lvgaldieri: blog

This Blog Has Moved

2012-03-25T21:53:00.002-04:00

as of January 2012, new posts (along with all previous posts) can be found at

lvgaldieri.wordpress.com

Can CEOs Ever Get the Political Fix They Need?

2012-01-22T06:17:00.000-05:00

There have recently been plenty of shareholder proposals asking companies to disclose political spending. In fact (as noted in an earlier post), the share of proposals to the Fortune 100 focusing on political spending increased 84 percent in 2011 from the three previous years. Last week, to mark the second anniversary of the Citizens United decision (on January 17th), Trillium Asset Management and Green Century Funds took things up a notch.

Urging “corporate leaders to heed the call of shareholders and citizens,” the two social investment firms filed shareholder resolutions at Bank of America, 3M, and Target Corporation asking those companies to stop political spending altogether. This was the first time institutional shareholders have formally asked corporations to refrain from political spending.

The chances of these resolutions winning approval are slim to none, of course - at least right now. The hope is that over time support will build around these proposals, until they reach a threshold where boards of directors can no longer ignore them. (That’s around 30 percent of shareholder approval.) That day seems a long way off. Still, a slim chance is better than no chance, and -- let’s face it -- there is simply no chance of legislative remedies to Citizens United, especially from the current Congress, and definitely not in an election year.

“We now have an entitled class of Wall Street financiers and of corporate CEOs who believe the government is there to do… whatever it takes in order to keep the game going and their stock price moving upward,” David Stockman tells Bill Moyers in an interview that will air this weekend. “As a result,” Stockman says, “we have neither capitalism nor democracy. We have crony capitalism.”

That sounds about right, though I would ask whether Stockman and others who take this view have really put their finger on what’s novel or unique about the present moment. Entitlement and cronyism are not exactly new in America; some would say the game has been rigged all along.

But that’s a historical discussion. The more pressing question is one these new shareholder resolutions would have us address. Is corporate political activity good for business? Is the corporate plan to capture government sound? Are corporations really getting what they pay for? Can those entitled CEOs and Wall St. financiers win the game, or are there rules to the game they don’t understand? In other words, how well does crony capitalism work? Those broad questions frame the question posed in the title of this post.

There’s some compelling evidence to suggest that corporate political activity is not only bad for democracy but also bad for business. The Trillium and Green Century announcements cite the research of Michael Hadani, who sets out to “question the standard narrative that political spending is an unmitigated good for firms.” Hadani, a Professor of Management at Long Island University, concludes that despite spending extravagant amounts of money – AT&T, for instance, “officially” spent over 219 million dollars between 1998 and 2008 “on achieving political success” (and that was before Citizens United!) -- corporations are not achieving the political outcomes they want.

What's worse, corporate political activity generally does not appear to increase shareholder value.

This chart tracks a negative correlation between firm market value and PAC activity:

And that is just one lens. The research Hadani presents tells a pretty consistent story: the profligate pursuit of illusory goods, usually without the requirement to disclose where the money goes, or what companies and their investor-owners get for it (apart from heightened risk and reduced transparency). It should therefore alarm all shareholders – not just socially-conscious ones -- that Citizens United makes it possible for executives to plunder the corporate treasury in pursuit of those same uncertain ends, without any limits or any real accountability. A new kind of barbarian may already be inside the gates: the CEO in search of the ever-elusive political fix.

Same Song, Different Verse - Bill Moyers on Woody Guthrie, Right Now

2012-01-17T13:48:00.002-05:00

Cross-posted from my blog over at 1913massacre.com:

In the most recent essay for his new "On Democracy" series, Bill Moyers picks up on the news that the George Kaiser Family Foundation has acquired the Woody Guthrie Archives for 3 million dollars. Plans to open a new center in Tulsa are already underway. Woody’s papers, drawings and things will be returning to Oklahoma. The irony is not lost on Moyers:

What he wrote and sang about caused the oil potentates and preachers who ran Oklahoma to consider him radical and disreputable. For many years he was the state’s prodigal son, but times change, and that’s the big news. Woody Guthrie has been rediscovered, even though Oklahoma’s more conservative than ever – one of the reddest of our red states with a governor who’s a favorite of the Tea Party.

Times change, and the scene may change; the cast of characters remains essentially the same. In 1913 Massacre, the Oklahoma oil barons and their patsy preachers play the parts of Michigan mining captains, Boston stockholders and the thugs they hire to do their dirty work.

Woody saw right through their change of costume. He knew that the man who robs you with a six-gun is likely to be more honest than the man who uses a fountain pen. In Oklahoma, in Michigan, in California, all around the country, he sang about the beauty of ordinary people whose undoing he witnessed. And the simple message at the heart of his songs is just as radical today as it ever was.

You just have to listen.

Moyers discovers it in This Land Is Your Land:

This land is mostly owned not by you and me but by the winner-take-all super rich who have bought up open spaces, built mega-mansions, turned vast acres into private vistas, and distanced themselves as far as they can from the common lot of working people – the people Woody wrote and sang about.

So in the video essay he produced about Woody Guthrie and the prospects for democracy in America now, Moyers might as well be describing Calumet in 1913 or Tom Joad’s California: “gross inequality,” he says, is “destroying us from within”. The question is what we're going to do about it, this time.

To Prosper We Need More Than Jobs

2012-01-02T16:22:00.001-05:00

I’m always thrown by attempts to measure prosperity purely in terms of economic growth or high employment figures. Those measures are too restrictive, and they are also disorienting. Politicians who offer jobs leave me cold, and do us all a disservice. As I've written several times, the country is, or ought to be, more than a workcamp.

There’s an opportunity to reflect on that last point in Close to Home, the documentary Ofra Bickel made for Frontline about the 2008 financial crisis. In Chapter 4, we see Rob, a human resources executive who has “been out of work for a year,” attending a series of “networking functions.” He has found the job search an “insurmountable” challenge, and he hopes – in vain – that these networking events will help him get over the hurdle.

We see Rob and his fellow networkers – all of them out-of-work middle management types -- exchanging business cards, practicing their pitches, learning how to introduce and present themselves. It's an endless rehearsal for a debut that never comes, and Bikel finally decides to give up on Rob and on the networkers: it’s pretty clear none of this is going to pay off.

As Bikel realizes, there is something pathetic in their efforts. There is something ridiculous -- and telling -- here as well: a gathering of able-bodied, educated, smart American adults, all in dire economic straits, and all they can think to do is to practice for their next job interview. It never occurs to Rob or any of his fellow networkers to do something together, to join efforts and start something, to create something where there is nothing. In a word, they never really build a network. They simply want to get back on the corporate payroll. It's disturbing to think that that’s all they know how to do.

What happened to that can-do spirit? American gumption? Bootstraps? Independence? Entrepreneurialism? Nowadays, over 90 percent of adult Americans are regular employees (as opposed to self-employed people); whether they have jobs or not, most Americans can think of themselves only as employees. Of course, it wasn't always this way. There was a time, before the industrial era and the great waves of immigration it brought, when the majority of Americans did not have a "job" and wouldn't take one unless they had to. "Being an employee was considered a form of bondage, only a step above indentured servitude," as John Curl puts it in his history of American cooperative movements. "One submitted to it due to economic hardship, for as short a time as possible, then became free once more, independent, one's own boss."

We still like to pay tribute to the freedom from wage slavery we once enjoyed, or lament its loss. Take another film, this one from 1961: The Misfits, directed by John Huston, written by Arthur Miller and starring Clark Gable, Marilyn Monroe and Montgomery Clift. Gable plays Gay, an aging cowboy who thinks that most anything beats “working for wages” and sees employment for what it is – a loss of freedom.

Gay's tragedy is that he has outlived the possibility of that freedom. The Wild West has become nothing more than a rodeo show; the cowboy life Gay leads is "like roping a dream. I just gotta find another way to be alive, that's all," he realizes, "if there is one anymore." In the film's closing scene, Gay, bloodied and defeated, drives off toward a new life, or at least what's left of his life, with his friend Guido yelling after him: "Where'll you be? Some gas station polishin' windshields? Makin' change in a supermarket? Try the Laundromat! They need a fella there to load the machines!" That's all that's left for cowboys in Miller's postwar America.

The most important thing to realize is that it doesn't have to be this way. You don't have to succumb to the despair of another networking meeting or turn in your cowboy hat for a Walmart greeter's cap. And you don't have to pull yourself up by your own bootstraps. Few people can or ever have. Throughout our early frontier history and well into the industrial era, independent Americans relied on altruism, mutual-aid societies and cooperative working arrangements to build houses and raise barns, protect one another from fires or other losses, or "to accomplish their liberation from wage slavery." That's the story Curl's book tells -- a side of the American story we don't usually acknowledge, but ought to understand and appreciate if we hope to prosper, together, with or without jobs.

Why Don't These Rich Liberals Act Like the Self-Serving Bastards They Are?

2011-11-15T12:15:00.001-05:00

In 1998, Howie Klein was the president of Reprise Records, and had the privilege of attending a dinner Bill Clinton threw to honor Vaclav Havel. The entertainment that evening was Lou Reed. (Havel is a big fan.) Klein was seated at a table with Senator Dick Lugar, the Indiana Republican, and he remembers Lugar’s reaction to Reed’s performance:

Lou Reed sang "Dirty Blvd," his then-current hit. People kind of recognized the melody or something and they kind of danced in their seats. I remember Lugar could barely contain himself. His big plastic smile never even faded when Lou sang:

Give me your hungry, your tired your poor I'll piss on 'em 
That's what the Statue of Bigotry says 
Your poor huddled masses, let's club 'em to death 
and get it over with and just dump 'em on the boulevard

No one seems to have noticed but me and my friend Brian.

For that brief moment, it was as if the country had not just gone through the adolescent convulsions of the Lewinsky affair. Vice President Gore’s “chair rocked constantly during Reed's 35-minute performance,” according to a report in the Washington Post. 

“Political leaders rarely listen to lyrics,” writes Klein. Maybe that’s why none of the APEC leaders took much notice the other night when Makana, dressed in an Occupy with Aloha t-shirt, sang his "Occupy" song for 45 minutes to the assembled dignitaries. But I wonder if that’s all there is to it.

Something else might be at work here as well. I am especially intrigued by the Post report of Al Gore rocking back and forth in his chair to Lou Reed. That’s not someone ignoring the music; that’s someone digging it. And from what I have seen and read about Al Gore, it’s pretty safe to assume that he was genuinely enjoying Reed’s performance. And why not? In his mind, he’s no bigot; he’s a friend of the poor and the huddled masses. How could he think otherwise? He and Lou Reed are on the same side; he shares the rocker’s indignation.

