Tag Archive: Adam Smith


The University of Oregon’s student run newspaper, The Daily Emerald, reported that one registered Republican serves on the university’s Law School faculty, and another in its Political Science Department.

To these two poor souls Almost DailyBrett promises to keep your political affiliation, secret. Seriously.

For those of you scoring at home, these two departments sport 44 registered Democrats and two Republicans. Since 2015, more than 98 percent or more than $235,000 in donations from university faculty has been directed to liberal causes.

Only 98 percent?

Working on my 2012 master’s degree at UO, your author could imagine Adam Smith and his “Wealth of Nations” being embraced at the Lillis School of Business. According to the Emerald, only 50 percent of the business school faculty are registered Democrats.

About 100-yards to the east, the School of Journalism and Communication (SOJC) offers a totally different atmosphere.

Close your eyes. You can envision a lecture by Che Guevara being packed to the rafters. Don’t have to imagine the championing and teaching of Karl Marx, even though his philosophy continues to fail today (e.g., Maduro’s Venezuela).

Is the real philosophical gulf between the overwhelming number of faculty Democrats vs. the un pequito Republicans or more between those who embrace Social Justice and those who defend Capitalism?

For What It’s Worth

“The cultish professor who self-evidently reinforces a set of political beliefs is not something that just about anybody openly and consciously says is okay.” – Professor Craig Parsons, UO Department of Political Science chair

Amen.

The regular readers of Almost DailyBrett long ago determined your author is a registered Reaganite Republican and a staunch supporter of Buy Low, Sell High.

For my M.A. at the University of Oregon, your author created a college course in corporate communications and investor relations and taught it for more than five years.

Remember telling my students each quarter that whether they individually support or oppose capitalism, the main purpose of the class is to provide a realistic explanation of how global markets work. We also assessed the vital role public relations professionals play in presenting to investors an accurate picture of company financials and how a corporation makes money.

As Professor Parsons correctly states, it’s not appropriate for professors to indoctrinate their students. Instead, they should instill their profession-based knowledge – in this case, Wall Street and SEC disclosure rules – about how the real world works.

Is the goal of a university to develop activists or to prepare professionals to succeed in our free-market-driven, digital economy?

Does Political Stridency Enter The Classroom?

Alas, way too many times strident political discourse is being posted on the Facebook, LinkedIn, Twitter or other social media pages by professors. They will piously claim they are exercising their cherished First Amendment right of free speech and therefore commenting as a private citizen.

But what happens when their online rhetoric becomes the subject matter for a course syllabus, and thus is transformed into the classroom for discussion, follow-up quizzes, midterms and/or finals?

Will the student toe the philosophical line in order to secure a good grade?

One overly eager activist associate professor was requiring her students to watch the anti-Vietnam War documentary, “Hearts and Minds.” What about the individual hearts and minds of her students?

Another dean prompted her college to sponsor a series of lectures on mass incarceration, which is all well and good … except there were no speakers from the correctional/law enforcement community.

When asked about the absence of balance in the lecture series, she retorted: “There are no other views.”

Okay?

Disgraced commentator Bill O’Reilly was once lamenting to the late great Charles Krauthammer about the preponderance of liberal faculty on America’s college campuses. Krauthammer told him to accept a reality, which will never change.

The real issue is whether a professor’s political philosophy permeates into the classroom. Almost DailyBrett for the most part was impressed with Millennial students. They are the most-educated generation in the planet’s history and the most moved by experiential learning.

Let’s provide them with the facts about how the real world works and life-long skills (e.g., how to read an income statement and a balance sheet), and then give them the opportunity to excel and grow.

Dominating a classroom to forcefully instill your chosen political philosophy to develop activists is wrong and inappropriate.

Starting later this month, this practice will undoubtedly raise its ugly head once again.

https://www.dailyemerald.com/2018/08/20/does-it-matter-if-your-professor-is-a-democrat/

Or unemployed …

justinesacco

Love him or despise him, you can always count on Mr. Warm and Fuzzy, Charles Barkley, to have an opinion. In this particular case, he has a point: Sometimes the Internet draws fools into its web.

When it comes to anything and everything binary code, one must always recognize that digital is indeed eternal. Weigh these examples.adamsmithvante

  • Former $200K+ Vante CFO Adam Smith took a video of himself berating Rachel, a Chick-fil-A employee working the drive-thru window, about the company’s position on same-sex marriage and posted it on YouTube. He was fired. He can’t find a job.
  • IAC/InterActiveCorp senior director of corporate communications Justine Sacco dashed off her insensitive tweet about AIDS in Africa just before she flew to Cape Town, South Africa. Her tweet went viral. She was terminated before her plane landed.

Let’s ask here and now: Why are so many so damn cavalier when it comes to Twitter’s 140 characters?

Why are some so consumed with posting every minute detail about their lives on Facebook, no matter how trivial?

Do we have to post every still on Instagram or upload every video on YouTube, no matter how mundane or in some cases, obnoxious and offensive?

Why will others insist on uttering every-and-any political thought that comes in between their ears on WordPress, Wix, Tumblr or any other blogging site? Maybe we are not interested, let alone enamored, with your political views?

Barkley is not a fan of social media and has the luxury to say so. He and many others assume a who cares attitude toward the Internet. For the rest of us mere mortals, we know that social, mobile and cloud are game changers.

The World Wide Web is the classic definition of a destructive technology, the biggest communications advancement since Johannes Gutenberg invented the printing press in the 15th Century. We can communicate to-and-from virtually any place on the planet in a matter of seconds, 24/7/365.

