Ben Franklin’s Business Ethics!

On By southwerkIn business ethics, Capitalism, ethics4 Comments

I was reading the Harvard Business Review when I came across this gem of an article by a John Paul Rollert. In it, Rollert discusses Franklin’s scheme for moral perfection and the cast of villains and heroes who assisted and obstructed his printing business.

I try to read Franklin’s autobiography at least once a year. After writing the biography he would go on to represent Massachusetts before the king, serve in the Continental Congress, and most importantly, serve on the Committee of Five that created the Declaration of Independence. He then represented the colonies to the French king, was one of three American negotiators for the peace treaty ending the Revolutionary War, and then to culminate his career, serve as a delegate as the Constitutional Convention. In the last years of his life, Franklin became an avid foe of slavery.

The autobiography is, thus, an early picture of Franklin before the world shaking accomplishment that would follow. Reading the book is an interesting experience. Franklin is witty, self deprecating and pridefull (often at the same time), cynical, clever and moral (most of the time). He freely admits that sex was a problem for him (he mentions intrigues with low women) and he believed it necessary for good health.

He is the antithesis of Friedman’s pure focus on profit, being an avid member of the community, supporting and creating in the public sphere constantly. He created organized firefighters, lending libraries, the idea of matching funds, and the development of education. He not only spent his own money, he solicited money from others and was willing to suffer controversy if he felt the cause was just. In short, he was a model American.

He was no shrunken, pale reflections of humanity, the kind that worships the green dollar sign above all other treasures. He loved his country and his fellow man. He was willing to suffer ridicule and danger for his country.

I have three heroes in my life, Benjamin Franklin, Henry Drummond (Inherit the Wind) and Caesar as portrayed in Shaw’s play, Caesar and Cleopatra.

I owe you gentle reader an apology. I have talked much about what I have read and what it meant to me and let Mr. Rollert’s article undiscussed. His writing appears in the Harvard Business Review which by itself speaks well of it and I recommend that you read it and get his take on the business significance of Franklin’s writing.

Philip Brookes Adds To His Friedman Comments!

On By southwerkIn business ethics, Capitalism

A few days ago, I reblogged a post from the web site, Get Aktiv. Since then, one of my favorite bloggers, Chris MacDonald, added a thought to which I replied and Mr. Brookes decided to significantly add to his argument. Below is a sentence from his argument, one that I particularly liked. It would, of course, be best if you read the entire post. I’ve written the occasional argument for a position. They take considerable time. So, honor his efforts and go to his site.

There is no legal reason (as a general rule – there may be certain exceptions in some states or countries around the world) that a company must extract every last cent of profit out of every situation. Instead, it seems to me just good ethics and business sense to operate transparently with your stakeholders so that you all share a common goal for the organisation, a la The Body Shop. The Directors of this company are clearly acting in good faith with their shareholders and customers, and within the bounds of the law, to sell environmentally and socially responsible products. Although it may be possible to sell other beauty products and make a higher profit, this is not the exclusive responsibility of the directors.

I went and had a look at Mr. Brookes’ web presence and it is significant. He is a consultant, has an article on blogging and is a proud family man, (provided that there is only one Philip Brookes in Australia). I’m going to continue to read his blog. I think you should too.

James Pilant

American Jobs – Let’s Start Now!

On By southwerkIn business ethics, Capitalism, Economic measurement, Government Failure3 Comments

I was reading “The Engineering Ethics Blog” and the author called my attention to an article by Andy Grove which had appeared in Bloomberg. It sounded interesting, so I went and had a look.

(I warn you, I ran across this quote from Grove while backgrounding the column: “You have to pretend you’re 100 percent sure. You have to take action; you can’t hesitate or hedge your bets. Anything less will condemn your efforts to failure.” I became a fan of his at that point, so I am in his corner!)

Andy Grove is one of the founders of Intel, the chip maker. He came to the United States from Eastern Europe, a refugee from the communist bloc. In a lengthy and well written article, he talks about the loss of American jobs and what that means in the long term. Unlikely many who point out problems but have no solutions, he provides a set of solutions as well.

Grove is a visionary and he has become increasingly concerned about the status of the United States. Grove reasons that the United States’ current policy is to allow jobs to go overseas because the jobs created here will be high quality knowledge jobs that pay more and provide more influence. Grove points out that creating one of these jobs is immensely expensive compared to regular jobs and while it is nice to create a few high quality jobs, it’s most unsatisfying when the rest of your population is unemployed.

Grove argues that several Asian countries have careful job creating policies at the national level. He feels we can learn a lot from these nations. In addition, he favors a tax on out sourced products particularly electronics like computers. He admits that this may start a trade war but he says if there is such a war we should plan to win.

I like what he says. I believe he is right and that our nation’s future in disappearing in front of our eyes.

I give you the link to his article here.

Here’s Andy Grove discussing the critical importance of moving transportation from oil to electricity.