I am willing to bet that Gore doesn’t see himself as an oppressor or exploiter, and neither, for that matter, does Dick Lugar. Does that make them delusional, or hypocrites, or is it evidence of false consciousness? Maybe. Gore’s detractors like to put up images of his compound in Tennessee and talk about its huge energy footprint. They calculate how much fossil fuel he burns, flying around in airplanes to educate people about climate change. It’s an easy game to play.

But I wonder what it really proves about Al Gore (or Dick Lugar, or anyone, for that matter). Would Gore be a more credible messenger if he lived in a small solar-powered cabin and cycled to his engagements? Probably. Would you and I have heard of him? Unlikely. Would the world be better off if he just gave up, sank into an oblivious rich man’s hedonism, and cackled with wild delight as he drove a Hummer over the fragile habitats of endangered species? Probably not.

The right has now learned from the politically-correct left to demand ideological and moral purity from the left.There is something ridiculous in the demand. I'd say the same about putting too much emphasis on moral consistency.

Be that as it may, it’s now Michael Moore’s turn to prove his authenticity, or at least disprove his duplicity. While mixing with the Occupy protestors, Moore has had to defend himself, repeatedly, against the charge that he belongs to the 1 percent. And there’s little doubt he does, if you look strictly at the numbers: the top one percent in this country earn around 350,000 dollars a year.

So a CBS reporter in Denver asks Moore whether it’s true that he’s worth 50 million dollars; Moore calls the reporter a punk and tells him to stop lying. A blogger with the same Denver TV station lambasts Moore for his "hypocrisy." Fox News and the New York Post have been flashing pictures of Moore’s lavish Torch Lake compound. They were also posted on Andrew Breitbart's Big Hollywood blog.

On CNN, Piers Morgan put the question to Moore this way:

“I need you to admit the bleeding obvious. I need you to sit here and say, ‘I’m in the 1 percent,’ ” Morgan pressed.
“I’m not,” Moore insisted. “I am devoting my life to those who have less and who have been crapped upon by the system.”

His evasive answer caused an uproar. "How Rich is Mr. 99%?" "Hypocrite and Liar." "Occupy Wall Street Supporter Michael Moore Belongs to the Affluent Class." But it’s also worth thinking about. Moore is trying, clumsily, to say you can be in a socio-economic class but not of it. He would have a much easier time of it if he would just “admit the bleeding obvious,” but let’s not pretend for a moment that that would silence his critics. Might Michael Moore be acting in his own rational economic self-interest by pretending to be one of, or at least one with, the 99 percent? Sure. But I'm naive enough, or optimistic enough about human nature, to think Moore’s concern for “those who have less” is genuine. Does it amount to more than noblesse oblige dressed down in a baseball cap? That’s hard to say.

It’s mildly amusing to see the American news media peddling class warfare and crude ideas about class-consciousness, but if that’s the game we’re playing, then let’s start looking at the class interests behind the American news media. CNN? Piers Morgan? CBS? Fox News? Andrew Breitbart? Follow the money. Let's specify the interests behind the American news media’s questioning of Michael Moore’s true allegiances or those asking about his annual income. Let's look at the rich people they ostracize and those they unthinkingly celebrate. It should be obvious – bleeding obvious -- that Michael Moore is not the problem; but there are people determined to make him the problem, and you have to wonder why.

I'm certainly not out to defend Michael Moore. Nor does he need me to defend him. Yes, Michael Moore has gotten very rich from his books and films. Yes, he’s obnoxious. Yes, he shamelessly promotes himself. Would he command more credence if he were not all those things – if he were poor, soft-spoken, and retiring? Maybe, but then most likely his films would never have gotten made or shown, and -- more to the point -- the TV would just find somebody else to distract us all from the real troubles of the day, or some other way to feed the resentment that keeps ordinary people from acting in their own best interests.

The End of the Three Mile Picture Show

2011-11-10T18:56:00.001-05:00

With the very kind assistance of Kathleen Dow at the University of Michigan Library's Transportation History Collection, I’ve gained new clarity since my last post about the fate of The Three Mile Picture Show, the 1915 film documenting H.C. Ostermann’s transcontinental journey on the Lincoln Highway.

In October of 1957, F. E. Sheldon, Head Film Librarian at Walt Disney Productions, wrote to Leo Natanson, Librarian at the University of Michigan Transportation Institute, to request “the Lincoln Highway material.” Walt Disney Productions was making a film called – at the time – The American Highway.

The film would air six months later, on May 14th, 1958, under a different title: Magic Highway, USA.

That film, of course, is still extant, and it includes a few scenes from the Ostermann film; like most early footage in Magic Highway, USA, the Lincoln Highway material is colored and sepia-tinted, and comes in for comic treatment. The past in Magic Highway, USA is a series of blunders and advances, comical mishaps and lucky accidents, a happy but confused world of exploration and invention, a time when things looked odd and ran at different speeds to funny music.

But the film had a serious intent. Magic Highway, USA celebrated “the freedom of the American road,” and connected the highway to the American “pursuit of happiness.” It also looked ahead, to the future. As Sheldon explained to Natanson,"because of the congestion of today’s highways, we need planning, preparation, and equipment well in advance to build the proposed dream highways of the future." Cartoon segments show a future of atomic reactors tunneling through mountains, elevator parking lots built around office buildings, and so on. This is the dream (though looking at it now, it seems a nightmare); the archival motion-picture footage describes the comic prelude.

Walt Disney Productions offered and the University accepted two dollars “per screen foot for material used in our film, with a guarantee of at least fifty feet.” One hundred dollars, total: this was in lieu of screen credit, which Natanson twice requested – apprehensively, one imagines; he was twice refused.

Natanson and staff packed the film reels in a large case, declared the value of The Three Mile Picture Show at one-thousand dollars, and shipped it Express Collect to Disney. On October 30th, Sheldon wired with this news:

four reels of film… have deteriorated to powder and bubbled condition. Extreme explosion or fire hazard. Strongly suggest you grant permission to destroy this material here or will return immediately at your responsibility. Four small rolls of negative in can appear to be alright.

On that same day, Natanson wired back: “You may destroy runined [sic] film.” And so they did.

Reading the correspondence, I see no reason to suspect anything sinister or even a lack of effort to save the film. The Three Mile Picture Show had become hazmat. Sheldon cited Burbank fire laws, prohibiting “the transportation of this type of material over city streets by waste film collectors unless it is immersed in a barrel of water.” Even the notes packed with the film had been so “contaminated” that the paper on which they were printed was “poisonous to breathe.” “It is regrettable,” writes Sheldon, in a December 13th letter, "that time had taken its toll of the four rolls that had to be destroyed. I feel there must have been valuable historical material in these rolls, but their decomposed condition made it impossible to examine."

As for the small rolls of negative that remained, Sheldon recommended duplicating them immediately; their “rate of decomposition may be accelerated,” he feared, by exposure to the other film.

On December 18, 1957, that negative film made its way back to the University via Railway Express. 1000 feet of negative was all that was left of the original three miles of motion picture film from 1915. Natanson informs Sheldon he has no facilities available on campus for making duplicates, and wonders “if you people could do this for us or could recommend someone.” Sheldon helpfully suggests Jam Handy in Detroit, and offers to loan the University the 900-foot fine grain Disney made from the Transportation Institute's negative rolls.

A duplicate negative and print at the going rate (in Sheldon's estimate) of 20 cents per foot would have cost the Transportation Institute 80 dollars more than it had collected from Disney for the footage used in Magic Highway, USA. Here the correspondence trails off. Perhaps Natanson was confused about what to do, or just decided to cut his losses.

What Ever Happened to The Three Mile Picture Show?

2011-10-27T15:06:00.001-04:00

For the past couple of days, I have been trying to track down a film made in 1915: The Three Mile Picture Show.

Directed by Henry Ostermann, the film was produced in the course of a transcontinental journey along the Lincoln Highway, which was at that time the only automobile route across the country. It is thought to be the first motion picture made of an automobile trip.

It was a big, ambitious first step. Traveling from Times Square in New York City to San Francisco, the film crew shot 16,000 feet of film. Three miles of film! The Picture Show is, at the very least, a fantastic artifact of Manifest Destiny, a gargantuan movie, made on a grand scale to stir a growing, already restless nation.

The film was shown at the 1915 Panama-Pacific Exposition in San Francisco, and then in cities across the country as it traveled east, back along the very road it documented. A mechanical traveling circus, the film played the country back to itself.

Until this morning, I had not been able to find a trace of the Three Mile Picture Show – not a frame, not a few feet of film, nothing. Now it appears that a copy of the film may have been among the materials donated to the University of Michigan by Gael Hoag and Henry Ostermann, in 1937. (But Ostermann had died in June of 1920, when his Packard slid off the road and rolled, crushing him.)

This, at least, is the most intriguing vestige of the film I have found: a reference in the University of Michigan archives to correspondence between Walt Disney Productions and the University of Michigan library “regarding several reels of film about the Lincoln Highway.” The correspondence runs from 1957-1958.

I've written to the library and I'm waiting for more details about the correspondence. Until I know more, I am working from the assumption that from 1957-1958 Disney was trying to acquire the University’s copy of the film, or rights to it.

Why? At this point I can only speculate. A few points deserve some further investigation and consideration:

The Interstate Highway System was on its way to completion by 1957; maybe Disney planned a movie or a theme park exhibition celebrating the new automobile nation, and wanted to use parts of the Three Mile Picture Show as a back story or foil.

In the late 50s, Disney had a number of projects in the works where this 1915 footage might have found a place. Consider for instance the almost unwatchable propaganda film called America the Beautiful Disney showed at the 1958 World’s Fair in Brussels. Parts 1 and 2 are both on YouTube. Sponsored by the Ford Motor Company Fund, the “18 minute spectacle” showed throughout the day in the Circarama Theater – a continuous 360 degree “movie in the round.”

Finally, it’s intriguing to consider that in 1957-58, the President of the United States, Dwight Eisenhower, had in 1919 traveled the same route as the Three Mile Picture Show, as part of a military motor convoy. (Ostermann led the caravan on that occasion, too.) The Three Mile Picture Show would have played back the President’s youthful itinerary to a nation transformed by Eisenhower's Interstate Highway System.

The real question of course is: What ever happened to that footage? Does it still exist? Where is it? Are all those reels sitting on a shelf at Disney?

Rick Santorum, Etymologist

2011-10-13T21:37:00.001-04:00

Words are not Rick Santorum’s friends. The Republican presidential candidate has the distinction of having had his own name turned against him. He pleaded -- to no avail – with Google to cleanse the Internet of the “filth” associated with santorum.

