The Ethics Sage latest post deals with price gouging in prescription medicine. He discusses the social responsibility of business and goes into some detail about his preference for a free market solution.
I am more and more convinced as time has gone by that the pharmaceutical companies have failed in serving the public and that some kind of government intervention to prevent price gouging and selling prescription medicines for other than their FDA approved uses is going to necessary.
However, the Ethics Sage is worthy of reading. You should put him in your favorites, visit often and perhaps, even sign up as a follower.
Below is a selection from his latest essay. I recommend you visit his web site and read it in full.
Recently a group of 118 oncologists came out in an editorial in the Mayo Clinic medical journal to support a grassroots patient effort to push for fairer prices from drug companies. According to the editorial, many cancer patients are bankrupted by the high cost of care even for insured patients for treatment that costs $120,000 a year. The proposal is to get it down to $30,000 in out-of-pocket expenses – more than half the average U.S. household income. According to the editorial, the drugs are so high that as many as 20% ofoncology patients don’t take their medication as prescribed. I believe it may be better to mandate catastrophic insurance coverage. Under Obamacare, if you are under 30 or obtained a “hardship exemption” you qualify for a high deductible, low premium, catastrophic plan. What about those over 30 who are more in need?
Greed is good. Greed is right. Greed works. These are the words spoken by Gordon Gekko in Wall Street. We could say this is the mantra of greedy CEOs of pharmaceutical companies. In a 2014 survey by Fierce Pharma, a news outlet for the industry, the average pay of the 10 top CEOs of big Pharma was about $30 million. None of the companies were in the Fortune top 100. Celgene was number 369, the highest in the industry. The CEO of Celgene earned $36.61 million. This seems out of line given the relatively small size of most pharmaceutical manufacturing companies.
NFL marketing using breast cancer as a tactic is bad business ethics and blatant hypocrisy. It’s bad business ethics because there is so little money actually given in relation to the hype. It’s blatant hypocrisy because the NFL cannot seem to find any consistent policy toward violence against women.
Maybe it is time to think of green or pink washing for the cynical tactics they are. Obviously, it can be argued that getting money from the NFL is better than no money at all. But is allowing a serious issue to become a corporate money maker and a pink silk veil to hide their problems really a wise decision in any long term sense?
As a marketing tool, the pink ribbon will appear on cups, on uniforms and countless varieties of merchandise. This is a formidable marketing tool. You’re telling the public that you care about a serious issue of personal relevance to them while pulling in large sums and giving very little actual money to the cause. The level of cynicism is staggering.
Is this the future of charity? If it doesn’t make a company a profit, we’re not giving any money? It is Milton Friedman to the max. We serve the shareholders first and foremost. I more reminded of William Henry Vanderbuilt’s quote, “The public be damned.”
Making money off the deaths of millions of women is cold blooded and is in no way a form of charity.
The NFL’s breast cancer scam sells bunk science to profit off pink clothes | Karuna Jaggar | Comment is free | theguardian.com
Pink ribbon marketing is great PR; breast cancer is good for business. Corporations use Breast Cancer Awareness Month to make money every October from pink merchandise and to make even more money in the long-term by generating customer loyalty for a supposedly do-good brand. As for the women living with and at risk of breast cancer, we supposedly benefit from all this “awareness”.
In reality, the NFL’s support of breast cancer philanthropy is outrageous, hypocritical, outdated and inaccurate. The NFL is exploiting breast cancer for its own gain and setting a pathetic example for big business: with nearly $10bn in annual revenue, they have given a mere $4.5m to breast cancer research since the pink misdirection play began.
Achilles was a Greek warrior at the siege of Troy. He was immune to all harm except on one heel. He was shot and killed by a poison arrow in his one vulnerable spot.
The United States has an Achilles heel. There is an American vulnerability that other nations even those with little credible military power can exploit.
To disrupt the German economy during the Second World War, the Americans used strategic bombing. They targeted key industries like ball bearing plants and oil production. There were attacks on infrastructure like bridges, governments offices and railroads. The effort required great sacrifice on the part of the Army Air Force. The 8th Air Force alone suffered 47,000 casualties with 26,000 dead.
One of the greatest missed opportunities of the campaign was the German electrical system. American intelligence did not realize how stretched German resources were and appear to have never considered the German grid a worthwhile target.
Bombing the United States presents serious problems to any potential aggressor. The distance is prohibitive for almost all the other nations on earth. Flight time would be measured in hours.
But strategic attacks can be made at the speed of an electronic transmission.
You can attack infrastructure through corporations, both domestic and multi-national. They possess critical targets held as data and in other systems like control of the electrical grid. Instead of physical attacks on infrastructure, hacking attacks with the same purpose would take place instantaneously and in multiple locations.
Of course, this could be considered wild speculation of the worse kind, a “chicken little” diatribe aimed at the weak minded. Unless you note that such attacks have already happened and are happening now. Unless you reflect that such cyber attacks are based overseas and have every appearance of state sponsorship, apparent trial runs for the “real thing.”