The Genie is not going back into the lantern.

The real question is whether we are using these tools with the care they require. Think of it this way: blogging, social media and other digital forms of communication are “radioactive.” They are not monolithic (e.g., think “Friends” for Facebook and “Connections” for LinkedIn), but they all have the potential and the capability to get us in trouble in nanoseconds.

They can be abused. Why do some insist upon posting literally anything about their daily lives on the net? How many baby pictures are necessary? How many images of casseroles are required? How many more cat photos do we need to see?

Okay, the author of Almost DailyBrett pleads guilty when it comes to felines; yes, I have posted a tabby cat photo or two on Facebook.

Reputation Management for an Eternal Digital World

“Someday that party picture is going to bite them when they seek a senior corporate job or public office. I think they should wake up now, and become aware of the extent to which they’re sharing parts of themselves that one day they may wish they had kept private.”– Don Tapscott, Author of “Grown Up Digital”

The most important public relations of all are personal public relations.party

Would a hiring manager performing a Google search (okay Yahoo and Bing too) uncovering photo of the obviously inebriated Florida Gator fan doing a little pole dancing, automatically disqualify this individual?

Is that fair?

Does the hiring manager actually know the individual?

Most likely, the answers are “yes,” “no,” and “no.” Translated: The candidate is disqualified. It’s not really fair. And the hiring manager does not know the individual … and yet she or he doesn’t want to become acquainted with the “candidate.” The digital ones-and-zeroes that make up the photo tell the story, and it is not a good tale.

Some have expressed a concern, particularly college students, that the vast majority of their photos of Facebook and elsewhere (hopefully not LinkedIn) usually come with a drink in one hand. Does the preponderance of party photos send an unwanted message? Is alcohol a problem? Maybe they should do a little surfing on Google images and see if there are one (or two) too many fiesta photos?

Studies have revealed that executive recruiters (e.g., headhunters) spend only 6.25 seconds on a contender’s LinkedIn profile, and the first place they go? A potential candidate’s photo.

If that is indeed the case, wouldn’t someone interested in personal reputation management choose the most professional JPEG possible? One would think so, and yet Almost DailyBrett has seen LinkedIn portrait photos that are more appropriate for Match.com.

Internet Jail?

“A little payback. Sometimes there are consequences for being a dick.” – TYT Network Young Turks host Ana Kasparian

Can Schadenfreude or the celebration of someone’s demise get a little out of hand?

Kasparian’s sidekick, Cenk Uygur, wondered if Adam Smith (not to be confused with the Adam Smith of Wealth of Nations fame) will ever get a job again, any job, let alone a six-figure position.saccolanding

Sacco’s sin, which she fully comprehended when she landed in Cape Town, is even worse, particularly when you consider that she rose in the ranks to become a senior communicator for a major media conglomerate. If she can’t police her own dialogue, why would a reputable firm turn over its messaging, branding and reputation management to Mizz Intemperate Tweet?

Both Adam and Justine are in Internet Prison. Did they earn a lifelong sentence? Is that fair? Maybe not. Will it change? Maybe not.

What did Sir Charles say about “Fools” and the “Internet”?

https://www.youtube.com/watch?v=Gha5rNS6WyI

https://www.tytnetwork.com/

http://www.businessinsider.com/former-vante-cfo-adam-smith-apologizes-for-bullying-chick-fil-a-worker-2012-8

http://www.nytimes.com/2015/02/15/magazine/how-one-stupid-tweet-ruined-justine-saccos-life.html?_r=0

http://iac.com/

http://www.forbes.com/sites/susanadams/2012/03/26/what-your-resume-is-up-against/

 

 

 

 

 

 

“Public scrutiny of business is constant and intense, and in the past decade, disillusionment has grown over excesses in executive pay, questionable accounting practices, drug recalls, and moral laxity on the part of corporations.” — Paul A. Argenti, Professor of Management and Corporate Communication at the Tuck School of Business at Dartmouth College

Should communication students be encouraged to work for publicly traded companies either from inside the corporation or providing external advice as a hired gun at public relations or advertising agency?

Or should these very same students be galvanized against the excesses of capitalism, demonstrating against Wall Street under the banner of social justice?

floodwallstreet

Are these questions mutually exclusive? Are you either for or against capitalism or for or against social justice?

These questions are magnified and intensified against the backdrop of underachieving employment, wage and real estate markets, while the NYSE and NASDAQ remain persistently bullish.

It appears this persistent economic scenario quite possibly will greet graduating students at least for the next academic year or two.

Examples of Corporate Excess

Finding examples of corporate excess is relatively easy.

Almost DailyBrett has joined the scads of other bloggers that take issue with seemingly brain-dead or just plain greedy antics by the leadership of large-cap publicly traded companies:

  • The author’s former company, LSI Logic, provided a seven-or-eight figure Golden Parachute to former CEO Abhi Talwalkar as he drove the 33-year-old specialty semiconductor designer into the abyss.
  • Spirit Airlines famously stiffed a decorated 76-year old, dying of cancer Marine veteran asking for a mere $197 refund, telling him literally to pound sand because he didn’t buy trip insurance. The carrier generously offered a partial credit, if he succumbed to the Grim Reaper before his flight.
  • October is right around the corner and that means (drum roll) even more corporate efforts to tie marketing bonanzas to Breast Cancer Awareness Month. Both 5-hour ENERGY and “Buckets for the Cure” KFC have become global leaders when it comes to “Pink Washing.”
  • Largest corporate bankruptcy-ever, Enron, is the poster-child when it comes to corporate greed and wrongdoing. And yet there were innocent people who were just trying to do their job, including telling the corporate story, until they realized they too were being misled.