Now Mr. Santorum has turned to etymology. In the most recent Republican debate, he argued that the real trouble with the economy is the breakdown of the American family. For advancing this view, he was predictably pilloried by the left and praised by the right. Both sides, however, seem to have given him a pass on one argument he advanced.

“The word ‘home’ in Greek is the basis of the word ‘economy.’ It is the foundation of our country,” Santorum said. “You can’t have limited government, you can’t have a limited government, if the family breaks down.

Technically, Santorum is correct: we derive our English word “economy” from oikos (household) and nomos (law); economy involves the ordering or dispensation of the household.

But the ancient Greek household – with its patriarchal order, its separate and unequal quarters and roles for men and women, and its slaves, who did the household chores and, on larger estates, worked the fields– is not the happy suburban home Santorum would like to associate himself with in his campaign for the presidency.

Who knows? Maybe there is a patriarchal, pro-slavery, plantation-owning constituency out there, waiting for someone to take a stand on its behalf.

So maybe all is not lost. Santorum can probably find fodder for his family-values argument in the observation that Greek lawmakers took an interest in promoting marriage, the main object of which was perpetuation of the oikos through child-bearing and child-rearing. That regressive view of the household and of women's place in the world might not win him the women's vote; but he wasn’t going to win that anyway.

Is Occupy Wall Street the Real Values Voter Summit?

2011-10-10T09:28:00.001-04:00

If it accomplishes nothing else, Occupy Wall Street creates an extraordinary opportunity for a conversation about American values. This became clear to me yesterday morning as I was reading about the Values Voter Summit and tweeted:

#OWS 99% are value voters, too. #vvs

My thoughts had drifted from Values Voters to voters’ values, from the “Premier Conservative Event of 2011” at the Omni Shoreham Hotel in Washington DC to Zuccotti Park, where people have been gathering to protest a whole multitude of outrages. Some are ridiculous and confused; some are dead serious. All, however, are pretty unanimous in their denunciation of greed – which is as good a place as any to start a conversation about the values we need to promote, embrace, recognize and celebrate in order to prosper. This is, I believe, a conversation we need to start now, and continue long after all the protestors have left Zuccotti Park.

Minutes after my tweet, someone named Dan Gainor (who, I have since learned, is a right-wing flack) shot back:

@lvgaldieri #OWS supports the WRONG values. #OWS #VVS

And that’s how the conversation started. When I asked what values he thought were being promoted by the Occupy Wall Street movement, Gainor said the protestors were intent on “crushing Wall St. and wrecking capitalism”:

@dangainor well how do you suppose they are going to accomplish that? And capitalism regularly wrecks itself without much help, doesn’t it?

@lvgaldieri Well Anonymous has vowed an attack on stock exchange. So perhaps they intend terrorist acts. Ask them.

Huh?

so for @dangainor, OWS = Anonymous =Terrorists? Have you informed DHS yet?

@lvgaldieri I think they know already.And yes, making threats against the US economy and govt are acts of terrorists.

Had I previously heard of Gainor, I might not have been surprised by this exchange. Instead, I found myself heading down a rabbit hole, and through the right-wing looking glass. On the one side, American capitalists; on the other, the terrorists: which side are you on?

In playing the terrorism card, Gainor was referring to unconfirmed reports that Anonymous plans to take down the New York Stock Exchange today, October 10^th. According to the Department of Homeland Security, the group has even been using Twitter “to solicit ideologically dissatisfied, sympathetic employees from within institutions in the financial sector.” But, a BusinessWeek report is quick to add, they haven’t found any: everyone within the financial sector is, I guess, ideologically satisfied.

A posting on Anonnews.org says the NYSE takedown, which surfaced in a Department of Homeland Security memo, “may or may not be a false flag operation initiated by authorities in order to discredit Anonymous and Occupy Wall Street”; as of this posting, a fire in a Mahwah, New Jersey data center seems to be the only source of technical trouble on the NYSE – a fire without ideological affiliation, I presume.

A few minutes after my initial exchange with Gainor, when some others had joined the fray and started exchanging insults, I tried to re-set: “no need for all the profanity. My original point: we should be having a conversation about values.” No reply.

I can’t say for certain, but I suspect that Gainor may not be terribly interested in pursuing that topic outside the confines of the Values Voter Summit – where people have the right values. I have come to think that he is a hacker in his own right, a social hacker, out to sabotage civility -- in this case by making lots of noise around Occupy Wall Street, and tarring all the protestors with the terrorist brush.

Why? Perhaps because he thinks of himself as a great defender of the American way, but more likely because he wants to prevent or undermine any genuine, thoughtful conversation about values that we might have -- in the street, in our living rooms, in bars and in offices, in malls and barbershops and coffee shops.

And this is, unfortunately, a tack others have taken, and on much grander scale. The major news media continue to wonder what Occupy Wall Street is really all about. What could be the trouble? The Wall Street Journal dismissed the protestors as a bunch of “ne’er do wells.” Cries of class warfare and ominous warnings from the likes of Representative Peter King have only compounded the fault.

Those who demonize or mock the Occupy Wall Street protestors for some of the more naïve-sounding and inchoate demands issuing from their midst– or for the sheer lack of demands – do us all a disservice.

The demonstrations on Wall Street and in cities around the country – like those in cities around the world -- are a distress signal. SOS. We ignore it at our peril.

What’s Wrong With Howard Schultz’s Proposal To Save America From Itself?

2011-08-17T17:20:00.001-04:00

A letter from Starbucks CEO Howard Schultz has been making the rounds, asking other CEOs to join with him and “forgo all political contributions until Congress and the President return to Washington and deliver a fiscally-disciplined, long-term debt and deficit plan to the American people.”

The idea has gained plenty of admirers: “thousands of Americans – both CEOs and everyday citizens” (as CNN puts it) have contacted Schultz to express their support. Joe Nocera dedicated his entire column in the Times last week to Schultz’s proposal, praising the boycott as “hardheaded and practical, the kind of idea you would expect from a good businessman”.

That it is. But its virtues are also its limitations. Schultz wants to tackle a very big, very difficult problem: what he calls “the lack of cooperation and irresponsibility among elected officials as they have put partisan agendas before the people’s agenda. This is not the leadership we have come to expect, nor deserve.”

We can debate that last point: the current crop of ineffectual cowards in Washington might be exactly the leadership we have come to expect and deserve. Be that as it may, I am a little suspicious of grassroots movements in which angry “everyday citizens” find themselves in cahoots with angry CEOs; and it seems odd that we are being asked to entrust “the people’s agenda” to Schultz and his gang of CEOs – who may be well-meaning, but whose agenda (it seems fair to say) may not exactly match up with the aspirations and priorities of everyday citizens, or at least those of us who don’t happen to be leading multibillion-dollar multinationals.

I know that Starbucks bristles at the suggestion that multibillion-dollar companies might not always put the interests of its people, its “baristas” and “partners,” front and center. (But just a couple of weeks ago, baristas in Chile went on hunger strike because the company refused to negotiate with them over wages.) And I understand that Schultz prides himself on being a good CEO – one who has done well by doing good. He is, in fact, regularly singled out for praise by the business press as a CEO who defies the “the power-hungry stereotype,” and who will put the long-term good of his employees, his company or the environment over short-term advantage. (That’s the story Motley Fool’s Alyce Lomax told just last week in a Howard Schultz puff piece on AOL’s Daily Finance site.)

I’m not questioning Schultz’s good intentions. But the effort he’s mounted so far has a whiff of benevolent corporate paternalism about it; and the prospect of well-meaning CEOs around the country banding together on behalf of all the little people to fight political paralysis in Washington DC should -- at least -- give us pause. It sounds like a bloodless coup in the making, a plutocrats' putsch.

There is something absurd here as well: aided and abetted by a pliant and misguided Supreme Court, corporate interests have already hijacked the political process; now they plan to withhold ransom payments until the ineffectual cowards we elected to represent and defend our interests – the public interest – deliver the economy back to them in sound condition, and deliver them from all “uncertainty.” Then they will create jobs. (Be sure to read Glenn Greenwald’s analysis of the uncertainty canard here.)

That said, the real trouble with Schultz’s proposal is not its presumption or its absurdity or its patronizing benevolence. The real trouble here is that Schultz fails to see the big picture, the broad agenda, the scope of the problem we face right now. Like most political and corporate leaders, he sees the people’s agenda – and the country’s uncertain prospects -- through the narrow lens of jobs and economic growth. And while jobs and sustainable economic growth are undeniably important, and can be made to serve the public interest, the public interest can’t be reduced merely to those things; they may sometimes even be at odds with the public interest, as they sometimes are in human rights, labor or environmental disputes.

Real prosperity can’t be measured simply in terms of economic growth or high employment figures. I fear that what we have here is a failure to imagine the American future as anything more than a sunny financial forecast, the country as anything more than a happy work camp.

Machines and Monsters or Thriving Markets?

2011-07-29T11:36:00.003-04:00

If you haven’t yet read it – and I admit I am late on this, as I am on nearly everything else – have a look at John Cassidy’s profile of Bridgewater hedge fund manager Ray Dalio in the July 25th issue of The New Yorker. Cassidy exerts most of his energy trying to figure out whether Bridgewater, which has bragging rights as the world’s richest and biggest hedge fund, is a Fountainhead cult, a Maoist re-education camp, or just a big bond-market player that happens to be run by a super-rich sociopath with intellectual “pretensions.” I was most struck by the passage where Dalio is “rambling” about how “everything,” or “almost everything,” is a “machine.”

“Almost everything is like a machine,” he told me one day when he was rambling on, as he often does. “Nature is a machine. The family is a machine. The life cycle is like a machine.” His constant goal, he said, was to understand how the economic machine works. “And then everything else I basically view as just a case at hand. So how does the machine work that you have a financial crisis? How does deleveraging work—what is the nature of that machine? And what is human nature, and how do you raise a community of people to run a business?”

I’ve talked about this view of nature, “the life cycle,” and the world as a machine in another context. Its philosophical heritage stretches back at least to the 17th century. But in Dalio’s case it’s hard to decide whether this is a considered view, informed by careful reading and thinking, or just some immature posturing, intended to create the impression that Dalio is an amoral übermensch. It’s not even clear how seriously Dalio takes himself: is everything a machine or is everything “like” a machine? The distinction is a crucial one, but Dalio wants to have it both ways.