Currently Burger King is moving its headquarters outside the United States to evade taxes. It’s hard to think of fast food place as a matter of strategic interest to the United States but the fact is this company holds several million credit card records including pin numbers as well as a considerable amount of employment information as well as corporate gateways to large financial institutions, lobbying organizations and other companies like suppliers. Throwing all this on the internet for the free market of theft would be a form of sabotage but a foreign hacker would probably gather many company’s data before launching a concerted attack to disrupt the economy by making credit card use difficult or impossible while crippling commerce and banking, a strategic attack without the loss of a single man.
What kind of vulnerabilities do we as a nation have to these kinds of attacks beyond financial information? Here’s some examples:
So, are corporations an Achilles heel in the defense of the United States?
It is obvious that American corporations should act to help defend the country and themselves from these kinds of attacks. According to some, however, corporations are people. Are these “people” patriots or citizens with responsibility? By the tenets of free market fundamentalism, there is no problem of patriotism or duty here. The profit motive will solve these problems simply and easily. Hacking causes problems that cost money, thus the companies will act to defend themselves. So far, so good. But a great deal of money and expertise has already been expended and American data seems to be hacked daily. It is quite likely that companies will attempt to defend themselves. On the other hand, will they defend themselves with the depth of commitment necessary for a infrastructure asset of the United States?
If a corporation has no patriotic duty. If its only duty is to its shareholders. If demands that it act in loyalty to the national interest be described as parochial then there is no need for preventive action in accordance with a nation’s needs. It is difficult and requires the outlay of money and time to defeat this kind of highly skilled and apparently state sponsored attack. Any company embarking on such a program of defense would be placed at a competitive disadvantage with its fellows. While, it would be acting in the interest of the United States and acting in accordance with the duty expected of any American citizen, this would not be in accordance with the “only” real purpose of a corporation, that is, to act only for shareholder value.
What do we do?
By the tenets of neo-liberalism, the market should solve this problem. Perhaps, Russian, Iranian and Chinese, etc. will find having access to American markets more important than exploiting our vulnerabilities? Perhaps will just be lucky – which is apparently our primary mechanism of defense so far.
Or we could demand and establish by law a responsibility to act in concert to act as patriotic citizens on all American corporations and fully prevent them from moving to other nations to escape the obligations of American citizens. After all a corporation, is created by the state and its benefits depend on state protection. While many find the idea of corporate personhood persuasive, I do not. But in any case, they don’t have human mobility and thus their geographic presence can be regulated in a way that human movement cannot.
Patriotism and responsibility for vital national assets like credit card numbers, defense secrets, etc. should not be a matter of choice for a corporate board, but expected behavior from fellow Americans.
Hackers’ Attack Cracked 10 Financial Firms in Major Assault – NYTimes.com
Questions over who the hackers are and the approach of their attack concern government and industry officials. Also troubling is that about nine other financial institutions — a number that has not been previously reported — were also infiltrated by the same group of overseas hackers, according to people briefed on the matter. The hackers are thought to be operating from Russia and appear to have at least loose connections with officials of the Russian government, the people briefed on the matter said.
And still the crisis goes on and on. Every few months, new unsettling information comes out. Every few months, new levels of incompetence emerge.
The reactor continues to leak radioactivity.
They can’t fix it.
Should that make you wonder about the future of nuclear power?
Better yet, what kind of business ethics is it that encourages taking these kinds of risks?
Fukushima: Third Anniversary of the Start of the Catastrophe | Eslkevin’s Blog
With the third anniversary of the start of the Fukushima Daiichi nuclear catastrophe coming next week, the attempted Giant Lie about the disaster continues–a suppression of information, an effort at dishonesty of historical dimensions.
It involves international entities, especially the International Atomic Energy Agency, national governmental bodies–led in Japan by its current prime minister, the powerful nuclear industry and a “nuclear establishment” of scientists and others with a vested interest in atomic energy.
Deception was integral to the push for nuclear power from its start. Indeed, I opened my first book on nuclear technology, Cover Up: What You Are Not Supposed to Know About Nuclear Power, with: “You have not been informed about nuclear power. You have not been told. And that has been done on purpose. Keeping the public in the dark was deemed necessary by the promoters of nuclear power if it was to succeed. Those in government, science and private industry who have been pushing nuclear power realized that if people were given the facts, if they knew the consequences of nuclear power, they would not stand for it.”
Based on those potential risks and terrible experiences, I cannot agree nuclear power is the best option for generating electricity. Nowadays, we still cannot control nuclear power steadily. Nuclear power is like a savage beast. If it becomes uncontrollable someday, we do not have the capability to control it. There is no perfect safety. We don’t know how serious problems will happen or when the next accident will appear. We cannot bear more catastrophes. We should decrease reliance on nuclear power. I hope scientists can develop new technology to obtain energy or improve other renewable energy and alternative energy resources, like wind power and solar power. We should learn from history to not repeat failure. For public health and for the safety of the environment, we should keep away from this beast.
David Yamada is a crusader against workplace bullying. I read his blog regularly and this is his latest post. I think you should read it.