Considering these examples and literally hundreds more, it is easy to give a broad-sweeping thumbs-down to multi-national corporations. At the same time, it should be remembered that these companies make the products and provide the services that we use on a daily basis (e.g., Apple = Macs, iPads, iPhones, iPods). They hire and provide benefits to literally tens of thousands (e.g., Boeing, 168,400; Starbucks, 160,000; Amazon, 88,400; Nordstrom, 58,140), Microsoft, 55,455). They provide wealth-accumulation prospects for the 54 percent of Americans who buy stocks, mutual funds and bonds (e.g., America’s investor class), including 73 percent of college graduates, and 83 percent of post-graduates.

Profit Motive

One of the major beefs espoused by the Occupy Wall Street movement three years ago, and the Flood Wall Street demonstrators earlier this month, is that publicly traded companies are focused on profits. These statements are accurate, but it should also be pointed out that companies have a legal (e.g., Employee Retirement Income Security Act or ERISA 1974) and moral (e.g., Fiduciary) obligation to produce the best bottom-line return possible for shareholders. Failure to do so invites almost certain civil and possible criminal litigation against the companies and potential dismissal of C-level executives.

floodwallstreet1

As a master’s degree candidate four years ago at the University of Oregon, the author of Almost DailyBrett noted the unrestrained celebration of competitive advantage and buy low/sell high mantra at the business school, and the unrestrained embrace of social justice including redistribution of income at the journalism school.

It seemed that one would build a statue of Adam Smith, while the other would throw flowers at the feet of Che Guevara. One would urge students to work and advise corporate America and the other would implore becoming an activist, marching, demonstrating and hopefully not being arrested.

Which is the better option for graduating students in making corporate America, particularly fallible publicly traded companies, more responsive to communities, the environment and let’s not forget, its own employees?

Corporate Social Responsibility

Corporate social responsibility or CSR should not be seen as an oxymoron. The concept of doing good (CSR) should not be viewed as contradictory to doing well (fiduciary responsibility). Graduates of communications, journalism and business schools can and should emphasize the value of doing BOTH to improve the bottom line for investors, including employees, while doing good deeds for communities, the planet and the rank-and-file employees.

Certainly the likes of Occupy Wall Street, which never found a unifying message, and Flood Wall Street, which tied capitalism to climate change, have their First Amendment Rights to (preferably) peacefully demonstrate. These NGOs need trained communicators and message developers.

Conversely, graduates could also choose to work internally to make companies better. They can stand for both fiduciary and corporate social responsibility. They can advocate against excessive C-level compensation. They can take stands against Pink Washing and Green Washing. They can ensure that the public is provided with good products at fair prices and everyone is treated with dignity and respect.

And heaven forbid, if another Enron is in the offing, they can courageouly tell the uncomfortable truth using their communication skills.

Is it better to be inside the corporation under the banner of capitalism or out in the streets (or in tents) calling for social justice?

There is more than one way to make corporate America better for everyone.

http://exec.tuck.dartmouth.edu/about-us/faculty/paul-argenti

http://www.huffingtonpost.com/2014/09/22/flood-wall-street-arrests_n_5865468.html

http://nypost.com/2014/09/22/climate-change-protesters-flood-wall-street/

https://almostdailybrett.wordpress.com/2014/01/02/farewell-lsi-logic/

https://almostdailybrett.wordpress.com/2012/05/06/lessons-from-the-spirit-airlines-pr-debacle/

https://almostdailybrett.wordpress.com/2012/05/02/evil-spirit-airlines/

https://almostdailybrett.wordpress.com/2013/10/10/5-hour-pink-washing/

https://almostdailybrett.wordpress.com/2014/05/22/shameless-5-hour-energy/

https://almostdailybrett.wordpress.com/2012/10/11/buckets-for-the-cure/

https://almostdailybrett.wordpress.com/2013/02/08/what-would-you-do-if-you-were-enrons-pr-chief/

https://almostdailybrett.wordpress.com/2011/12/13/fiduciary-responsibility-vs-corporate-social-responsibility/

https://almostdailybrett.wordpress.com/2011/06/03/adam-smith-vs-che%e2%80%99-guevera/

 

 

Most of the time, I come down hard on the side of Adam Smith and The Wealth of Nations.

So why am I aligned more on the side of the ACLU and Ralph Nader’s Public Citizen when it comes to First Amendment Rights of Free Speech, and Yelp reviews?

yelp1

The answer lies in a complicated set of circumstances and trends with many sinners and very few saints.

Let’s try to make some sense of these intertwined factors:

● Our society has evolved from agrarian/agriculture to industrial/manufacturing to technology/service provision.

● Web 2.0 through the means of digital ones and zeroes has not only put word-of-mouth advertising on steroids; it has given consumers an unprecedented level of control over the reputations and brands of service providers (e.g., doctors, lawyers, contractors, Realtors, resorts, restaurants, butchers, bakers and candle-stick makers).

● Yelp (NYSE: YELP), TripAdvisor (NASDAQ: TRIP), Angie’s List (NASDAQ: ANGI) are the market leaders in affording consumers and travelers digital opportunities to publicly review service providers. They also have business models based upon delivering lots of eyeballs to advertisers, thus attempting to satisfy shareholders.

