Today, let’s discuss responsible consumption, which can cut in more directions than one. Let me explain.
A current topic discussed in the news is for consumers to assume responsibility for their purchases, taking steps to be as certain as possible that their purchases don’t support companies committing environmentally harmful acts or companies that may behave in a socially irresponsible manner. These are certainly worthwhile goals. The world could do with less environmental harm and less social irresponsibility, committed by either corporations or individuals.
Of course, one problem that consumers would have in making such decisions would be with the identification of such companies. The problem lies in the semantics; just what does “environmentally harmful” or “socially irresponsible” mean, and who defines such things. If you read the business press regularly, or even if you occasionally read this blog, you’ll know that many of those definitions are set by NGO and activist groups such as Greenpeace, Rainforest Action Network, and Corporate Accountability International. It is these groups, these “semantical gatekeepers,” who have appointed themselves to define what is “environmentally harmful” or what is “socially irresponsible.” I suppose that’s better than no one taking on this task, but such power in the hands of a limited number of groups can be unsettling. Perhaps what is needed here, in addition to more “responsible consumption” of companies, is more responsible consumption of these “semantical gatekeepers,” a “monitoring of the monitors,” if you will. But what’s to motivate the public in taking such an interest? How about a financial interest? The criterion of money usually hits home.
Whether you know it or not, if you are an American taxpayer, you support these semantical gatekeepers, the groups who decide from whom you should buy and from whom you should not.
How so?
A quick idea for today.
Currently I am reading When Corporations Rule the World by David Korten. Among anti-corporate thinkers, this book is touted as one of the leading works in modern anti-corporate theory. I’m only up to page 65 so far, but I must say that, although overall I don’t agree with David’s point of view, in this book David has raised some interesting issues. A few of his arguments have been well-made and well-sourced, while some others . . . well . . . not so much. Today’s idea concerns one of those arguments that could have been made more soundly.
On page 59 of the paperback edition, near the beginning of Chapter Four – Rise of Corporate Power in America, when discussing the significance of the corporation as an institution, David states:
On the negative side, it (the corporation) allows one or more individuals to leverage massive economic and political resources behind narrowly focused private agendas while protecting themselves from legal liability for the public consequences.
Yes. This is true. Business corporations do do this.
And the corporation, at least the type to which he refers, pays taxes in return.
Yet, there is a type of corporation which fits David’s description and that does not pay taxes. Not one cent. In fact, the type of corporation of which I am thinking, in essence, does its business at the expense of taxpayers. Let’s consider David’s description from the perspective of the modern non-governmental organization (NGO).
Modern NGOs are corporate entities which permit one or more individuals to leverage and apply their economic and political resources on narrowly focused privately-defined agendas while they and their employees enjoy the liability protection of the corporate form. And let’s add to this description of NGOs that they do so while receiving a tax-exempt status, so that, in essence, taxpayers are implicitly paying for the actions of the NGOs and the common resources that those NGOs consume at taxpayer expense.
This corporate format has worked out very well for businesses, yes. But it has also worked out well for NGOs. Remember. There are always two sides to every coin. Were it not for the corporate form, NGOs would probably not enjoy much of the power that they currently exercise.
The coin of corporate power cuts both ways, but when making an argument it should be incumbent upon the advocate to consider both sides of any coin.
In the field of issues management, it’s common knowledge that some corporations now “partner” with NGOs on various issues of “social concern.” That term “social concern” is often one that is defined by the NGO, rather than the corporation, by the way. So now, instead of an NGO and a corporation fighting tooth and nail over an environmental issue, for example, they work together toward a “common goal.” Okay. That seems all warm and fuzzy, on the surface. But let’s dig a little deeper into the nature of this “partnership.”
In a situation like this, what’s that “common goal?” For the NGO, the goal would be the achievement of, perhaps, a social agenda objective that they have pursued for years, often via an adversarial relationship with the corporation. For the corporation, what’s the goal? What motivates the corporation to take on such a “strange bedfellows” relationship? Well, as a recent article in the Christian Science Monitor commented, corporations often approach NGOs to partner on a common project so that those same NGOs don’t turn around in the future and spread bad press about the corporation. A “common goal?” Seems more like a protection racket.
Imagine this scenario. Corporation X is concerned that future bad press could negatively impact their expected future revenues. So, to preclude the threat of negative press, an implicit threat at least, the brass at X dial up their historical foes at NGO Z and play let’s make a deal. The brass over at Z aren’t going to say, “Hey X, thanks for calling, but no thanks.” No. Z’s ship just came in. The pressure that the folks at NGO Z have been applying to Corporation X all of these years has just paid off.