I find his rationale for dropping the service to be compelling. Why don’t you go to his site, read the full post and see if you agree?
Why I cancelled my Amazon Prime account « Minding the Workplace
I cancelled my Amazon Prime account earlier this week, and until working conditions for their employees improve, I won’t be shopping there nearly as often as I have previously.
Amazon Prime is a premium membership service that guarantees two-day shipping on almost every item ordered. For frequent customers such as myself, Prime offers easy, dependable, click-and-ship ordering, with hardly any waiting time for delivery.
However, revelations about Amazon’s labor practices have become increasingly disturbing, more specifically the working conditions in its vast merchandise warehouses. For me, the final straw was a recent Salon investigative piece by Simon Head, “Worse than Wal-Mart: Amazon’s sick brutality and secret history of ruthlessly intimidating workers,” detailing how the situation is much worse than I imagined …
• Cheap books are really publishers and authors receiving less: this doesn’t support the future of book publishing and quality writing. Amazon can offer “discounts” because they are cutting other costs: taxes, publisher payments, author payments, and safe-labor practices.
• Amazon has strong-armed many publishers into reducing the prices of their books and eBooks. In some instances when publishers have refused, Amazon has removed the “buy” button from the pages of the publishers’ books. This tactic threatens the ability of publishers to survive in an industry with an already low profit margin. (Read more: Books After Amazon)
• Amazon uses “loss leaders” to gain an unfair pricing advantage over their bookselling competition. Selling certain books (or Kindles) at a loss or no profit entices customers to their website to buy big ticket items (often non-book items, like electronics, since books are only a tiny fraction of Amazon’s Walmart-esque business model).
• Amazon refuses to pay taxes in most states, even when they have a physical presence there. By not paying state sales taxes, Amazon gains an advantage in pricing perception over independent bookstores because their prices seem lower by 5 to 8% (the sales tax rate in most states).
Working in an Amazon warehouse literally means working in a sweatshop
• Amazon’s Pennsylvania warehouses get so hot in summer months that Amazon keeps ambulances outside of the buildings to rush employees to the hospital. Employees must keep a brutal production pace even during heat waves or they risk being terminated. (Read more: Inside Amazon’s Warehouse)
As I wrote with some foresight years ago, the Fukushima disaster is going to last for decades. As a business ethics disaster, Fukushima gives fracking a good run for its money, and here’s how: We keep finding out new ways that TEPCO screwed up. That’s right, after enormous failures in management, truth telling and just basic competence, all of them staggering, we keep finding new ones.
Read below about the new one and relish their utterly responsible reason – they were real busy. That is precisely one step above “the dog ate my homework.”
We’re talking Strontium 90, an isotope of the element. Our bodies mistake it for calcium and thus incorporates it into our bone structure. And that’s because we all need silvery radioactive metals deposited right next to our bone marrow so that our production of blood cells can be illuminated by the glow.
So, it seems they got real busy and lost track of how much strontium 90 was being released. No big deal. After all, what is it going to do? – Deposit itself in the bones of adults and in particular children giving them enhanced opportunities for cancer and leukemia?
Nah. Don’t let that kind of thing worry you. After all, these are the kinds of people running nuclear power all over the world. They’re competent, cool, collected, well-educated businessmen. Not flaky environmentalists, no government officials, no liberal arts trained thinkers, just savvy businessmen who understand the real world, the world of competence, of money, the important stuff. Genetic structure? Screw it. It’s not on the balance sheet. Won’t cost the investors a dime, and that’s where the action is, after all.
Remember the free market can solve all problems. Government interference damages the free market and thus produces inefficiencies which cannot be tolerated. So, therefore, these gentlemen at TEPCO are heroes being unfairly stigmatized. We should get out of their way and let market forces naturally solve the problem.
Tokyo Electric Power Co. (9501) is re-analyzing 164 water samples collected last year at the wrecked Fukushima atomic plant because previous readings “significantly undercounted” radiation levels.
The utility known as Tepco said the levels were undercounted due to errors in its testing of beta radiation, which includes strontium-90, an isotope linked to bone cancer. None of the samples were taken from seawater, the company said today in an e-mailed statement.
“These errors occurred during a time when the number of the samplings rapidly increased as the result of a series of events since last April, including groundwater reservoir leakage and a major leak from a storage tank,” according to the statement.
Mitsubishi Corporation (MC) is pleased to announce plans for the construction of a new solar power plant* in Iwaki City, Fukushima. The largest of its kind in the Tohoku region, the 12,000-kilowatt facility is expected to start operating from mid-2014. The project forms part of MC’s overall strategic focus of developing its business in the renewable energies sector.
Known as one of the foremost industrial areas in the region and as well for being a major sightseeing area, Iwaki receives the highest amount of sunlight annually within Tohoku. MC is developing the mega solar project with full support from Nippon Kasei, as well as cooperation from the Fukushima Prefecture and Iwaki City governments. MC is simultaneously developing a 6,000-kilowatt mega solar project at the site of Onahama Petroleum Co., Ltd, a joint venture between MC and Tepco in Iwaki. Together, the two projects will constitute 18,000 kilowatts of solar power generation in total at Onahama.