● The personal reputations and brands of service providers are in play as never before, assisted by positive reviews and potentially damaged by negative criticism. The best defense for service providers is a good offense as exemplified by the Zappos creed of under-promising and over-performing, delivering a “Wow!” experience to consumers.

● Yelp has been accused of being willing to employ its “automated review filter” to remove negative reviews in exchange for advertising dollars. An L.A. dentist with some negative reviews allegedly was informed that these critiques could magically go away by means of a few Yelp advertising dollars. The doctor during on-camera interview equated this practice to “blackmail.”

● Virginia resident Jane Perez hired building contractor Christopher Dietz to perform some work. She was not pleased. She wrote negative reviews about Dietz on Angie’s List and Yelp, giving him the dreaded one star out of five potential stars review.

dietz

● Dietz in turn claimed that Perez’ less-than-pleasant review cost him an estimated $300,000 in business, and in turn filed a $750,000 defamation lawsuit against Perez. The case is going to trial. The ACLU and Public Citizen are representing Perez on a pro bono basis. Did Chris Dietz really sue his customer? Would you hire Mr. Dietz to fix your deck, knowing you too could end up in court as well?

Dude, what are you thinking?

So what do we have here?

  1. Publicly traded online consumer review outlets in search of big-time and small- time advertising dollars.
  2. Literally thousands of service providers, each of which is critically dependent on their good names and reputations to be successful and stay in business.
  3. Consumers, who can ethically or unethically inflict literally hundreds and thousands of dollars’ worth of damage against the reputation and brand of a service provider, and possibly put themselves rightfully or wrongfully in the cross-hairs of a defamation law suit.
  4. The rights of consumers to use their constitutionally guaranteed rights of free speech to express their opinions and by doing so providing a service for fellow consumers.

And what are the public relations/marketing/communications implications for this simmering stew of providers, reviewers, lawyers and Yelpers?

Service providers need to understand and accept that the rules of engagement have forever changed and are continuing to change. Doing a good job and delivering a great service and/or product is the best defense on the planet.

Service providers need to constantly monitor what is being said about them via social media sites and blogs. And if a review is less than positive, the provider needs to respond pronto. In some cases, there is value in accepting the criticism and moving to make things right. If not, the service provider needs to respond and offer a professional rebuttal. If the service provider does not have the time to monitor digital media, then she or he should hire someone to do so.

Consumers should be mindful that service providers have legal rights. They can defend themselves against willful defamation. They can also launch countersuits, and win.

When Yelp, TripAdvisor, Angie’s List all decided to go public, accept investor dollars and report quarterly and annually, they triggered questions as to which priorities are more important: advertisers, shareholders or reviewing consumers. Maybe these firms would be better off going private.

These firms, particularly Yelp, need to be cautious about responding to a wounded service provider with an offer to essentially trade advertising for a little sleight of hand when it comes to algorithms (Poof! … the negative review has gone away). Wonder if that is what happened to my Yelp review about a particular Pleasanton, CA Realtor, Tim McGuire of Alain Pinel Real Estate?mcguire

Our First Amendment Rights of Free Speech are precious. They need to be protected, safeguarded and cherished. Having said that, there are limits besides not yelling “Fire!” in a theatre. An example of these limits is deliberate and willful, and most of all untruthful, defamation of a service provider’s character, reputation and brand.

Service providers would be well advised from a PR standpoint to think long and hard about filing one of these defamation suits. The $750,000 suit by Christopher Dietz against Jane Perez has drawn the attention of the national media, including the Washington Post and Beltway network affiliates, (guess who they are privately rooting for?). And if and when Mr. Dietz publicly loses his case, they will be sure to make the verdict very public.

Dietz will be known as that contractor guy, who sued his customer because she wrote a bad Yelp review. Want to hire Mr. Dietz for your next construction job? Make sure your lawyer is on your speed dial.

http://www.washingtonpost.com/local/crime/750k-lawsuit-over-yelp-review-will-go-to-trial/2014/01/26/63e9d372-8539-11e3-8099-9181471f7aaf_story.html#!

http://www.washingtonpost.com/blogs/crime-scene/post/aclu-public-citizen-to-fight-lawsuit-over-negative-yelp-review/2012/12/20/9242b430-4ab8-11e2-b709-667035ff9029_blog.html

http://www.washingtonpost.com/local/crime/2012/12/04/1cdfa582-3978-11e2-a263-f0ebffed2f15_story.html

http://www.huffingtonpost.com/2013/10/30/yelp-lawsuit-_n_4179663.html

http://www.ibtimes.com/yelp-extortion-rampant-say-small-business-owners-class-action-lawsuit-against-review-bully-appealed

http://www.nbclosangeles.com/news/local/Yelp-Under-Fire-for-Alleged-Pandering-to-Advertisers-232472381.html

http://finance.yahoo.com/news/christopher-deitz-sues-jane-perez-over-negative-yelp-review-222800638.html

http://finance.yahoo.com/q/pr?s=YELP+Profile

http://sueyelp.webstarts.com/

https://almostdailybrett.wordpress.com/2011/07/11/loss-of-control-how-to-safeguard-reputations-and-brands-in-a-digital-world/

http://www.yelp.com/biz/tim-mcguire%E2%80%94alain-pinel-real-estate-pleasanton.

https://almostdailybrett.wordpress.com/2010/09/17/hard-lesson-in-seo-search-engine-optimization/

Executives are hired to maximize profits; that is their responsibility to their company’s shareholders. Even if executives wanted to forgo some profit to benefit society, they could expect to lose their jobs if they tried—and be replaced by managers who would restore profit as the top priority,” — Arneel Karnani, University of Michigan associate professor of strategy, Wall Street Journal, August 23, 2010.

