Comment on – Yahoo Execs Apologize For China Role; Company Revealed Dissident’s Web Work

So CEOs and “C” suite execs, here’s your question of the day —

 

Do we center our organization and develop and refine its group and individual behaviors around a values system — being truthful, acting from a moral foundation (much as that is sometimes viewed as an anti-business sentiment), being protective (of those we do business with), and other beliefs usually thought to be progressive and American… or …

 

Do we go-with-the-flow in each of the countries and cultures in which our company does business…so we can get ahead (even if sometimes little folk are crushed in the process)? That seems to be the case with Yahoo, now in the crosshairs because of informing on a Chinese customer. Serious questions – serious outcomes.

 

Here we have a company — it seems from all that’s been reported and the company’s own comments — that wanted to get a foothold in the world’s most populous nation (and now, a fast growing economy) — and if seeming to say, if we have to throw our values (and people) to the wolves, well that’s the price of globalization and entry to the Chinese market.

 

Is our question (and this type of situation) really that simple? I think many folk in the USA in following these developments will think so. At least now Yahoo can stand as an example of what happens when values are not fully developed, or fully communicated to all staff, or fully embraced by decision-makers, or set aside, so that new markets can be penetrated. (Yahoo China provided information about [dissident] Shi’s online activities at the behest of the Chinese government.)

 

This is not an isolated incident…affecting only Yahoo…and we will be hearing of similar things in the future. (See the recent Fortune story on Microsoft penetrating China — and the concessions it apparently makes.) So, this is a good time to re-examine company values, mission, ethical code, guidelines for managers and rank & file…and decide what “the right thing to do” is…in all circumstances.

 

Hank Boerner

 

Editor – AC

Comment on – Trade Pacts Have Paved Way For Toxic Toys

This opinion piece (“op-ed”) by Jesse Jackson in the Chicago Sun-Times is very direct (you know what he is unhappy about) and makes some very powerful arguments. No matter your politics, no matter your ideological compass, no matter your position on unionized labor, no matter your views on free trade and globalization — you have to sit up and take notice when millions and then tens of millions of toys are recalled because of the risk posed to our babies, toddlers and young children.

 

Grover Norquist, advocate and activist for the conservative right, said it best: “Starve the beast…” meaning on your ideological basis, cut off funding for government agencies that meddle with business or other vested interests. And here we see examples of starving the beast as a clear strategy by the present administration, and also past administrations; if the leadership disagrees with the direction of or results of government oversight and intervention, don’t fund the agency to hire overseers and inspectors. And where is the oversight of the legislative branch in all this? Not clearly in sight, is it.

 

One guy named Bob is inspecting all toys for the Consumer Product Safety Commission? Is this a joke…if not, and it’s factural, is this a tragedy-in-the-making? At what price do we sell out our children’s health and safety…and futures? (Think of lead-related brain damage.)

 

This is all about accountability — all along the supply chain line, from the purchase order (issued from the US firm) to the distant supplier in Asia; from the Asian factories and over the high seas to the West Coast toy warehouses; from those warehouses into retail stores where parents make their choices. Who is at fault for lead toys being on American retail shelves? Well, perhaps now that we have had our awareness raised, and parents / grandparents and other gift-buyers become more aware of retail dangers, we will see positive changes coming about and safer toy suppliers will emerge. Don’t wait for government to do it — that may be where some folks part company with op-ed author Jackson…maybe there really are limits to what the federal government can do. So we look again to the supply chain and the responsibilities and accountabilities of those involved…from the purchasing office, etc. And finally, the market will speak — parents and others will let the marke!

 

t know what they will or will not tolerate even if they want to keep the cost of toys down (thank you, globalization and distant sourcing).

 

Your views on the toy safety issue? On government’s role in all this? On retailing industry accountabilities? On global trade and the consequences? On Jesse Jackson’s op-ed?

 

Hank Boerner

 

Editor – AC

Comment on – Rock Testifies Before Congress on Sub-Prime Mortgage Crisis

As our reader, “lethal at debt prison” (love it!) notes below, folks are nervous about subprime. And with good reason — this is a very serious situation.

 

We would like to point you to our other Web platform if you are interested in subprime news and developments —

 

Hank Boerner

 

Editor – AC

Comment 2 on – SEC Requiring XBRL To Help All Investors Learn Firms’ ABCs Financial Data Easier To Use The Technology Is Putting Complex Financial Reports Into An Interactive Format

on the posting by a reader: We respect the opinions of our readers who weigh in on news or commentary published here. We invite comments to help readers put stories (and opinions) in context, and to put in public view numerous points-of-view on an issue or topic. The “anonymous commentor” has weighed in on XBRL as reported by IBD and published here. We think a commentary on the comments posted is in order.

 

A careful reading of the Investor’s Business Daily feature shows that opinions stated in the piece are in “quotes” and the person being quoted is clearly identified — for example:

 

Microsoft is one of the companies already using XBRL. [stated fact]

 

It’s hard to find what’s relevant and useful among all the data the SEC collects, says Michael Ohata, Microsoft’s senior director of business reporting. [quote, clearly identifying the speaker]

 

“XBRL enables you to put information into the hands of people about their investment choices,” Ohata said. [further stated opinion]

 

“It gives investors and company management insights about how their companies are performing,” he said. [his experience?]