For the first time since the triple meltdown at the Fukushima No. 1 nuclear power plant three years ago, the government is lifting an evacuation order in a restricted area, allowing residents to return to their homes.
Residents of an eastern strip of the Miyakoji district of Tamura, Fukushima Prefecture, are being allowed to return as of April 1, the first day of the 2014 fiscal year, government officials said at a meeting Feb. 23. The area lies within 20 kilometers west of where the accident occurred.
One reason the government is rushing to lift evacuation orders for communities affected by the Fukushima nuclear disaster is cost. Tokyo Electric Power Co., which is being lent money by the government’s Nuclear Damage Liability Facilitation Fund to compensate evacuees, is required to continue compensation one year after an evacuation order is lifted. Lifting the orders will hasten the end of those payments.
According to the industry ministry, 1.5 trillion yen ($14.63 billion) has been paid in compensation to evacuees from 11 municipalities as of February.
In addition, decontamination costs will snowball if the government tries to achieve its long-term goal of lowering annual airborne radiation doses to 1 millisievert or less in areas where evacuation orders are in place.
A Reconstruction Agency official said it is unclear whether the long-term goal can be achieved even if the government continues decontamination work.
Prior to the Feb. 23 meeting, a senior Reconstruction Agency official asked Kazuyoshi Akaba, a senior vice industry minister, to explain the government’s policy to evacuees “even if it means rising to your full height and standing firm before residents.”
Akaba and Tamura Mayor Yukei Tomitsuka were tasked with explaining the new policy to the residents.
During a previous meeting in October, Tomitsuka had proposed lifting the evacuation order by November, but residents complained, saying too much contamination remained.
Some evacuees requested additional decontamination work because the radiation levels remained above 1 millisievert in some areas. The government promised to deal with residents who are still worried about high radiation levels on a case-by-case basis.
“If this abnormal situation continues, residents will lose attachment to their hometown and the community will collapse,” Tomitsuka has said.
Frantic efforts to contain radioactive leaks at the wrecked Fukushima Daiichi nuclear power plant have been dealt another blow after its operator said about 300 tonnes of highly contaminated water had seeped out of a storage tank at the site.
The leak is the worst such incident since the March 2011 meltdown and is separate from the contaminated water leaks, also of about 300 tonnes a day, reported recently.
Tokyo Electric Power Co (Tepco) said it did not know how the water leaked out or where it had leaked to, but it believed that the spillage had not flowed into the Pacific ocean.
Tepco’s spokesman, Masayuki Ono, said the water had seeped into the ground after breaching a concrete and sandbag barrier around the tank. Workers were pumping out the puddle and removing the remaining water from the tank, he added. Despite efforts to contain the spillage, the leak is already the most severe since the crisis began.
This is the worst leak since the 2011 disaster. Fukushima after the disastrous tsunami was a major disaster. It was on the news every day.
Now it’s slow motion disaster. Leakage continues into the ocean while experts solemnly intone that we shouldn’t worry because the ocean is big.
This is business ethics at its worse. A nuclear power plant was built on the coast near an earthquake fault. The safety systems we were repeatedly assured would never fail failed. We don’t find out from the government or the industry that there is a problem. The news media discovers the serious nature of the crisis. A corrupt industry downplays the incident with government connivance. As the disaster worsens, the lies and incompetence become more and more obvious, and gradually it becomes obvious that when confronted by a disaster, the nuclear industry simply has no idea how to fix the problem. This is contrary to what the industry has been saying for decades.
Remember, just repeat, “Nuclear industry is the future. It’s safe and cost effective. Only a handful of people have died in the rare nuclear accident compared to thousands in the coal industry. It’s only fearmongers and environmental cranks who oppose this future.”
See, after a while you feel better about everything?
Highly radioactive water from Japan’s crippled Fukushima nuclear plant is leaking into the ocean creating an “emergency” that the operator, TEPCO, may be unable to contain, said an official from the country’s nuclear watchdog.
“This contaminated groundwater has breached an underground barrier, is rising toward the surface and is exceeding legal limits of radioactive discharge, Shinji Kinjo, head of a Nuclear Regulatory Authority (NRA) task force,” told Reuters.
Tokyo Electric Power Co’s “sense of crisis is weak,” Kinjo said. “This is why you can’t just leave it up to Tepco alone” to deal with the ongoing disaster.
“Right now, we have an emergency,” he said.
A total of up to 40 trillion becquerels of radioactive tritium may have leaked into the ocean since the disaster, said TEPCO, insisting that it was within legal limits.
Two and a half years after the Fukashima tragedy Japan does not want to admit how serious it is, but it is obvious the drastic environmental implications are to follow, Harvey Wasserman, journalist and advocate for renewable energy, told RT.
RT: Japanese officials have admitted a leak at Fukushima has been happening for two years and is worse than earlier thought. Why did it take so long to evaluate the actual repercussions of the tragedy and take decisive measures to tackle them?