“…It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest.” – Adam Smith, author of The Wealth of Nations.

Right now, the public is more likely to view greed as a deadly sin than an engine of economic growth,” Edward Glaeser, Harvard Economist, New York Times, January 6, 2009.

When push comes to shove, are corporate executives (especially at the C-level) more inclined to worship at the altar of fiduciary responsibility as opposed to corporate social responsibility (CSR)?

And conversely are public relations practitioners more inclined to counsel corporate social responsibility over fiduciary responsibility to these very same executives? And if so, is there a disconnect to the detriment of the corporate communicator? Is this a primary reason there are not more seats at corporate boardroom tables for PR pros?

The debate between fiduciary responsibility (maximizing profitability for investing shareholders) vs. corporate social responsibility (doing good deeds benefitting stakeholders in places where a company does business) is not new.

Nobel Prize winning American economist and academic Milton Friedman (1912-2006) took a Kantian stance (categorical imperative) toward a publicly traded company maintaining its fiduciary responsibility to its shareholders in his oft-quoted New York Times Magazine piece in 1970. Friedman said: “…A corporate executive is an employee of the owners of the business. He has direct re­sponsibility to his employers. That responsi­bility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while con­forming to the basic rules of the society.”

Echoing these sentiments is Harvard professor and former Treasury Secretary Lawrence Summers who stated: “It is hard in this world to do well. It is hard to do good. When I hear a claim that an institution is going to do both, I reach for my wallet. You should too.”

Summers

Besides the Friedman Doctrine, there is the matter of law that is directly applicable when it comes to striving for profitability. The federal Employee Retirement Income Security Act (ERISA) of 1974 was passed to protect the retirement assets of Americans.

Specifically, the law defines a “fiduciary as anyone who exercises discretionary authority or control over a plan’s management or assets, including anyone who provides investment advice to the plan. Fiduciaries who do not follow the principles of conduct may be held responsible for restoring losses to the plan.” Considering that the overwhelming majority of securities are owned by institutional investors (buy-side and sell-side analysts purchasing stocks for retirement funds and big-ticket clients among others), the implied threat of regulatory action and/or liability to plaintiff strike suits aimed at deep pockets is obvious.

Also coming into play is the Nexus of Contracts Theory that posits that corporations are essentially a series of contractual obligations with stakeholders, such as the shareholders who provide capital (market capitalization or market value) to publicly traded companies in return for a potential monetary gain. Kenneth Ayotte and Henry Hansmann in their 2011 A Nexus of Contracts Theory and Legal Entities contend that a firm’s most valuable rights are its contractual assets. The question is whether a company can ethically risk running afoul of these contractual obligations in the pursuit of a higher public good?

Arneel Karnani, University of Michigan associate professor of strategy, is more aligned with Friedman than the growing movement toward CSR, particularly among the practitioners in the public relations community.  In his 2010 Wall Street Journal commentary, The Case Against Social Responsibility, Karnani states categorically that when push comes to shove executives with regularity will come down on the side of fiduciary responsibility for their shareholders and equity-holding employees. To do so otherwise, potentially impacts executive compensation, invites the eventual removal of the chief executive officer and chief lieutenants, prompts ERISA enforcement, and spurs almost certain litigation by the plaintiff’s bar on behalf of alleged aggrieved shareholders.

Fiduciary, imperative “must;” CSR, subjunctive, “should?”

The specter of these very real risks does not mean that CSR is not a factor in today’s boardrooms, even though Karnani uses the categorical words, “irrelevant or ineffective.” Karnani does acknowledge that the prospect of imposed additional costs—regulatory mandates, taxes, punitive fines, public embarrassment—on socially unacceptable behavior (see  2010 BP “Deepwater Horizon” debacle) can drive corporate executives to be at least mindful of CSR.

Karnani cites the global movement toward more fuel-efficient vehicles or healthier fast foods as being driven more out of consideration for profits (e.g. Toyota and McDonald’s respectively)  than a desire to reduce energy consumption and promote healthy diets. J.D. Margolis et al in their 2007 Does It Pay to Be Good? uses the anecdote of Home Depot building playgrounds as more of an effort to stimulate “Corporate Financial Performance” (CFP) as to demonstrate “Corporate Social Performance” (CSP).

According to these authors, all of these CSR activities are direct offshoots of the quest for profits and the maximization of shareholder value.  For example, Karnani said that pleas for corporate social responsibility will only be accepted by executives smart enough to realize that doing the right thing directly coincides with the pursuit of profit. “Pleas for corporate social responsibility will be truly embraced only by those executives who are smart enough to see that doing the right thing is a byproduct of their pursuit of profit,” Karnani wrote.

There is no argument about the mandated fiduciary obligation of publicly traded companies to maximize profits within the context of applicable laws and regulations for the benefit of their investing shareholders. Having said that, just blindly adopting Friedman’s deontological approach in rejecting CSR or Karnani’s skepticism ignore significant global trends in favor of Corporate Social Responsibility.

The Tide Turns?

Professor Charles W.L. Hill in his 2011 seventh edition of Global Business Today defined CSR as the idea that business executives should carefully consider the social consequences of economic actions when making business decisions. CSR advocates contend that businesses, particularly large multi-national enterprises (MNEs), need to recognize their noblesse oblige (Hill’s emphasis) and actually give back to the societies that make their economic success possible. Is this an Utilitarian approach, if shareholders do not receive the ultimate maximum financial return as a result of an increased emphasis on CSR?