Didn’t I see a scene something like this in at least one episode of The Sopranos?
Now, when the NGOs and the corporations get together like this, at least according to the previously mentioned Christian Science Monitor article, no money changes hands. The article stated that the NGO doesn’t receive any fees from the corporate partner. But isn’t there an exchange of value here? Isn’t this somewhat like a scene from The Sopranos? Let’s look at it this way.
The Sopranos Example – Paulie, grey slicked-back side wings and all, goes into a shop and “tells” the proprietor that the shop could “have some trouble” in the future. This “implicit threat” means that the shopkeeper might lose some of his or her “expected future revenues.” But, Paulie and his problem-resolution specialists can “protect” the shop and make that trouble “disappear,” for some consideration of course. In this Sopranos example, that consideration is money.
Paulie and his problem-resolution specialists get what they were looking for, i.e., they reach their direct objective. The shopkeeper avoids that “implicit threat” and gets to keep his or her future revenue stream.
The NGO Z/Corporation X Collaboration Example – The presence of NGO Z represents an “implicit threat” to Corporation X, the threat of
Continue reading NGO & Corporate Collaboration: How Far Does It Go?
Does the Greenpeace CEO make more than the Exxon Mobil CEO?
Well, yes and no. In terms of absolute dollars, no. Not even close. But, in terms of a percentage of their respective organization’s revenue, yes. More. Very much more.
In terms of compensation as a percentage of revenue, the Greenpeace CEO pulls in considerably more than does his counterpart at Exxon Mobil.
Recently I performed research addressing this issue. The reason I performed this research was due to activist’s and NGO’s frequent claims that CEOs of multinational corporations (MNCs) take as compensation an unfair proportion of their companies’ overall revenue. After recently hearing this claim again, perhaps for about the 500th time, I wondered, “Who actually makes more in terms of percentage of revenue? Huge multinationals? Or NGOs?” I decided to do some digging, create a comparison, and take a look.
Methodology
Now, to address this question, what I decided to do was just take a “quick and dirty” look. I just wanted to test my theory with some trial research. Therefore, at the outset my intention was not to do an exhaustive study by including a large number of NGOs and MNCs in a representative and statistically controlled sample. When I began this research I decided that I would save that exhaustive study for another occasion should my theory be supported by the results of this “thumbnail” research project.
To commence my pilot research project, I simply selected, very much at random, one NGO and one multinational. The first two of each that came to mind were Greenpeace and Exxon Mobil. These two organizations are often at odds with each other and both are frequently in the news, making them top of mind.
To identify the revenues of Greenpeace I went to Guidestar.org. Guidestar is an organization which aggregates information about non-profit corporations. At their site, you may search for your non-profit of interest and find information you desire, much of it a no charge. One of the pieces of information stored by Guidestar is a non-profit’s US IRS Form 990.
The IRS Form 990 is a document that must be filed by all tax-exempt non-profit organizations operating within the United States. This document is much like a tax return and contains some information similar to what you would find in a for-profit corporation’s annual report or 10K filing. Among the information shown in a Form 990 is annual revenues and executive compensation. On the Guidestar site, I located Greenpeace’s Forms 990.
To obtain the revenue and executive compensation information for Exxon Mobil, I journeyed to SEC.gov, the site of the Securities and Exchange Commission for the United States. At that site, I accessed Exxon Mobil’s Schedule 14A Proxy Statement which contained summary compensation figures for Exxon Mobil executives for the years 2006 – 2008. Also available on that site was the Exxon Mobil 10K, containing the annual revenue figures that I sought. Additional information on Exxon Mobil’s revenue was obtained from their 2008 Annual Report available at Continue reading Greenpeace CEO Makes "More" Than Exxon CEO?
From much of my reading, I can see that the power of the NGO (non-governmental organization) is increasing. With regard to how that power affects business, my research shows that over the past decade NGO-influenced corporations are now becoming the norm rather than the exception. And from the projections I’ve read, it appears that that influence will only become greater over the next decade.
To go along to get along with this trend, multi-national corporations (MNCs) are moving, seemingly together as if in lock step, to establish corporate social responsibility (CSR) programs in order to meet the demands and expectations of NGOs, whether it be on environmental, social, labor, or cultural issues. And to help them craft their CSRs, MNCs now regularly collaborate with NGOs, bringing NGOs to the table as trusted advisors and de facto consultants. And when MNCs do this, which is increasingly often, they seem to do it with a “mea culpa” attitude.