HW: The Japanese authorities have been covering up the true depth of the disaster because they don’t want to embarrass themselves and the global nuclear industry and they are trying to open up another nuclear plant in Japan. When the Japanese people now find out that the accident is worse than we thought and they have been leaking many tons of radioactive water into the Pacific Ocean for almost two and a half years, this is a catastrophe. Tokyo Electric has no idea how to control this accident. This is absolutely terrifying after two and a half years. To find out that these reactors have been out of control, now that they can’t control this they don’t know what’s going on. This is not a primitive backward country; this is Japan with advanced technology. It has very serious implications for nuclear power all over the world.
RT: Why the plant’s operator failed to contain the leak?
HW: Because they don’t know what to do. This has never happened before. You have three explosions; you have four nuclear reactors that are severely compromised. No one ever planned for this. This is an apocalyptic event. This is something that could contaminate the entire Pacific Ocean. It is extremely serious. The reality is that Tokyo Electric does not know what is happening and does not know how to control what is going on. Our entire planet is at risk here. This is two and a half years after these explosions and they are still in the dark. It’s terrifying.
The New York Times has recently reported that the workers at Fukushima are running out of places to store the water that has been used to cool the radioactive waste. The water is highly radioactive, and is leaking from its storage tanks at the rate of 75 gallons per minute. In other news, the Japanese government is changing the threshold for danger so that people may return. Thus, doses of less than 20mS/y are now acceptable.
The rise of the benefit corporation, a type of corporate form that didn’t exist before 2010, is remarkable in its speed. This kind of corporation offers an organization not tied to the narrow goal of short term profit maximization. While the “judgment rule” seems to offer corporations a freer decision making climate to be environmentally friendly and exist with some freedom from being sued for loss of share value, there is some legal uncertainty. The Benefit Corporation removes all doubt. This kind of corporation does not exist for profit maximization.
This offers the opportunity for building purposeful organizations with a stated and legal responsibility to do no harm. This is a far better model than the soulless machines of destruction we often experience as the modern corporation.
This may herald a new era in corporate social responsibility. It only takes a small adjustment in the law to have tremendous effects on the culture over time. This may be one of those historical adjustments.
For my students, the most important concepts here for study are the “judgment rule” and “short term profit maximization.”
Delaware Gov. signs landmark social entrepreneurship law
The benefit corporation, the brainchild of the nonprofit B Lab, is predicated on a simple idea: use the power of business to solve social problems. Companies incorporated under legal frameworks like the one passed in Delaware strive to maximize profits, but can do so while also pursuing a broad range of social and environmental goals, from low carbon emissions to generous employee benefits and transparency in governance. Under traditional corporate law, a firm’s fiduciary responsibility to its shareholders to maximize profits is privileged over other commitments to social or environmental responsibility. The benefit corporation amends this, legally enshrining the interests of stakeholders, including employees, customers, the community and the environment, alongside those of shareholders. Among other things, benefit corporation status shields a company’s social and environmental objectives when it is up for sale. Today, there are at least 200 legally registered benefit corporations (and likely many more, as some states don’t currently track their incorporation), including large companies like Patagonia and many smaller ones like Vermont-based WomenLead and New York-based Clay Marketing. The “shared value” created by these companies is heralded by benefit corporation enthusiasts as a radical refashioning of contemporary capitalism.
From Wikipedia: (I included this section from the Wikipedia article because I want you, kind reader, to get a grasp on the speed of the change in corporate law. Business law tends to be very conservative and usually slow moving, but not in this case. jp)
In April 2010, Maryland became the first U.S. state to pass benefit corporation legislation. As of January 2013 California, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, South Carolina, Vermont, and Virginia had all passed legislation allowing for the creation of benefit corporations. Legislation is also pending in Illinois that establishes a new type of entity called the “benefit LLC,” making available to limited liability companies the same opportunities afforded to Illinois corporations under the state’s Benefit Corporation Law. Passage of the bill would make Illinois the first state to offer a social enterprise the opportunity to be a benefit L3C.
Maryland’s legislation was signed into law on April 13, 2010 and became effective on October 1, 2010.
Virginia’s legislation was signed into law on March 26, 2011 and became effective on July 1, 2011.
Vermont’s legislation was signed into law on May 19, 2010 and became effective on July 1, 2011.
New Jersey’s legislation passed on January 10, 2011 and became effective when it was signed into law on March 1, 2011.
Hawaii’s legislation was signed into law on July 8, 2011 and became effective upon signing.
California’s legislation was signed into law on October 9, 2011 and became effective on January 1, 2012.
New York’s legislation was signed into law on December 12, 2011 and became effective on February 10, 2012.
Louisiana’s legislation became law on May 31, 2012 and went into effect on August 1, 2012.
South Carolina’s legislation became law on June 6, 2012 and became effective the same day.
Massachusetts’ benefit corporation legislation became law on August 7, 2012 and became effective on December 1, 2012.
Illinois’s legislation was signed into law on August 2, 2012 and went into effect on January 1, 2013.
Pennsylvania’s legislation became law on October 24 and will become effective on January 22, 2013.