Henry Mintzberg et al in their 2002 essay Beyond Selfishness argued that the terrorist attacks on Sept. 11, 2001 (at least for a short-period of time) changed the prevailing thinking of Wall Street denizens to actually consider engaging with society. Before the hijacked planes struck the World Trade Center towers and the Pentagon, the overwhelming focus was on the Internet bubble of the 1990s and the Enron-era rapid acquisition (“irrational exuberance” in the words of Alan Greenspan) of capital. “A society devoid of selfishness is certainly difficult to imagine. But a society that glorifies selfishness can be imagined only as base.”

One very clear trend in favor of CSR is the growing global respect for non-governmental organizations (increasingly seen as independent third-parties). Public esteem and trust for these NGOs has steadily increased. For example, the 2011 Edelman Trust Barometer revealed that not only are NGOs the most trusted in society, but their level of popular support is growing from 57 percent in 2010 to 61 percent in 2011. Certainly, the increasing public trust in these NGOs has prompted companies (e.g.Starbucks) to enter into “synergistic” relationships with these non-profits, such as Conservation International and the Environmental Defense Fund.

ci

The Edelman Trust Barometer reported that trust in business as measured by a quantitative survey of more than 5,000 “informed publics” grew marginally worldwide from 54-to-56 percent between 2010 and 2011, but actually declined in the US from 54- to-46 percent, and in the UK from 49-to-44 percent. Business trails NGOs in trust, but still leads the media, which only saw its trust score rise from 45-to-49 percent between 2010 and 2011.

The Edelman survey illustrated the stark difference when it comes to public benefit of the doubt between a company that is seen as trustworthy and one that is not. If a company is distrusted then it only takes on average only one-or-two negative Internet mentions for 57 percent to believe a particular item of negative information about a company. Conversely, if a company is trusted then it takes on average only one-or-two positive mentions for 51 percent to believe a particular item of positive information about a company. Edelman concluded that it was good business to align profit and purpose for social benefit.

Another reason for companies collaborating with environmental non-profits is to inoculate a firm against public attacks by more fundamentalist organizations that opt for confrontation rather than cooperation with corporations. For example, Global Exchange launched a protest at Starbuck’s annual meeting and demanded that the company sell more fair trade coffee. The company also was subjected to repeated instances of antagonism from Seattle Audubon and others.

Commenting earlier this year on the net effect of Starbucks CSR activities, Rick Cohen of the Non-Profit Quarterly wrote: “Whether one likes or dislikes Starbucks or its philanthropy, the Starbucks CSR model looks like a recipe that many corporations recognize as a solid formula for social responsibility.

And what is the present-day view of company employees if their employer is perceived to be only concerned with enriching its shareholders? This question was posed by Harvard Economist Edward L. Glaeser in his 2009 Can Business Do Well and Do Good?  He offered that the tide is turning against the Friedman Doctrine as business giants, such as Bill Gates and Warren Buffett, are increasingly arguing the value of CSR.

glaeser

This question was the focus of a MIT Sloan Management essay by C.B. Bhattacharya et al (2008) Using Corporate Social Responsibility to Win the War for Talent, which calls upon employers under pressure to attract-and-retain the best-and-the-brightest employees. Bhattacharya advocates that corporations use internal marketing to champion a company’s CSR efforts as part of a portfolio of “job products” offered to valuable employees. The results of this additional motivation can contribute to job satisfaction, retention and higher productivity.

However, companies must learn to engage in CSR and communicate the news about these activities to its vital internal audience. Many times a company makes only cursory management statements along the lines of “we support recycling” or buries a one-paragraph mention of CSR activities as a throw-away in the text of a chief executive officer’s annual report letter (SEC filing 10K).

Bhattacharya et al state that CSR can serve as a “reputation shield” to parry negative thrusts by NGOs about a company’s impact on society. Knowledge of and employee participation in these CSR activities can also “energize” employees, stimulating them to work harder, be more productive and to focus more on quality. The latter can also contribute to fiduciary responsibility as Harvard Business Professor Michael Porter has argued that quality-driven differentiation along with lower costs are the two basic strategies for creating value for customers.

A corporation’s “reputation shield” has become even more tenuous in this age of 24/7/365 digital self-publishing. As a result, a company’s accumulated brand equity and carefully nurtured reputation are effectively traded every minute of every day online, just like a NYSE or NASDAQ security. And some of these traders are competitors or others that do not have a company’s best interests in mind. Building up goodwill through being perceived as a solid corporate citizen may help mitigate broadsides by those who harbor different agendas.  The recent web disclosure that Burson Marsteller was secretly reaching out to bloggers to chastise Google on privacy concerns without disclosing its client, rival Facebook, turned out to be a black mark on the reputation and brand of both Burson Marsteller and Facebook.

A Balanced Approach?

The debate between the fiduciary responsibility adherents on one side and the devotees of corporate responsibility on the other is not new. In at least one case, the debate was longitudinally conducted by the same organization.

In 1981, the Business Roundtable concluded: “Balancing the shareholder’s expectations of maximum return against other priorities is one of the fundamental problems confronting corporate management. The shareholder must receive a good return, but the legitimate concerns of other constituencies (customers, employees, communities, suppliers, and society at large) also must have the appropriate attention…(Lead managers) believe that by giving enlightened consideration to balancing the legitimate claims of all its constituents, a corporation will best serve its shareholders.”