It’s unfair, I suppose, to expect coherence and rigor from ramblings. And yet Dalio’s express goal – “to understand how the economic machine works” – deserves to be taken seriously. He’s betting the future of his firm on it; it’s key to his success. And it’s not just an offhand remark. As Cassidy explains, this mechanistic outlook is of a piece with Dalio’s crude social Darwinism.

He regards it as self-evident that all social systems obey nature’s laws, and that individual participants get rewarded or punished according to how far they operate in harmony with those laws. He views the financial markets as simply another social system, which determines payoffs and punishments in a like manner.

There’s nothing self-evident about any of this; and to track “all” social systems back to “nature’s laws,” whatever those are, is merely to admit one's ignorance of social arrangements and social history and to confuse metaphors. The confusion, moreover, is not just Dalio's; it's general, and it fails us every day.

When, like Dalio, we regard the economy as a “machine,” and markets as a “social system,” we are inclined to put the system first and relegate people to the status of beneficiaries or collateral damage. The system does not serve human priorities. Instead, we put aside those priorities to keep a dysfunctional system running. The system “determines payoffs and punishments”; the system is the ultimate arbiter of our lot in life. We’ve already surrendered.

But we don’t have to. Umair Haque put up a post yesterday called "How Our Economy Was Overrun by Monsters and What to Do About It." It offers a reminder that the market is a social construct – our construct, something not just hedge fund managers but human beings from all different places and all walks of life make and remake every day. And what we’ve created, says Haque, are monsters of opulence and greed, rather than markets that work for people and help us thrive. This is not just a moral reproach and it's not (at all) an anti-capitalist rant. It’s simply about getting priorities right, and putting human prosperity before the efficiencies of a dysfunctional machine.

Can the UN Make Business Respect Human Rights?

2011-06-19T06:43:00.002-04:00

Last Wednesday, the UN Human Rights Council announced its endorsement of the Guiding Principles on Business and Human Rights, developed by John Ruggie. The UN press release called it “an unprecedented step,” the establishment of “the authoritative global reference point” in questions of business and human rights.

Unprecedented? Only if you ignore history. In fact, the UNHRC endorsement caps a long period of unhappiness over business and human rights at the UN.

Consider the origins of Ruggie's mandate. After several false starts, beginning in the 1970s, the UN in 2003 issued the Norms on Transnational Corporations and Other Business Enterprises. The original goal, as Ruggie describes it [pdf], was “to impose on companies, directly under international law, the same range of human rights duties that States have accepted for themselves under treaties they have ratified.”

Sensible enough, you’d think. The Norms gave the UN a chance to “revive its relevance,” as Surya Deva puts it [pdf], “in a new world order in which states no longer enjoy the monopoly as violators of human rights”. Despite a promising start, the Norms ended up falling far short, in Deva’s judgment, of laying the groundwork for “an effective international regulatory regime of corporate human rights responsibility.”

Businesses fought back fiercely; and governments, far from offering support, “went into hiding,” as Ruggie put it in a 2008 interview. By the time the Norms emerged from a UN Sub-Committee in August of 2003, they were hardly fighting words. Like the UN Global Compact, launched amid much hullabaloo only three years earlier, the Norms were not legally binding and left it up to businesses to decide the depth of their commitment and to meet human rights responsibilities on their own terms. (And as I pointed out in a previous post, most companies are only too happy to say that they are equipped to decide, all by themselves, whether they are respecting human rights.)

Recognizing that his mandate began in “controversy,” Ruggie took a “consultative” approach to developing his framework. This was shrewd, as it included business from the start, and gained endorsements -- I almost want to call them corporate sponsors, given the display of logos on the Global Business Initiative site -- along the way: South American mining company Cerrejon, GE, Flextronics, Coca Cola, JSL Stainless, Sime Darby, Novo Nordisk, and French oil giant Total, among others. 47 states, including the United States, also signed on.

The diplomatic achievement is admirable, but result of all this consensus-building is predictably anodyne. According to the “Protect, Respect and Remedy” framework Ruggie developed, the State has a duty to Protect human rights; corporations have a responsibility to Respect human rights; and victims of abuse need access to judicial and non-judicial Remedy. The Guiding Principles set out “comprehensive recommendations” for how states and businesses are to “implement” the framework, “in order to better manage business and human rights challenges.” “Manage” seems to be the operative word here, and the whole exercise is, unfortunately, replete with management-speak.

In other words, the Guiding Principles and the Framework they accompany feel a little like Norms 2.0, offering guidance and encouragement instead of rules and regulations, and on terms business finds acceptable. Like the Global Compact, the Guidelines create a forum for discussion and dissemination of ideas -- “another talk shop,” as Arvind Ganesan of Human Rights Watch said dismissively. US envoy Daniel Baer was a little more generous – and decidedly cautious -- when he said the Guiding Principles would make it “less likely” that businesses take “actions that might undermine the enjoyment of human rights.”

So it’s unclear to me exactly how much has been accomplished. Julian B. Gonzalez, Vice President for Sustainability and Public Affairs at Cerrejon, says Ruggie’s work has “not been in vain” and credits Ruggie with having shown his company the way: now the mining company has established “a rights-based Grievance Office” and has gained “better knowledge of neighbor communities and our impacts.” Flextronics reports it is now “proactively” addressing human rights; Coca-Cola CEO Muhtar Kent appeared in a “global video” emphasizing the importance of respecting human rights across the global supply chain. And so on.

Maybe this counts as a step in the right direction, or maybe it’s just a public relations exercise. It might be both. Whether the UN could have done more this time around remains a question. In any case it seems clear that Wednesday’s announcement represents another attempt to establish UN authority in the area of human rights without offending some of the world’s most powerful actors, without regulating business activity or curtailing bad corporate behavior.

On the Heroics at Home Depot

2011-06-05T12:46:00.001-04:00

A video making the rounds on YouTube and on progressive blogs features the American Family Association’s Buddy Smith telling the story of his run-in with Home Depot Chairman and CEO Fred Blake at the annual shareholders meeting on June 2nd.

Smith, whose organization also runs a site called BoycottTheHomeDepot.com, came to the shareholders meeting to present a petition asking Blake to “stop sponsoring gay pride parades and making direct contributions to gay activist organizations.” “A corporate company like Home Depot,” he complains, “is just not being a good citizen,” because they are “spreading the word” about a “lifestyle that is just a trap of Satan.” Good corporate citizenship, in Smith’s view, requires “standing for God’s truth” out of “love” for “our neighbors.”

How’s that for a theory of corporate social responsibility?

To Smith’s dismay, Fred Blake wasn’t having any of it. The Home Depot CEO responded “very briefly” to Smith. Blake went on, in Smith's account, to say that he “was very proud of Home Depot’s diversity"; and the CEO "made a recommitment just to continue down the very track that they’re going.” So Blake sent Smith packing.

Whether this showed “some real backbone,” as blogger Cory Doctorow puts it, is up for debate: how much courage does it take to dismiss a crazy old coot like Smith, or double down on diversity policies for which there is a strong business case? Discrimination unnecessarily limits the labor pool and risks offending potential customers.

If the buzz on Twitter is any indication, the issue seems settled; and Blake is a champion of diversity and a model of socially responsible corporate leadership. Most people were retweeting @RightWingWatch’s tweet: “AFA brings boycott to Home Depot board meeting & CEO tells AFA to take a hike, reiterates commitment to diversity.” One poster, a Lady Gaga fan, called Blake “bad ass”; others said they now preferred Home Depot to its competitor, Lowes. @biggkhalil took up AFA’s theme of corporate citizenship: “Dear AFA, Home Depot is a great citizen. I pledge to continue shopping there. You people are pathetic.” Yet another poster thanked the company “for standing up for equality! Let's send a Village People construction worker with a gift basket!” Others used more colorful language to denounce Smith and praise Blake.

Everybody agrees Blake made the right call; nobody seems too concerned that he made an easy call. I guess people like to see these holy-rollers get their comeuppance. But it’s worth noting that there was another item on the agenda at the Home Depot meeting that deserves more attention than Blake’s rebuff of Smith. It has to do not with Home Depot policy but Home Depot politics – specifically with the money Home Depot gives through its PAC to candidates and their refusal to give shareholders a say in how that money gets spent.

It turns out some of the company's spending doesn't jive with their much-celebrated commitment to diversity. As Andy Kroll reports in Mother Jones:

in 2006, the PAC donated $1,000 to Kansas Republican Sam Brownback, now the state's governor and a supporter of a constitutional amendment banning same-sex marriage, and gave $10,000 to help Bob McDonnell's gubernatorial campaign in Virginia. McDonnell is a staunch opponent of workplace protections for LGBT state employees.

Arguing that Blake and his executive team at Home Depot “were giving to candidates who were actively rolling back the rights of GLBT people in the states in which they did business” and that this put the company’s reputation at risk, Julie Goodridge and Northstar Management brought a resolution to give shareholders an advisory vote on corporate political spending.

I’ve written about this resolution in a previous post. It is at best a first step, but it's a step in the right direction. Some people believe that requiring full disclosure and giving investors a say may help check corporate political spending in the wake of the Citizens United ruling.

That's the hope. In fact, CEO Fred Blake and the Home Depot management team opposed the Northstar resolution from the very start. It gained a place on the annual meeting agenda only after an SEC ruling required the company to include it. And at the June 2nd shareholders meeting, the resolution (not surprisingly) went down in defeat.

Fred Blake has promised to announce the final tally soon. It would be a sign of real courage, or at least consistency, if he took the occasion to distance himself and his company from the bigotry of Brownback, McDonnell and their ilk.

God and Mr. Dimon

2011-05-19T10:43:00.005-04:00

While protestors at the JP Morgan Chase annual shareholders meeting in Columbus, Ohio braved the rain and faced off with police, inside the McCoy Center there was a remarkable exchange.

“As a person of faith, my God believes you shouldn’t take advantage of people when they are down,” said Dawn Dannenbring, of the community group Illinois People’s Action, addressing CEO Jamie Dimon. “Do you believe in the same God I believe in?”
Dimon answered: “That’s a hard one to answer.”

Of course, whether Jamie Dimon believes in a merciful God is a matter for him to decide and settle with his own conscience. Whether he believes in the same merciful God Dawn Dannenbring believes in is probably impossible to answer, or would, at least, require an extended theological discussion. And neither Dimon nor Dannenbring seemed ready to have that conversation. The JP Morgan Chase CEO obviously wanted to get on with the business of the shareholder meeting. And Dannenbring was less interested in knowing the secrets of Mr. Dimon’s heart than in playing Portia to his Shylock and shaming him.