I will be talking more about this topic later on. I am struggling with a sinus infection. It’s slowing down my posting.

James Pilant

Milton Friedman got corporate Social Responsibility wrong (via Get Aktiv)

On By southwerkIn business ethics, Capitalism3 Comments

I suppose there is a certain satisfaction from hearing one’s own views confirmed. I plead guilty. This is delicious. This is from the web site, Get Aktiv.

This is the key sentence from the essay.

Extrapolated into another scenario, Friedman would no doubt argue that a corporate executive would be duty-bound to offshore their operations to low-cost developing countries wherever it maximised profits, and this should only be done at the very lowest possible labour rates allowed by law so as to maximise corporate profits, even if the developing country has no effective wage protection and it is exploitative of the workers, provided that doesn’t bring financial harm to the company through loss of reputation – indeed, to pay a more ‘humane’ or ‘reasonable’ wage to staff than the absolute minimum that could have been negotiated is a reflection of an executive not performing his duties to the company.

On my flight back from Kuala Lumpur to Melbourne yesterday, I took the opportunity afforded by flying AirAsiaX (sans onboard entertainment) to read another sizeable chunk of “Creative Capitalism: A Conversation with Bill Gates, Warren Buffet, and other Economic Leaders”. I guess I’m a bit slow in getting to the literature of leading global economists but I can now say I’ve read Milton Friedman’s “The Social Responsibility of Business”, an essay f … Read More

via Get Aktiv

Is emotional detachment an antidote for a nasty workplace? (via Minding the Workplace)

On By southwerkIn business ethics

David Yamada is back discussing whether emotional detachment (withdrawel?) is an appropriate response to work place problems. He contrasts Roberts Sutton’s current view with that of a much older source, Albert O. Hirschman. Yamada concludes that it is a solution of a sort but a sad solution.

Organizational psychologist Robert Sutton advises on his blog "Work Matters" (hosted by Psychology Today) that "for people who are trapped in nasty workplaces, and can't escape at least for now," one useful coping mechanism "is to learn the fine art of emotional detachment — so the poision (sic) around you does not ruin or infect your soul."  Sutton, who draws on his popular book The No Asshole Rule (2007), further explains: Passion is . . . won … Read More

via Minding the Workplace

CEO of JP Morgan “tired” of Villification

On By southwerkIn business ethics, ethics, Government Failure, Teaching

Jamie Dimon, CEO of JP Morgan says –

“We do not have change-of-control agreements, special executive retirement plans, golden parachutes, special severance packages or merger bonuses,” he told a JP Morgan healthcare conference, adding that many of company’s employees are in client-facing jobs and work hard with small and mid-size businesses. “I am a little tired of the constant vilification of these people,” he said.

I am going to do my best to make this gentleman even more tired.

When I was a young man a very long time ago, there was all this talk of people refusing responsiblity. Usually there would be a seedy hippie sitting on the witness stand in a court room full of dignified justified middle class citizens. He would have done some readily apparent crime and would claim that it was society’s fault that he had committed this act to the derision of all concerned. I never really saw much of this actually taking place, old as I am.

But here I am in 2010 looking at the “villification” of these financial workers. These huge financial institutions through a form of complex transactions that essentially mimic gambling at a casino did damage to this country that will take decades to repair. My favorite part of his defense is that his obvious claim that most of his workers are innocent and shouldn’t be villified. We of the general public have a difficult time perceiving on a case by case basis who destroyed much of the American economy and therefore wind up distrustful of the entire industry. He is surprised by this.

The villification has just begun. You see I do not believe this economic crisis is over and I definitely do not believe the damage done by these institutions is going to stop or abate.

James Pilant

How About Some Intelligence?

On By southwerkIn Government Failure

Some airlines have been telling their passengers that new government security regulations prohibit them from leaving their seats beginning an hour before landing.

In this Blog, I try to talk about ethics, but from time to time it becomes difficult to talk about doing what’s right when it is evident that for some people knowing what to do in the first place is a problem.

Try this principle for behavior out for the Federal Government and its response to air crime.

Principle 1: I will not enact regulations in response to every lunatic action that occurs on a plane.

Millions of people fly each day. Some drink. Some have serious medical or mental problems. Some are merely rude. Some are just dum and some are stupid. You can rest assured that some of these people are going to do something illegal, foolish or just strange. At times, these actions will receive wide publicity in a 24 hour news cycle world.  

Last year a man tried some kind of destructive act on an airplane with the only effective result being his admission to a burn unit. What ever his intent, this is not effective terrorism. At least not until the government reacted. In the real world people are killed. Bad things happen. But in some imaginary world, apparently some want badly to live in, if we just have enough regulations we won’t have bad things happen.

So, one loon injures himself trying to harm an aircraft and the response is a set of regulations requiring passengers to stay in their seats an hour before touchdown? How does that work? If the next loon sets himself on fire 62 minutes before touchdown, do we make everybody stay in their seats for two hours before landing?