Sixteen-years later, the Business Roundtable completely reversed its field stating that a corporate board of directors cannot pit its shareholders against other stakeholders. The Business Roundtable said that imposing conflicting demands on corporate boards is unworkable and when push comes to shove between customers, employees and shareholders, a board must down on the side of shareholders.

Even though the debate is not new, the growing trend in favor of corporate social responsibility over merely adherence to fiduciary duties is gaining speed. For example, David Bach and David Bruce Allen in their 2010 What Every CEO Needs to Know About Nonmarket Strategy offer that non-market strategy recognizes that corporations are social and political entities, not just economic agents.

Glaeser wrote that company employees are becoming less enamored with the notion of working their entire lives only to pad the wallets of anonymous shareholders. Even though he agrees with Friedman’s doctrine that corporations “overriding moral obligation” is the fulfillment of fiduciary responsibilities and the maximization of shareholder wealth, he is also a fan of the notion of “Creative Capitalism.”

Michael Kinsley and Conor Clarke wrote the book Creative Capitalism, gathering the contributions of dozens of participants on the issue of corporate social responsibility, including Microsoft billionaire Bill Gates and Berkshire Hathaway billionaire Warren E. Buffett. Both offer counterpoints to the sentiments expressed by Milton Friedman, Larry Summers and others.

In particular, Gates has called for “market-based social change” and for doing the essential work that addresses the world’s inequities. “This kind of creative capitalism matches business expertise with needs in the developing world to find markets that are already there, but are untapped,” Gates said. “Sometimes market forces fail to make an impact in developing countries not because there’s no demand, or even because money is lacking, but because we don’t spend enough time studying the needs and requirements of that market.” The Bill and Melinda Gates Foundation has given $26.1 billion cumulatively, mainly for health and productivity improvements in the developing world.

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A Seat at the Table?

Regardless of the ultimate outcome of the fiduciary duty vs. corporate social responsibility debate, public relations practitioners — internal and external — are coming down reflexively on the side of Corporate Social Responsibility. The question is whether this is a wise personal public relations strategy, when PR practitioners have long complained about not being given a seat at the corporate board room table.

To gain a coveted seat, a budding corporate executive must command respect and exude gravitas. Certainly there is plenty of evidence in support of the growing trend toward CSR including the Edelman Trust Barometer, the notion of “Creative Capitalism” and increasing number of prominent executives who champion CSR. The danger lies in being seen as single mindedly arguing CSR, creating the dangerous perception of being oblivious to a publicly traded company’s fiduciary duties.

Karnani in his commentary issues the following warning: “In circumstances in which profits and social welfare are in direct opposition, an appeal to corporate social responsibility will almost always be ineffective, because executives are unlikely to act voluntarily in the public interest and against shareholder interests.”

Public relations practitioners cannot exclusively sing the siren song of Corporate Social Responsibility without acknowledging and implementing the moral obligation of fiduciary responsibility to shareholders, equity-participation employees and to those who are genuinely interested in effective corporate governance (see Sarbanes-Oxley).

Fiduciary duties are legal-and-moral requirements for publicly traded corporations. Diversified shareholders are investing a portion of their future in the projected success of a company. Management is obligated to effectively respond to these investors.

At the same time, they are not the only stakeholders in society. That is where corporate social responsibility comes into the equation. A company doing business in a community does have an ethical responsibility to give back to society and to apply pressure to its supply chain to do the same.

Fiduciary and CSR are not mutually exclusive ethical requirements. Public relations practitioners need to worship at both altars. If not, corporate executives may stop listening before the public relations pros stop talking.

How do you follow a lecture about male and female condoms including a video demonstration about inserting the latter?

And in particular, how do you compete with an erotic discussion about “social marketing” (not to be confused with social media) with a lecture about financial statements, fiduciary responsibility and market psychology?

The answer is to remind students that it all boils down to dollars-and-cents and return on investment (ROI).

There is no doubt that condoms, both the ubiquitous male version and the relatively new offering for the female of the species, do help defend against nasty STDs. And I will humbly submit that knowledge about financial statements from the top-line-to-the-bottom-line may help guard against long-time unemployment. It may also make you wealthy and fiscally healthy.

Take a look at a 2006 PRSA/Korn Ferry International Survey of average salaries from public relations practitioners. Financial public relations/investor relations pros averaged $165,620 (serious money); Crisis management specialists, $150,000; Reputation management, $143,000; Public affairs (lobbying), $98,500 and Community relations, $59,910.

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Yes, the survey has grown some moss in the last five years and the world is now in a global economic funk, but I seriously doubt the employer preference for those who know how to work with investors and positively impact share values has changed. There may also be some cross over between financial/IR and crisis management/reputation management, but they are all handsomely compensated.

When you take financial statements into account, a job applicant should be less prone to state that “I really work well with people” in an interview with a perspective employer. What is the ROI (return on investment) in that particular overused assertion? How can you separate yourself from your competition for a job if your only claim to fame is working well with people?

Keep in mind that any firm – profit or non-profit, private sector or public sector – is making an investment in hiring any employee. One of the primary factors for the nearly 10 percent unemployment rate is the massive amount of private capital sitting on the sidelines waiting for certainty from Washington and Brussels…err Berlin…something that may not happen until 2013.

And if these firms are making an investment, they are asking what is the return on the invested capital. Will this new employee get quickly up to speed? Will she or he bring existing contacts to the job? Does her or his prior have experience that directly relates to the job? Can she or he solve a particular problem? Does she or he speak our language? Can she or he become fluent in the lexicon of our company?