Dannenbring's motives aside, her question echoed other recent criticism of Mr. Dimon. On the blog Credit Slips, Adam Levitin attacked Dimon a couple of weeks ago for having no concept of mercy after Dimon said, in an exchange with CNBC’s Maria Bartiromo, that some people find themselves in better financial circumstances after foreclosure, and that, moreover, foreclosure is a form of debt relief: "Giving debt relief to people that really need it, that's what foreclosure is." Levitin was baffled:

For real?... "Debt relief" requires a forgiveness of debt. It's a gift, not an exchange. There's no quid pro quo….I can't fathom how Dimon conceives of foreclosure as an act of mercy.

Over at Naked Capitalism, Yves Smith picked up on Levitin's criticism: “the Dimon moral calculus is fascinating. If foreclosures are kind, is it even kinder to restore debtors’ prisons? After all, those people who lose their homes would be assured of getting shelter.” If today’s bankers believe in God, Smith says, they must believe in the angry God of the Old Testament, the same God who strips Job of his possessions and reduces him to sackcloth and ashes.

That Jamie Dimon is now being put in the company of Goldman's Lloyd Blankfein and other tight-fisted ministers of vengeance is all the more remarkable because Dimon is regularly held up in management literature (like this Introduction to Leadership[pdf]) and in the business press as an example of great leadership.

“Outspoken, profane, fearless,” as one CNN Money profile describes him, Dimon is regularly praised for having steered JP Morgan Chase away from the subprime crisis, exiting the business of securitizing subprime mortgages at the height of the boom and forgoing both Structured Investment Vehicles and Collateralized Debt Obligations, or CDOs. Notably, neither New York Attorney General Eric Scheiderman nor Senator Carl Levin, who are independently investigating criminal wrongdoing in the subprime crisis, have named Dimon or JP Morgan Chase as a target of their investigations. Even Matt Taibbi has focused his pieces for Rolling Stone on Goldman, not JP Morgan Chase.

For some, no doubt, it is a question of degree: while certain CEOs led their banks into criminal activity, others offered little relief to those caught up in the mortgage crisis. Perhaps both are to blame, and thanks to Levin and Schneiderman at least some of the criminals will now face justice.

But rather than expect the CEO of a global bank to forgive debts, or bear witness to his faith in a merciful God, I would prefer to know what constructive steps, if any, the banks are taking now to help the American middle class regain its footing and rebuild trust – not necessarily in God, but in the everyday workings of the American economy.

In other words, why ask for mercy when you can demand responsibility? I wish Maria Bartiromo would press Mr. Dimon in their next interview to talk specifically to this point, and to articulate clearly the obligations his company has, and the steps his bank will take, to help restore -- what else to call it? -- the common wealth. The exchange might be one for the leadership books.

From Zero to 32.73 at Bank of America

2011-05-16T08:04:00.005-04:00

First, a correction. In my last post about the 2011 proxy season, I wrote that shareholder resolutions requiring disclosure of grassroots political spending brought by AFSCME to Prudential and Bank of America had met with zero support. That is incorrect.

ProxyMonitor reported the zero vote tally because the votes had not yet been cast. The two AFSCME proposals regarding grassroots lobbying were listed on ProxyMonitor with other, fully tallied 2011 results, including one AFSCME proposal to IBM that received nearly 30 percent support; and I wrongly assumed that that meant the Prudential and BofA proposals had already been voted on. Instead, ProxyMonitor included them simply to show – I guess -- that they had been filed and were on the docket. At the time I wrote my last post, zero results had been reported, because the shareholder meetings hadn’t yet been held.

Serves me right for relying solely on the numbers in the “Votes” column on the database. Common sense would dictate that with AFSCME in the room a tally of zero would have been unlikely, unless (as I thought) some agreement to table the proposal had been reached before the meeting; and I should have checked the reported data against other news stories and the companies’ own sites. It’s a little odd that ProxyMonitor indicates a pending vote by reporting a tally of zero, and I've written to the Manhattan Institute asking about this point. But now I understand that the ProxyMonitor database is not strictly historical, and that should be taken into account when looking at emerging trends or patterns in 2011.

In any case, votes on those resolutions have now been cast, and the site has been updated with the results.

The proposal to Prudential won a modest 8.03 percent of the vote -- no big surprise there.

The proposal to Bank of America – which held its shareholder meeting on Wednesday of last week, amid protests over its mortgage and foreclosure practices -- was another matter altogether. 32.73 percent of BofA shareholders voted in favor of grassroots lobbying disclosures. That is well past the conservative 30 percent threshold set by Ernst & Young. BofA’s board of directors can’t put off this issue much longer.

This outcome is in keeping with the trend toward political disclosure I’ve discussed previously, with shareholders pressuring companies to report on where they spend their lobbying dollars, and lobbying now considered part of a company’s risk profile. The question is what Bank of America’s board will do about it: will they show leadership, or try to hide out for another year?

It’s unlikely they will do all that the proposal requires. AFSCME asked Bank of America to provide an annually updated report disclosing 1) policies around lobbying contributions and expenditures; 2) payments, "both direct and indirect, including payments to trade associations, used for direct lobbying and grassroots communications." The kicker was a third request, requiring the bank 3) to identify -- for each payment -- the person who decided to make the lobbying expenditure and those who participated in the decision to make payments to grassroots lobbying campaigns. Now that sounds like accountability.

John Keenan, the champion of the proposal and a strategic analyst for AFSCME, seems braced for a long tough slog. “We have concerns over our company’s sincerity when it comes to commitment to transparency and accountability,” he said in his remarks at the shareholders’ meeting [Keenan's remarks start at around 1:29 in this webcast]. Keenan noted that “last year, BofA agreed to disclose its political contributions on its website, including accounting for political contributions made by the Bank’s PACs,” but the reporting was so “anemic” that the “company and the board should be embarrassed by this weak effort.” The bank pointed interested parties to a federal database and left them to figure it out for themselves.

And though Keenan and others were able to determine that BofA “spent about 7.4 million in 2009 and in 2010 on Federal lobbying activities,” he noted “incomplete disclosure at the state level as state lobbying disclosure is not comprehensively required by law.” Keenan and his colleagues were able only to paint a “partial picture,” which showed BofA spending “more than 2.3 million” in 17 states. As for the rest? Even Bank of America itself may not have the whole picture.

It gets murkier. As I noted in a previous post, the area where it is most difficult to document these expenditures is in contributions to industry trade associations. Keenan cited an April 23, 2011 article in the LA Times documenting “a parallel, opaque system of political giving” in which the leading, politically active trade associations – the U.S. Chamber of Commerce chief among them – “took in more than $1.3 billion, more than the state of Vermont collected in taxes. These groups, in turn, spent some $500 million on lobbying and other political activity such as television advertising.”

How deep this goes is anybody’s guess. The LA Times report found that “substantial corporate political spending remains in the dark, leading to an incomplete, and at times misleading, picture of companies' efforts to influence legislation and elections.” Keenan began to make the same point at the BofA shareholders’ meeting, but a testy and "impatient" CEO Brian Moynihan interrupted him repeatedly, told Keenan that his time was up, and then, finally, just cut him off.

In the wake of Citizens United, Keenan and others like him are trying to do what Congress has so far failed to do. We probably should not expect the appointed guardians of our republic to step up anytime soon. The news in mid-April that President Obama had drafted an executive order requiring disclosure of political spending -- including contributions to third parties -- from companies contracting with the federal government met with immediate denunciations from Republicans, who complained about Orwellian oversight and muttered things about the First Amendment. They did not offer a better proposal. Nor did the Democrats. In fact, just last week, The Hill reported, a growing number of Democrats repeated the Republican criticisms of the President's executive order, and urged the administration to drop the plan, for fear that it might “politicize” the Federal contracting process.

To keep politics out of business, they oppose any measure to keep business out of politics.

2011 Proxy Season: Social Investment at the Threshold

2011-05-05T10:24:00.003-04:00

Ernst & Young estimates in a new publication [pdf] that half of all shareholder proposals in 2011 will deal with environmental and social issues, and support for these proposals is growing. In fact, “83 percent of investors now believe environmental and social factors can have a significant impact on shareholder value over the long term.”

Last year, E & Y finds, approximately one quarter such social investment proposals won 30 percent support –which E & Y calls a “threshold” number, where “many boards take note.”

Perhaps they’d better. Typically, when proposals reach a second threshold -- garnering 50 percent support-- directors who oppose them start losing their seats.

Things may not yet have reached a tipping point, but these are promising developments. With the enactment of Dodd-Frank in 2010, mandatory say on pay provisions became law; that means fewer executive compensation proposals are on the table, and it’s easier to introduce social issues into the conversation.

There are even some early indications of the trend toward social investment in the 2011 data reported so far on ProxyMonitor.org. (ProxyMonitor – the Manhattan Institute database I relied on in a previous post about why boards say they don’t back human rights proposals -- is keeping a “scorecard” of the 2011 proxy season.)

Now the ProxyMonitor data is special, and there might be reason to expect it to tell a unique story. ProxyMonitor documents only proposals made to Fortune 100 companies. Can we reasonably expect Fortune 100 shareholders to set the trend or lead in the area of social investment? On the one hand, investors in the Fortune 100 might tend to be more conservative –and risk averse -- than the average shareholder. On the other, these high-visibility public companies with strong brands are likely to attract activist investors and funds with a social agenda. The likely outcome is more proposals, less traction.

Be that as it may, so far, a clear majority of shareholder proposals made to Fortune 100 companies in 2011 target social investment issues.

And there is another encouraging trend here. More and more shareholder proposals ask boards of directors to report on corporate political spending and contributions. The Findings page on ProxyMonitor notes that among Fortune 100 companies, “the share of social policy proposals focusing on political spending has increased 84 percent in 2011 from the three previous years (2008-2010)” [emphasis mine].

A few examples give some sense of where things are heading. Two proposals requiring Valero Energy Corporation to report on its political contributions received 26 and 27 percent support, edging closer to the 30 percent threshold of boardroom visibility. A proposal by AFSCME asked IBM to disclose “direct and indirect spending to influence legislation as well as grassroots lobbying communications to influence legislation”; it received 28.5 percent support in the 2011 vote. It will be hard for the IBM board to ignore or resist this much longer.

All is not sunshine. It’s worth noting that when AFSCME advanced similar proposals with Prudential and Bank of America, both proposals met with zero support. [Update 5/16/11: this is incorrect. Please see this post.] Prudential made the case that the information is already available; Bank of America complained that it would be burdensome and redundant, and, besides, “our company does not engage in grassroots lobbying.”

Make of that statement what you will. It’s clear that forcing disclosure of so-called “indirect” and “grassroots” spending will be an uphill battle, in part because it is difficult to define or track grassroots spending, or distinguish it from legitimate trade association activity.