Washington, D.C. legislation was signed by the Mayor on February 8, 2013 will go into effect after 30 days of congressional review.
Arkansas’s legislation was signed by Governor Mike Beebe on April 19, 2013 and will go into effect 90 days after sine die.
Guest post by Layton Olson. Layton specializes in representing tax exempt community, trade, and professional organizations at Howe & Hutton LTD.
Last month, a dozen companies committed to advancing social good filed to be classified as ‘Benefit Corporations’ in California. Their decisions represent a commitment to business strategies that systematically contribute financial, time, human, and other resources to charitable, educational and community improvement initiatives and institutions. California has joined the six states – Vermont, Maryland, New York, New Jersey, Virginia and Hawaii- that have enacted so-called public benefit or “B Corp” legislation since 2010. Colorado, North Carolina, Pennsylvania and Michigan and some cities have similar laws under consideration.
While traditional C Corporations are chartered to maximize benefit (i.e. profits) for shareholders, the B Corporation is legally chartered to consider and benefit stakeholders – a group that also includes employees, the environment, vendors, and the broader community… This legal status shields corporate directors from “stock-drop lawsuits,” in which shareholders can sue corporate leadership for knowingly acting in ways that decrease profits (i.e. raising social or environmental standards). Benefit Corporations must also publish an annual benefit report, which publicly discloses environmental and social performance using 3rd party reporting standards – therefore increasing transparency and accountability to shareholders and a burgeoning class of social investors.
What I learned at the workshop was that a benefit corporation is a new corporate legal structure that several states have established (Massachusetts passed BC legislation in August 2012) to provide an alternative to for-profit entities that want to include a public mission equally alongside seeking a profit. This is significant because historically, for-profit corporate legal structures bound CEOs and boards to pursue profit over all other considerations, regardless of the potential social and environmental costs. In addition, while not all corporate lawyers agree, founders and CEOs of traditional for-profit corporations perceived as making decisions that jeopardized the bottom line, can be fired.
Consequently, while there are many contributing factors to the numerous social and environmental challenges humanity’s faces, a very significant factor is the corporation’s pathological pursuit of profit at the expense of public health and environmental sustainability. This pathological pursuit of profit leads many corporate decision-makers to externalize as many costs as possible. As Joel Bakan, highlighted in his book, The Corporation, “It is no exaggeration to say that the corporation’s built-in compulsion to externalize its costs is at the root of many of the world’s social and environmental ills.” (My Emphasis, jp)
From the web site, Pennsylvania Nonprofit Law blog.
This new construct, called a “Benefit Corporation,” stresses sustainability along with financial success. More to the point, this new model is a boon to the non-profit world. It provides the opportunity for increased cooperation with a conscientious corner of the for-profit sector and the potential to leverage more sustainable impacts on business practices beyond existing corporations. Benefit or “B” Corporations redefine the modern notion of commercial success by valuing “stakeholders” above “shareholders.” Unlike traditional corporations, B Corporations must facilitate, and publicly report, positive social and environmental impacts through their work in order to register with the non-profit organization, B Lab (http://www.bcorporation.net). This third-party validation process provides a number of valuable benefits to participating businesses:
Save Money. B Corporations have the potential to deliver immediate financial value, and B Lab has already saved B Corps over $1M through service partnerships.
Set Yourself Apart. B Corporations differentiate themselves in the marketplace, and the certification process allows companies to generate press, meet sustainability requirements set by other companies, enhance reputation and mitigate potential trust erosion from consumers.
Find Common Ground. B Corporations offer a “common ground” for businesses that are committed to both the mission-driven ethos of the non-profit world and the best practices of the for-profit section.
Connect With Your Peers. Through B Lab, B Corporations are encouraged (and incentivized) to collaborate amongst themselves and share best practices in sustainability, marketing, finance, IT, and HR.
Grow Faster and Smarter. The raw numbers (http://www.bcorporation.net/resources/bcorp/documents/2011-AR_B-Index.pdf) demonstrate that registered B Corporations expand at a more consistent rate, work more closely with other area organizations, offer better benefits to their employees, and foster more positive change within their communities than traditional corporations.
From the web site, Class War in America. (I particularly enjoyed this post and recommend you visit the site and read the entire article. jp)
There’s a promising development in the capitalism department these days. It’s called the Benefit Corporation. It’s pretty new, and it’s important. This article in The Nation tells you what’s what.
Benefit corporations are characterized by three things: (1) The purpose of such companies is to support the triple bottom line. That is, they are sworn to protecting the environment and doing good things for the community as well as earning profit; (2) Their social accountability standards are high; (3) They work to build sustainable businesses that are designed to last.
I have shown many films in class over the last five years. I tend to shy away from documentaries and use commercial movies to make points. For instance, I use the film, Sabrina, to bring up the issue of class differences, and it is a consistently successful film commanding class attention and getting intelligent responses when they analyze the influence of class.
However, I have two documentaries that have been consistently successful in class use. One of them is Gasland, the other King Corn.