This isn’t four guys doing a special government project three times a year, these regulations will cover millions of Americans. We can get to the point where no one is allowed carry on luggage, are ever able to leave their seats, or fly in the first place. Why?

Regulations are a tool in crime prevention and encouraging good behavior. They have good uses and bad uses. Whenever you see rapidly multiplying regulations you have a new set of behaviors developing or no effective action is possible.

Here are the facts. We can create rules that will make it difficult for people to harm aircraft and the people flying on these aircraft. That’s it. One hundred percent prevention is not possible. You should change regulations from time to time to reflect changes in behavior. Absolutely. But there arrives a point at which you are either demonstrating that you feel you have to do “something,” or that you are frightened.

Neither one is impressive in any way. We don’t have to do something when it has no effect. We don’t have to live in fear, we have to accept some risks, some threats, some craziness, some evil. Life is not guaranteed ride. There are crazy people out there. Their individual acts should not drive policy. The collective threat drives policy.

Now let’s decide what regulations should be to be most effective against threats and enact and enforce those.

Let’s not enact regulations just because we can.

James Pilant

BP Gets Ten Billion Dollars From You!

On By southwerkIn business ethics

That’s right! British Petroleum has found a new way to make money. They have taken a perfectly legal tax deduction for their losses caused by the oil spill enabling them to evade $10,000,000,000 of taxes.

That’s ten billion dollars the federal government has to get somewhere else. Goodness Gracious, who might the burden of taxes fall on without BP paying its share? I wonder.

Loren Steffy writing for the Houston Chronicle is all over this. Steffy points out that considering these kinds of tax benefits, claiming that corporations pay too much taxes is disingenuous, since very often they pay none at all.

The feds could have figured this into their 20 billion dollar escrow fund but didn’t, so essentially BP is only on the hook for ten billion of it. The rest we pay for.

James Pilant

Ethics Newspaper Columnists – Round Up 7/30/10

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure

Keith Chrostowski writing for the Kansas City Star has an article contemplating the likelihood of deflation, an economic malady, an unknown experience for Americans as the last time it happened was before our generation and the generation before that were born. He hopes that optimism in the minds of consumers will avert this but looking at his story I am more struck by the enormous cash reserves held by major corporations and their unwillingness to invest it in this country.

Edward Lotterman writing for Twin Cities has a wonderful article explaining a basic concept of economics, comparative advantage. It is also used as an argument for free trade. Whether you believe in free trade or not it is a good read by a very competent teacher of economics. (Warning – Lotterman’s Twin Cities web site does not allow me to link you to the individual articles just to his columns as a whole, so you may have to work your way into the archives unless you are reading this before he writes his next column.)

Jon Talton writing for the Seattle Times explains the concept of indigenous innovation rules. Read his explanation but it all boils down to they can sell to us but we can’t sell to them.

Barry Ritholtz writing for the web site, The Big Picture, explains that we are really just pants wearing monkeys (really) and that knowing and understanding that can keep us out of trouble. (He may be writing provocatively here.)

Goldman Sachs And Patriotism?

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure

Goldman Sachs in the true spirit of duty to country paid one percent of its profits in taxes. That’s right, you may have paid a little more but reflect that 14 million dollars is still a good piece of change. Of course, they did hold on to the other 2 billion dollars in profit. That might upset you. It made me feel uncomfortable. What am I lacking that they have?

It’s tax havens. There are places they can go to register their business and pay little or no taxes. Now, you might think that businesses obtaining heavy and continued benefits (like the bailout and cheap borrowing from the Federal Reserve) from being (actually) in the United States would feel an obligation to support the country that has given them so much (you know, little things, blood of our soldiers, etc.). But they don’t feel that way.

The following quote is from a report available here. The report is entitled – Unfair Advantage, The Business Case Against Overseas Tax Havens.

In 2008, Goldman Sachs, with 29 subsidiaries located in offshore tax havens, reported profits of over $2 billion and paid federal taxes of $14 million, an effective tax rate of just one percent, and less than one third what they paid their CEO Lloyd Blankfein ($42.9 million).

The report estimates that America loses minimally 37 billion in tax revenues due to tax havens. Fifty years ago, corporations paid almost a quarter of the tax revenues of the federal government. Today it is less than a tenth.

So, I return to my question, do businesses have a duty to patriotism or is the only duty a corporation has to its shareholders to advance profits? Should we expect business organizations to advance the welfare of the citizens of their country and the nation itself?

I have the duty to tell you that the current doctrine practiced in “American” corporations is that there is no national duty whatever. What is taught is a fervent loyalty to shareholders and profits.

I do not believe that a pursuit of profit should be the only goal of an organization like a corporation. I worry that one day this nation will be in terrible danger and these enormous behemoths of business will simply find another place to go.

James Pilant