Corporate fluency includes understanding how a business operates. And this also applies to non-profits that are also governed by the tyranny of the financial statement. They may be not-for-profit, but at the same time they cannot consistently lose money if they want to stay in “business.”

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Do you understand what constitutes the top line other than it is located on the top of the page? Hint it has to do with revenues. What about COGS? If you don’t know, you need to find out pronto. The same goes for gross margin. Is it expanding or contracting? Year-over-year? Sequentially? Is your function included in SG&A? If so, how do you feel about being an “expense?” Can you distinguish between gross margin and operating margin? What is the bottom line other than being on the bottom of the page?

Companies also must comply with GAAP, but some will also use pro forma or non-GAAP and are required by the SEC to reconcile the difference (Reg. G). Don’t be the reporter in Chris Roush’s “Show Me The Money,” who asked a CEO what the Southeastern Conference (SEC) had to do with his business…He was referring to a different SEC, the Securities Exchange Commission. Oops.

In this tough job environment, doing your homework prior to the interview is an absolute must. Included in this study is coming completely up to speed on the language of business and that includes the financial statement and fiduciary responsibility.

Adam Smith stated that the (fiduciary) duty of a capitalistic endeavor is to make a profit and remain viable. Economist Milton Friedman said the job of business is not only to survive but to do well.

So how can you help your perspective employer or present employer in doing well? If you can answer this question affirmatively and convincingly, you should do well as well.

Editor’s Note: I am presently working on my University of Oregon master’s project creating a course, “Communicating with Wall Street.” Any insights on market psychology, media relations, crisis communications, analyst relations, social media and employee communications are greatly appreciated.

What does an engineering student ask?

How can I build it?

What does a pre-med student ask?

How can I cure it?

What does a business student ask?

How can I finance it?

What a liberal arts student ask?

Would you like fries with that hamburger?

There are many variations of this particular joke, but as your mom taught you: Much truth is often spoken in jest.

Today was the last day of the spring term and the end of my first year of Graduate School. During the past 10 weeks, I took Strategic Management and was surrounded by (soon-to-be) MBA types.

What impressed me was their unrepentant, unrestrained and unabashed celebration of capitalism. How can we drive revenues? How can we promote growth? Is gross margin expanding or contracting? Should we be investing in this business or that business? How can we promote sustained profitability…Notice the question was not about the promotion of “sustainable” profitability.

And by the way, they think it is cool to make a profit.

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The spirit of the father of modern economics and capitalism – Mr. Wealth of Nations – Adam Smith permeates the dialogue. This is exciting. It is a reflection that entrepreneurs, free markets, capitalism produce the products that we need; provide jobs; and make global societies better.

Golly gee, just call me old-fashioned. And how do you finance that?

And then for my other classes I walked about 100 yards or a long LaMichael James touchdown run into another world, the world of redistribution and social justice. Adam Smith would not be welcome here, but a lecture by Che Guevara would be packed to the rafters.

In this organic, sustainable, free-trade, shade-grown environment I found out that Communism didn’t work in Russia, East Germany, Czechoslovakia, Rumania, Bulgaria, Albania, Yugoslavia, Poland, Lithuania, Latvia, Estonia, Mongolia, Vietnam, Cambodia, Laos, China, North Korea and even Guevara’s Cuba because they were/are dictatorial governments. Otherwise, the system is just swell.

For some reason, virtually every class needs to ponder the works and deeds of Karl Marx. I miss him; oh I miss him so…

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I learned from my classmates that Internet access is a basic human right, and should be provided free of charge to the proletariat regardless of the R&D and all other up-front costs incurred by those who had the courage and foresight to build the system. Semiconductors, software, connectivity devices, fiber optic lines…who cares? Intellectual property? Smitellectual Schroperty!

KFC? Boo hiss. Microsoft? Grrrr. Monsanto? Ugh. Wal-Mart? Arrgh. Starbucks? Smash their windows…And the list goes on and on and on. Have you ever met a happy activist?

It took about two quarters, but I was eventually labeled by a few as the class Republican. In fact, over adult beverages I was asked in the context of my party registration and annoying voting patterns, if I was an angry person…What? The answer is no and besides unlike so many of my colleagues, my biggest moment in life did not involve being arrested or fondly dreaming of some form of civil disobedience.

To some companies are just evil. I worked for 10 years for custom semiconductor innovator LSI Logic. It was founded by a guy who came to America with zero money. He had a dream. He grew this dream into a company with $1.8 billion in revenues, employing more than 4,000 highly skilled people and providing the key microchip for the first two generations of the Sony PlayStation. Is that evil? Should he give his hard-earned millions to someone who has never built a billion-dollar-plus business from the ground up? Is that fairness? Is that justice?

So…if the majority of jobs come from the private sector which group of people is going to be more in demand by employers? Those who know how to read a financial statement from the top line to the bottom line or those who wouldn’t know fiduciary responsibility if it bit them on the backside?

Today, we learned that the number of jobs barely grew in May and that unemployment jumped back to 9.1 percent nationally. I really hope there is a job market out there for those demanding redistributive social justice. Maybe it will be the expanding nanny state or maybe it will be a place that offers both onion rings as well as pommes frites.

http://en.wikipedia.org/wiki/Adam_Smith

http://en.wikipedia.org/wiki/Che_Guevara

http://en.wikipedia.org/wiki/Karl_Marx

http://www.cnbc.com/id/43265008/

http://www.cnbc.com/id/43267992

http://en.wikipedia.org/wiki/LSI_Corporation

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