King Corn is story of two men who do a simple experiment in the pursuit of truth. Concerned by the diminishing life spans of Americans, they discover that their diet is primarily corn. They journey to Iowa and grow an acre of corn to see how the process works. They talk to many people in their travels and these conversations are the best part of the film.
The issues of corn, overproduction, factory farming and high fructose corn syrup are very controversial and can be very emotional. The documentary’s approach, the humble seeker after truth, sets the emotional level very low and the film is amusing and relaxing. Nevertheless my students do leave the film uneasy about the state of American agriculture and there are usually a good many comments about what we should be eating.
I usually add some lecture material on the Cuban Embargo, and go into more depth on the high fructose corn syrup controversy.
If you are a fellow instructor I recommend you use the film. It used to be available of Netflix but now you have to purchase it or find it on the web.
As Ian and Curt discover, almost everything Americans eat contains corn. High-fructose corn syrup, corn-fed meat, and corn-based processed foods are the staples of the modern diet. America’s record harvests of corn are supported by a government subsidy system that promotes corn production beyond all market demand. As Ian and Curt return to Iowa to watch their 10,000-pound harvest fill the combine’s hopper and make its way into America’s food, they realize their acre of land shouldn’t be planted in corn again—if they can help it.
Engrossing and eye-opening, KING CORN is a fun and crusading journey into the digestive tract of our fast food nation where one ultra-industrial, pesticide-laden, heavily-subsidized commodity dominates the food pyramid from top to bottom – corn. Fueled by curiosity and a dash of naiveté, college buddies Ian Cheney and Curt Ellis return to their ancestral home of Greene, Iowa to figure out how the modest kernel conquered America.
There is legislative logic to the flood of cheap corn-based foods. In 2005, federal subsidies spent $9.4 billion in taxpayer money to promote corn production. For Iowa farmers, these payments often mean the difference between profit and loss on a given acre. With subsidies promoting production beyond market demand, the raw materials for an obesity epidemic are readily at hand.
My father calls this part of the U.S. “God’s Country”. And I do believe that he is correct. It is an amazing place in our country, and in the world. But now the corn grown there is not for us to feast on as it used to be. It is used primarily for manufactured sweeteners and animal feed. You can learn more about this when you see the film by two young men determined to discover the genesis and path of our food production. They set out on a journey to grow one acre of corn, and they learned more than they ever knew they would. See King Corn. You can rent it at your local video store. It is worth a watch.
Live from the Union Square subway: A big food message that tips its hat to changing consumer perception. When I saw this poster, the first thing I thought of was the film King Corn. The filmmakers explain that grass-fed cows used to take 2-3 years to get fat and ready for our beef consumption. Once we started feeding them corn, however, they got to the same weight in just 15 months. By changing the diet of our cows, we’re forcing them into false maturation. With this, and so many of our industrial food ways, we wrestle nature into the ground.
On the odyssey of the pilgrim researcher, many experts are consulted. In the set up they visit a lab where they have their hair analyzed to get the data version of the typical American eater. Yup, the hair speaks counter-intuitive truth to reason: a diet of soda and hamburgers and snack foods delivers what they suspected: the main ingredient in their hair is corn. Look in the bioinformatic mirror and you read what you eat/are.
One of the strengths of the film is their respect for the Iowa farmers they encounter. They don’t assume anything about their informants’ lives, opinions or class affiliation. They refrain from interpreting and judging what they learn, but the knowledge they acquire complicates the decisions they have to make. And despite their restraint, those complications are ethical ones.
King Corn is a documentary about two men, Ian Cheney and Curt Ellis, who study where their food comes from. The film begins with the realization that corn is in most of our foods and that it is one of the most productive and most subsidized grains in the United States. Iowa alone produces 2 trillion corn crops which is the largest in American history and is enough to feed the entire United States (Wolfe, Cheney, Ellis, & Miller, 2012). Ian and Curt move to Iowa to plant their own crop of corn and then follow it through the food system. They end up raising all sorts of questions about the food we eat, how it is farmed, and what happens to it after the harvest.
It’s just amazing to see how much Earl Butz‘s farm policy in the 1970s, which I’m sure he enacted with really good intentions, has changed family farms, our health, and our environment, and all for the worse. Does that mean the old farm policy of the 50s and 60s would work now? I don’t know. But something has got to give, and the farmers in the documentary were in agreement that the ridiculous amounts of corn they produce are, well, ridiculous.
I wish I knew what the solution was. Simply educating consumers to make informed choices is a start, but I just don’t think it’s enough, not when our government is pouring giant subsidies on a crop that no one can eat.
Milton Friedman’s Dumbest Idea (The article actually says “the world’s dumbest idea,” but it is longer than the recommended length for titles if you are doing “search engine optimization and I had to cut it. jp)
I wish I had written the article below. I love every word of it, and the most astonishing thing about this writing is where it appears, in Forbes. That takes by breath away. How did he get past the editor?
Well, enough of that –
The article is very much what I have been saying in previous articles on this web site and in public, that is, the idea that a corporation’s sole purpose is to make money for the shareholder is ridiculous. I’d start my analysis with “non-profits,” and get more legally critical as I went through the various kinds of corporations and what they were used for.