But the focus now on corporate political spending brings welcome relief. As I suggested in an earlier post, some social investors are trying to do what Congress is unable or too cowardly or too compromised to do: take back some of the ground that was lost or – as I prefer to put it – given away by the courts in Citizens United. The boldest of these proposals, requiring Home Depot not only to disclose its political expenditures, but also to submit those expenditures to a shareholder advisory vote, will come to a vote on June 2nd. Maybe this measure will make it past the threshold.

Ding Dong the Witch is Dead

2011-05-02T11:13:00.002-04:00

The trouble is, we’re not in Kansas anymore, and Kansas is no longer the place it used to be. The pursuit of Bin Laden has exhausted our treasure and killed thousands. It has transformed the state in countless ways and extended the reach of the state into our lives.

So this brief note, just to say I am not so sure the occasion calls for jubilation and dancing in the streets. Maybe, instead, it’s time for some sober reflection on where this decade-long pursuit has brought us, and where we go from here.

I look at the past ten years and I have no confidence – absolutely none -- that our political leaders are up to the task, or that we, the people, will make or can make better choices about our foreign adventures or interventions and the protection of our own liberties.

The flag-waving celebrations at Ground Zero and outside the White House are over. Now everyone from Dick Cheney to the President has been quick to remind us that the War (or whatever it’s being called these days) isn’t; and -- we are already being told – we must remain ever vigilant.

Citizen Investors and Citizens United

2011-04-12T11:23:00.002-04:00

Home Depot’s Spring 2011 proxy report will include a proposal seeking shareholders’ say on political spending done by the corporation. This proposal is the first of its kind. Chances are it will not be the last.

If shareholders approve the resolution, where and how Home Depot funnels money into the political process and influences elections will be subject to shareholder approval.

Home Depot did not exactly welcome this development. According to documents filed with the SEC[pdf], the company resisted the proposal, arguing that such a resolution would impinge upon and restrict “ordinary business of the company.”

More specifically, Home Depot took three legal tacks, all involving various clauses of SEC rule 14a-8, governing proposals of security holders. First, they invoked SEC rule 14a-8(i)(3), “that the proposal is [too] inherently vague or indefinite...to determine with any reasonable certainty exactly what actions or measures the proposal requires.” Second, they tried rule 14a-8(i)(7), that the proposal seeks “to micromanage the company.” Last, they tried invoking rule 14a-8(i)(10), “that Home Depot has substantially implemented the proposal.”

These are hardly original arguments – we don’t know what you’re asking, you’re trying to tie our hands, we’re already doing this -- and they did not carry the day. Writing on behalf of the SEC, Attorney Bryan J. Pitko found all three arguments to be without merit.

"In ruling in favor of allowing the proposal," writes Sanford Lewis, an attorney who defended the proposal on behalf of Northstar Asset Management, “the [SEC] has essentially determined that after Citizens United, corporate political spending is a significant social policy issue and shareholders can seek to have input on management’s decisions.”

How this will all turn out remains uncertain. As Lewis admits, “a majority of institutional investors typically support whatever the management of a company thinks is appropriate.” But in the absence of any new law restraining corporate speech, “citizen investors” like those Lewis represents may be able take back some of the ground that was lost – or given away by the courts -- in Citizens United.

3 Big Reasons Why Boards (Say They) Don’t Back Human Rights Proposals

2011-04-05T09:25:00.002-04:00

Last week the Manhattan Institute launched ProxyMonitor, a site tracking shareholder proposals submitted to publicly traded companies via the annual proxy process. Right now, the site is limited to proposals made to Fortune 100 companies. Data goes back three years, to 2008. The site already offers some great features, including links to SEC filings around each proposal as well as the ability to filter and sort search results and export them to Excel.

People who have read my blog posts about business and society won’t be surprised that I went immediately to the “Social Policy” filter, which turns up 266 results.

Of these, thirty are human rights proposals made to the boards of twenty-one corporations: Abbot Laboratories, Archer Daniels Midland, Bank of America, Boeing, Caterpillar, Chevron, Cisco, Citigroup, Coca-Cola, E. I. du Pont de Nemours, Google, Honeywell International, IBM, JPMorgan Chase, Microsoft, Morgan Stanley, Motorola, News Corp, Philip Morris, United Technologies and Wells Fargo.

I’ve been sorting through those 30 proxy proposals, to see what they say about the way shareholder proponents and Boards of Directors deal with proposals around human rights.

It’s a fairly narrow range of investors putting forward these resolutions, and I wonder if this limits their chances of success. Proponents include churches and religious orders -- the Sisters of Charity of St. Elizabeth, the Domestic and Foreign Mission of the Episcopal Church, the Province of St. Joseph of the Capuchin Order and the Presbyterian Church -- as well as socially responsible investment funds: Christian Brothers Investment Services (who invest for Catholic institutions) and New Covenant (dedicated to advancing the Presbyterian mission through investment) along with independent, socially conscious investment firm Trillium Asset Management. Among the thirty proposals is one from Amnesty International; a handful of individual investors submit their own proposals. So far, no big surprises. The only standout entry in the list of human rights proponents is the New York City Comptroller’s Office, shareholders in Archer Daniels Midland.

It’s no surprise, either, that shareholder support for these proposals is usually weak, ranging from around 3-8 percent. There are a few notable exceptions. The NYC Comptroller’s Office proposal to ADM -- requesting “that the company commit itself to the implementation of a code of conduct based on...ILO human rights standards and United Nations’ Norms...by its international suppliers and in its own international production facilities” -- garnered 20 percent and 25 percent of the vote in 2008 and 2009 respectively. A 2010 proposal would have required Caterpillar to “review and amend, where applicable, Caterpillar’s policies related to human rights” and to post “a summary of this review...on Caterpillar’s website by October 2010”; that gained 20 percent support. And a proposal put forward by Chevron shareholders -- that the Board “adopt a comprehensive, transparent, verifiable human rights policy and report to shareholders on the plan for implementation by October 2008” – won almost 28 percent support.

Why these proposals fared so much better than others is a question for another day. Why they didn’t ultimately succeed merits discussion as well. Despite impressive levels of support, they met with the same objections as all the other human rights resolutions in the ProxyMonitor database.

Why do Boards of Directors oppose these resolutions and recommend that shareholders vote against them? Or, at least, why do they say they can’t get behind human rights resolutions? What reasons do they offer?

Board opposition falls roughly into three categories.

First, the proposals are opposed because they are restrictive. The argument here is that the proposal would limit the company’s autonomy and blanket policies will hamper the company’s ability to operate. As JPMorgan Chase notes in its response to a 2008 human rights proposal, these matters are “complex” and “fact-specific,” so they need to be taken on a case-by-case basis. Good judgment deals in particulars, without having to check each call against abstract measures; and since “opportunities for engagement” on these issues “vary greatly,” blanket policies might prevent the company from responding to a particular case in an appropriate way; and they might also hinder the company from pursuing “objectives and policies” they are charged with.

Second, they are opposed because they are burdensome. Putting human rights proposals into practice can be expensive, and it can place other burdens on company resources. Some companies make it sound as if they would simply be overwhelmed. This argument is taken to an absurd extreme by Wells Fargo in a 2008 filing.

Proponents were moved by the example of Sudan to put forward a resolution to “authorize and prepare a report to shareowners which discusses how our investment policies address or could address human rights issues.” The report was to specify “appropriate policies and procedures to apply when a company in which we are invested, or its subsidiaries or affiliates, is identified as contributing to human rights violations through their businesses or operations in a country with a clear pattern of mass atrocities or genocide.” Wells Fargo took refuge in its position as “a diversified financial services company”:

we invest on behalf of clients and customers in thousands of domestic and foreign companies, many with complex and far-reaching global operations. The effort required to screen thousands of individual companies, as the Proponents would seem to advocate, would be a task of tremendous scope requiring in-depth research and detailed evaluations of the nature and extent of each company’s global operations. We simply do not have appropriate resources or access to adequate and accurate information to make informed judgments on these complex issues.

So the argument that won the day came down to this: Wells Fargo can’t really track its own investments. The world is just too complex. Unable to do the research required to clarify its positions in “thousands of individual companies” and to make “informed judgments,” Wells Fargo simply can’t account for all the places it puts its clients’ money. This is not exactly reassuring. Still, the argument seems to have served its intended purpose. The proposal only received 6.81 percent support.

The third and by far the most common objection to human rights proposals is simply that the resolution is unnecessary or redundant. We see this argument made again and again in the SEC filings: the company already has a human rights framework or a code of conduct in place; the proposal, as one Chevron filing says, would “merely duplicate...current efforts” – an “unnecessary and inefficient use” of company resources.

Chevron has The Chevron Way. Caterpillar has its Worldwide Code of Conduct. ADM “believes that our company’s Business Code of Conduct and Ethics and our existing business practices address the substantive areas covered by the proposal.” Coke and Motorola say that when it comes to human rights, they already have it covered. Microsoft “continues to take steps we believe are appropriate” in the area of human rights and requires no additional prodding or cajoling. Citigroup has “implemented best practices regarding human rights,” so “a report concerning the company’s investment policies with respect to human rights issues would provide no meaningful benefit” to shareholders.

So much for scrutiny. In nearly every response to human rights resolutions, we are asked to believe that the company’s good faith, code of conduct and current efforts will be sufficient. Over and over again, companies assert against human rights proponents that they are perfectly capable of monitoring themselves and governing their own behavior. They have already incorporated existing human rights frameworks, such as the non-binding UN/Ruggie framework, into their deliberations, or developed their own codes of conduct with reference to those frameworks. Additional human rights reporting would be meaningless and probably just interfere with business operations. What could a report possibly turn up, these companies ask, that we ourselves have not already seen?

Call it arrogance, but these Fortune 100 companies are now confidently asserting their own human rights competence. They refuse to be held accountable because in their own estimation they are already socially responsible.

Why Pollard, Not Manning? Ask John McCain

2011-03-13T22:01:00.001-04:00

Last week we learned that John McCain has joined the ranks of those calling for the release of Jonathan Pollard. Pollard, you will recall, was sentenced to life in prison in 1987 for espionage – specifically for passing tens of thousands, “possibly over a million” U.S. classified documents to the Israelis, many of them related to the military activities of Arab states.