Mea culpa attitudes belong only on the truly guilty. MNCs don’t give themselves enough credit. They suffer from a poor self-image. Paraphrasing Jessica Rabbit, “MNCs aren’t ‘bad.’ They’re just drawn that way.” Their “We’re so guilty” attitude is unjustified. MNCs should not sit themselves in a corner.
Yes, it’s true that MNCs are guilty of doing some “bad” things. Aren’t you? MNCs are operated by humans. Imperfect humans who make mistakes. But I fear their mea culpa is overdone because most, if not all, MNCs indeed do more “good” than “bad.” One doesn’t need to perform extensive quantitative analysis to realize this.
If the MNCs were not doing more good than bad, then such behavior would be obvious to the marketplace, which is not stupid contrary to the belief of many activists. The marketplace is not stupid. We can use the activist’s own thought process to address this issue. Ask any activist how “stupid” the marketplace was in electing Barack Obama to the White House and the majority response will prove this point. So, if the “bad acts” of any MNC outweighed the “good acts” performed to support the economy and society, then the marketplace would know that; the people would “vote” with their dollars, numbering the days of any wayward MNC.
Given this automatic economic voting mechanism, where “election day” for the MNC is every day, is the current and projected level of NGO influence upon MNCs really justified? Which party receives more legitimization?
Yes, MNCs make mistakes. I accentuated the obvious above. MNCs are operated by humans. But so are NGOs. NGOs are run by humans, imperfect humans. NGOs, as well-intentioned as most probably are, are not exempt from making mistakes, and performing “bad acts,” whether by accident, or by intention, or by just plain ignorance. But how is the influence of these imperfect organizations counter-balanced? Unlike MNCs, NGOs are not subject to the same automatic regulatory mechanism of the “vote.” NGOs are not subject to the same daily “election day” as are the MNCs. The motivations and the acts of the NGO are not examined and
Continue reading The Marketplace Is Not Stupid
Competition comes in several classes. Let’ discuss.
First of all, you, as a business person, have obviously known about the class of “direct” competitors since you went into business, and probably you have known about this class of competitor as far back as those tender years when you were first able to sit up and recognize for what money was actually used. Direct competitors, of course, are those other companies which sell the same products or services that your own company sells.
Secondly, you’ve most likely known about the class of “indirect” competitors, also just about as long as you’ve known for what money is used. When you were a kid with five bucks burning a hole in your pocket, you knew that you could use that moolah to buy a toy or you could use it to buy a movie ticket or you could use it to buy an ice cream cone. None of the companies which produced those goods or that service were direct competitors, but they were indirect competitors vying for that five bucks in your pocket.
The classes of direct and indirect competition are not new. Business people have always taken seriously the impact of direct and even indirect competition, and have planned and altered their business models accordingly. This is well-known.
“Irregular Competition” Introduced
But what perhaps isn’t as well-known to you is the class of competition which I have named “irregular competition.” That is a term I coin and a concept which I define and introduce to you today.
When your direct and indirect competitors bring their offerings to market, they tell that market just how great are their offerings and how well those offerings can meet the needs and wants of the market targeted. And while making their sales pitch, those direct and indirect competitors play with the image of your company. Your competitors, direct and indirect alike, will take every opportunity to portray your company image in a manner that would not please you and by doing so communicate to your common market how well your products or services do not meet the needs of those consumers that you jointly serve.
Either through comparative advertising, or through innuendo, or via some other communications mechanism, your direct or indirect competition promotes the image of their own company and demotes the image of your company. Again, this is well-known. So if it’s well-known, why am I writing about it?
I write about this in order to make a point about competition in general, either direct or indirect, and to tie that point into the less well-known concept of “irregular competition.” Competition is not just about promoting competing products or services. It’s also about demoting, about tearing down, tearing down the image of the competitor. To tear down the image of a competitor means to battle for what the competitor’s company or brand image means, and to achieve an agendized goal in the process.
In the case of your direct and indirect competition, that agendized goal is to sell more products or services
Continue reading "Irregular Competition" – The Newest Threat
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About  Here at " Richard Telofski on The War on Capitalism," I discuss and analyze the individuals and groups conducting campaigns against capitalism. In the articles on this site, I provide analysis on lesser known facts about this movement. More . . .
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