resources in areas across the globe will almost certainly ensure that the situation only gets worse.

And it is true that water is making its way up the sustainable development agenda. Millennium Development Goal Target 7.C calls for a commitment to ‘halve, by 2015, the proportion of the population without sustainable access to safe drinking water and basic sanitation’. Water is also one of the key issues for the UN’s upcoming Rio+20 conference.

Despite this, there remains a disconnect between attitudes and behaviours in water-rich areas and the problems in water-poor areas. (Although it should be said that a number of large multinationals whose operations straddle both types of region are taking their consolidated responsibilities seriously.)

One of the problems is that while there are parallels between carbon and water as sustainable development issues – the concept of water footprinting, for example, is gaining traction – there are significant differences. To put it bluntly, on a global scale, consuming less water in a ‘wet’ region does not add to the available resources in a ‘dry’ region.

However, while the big issues are on the agenda for debate, at Rio +20 for example, perhaps we should move our focus to what is called ‘virtual’ or ‘embedded’ water.  Examples of moving virtual water abound. Just take the case of tomatoes exported from a water-poor area to retail shelves in a water-rich area.

One behaviour change that could create a unity of purpose, from individuals through to multi-national companies, is to be aware of where products come from and to make active choices about how we use or value embedded water products from water-poor regions. A type of ‘fair water’ trade, in which products that use embedded water have higher prices that help to make contributions to the local community in addressing water issues (including sanitation) could link the issues together.

What is certain is that, at every level, there is a need for real transparency and joined-up innovative thinking in our management of a finite, collective resource that every human life depends on. Initiatives may be hosepipe bans or the mending of leaking mains pipes; charity-based water products and promotions that divert funds to water projects in drought-susceptible areas, or commercial initiatives that reduce the need for industrial and agricultural water extraction; the movement of virtual water or supra-national mediation aimed at the avoidance of potential ‘water wars’.

This means that the link between changing attitudes and changing behaviours is not a straightforward one.  Whether at an individual, organisational or governmental level, we need to be clear about what kind of behavioural change we want to effect. And that calls for some smart thinking, some honest debating and real transparency about the issue of embedded water.

This post originally appeared on the Radical Shift blog. Photo by David Cohen