In a February 15, 1987 article for the Washington Post, Wolf Blitzer set out a partial list of the secret materials Pollard stole and passed on to his Israel handlers. The list reads eerily like a prologue to the past twenty-five years of American foreign policy: it includes American reconnaissance of the PLO, information about Iraqi and Syrian chemical warfare facilities, details of Soviet arms shipments to Syria and Lebanon, and reports on what was then Pakistan’s fledging nuclear weapons program. “What Pollard did,” wrote Blitzer at the time, “was to make virtually the entire U.S. intelligence-gathering apparatus available to Israel.” The Israelis found the intelligence Pollard provided “breathtaking”; Caspar Weinberger at the time called it “treason,” noting that once in Israeli hands the same information could pass easily to the Soviets.

According to the terms of his sentence, Pollard will be eligible for parole in 2015. But that is not soon enough for many American politicians, who range from Barney Frank to Anthony Weiner to Henry Kissinger, and now, McCain, who has done an “about face” on the matter: until recently he was adamantly opposed to Pollard’s release, telling the Conference of Presidents of Major American Jewish Organizations that Pollard had “betrayed our nation.”

The argument for clemency usually takes a few forms: Pollard is ill (where have we heard that one before?). Freeing Pollard now will be a goodwill gesture toward the Israelis, and will help the Obama administration advance Middle East peace talks: but exactly how is unclear. Lawrence Korb, former Assistant Secretary of Defense under Ronald Reagan, recently decried Pollard’s “harsh sentence” in an Op Ed for the conservative Jerusalem Post, claiming “whatever facts [Pollard] might know would have little effect on national security.”

Can't the same be said for the classified information released on Wikileaks, and linked by the U.S. government, via Adrian Lamo, to Bradley Manning?

John McCain called Cablegate “an incredible breach of national security." But in the moment of candor that just cost him his job, P.J. Crowley admitted that “from a State Department perspective, we’re not really embarrassed by what came out. A British colleague observed that his opinion of US diplomacy went up as a result of reading the cables.” So while Crowley thinks “Manning is in the right place” – why, and based on what evidence, he does not say -- neither he nor anyone at the Pentagon will say that Wikileaks has harmed national security.

So it strikes me as curious that our leaders are eagerly lining up to advocate for the release of a convicted spy, but are unable to summon the courage to ask for the humane treatment of an Army private who has not even had his day in court.

General Electric's F-136: Down but Not Out

2011-02-17T12:06:00.002-05:00

Was I wrong. In a January post, I confidently stated that “newly elected House Republicans are not going to stop the F-136”. Yesterday they did, stripping funding for GE’s alternate propulsion system for the F-35 Joint Strike Fighter from HR1, the continuing resolution for 2011.

House Armed Services Committee member Tom Rooney, a Florida Republican, sponsored the amendment. 47 Republican freshmen bucked their party’s leadership – Boehner, Cantor, and House whip Kevin McCarthy -- and voted with Rooney. This led Colin Clark, who blogs over at DoDBuzz, to see yesterday’s 233-198 vote as a victory for the Tea Party and other “other deficit conscious Republicans.” Clark cites an email from defense analyst Loren Thompson:

“This shows how election of Tea Party Republicans has changed the political calculus in Congress.”…“Proponents of the second engine argued it could save the government money by enabling competition, but members were more impressed by the up-front cost of funding a second production line and supply network.” It also “really puts [House] Speaker [John] Boehner on the spot, because he was a leading proponent of pork-barrel spending that would have benefited his district. He doesn’t look like he’s in tune with the dominant trend in his party.”

“Now we know just how much Congress has changed since the November elections,” writes Clark, who thinks the F-136 vote might represent “a tipping point” for the Defense Budget generally. But that’s a pretty big leap, and the notion that meaningful cost-cutting is really “the dominant trend” in the Republican party is open to debate.

After all, the F-136 was an easy target. Secretary Gates didn’t want it; the Air Force didn’t want it; the President didn’t want it. It was egregious example, a symbol of the excesses of the Military Industrial Complex. Rooney brags that over the long term this single cut will save taxpayers “over $3 billion,” but more immediately it cuts $450 million – a fairly insignificant number in the world of DoD appropriations. Indeed, if HR1 marks a tipping point, it is most likely in other areas, such as transportation, education, funding for the arts and domestic programs.

It’s also unlikely that the vote on the F-136 will go the same way in the Senate. (Here I go, making another prediction.) GE will continue to “press the case for competition,” a spokesperson said. That probably will mean some negotiating behind closed doors for Jeffrey Immelt, whose appointment last month to lead the President’s Council on Jobs and Competitiveness marked the crowning achievement of a $39.3 million dollar GE 2010 lobbying campaign, $9 million of which was spent on lobbying for the F-136. Mr. Immelt would be remiss if he did not take this opportunity to champion competition.

A Brief for Mr. Kleisterlee

2011-02-10T15:01:00.004-05:00

Last week, Vodafone Group announced that Gerard Kleisterlee would replace outgoing Chairman of the Board Sir John Bond. This should be welcome news for shareholders. The Ontario Teacher’s Pension Plan, which led a vote against Bond at last year’s Annual General Meeting, protested that the telecommunications firm currently suffers from “significant structural and strategic weaknesses,” and complained publicly of Vodafone’s “long history of poor capital allocation and disastrous M & A.” The board, they averred, was in need of “rejuvenation” and the company in need of restructuring.

From all appearances, Mr. Kleisterlee is the man for the job.

Kleisterlee gained his reputation at Philips, where as CEO he performed a masterful and unsentimental overhaul of the ungainly conglomerate, getting Philips out of the semi-conductor, component and television business, introducing new licensing agreements, and simplifying Philips’ business operations from eight to three units. Not known as a “gung-ho dealmaker,” Kleisterlee nevertheless demonstrated an intelligent approach to M & A. He is rightly credited with saving Philips from itself and returning the company to growth. Analyst Will Draper sees him as a strong ally for Vodafone’s current CEO, Vittorio Colao, who is trying to reposition the firm around core geographies, revamp the Vodafone brand, and make headway in emerging markets.

When it comes to emerging markets, Kleisterlee will have his work cut out for him. India has been an especially troublesome spot, where Vodafone has fought a pitched battle over taxes from a 2007 acquisition, dealt with some unscrupulous regulators, and is now contending with the ugly unraveling of Vodafone Essar, a joint venture. But for Vodafone’s new chairman getting things squared away in India will be only one aspect of a much bigger emerging markets story. Eventually Kleisterlee is going to have to come to terms with other aspects of that story, and notably with Vodafone’s actions during the uprising in Egypt.

That is, I suspect, where Mr. Kleisterlee will find one of his most difficult briefs. The company’s human rights record in Egypt has come in for some strong and well-deserved criticism. (The two are not necessarily the same.) Officially, Vodafone claims to have had no choice but to comply with Egyptian authorities in shutting down its mobile network and allowing the government to send SMS messages that precipitated a violent crackdown.

Vodafone Group has protested to the authorities that the current situation regarding these messages is unacceptable. We have made clear that all messages should be transparent and clearly attributable to the originator.

The company has consistently taken refuge in the government’s “technical capability” to override and shut down their network. There was nothing they could do, they explained, without putting their own employees’ lives in danger.

But they have not yet answered some serious allegations, like those made by Hossam Bahgat of the Egyptian Initiative for Personal Rights. Bahgat claims that Vodafone “selectively severed phone access for human rights defenders, lawyers, and political activists starting on Tuesday,” January 25th, blocking SIM cards and rendering human rights workers’ phones useless when they most needed them.

Others have asked whether Vodafone did more than merely comply: were they in some way complicit? That was the tenor of the discussion on a Facebook page in the run up to a demonstration at Vodafone headquarters in London; and it continues to be the tenor of the "Vodafail" Global Boycott and Protest. There were even rumors online of secret police running the Vodafone Egypt core room in Cairo, but nothing that could be verified. Access Now rebuked the company for silently tolerating – assenting to -- emergency rule in the first place: “decades of emergency law suited Vodafone when they were making billions of profit in Egypt,” reads a strident email promoting one of several online petitions. But as I noted in a previous post, it is not at all clear the people gathered in Tahrir Square would be better off now had Vodafone and other mobile providers never done business with Mubarak’s regime.

Much harder to quarrel with is Salil Tripathi at the Institute For Human Rights and Business in London. He asks, very sensibly, whether Vodafone could have done more to create transparency – to alert customers of impending shutdowns or government interference with the network – and, more importantly, whether they gave any serious thought to developing a “human rights framework” before entering into business with the Mubarak regime.

On this front, Kleisterlee has to fight more than a public relations battle. To be sure, Vodafone’s public response to events in Egypt will send a strong signal to mobile customers in Egypt or Vodafone customers around the world. (Americans rushing out to buy Verizon iPhones might pause to consider that Verizon Wireless is a joint venture with Vodafone – though I have no illusions that that will slow the stampede.) Egypt will also factor into any effort to re-brand the company, and if Mr. Kleisterlee and Mr. Colao intend to make the Vodafone brand synonymous with “mobile data and network quality,” it would make good sense to look closely and seriously at how data and networks played into events in Egypt. One message from Tahrir Square is that data doesn’t just move through networks: a network always touches and is embedded in human situations; and data alters and is altered by its situation. The quality of a network should not be measured simply in terms of signal strength; the privacy and security afforded users of the network also matters, in Egypt and elsewhere. How do these basic rights figure into Vodafone’s promise of “quality”? How is Vodafone going to respect and protect these rights?

Dodging the question won’t do. Blaming bad governance on Bond’s part only begs the question what good governance will look like under Chairman Kleisterlee. Pace Martin Sorrell, who wrote an apology for Vodafone in the London Times, there is no avoiding the “de facto editorial and political judgments” that Google, Twitter and Facebook have made in providing technologies and services to organizers in Tahrir. Denying service in compliance with the Mubarak regime also involves a political judgment, and trying to avoid what Sorrell calls “unintended consequences” is itself an act –a cowardly evasion – with social and political consequences. Limiting exposure to risk is not simply a matter of seeing no evil; and taking intelligent risks, with an eye to the future, and a nuanced understanding of how the world is changing, is the very essence of good judgment.

No business operates in a neutral zone, on a holiday from history. If Vodafone wants to compete in emerging markets, then the company has to earn and keep the trust of people in those markets, prove that they share their aspirations for a better life, and acknowledge that they have a stake in whether people living in those societies suffer or thrive. At this year's Annual General Meeting, shareholders deserve to hear whether Vodafone is a relic of Egypt's past, or invested in its future.

Doing Business With Bad Regimes: Vodafone in Egypt

2011-02-01T09:28:00.000-05:00

Last Friday, Access Now put out a link to a petition urging Vodafone, Orange and all ISPs and mobile operators in Egypt to “get Egypt back online.”