Generally speaking, articles dealing with the crisis focus on derivatives, Sallie Mae, the business press, rating agencies, etc. They all share blame and a lot of it. I have always been convinced that the underlying problem was greed, self interest, the corrosive effects of Milton Friedman’s bizarre doctrine of economic utopia, and the replacement of critical scrutiny by frantic cheerleading in the financial press, and I have some more villains to name.
Bogle doesn’t dodge the ethical question. He wonders how we got here and how we can get out. He longs for the day when businessmen understood the value of trust and fair dealing. I’m not surprised to find that Mr. Bogle has no simple solution. It took four decades of worship of the financial means of production of little more than electronic impulses to triumph over the creation of actual goods. This isn’t going to be easy, and it it likely to fail subjecting this country to a chain of financial meltdowns each one of which will severely damage the lives of millions of Americans who will bear the chief cost not only of their way of life but paying for the meltdown themselves out of their “widow’s mite.”
This is capitalism run off the tracks. Greed out weighed simple good judgment. Obvious signs of trouble, not just obvious but certain evidence of approaching disaster, were ignored as money piled up.
The market was supposed to be self regulating. Read a little Milton Friedman. This economic freedom to innovate was supposed to lead to better lives for all Americans, perhaps the whole world. This utopia, this nirvana, has thus far failed to appear. But incomes in a handful of the well placed are measured in the billions.
Now, you could make a good argument that this kind of business thought (Milton Friedman, etc) actually falls into the second level where self interest and avoidance of punishment become primary concerns. However, making moral decisions at the second level of Kohlberg’s six stages is just about as insulting as reasoning at the first.
My second point is when business is considered only as a money making endeavor, all the other levels of moral development don’t just become irrelevant, they become a block and a hazard to making maximum profit.
If you are short on time, please read the brief excerpt below, but if you have time click on the link and read the whole article. It merits it.
As the leader of the Chicago school of economics, and the winner of Nobel Prize in Economics in 1976, Friedman has been described by The Economist as “the most influential economist of the second half of the 20th century…possibly of all of it”. The impact of the NYT article contributed to George Will calling him “the most consequential public intellectual of the 20th century.”
Friedman’s article was ferocious. Any business executives who pursued a goal other than making money were, he said, “unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.” They were guilty of “analytical looseness and lack of rigor.” They had even turned themselves into “unelected government officials” who were illegally taxing employers and customers.
How did the Nobel-prize winner arrive at these conclusions? It’s curious that a paper which accuses others of “analytical looseness and lack of rigor” assumes its conclusion before it begins. “In a free-enterprise, private-property system,” the article states flatly at the outset as an obvious truth requiring no justification or proof, “a corporate executive is an employee of the owners of the business,” namely the shareholders.
If anyone familiar with even the rudiments of the law were to be asked whether a corporate executive is an employee of the shareholders, the answer would be: clearly not. The executive is an employee of the corporation.
But Friedman also produced a less felicitous legacy. In his zeal to promote the power of markets, he drew too sharp a distinction between the market and the state. In effect, he presented government as the enemy of the market. He therefore blinded us to the evident reality that all successful economies are, in fact, mixed. Unfortunately, the world economy is still contending with that blindness in the aftermath of a financial crisis that resulted, in no small part, from letting financial markets run too free.
The Friedmanite perspective greatly underestimates the institutional prerequisites of markets. Let the government simply enforce property rights and contracts, and – presto! – markets can work their magic. In fact, the kind of markets that modern economies need are not self-creating, self-regulating, self-stabilizing, or self-legitimizing. Governments must invest in transport and communication networks; counteract asymmetric information, externalities, and unequal bargaining power; moderate financial panics and recessions; and respond to popular demands for safety nets and social insurance.
The birth of the shareholder value movement is commonly traced to a speech Jack Welch gave at New York’s Pierre hotel in 1981, shortly after taking the helm at GE. In that famous speech, entitled “Growing Fast in a Slow-Growth Economy,” Jack Welch outlined his beliefs in selling underperforming businesses and aggressively cutting costs in order to deliver consistent profit rises that would outstrip global economic growth. He told analysts then, “GE will be the locomotive pulling the GNP, not the caboose following it…,” according to reports of the speech.
Jack Welch said in the interview given on 11-March-2009 that he never meant to suggest that setting, and meeting, profit expectations quarter after quarter in an effort to boost a company’s share price should be the main goal of corporate executives.
“It is a dumb idea,” he said. “The idea that shareholder value is a strategy is insane. It is the product of your combined efforts – from the management to the employees”.
What he was talking about is the commonly held belief that the purpose of business is to increase shareholder value. That belief is variously attributed to Milton Friedman, Adam Smith, and perhaps common sense. BUT, it was the operating principle that resulted in two market busts and innumerous scandals in the past decade. The fact that Welch was one of the main proponents certainly adds a fair amount of gravitas to his comments.
Profitability, shareholder value, and measures like economic value added (EVA) completely miss a point that Welch articulated so well. Namely, increased “shareholder value” is a result, not a strategy.