We call on you to immediately open the Egyptian telecommunications networks. We ask that you stand firm against the Egyptian government and allow the people, and your customers, to communicate freely and openly at this vital time.

On the face of it, putting pressure on ISPs and telecoms companies operating in Egypt seems to make good sense. One might assume that appealing to Western companies might be more effective than putting pressure on Mubarak, which is what President Obama tried to do last week when he urged the Egyptian government "to reverse the actions that they’ve taken to interfere with access to the Internet, to cell phone service, and to social networks that do so much to connect people in the 21st Century.” (The President failed to persuade Mubarak, but inspired Steve Denning to float the idea in a column on Forbes.com that Internet access may be "a basic human right.")

It’s unclear, however, how much the ISPs and mobile telephone companies operating in Egypt can do. On Saturday, for example, Vodafone Egypt announced that they had resumed services but expected further interruptions, and they explained their decision to take the network down as a pre-emptive move:

Statement - Vodafone Egypt
Saturday 29 January 2011. Vodafone restored voice services to our customers in Egypt this morning, as soon as we were able.
We would like to make it clear that the authorities in Egypt have the technical capability to close our network, and if they had done so it would have taken much longer to restore services to our customers.
It has been clear to us that there were no legal or practical options open to Vodafone, or any of the mobile operators in Egypt, but to comply with the demands of the authorities.
Moreover, our other priority is the safety of our employees and any actions we take in Egypt will be judged in light of their continuing wellbeing [sic].

Salil Tripathi at the Institute for Human Rights and Business takes issue with this official statement, saying that Vodafone could have done more before “instantly” complying. Why didn’t they “push for answers” by asking the Egyptian state to provide instructions in writing and explain its rationale? Why didn’t they more forcefully argue the case for keeping service uninterrupted? At the very least, he says, they should have warned their Egyptian customers before shutting down.

These recommendations would seem sensible enough, but for the fact that the Egyptian authorities, according to Vodafone, have the “technical capability” to shut down the mobile network. (I am unclear why it would be even more difficult for Vodafone to restores service after a government shutdown, but I imagine it has to do with the fact that a government shutdown would not exactly proceed in a careful and methodical way.) If this is true, and Vodafone is not just taking refuge in technical hocus pocus, then no amount of protesting or arguing or pushing for answers would really matter, when push came to shove. It's easy to imagine that defying the Mubarak government, refusing to comply, or delaying would put Vodafone employees at risk. Affiliation with a Western company is no guarantee of safety or immunity; consider the fate of Google’s @Ghonim.

John Morrison, Executive Director of the London-based Institute, followed up on Tripathi’s remarks with a letter to the Financial Times in which he pointed out that Vodafone’s "dilemma could hardly have been unexpected," and telecoms and ISPs should exercise due diligence before doing business in a place like Egypt (or China, Iran or Sudan). "The clash between local law, albeit that of an authoritarian regime, and international law will be a key theme for the information and communication technologies sector for years to come," he writes.

These companies will need to exercise comprehensive human rights due diligence before signing contracts with the governments or joint venture arrangements with national companies. The risks need to be managed as effectively as possible in the wording of the contracts themselves, something that is rarely the case at the moment. Without such action by the industry, some will say that UK or European Union law should be amended to require them to do so.

It is not too much to ask a company wishing to do business with an authoritarian regime to balance concerns about human rights and international law with its business interest. But that balance may be very difficult to strike, and due diligence should also take into account the crucial role mobile telephony and information technology have already played in opening closed societies.

Let's say, for example, that Vodafone did human rights due diligence before signing a contract with the Egyptian government, and decided that the risks were too great – or that it could not include meaningful human rights agreements in its contract with the Egyptian government. Would it then have been better for the company to decide not to do business in Egypt? Would Egyptians really be better off today if Western mobile operators had decided, long before the events of January 25th, that it was just too risky, or too difficult, to do business in Egypt?

To ask the question is not to apologize for Vodafone. But it is worth asking what sorts of compromises are acceptable, especially since mobile telephony and mobile-based services like SayNow have stepped into the breach now that Egyptian ISPs are offline, allowing Egyptians to communicate – albeit not without interruption – with each other and with the outside world.

A Connecticut Lobbyist In Obama's Court

2011-01-22T12:44:00.001-05:00

There has been plenty of griping and grumbling over the past twenty-four hours about the President’s appointment of General Electric CEO Jeffrey Immelt to lead the President’s Council on Jobs and Competitiveness. While he may be an idol of corporate America, Immelt appears to be an unlikely champion of American job creation. "Since Immelt took over in 2001," Shahien Nasiripour reports in an article on Huffington Post,

GE has shed 34,000 jobs in the U.S., according to its most recent annual filing with the Securities and Exchange Commission. But it's added 25,000 jobs overseas.
At the end of 2009, GE employed 36,000 more people abroad than it did in the U.S. In 2000, it was nearly the opposite.

To make matters worse, Connecticut-based GE has not exactly been focusing its investments on American innovation and growth: in 2008 and 2009, Nasiripour points out, GE decided "indefinitely" to invest earnings abroad, while booking losses at home: as a result, General Electric enjoyed a negative tax rate in 2009 and a low rate of around 5 percent in 2008.

It stands to reason that more inducements and allurements, in the form of corporate tax breaks, are in the works to help focus Immelt and other corporate leaders on job creation. To help bring some of those foreign investments home, Immelt and other corporate titans will most likely continue to push for making the Research and Development Tax Credit permanent. They give the impression they are holding the spirit of Thomas Edison hostage, and will only release him if their conditions are met.

You might be forgiven for asking whether this is really the best way to spur American innovation, or whether Jeffrey Immelt and GE really have America’s best interests at heart. I’m sure Immelt believes he does; but can he, really? Maybe it all depends on how you sweeten the deal. Immelt himself reassured analysts and investors yesterday that he will always put GE first: "My commitment to GE and my leadership at GE, that doesn't change," he said on a conference call. He knows, I suppose, that no man can serve two masters.

The disturbing truth is that there really isn’t any great conflict of interest here: GE’s interests are not so far from American lawmakers’ interests. This happy consensus is largely the result of GE’s lobbying campaign, which in 2010 amounted to $39.3 million. $9 million of that campaign was dedicated to lobbying around a single project: the F-136 propulsion engine.

Developed for the Lockheed Martin F-35 Joint Strike Fighter jet (a big $382 billion project), the F136 propulsion system is GE’s “alternative” to the F-135 propulsion system developed by Pratt & Whitney. An alternative. That is, there are no plans to use GE’s F-136 engine in the fighter jets. Pratt & Whitney won the government contract for the F-35’s propulsion system. You’d think that would have resolved the matter.

But these things have a momentum all their own. Funding for the F-136 started as an earmark in a defense bill, and grew. The Bush administration tried to kill the F-136 engine; Secretary Gates called it a “boondoggle,” and President Obama promised to veto any defense bill that included the GE engine. Robert Gibbs yesterday reiterated that the engine is “not something we need.” But GE, arguing that competition drives down costs, has lobbied and continues to lobby for its engine, running ads, working both sides of the aisle, and spreading its message through the press.

Newly elected House Republicans are not going to stop the F-136. Congress has already funded its development to the tune of $3 billion, and funding will continue unabated through March 4th of this year. And just yesterday, a GE spokesman told ABC News that "newly elevated leaders are even more likely to keep the engine program afloat." It remains to be seen whether, come March, the President can or will stand his ground.

Can America Still Bring Good Things to Life?

2011-01-21T18:16:00.007-05:00

When announcing the appointment of General Electric’s Jeffrey Immelt to lead the President’s Council on Jobs and Competitiveness today, President Obama vowed to put “our economy into overdrive.” He meant what everybody took him to mean: we are now going to get things really going, shift America into high gear, pull out all the stops, discover our inner Edison, “build stuff and invent stuff,” and export it to the world.

But the word “overdrive” is probably not the word the President should have chosen. Or at least it commits him to positions he isn’t going to take – positions I wish he would take.

Indulge me for a moment. Overdrive is not just high gear. Overdrive also means better fuel economy. When you put your car into overdrive you get the best mileage per gallon, because the overdrive mechanism allows “cars to drive at freeway speed while the engine speed stays nice and slow.” Or, as the entry on Wikipedia puts it, overdrive “allows an automobile to cruise at sustained speed with reduced engine speed, leading to better fuel consumption, lower noise and lower wear.”

At the very heart of the President’s metaphor, then, are two ideas: one, economy, a more efficient or economical use of resources (or fuel) and two, sustainability, maintaining a constant speed without causing wear and tear. Right now, we are desperately in need of both: new ways of conserving the resources we have and a more sustainable way forward than the cycle of boom and bust, or dangerous exuberance followed by social collapse.

Those ideas were not on display today in Schenectady. There was some talk about clean energy – a business GE is in, and where, not surprisingly, Immelt thinks a “partnership” between the private and public sector is “essential.” But the main focus was on U.S. manufacturing and U.S. exports, which the President wants to double over the next five years. “For America to compete around the world, we need to export more goods around the world,” said the President. So we need to innovate and invent new “stuff,” or bring good things to life, as the people at GE used to say. “Inventors and dreamers and builders and creators," we need to expand our manufacturing base and bring American products to the global marketplace.

Reading these remarks, I can almost hear the old General Electric jingle. "We still have that spirit of innovation," Immelt said. "America is still home to the most creative and innovative businesses in the world," said the President. We are "still" innovative, both leaders took care to say -- almost as if we no longer believe it or doubt it's true. We've still got it. Our force is not spent.

It's great to be reassured of our continued prowess. There are, however, lots of unexamined assumptions at work here, and chief among these is one I’ve discussed in earlier posts: namely, the assumption that “innovation” is the surest path to “growth,” and that growth – even unsustainable growth – is good in and of itself.

Sustainability doesn’t really enter into this conversation – partly because, I suppose, it really isn’t a conversation. It’s all bluster and boosterism.

Nor would anyone at these events, the President least of all, take a step back and ask whether, while we are doubling our exports, we should also take some steps toward greater self-sufficiency. Doing that, especially when it comes to energy -- and energy consumption -- would leave us less exposed.

I'm not even convinced doubling our exports or even saying we are going to double our exports is the right thing -- for the dollar, for trade agreements we have in place, for the very focus of American industry and innovation. For his part, Immelt has no doubts:

"It's the right aspiration," Immelt said of the president's goal of doubling American exports to more than $2 trillion in five years, during a Nov. 6 interview in Mumbai, where he joined Obama for a meeting with business leaders. "We've done it in the last five years as a company."

Maybe in the long run, or at least in five year's time, what’s good for General Electric will turn out to be good for the republic. How could it be otherwise?