 

Microsoft is using the new format to improve its investment strategy, Ohata says. [quote, stating facts]

 

Leading thinkers and players in XBRL implementation were sought out. As you read this story (published originally in IBD, by J. Bonasia), and then the anonymous writer’s opinions, consider this:

 

The market cap of companies now voluntarily filing XBRL (financial reports) exceeds $2 trillion. There are 55 companies participating in this ambitious test. Edgar(R) Online reports it has 15,000 reports and 30 million datapoints in its database — and can process a company’s report for investors etc. to use in 15 minutes — and all current period reports in under 6 hours. SEC has $55 million invested in the interactive data project. This is an important initiative in financial reporting that is building momentum — we’ll watch what we publish as being “presumptuous” so that we don’t take folks down the wrong road on interactive reporting. Our thinking is that this is an important development executives should pay close attention to.

 

We’re not sure who Anonymous Commentor refers to in his sign off —

 

“Unless you’re going to mark this article as an “editorial”, you should be a little less loose with facts and give an objective view.”

 

The article was marked by your editors as coming from a published feature story in Investor’s Business Daily, where facts were stated as facts (yes, this can be a subjective thing with writers) and quotes were clearly set off (as opinions). The purpose of Accountability Central is to inform, educate and broaden the base of the debate.

 

Your thoughts on all this most welcome!

 

Hank Boerner
Editor – AC

Comment on – “Choosing Business Leaders with Integrity”

November 1, 2007 – We welcome Kenny Moore to the roster of commentators regularly providing their views on Accountability Central. Kenny is a remarkable individual — you have to read his book (“CEO and the Monk”) to find out more…it’s essential reading for every corporate leader. (He’s the Monk; KeySpan’s Chairman-CEO Bob Catell is the CEO; together they made a dynamite team at the $6 billion company. Now Ken is sharing his take on Corporate America, life in the corporate fast lane and other topics with all of us.

 

Welcome, Ken, to these pages.

 

Hank Boerner

 

Editor – AC

Comment on – MARKETS; Merrill CEO Departs With $160 Million; His Compensation Receives Scrutiny After He Becomes A Casualty Of The Sub-prime Crisis

A few footnotes to the Merrill Lynch / O’Neal story…and CEO compensation in general…

 

As founders and the founding families of today’s giant, modern corporations — the Merrills of Merrill Lynch, the Rockefellers of Standard Oil (ExxonMobil) and the Fords of Ford Motor Company – gradually were being replaced by hired agents (those we know by the title of corpoate executives and senior managers today), the separation of ownership and control was thorougly explored by two leading authors / academics who were looking ahead to possible changes in the way large shareholder-owned companies would be run.

 

In the landmark work, “The Modern Corporation and Private Property,” authors Adolf A. Berle Jr. and Gardiner C. Means (both of Columbia University) in 1932 wrote…

 

“…In the corporate system, the “owner” of [industrial] wealth is left with a mere symbol of ownership, while the power, the responsibility and the substance which have been an integral part of ownership are being transferred to a separate group in whose hands lies control…” and “…where ownership is sufficiently sub-divided (as though broad-based and dispersed shareholding), management can become a self-perpetuating body even though its share in ownership is negligible…”

 

And so seven-plus decades later we see what the directions taken were — directors on self-perpetuating boards appointing “their own” circle of contacts or a tight-knit universe of candidates to the highest positions.

 

Guess who mostly benefits from “control” (vs. ownership) — right, generously paid CEOs. Where there is real performance there is often little beefing about pay. Where there is poor performance there is the charge of “pay-for-pulse” or pay for failure and shareholders raise their voices while editors flail away at what they see as excesses in the corporate world.

 

While top managers are “agents” of the owners (the shareholders), in effect they are really the controlling interest, even to the point of determining their own compensation. (As governance guru Bob Monks points out, no where in all of the market mechanisms does the buyer let the seller determine the price, conditions, etc. as though no competition existed — except for the CEO position.)

 

You can hear the sigh of relief of an important “owner” of the enterprise in this quote…””He’s walking away with the generous compensation that he’s mostly already earned,” said Ed Durkin, director of corporate affairs for the United Brotherhood of Carpenters, whose affiliated union pension funds own 875,000 Merrill shares. “At least they didn’t give him more. Although given what’s transpired, it would be a stretch to justify anything else.” (Carpenters Union)

 

So — despite your raised eyebrows at the numbers, the going away package here is not unusual. Way way back in the depth of the Great Depression even two bright guys like AA Berle and Gardiner Means would not have been able to forecast where all this separation of ownership and control would lead.

 

And today — in this 7th year of the 21st Century — can we (you, me) forecast what’s ahead for the relationship between owners and agents (top management)? Who will determine CEO pay in 2010? We’ll see…CEO comp may be the biggest debate (and focus of shareowner ire) in the coming 2008 proxy season. And Mr. O’Neal will be among the examples held up of failure of boards to appropriatel reward executives…notice that Michael Eisner of Disney is still an example cited (here in this story).

 

Hank Boerner

 

Editor – A-C

Comment 1 on – SEC Requiring XBRL To Help All Investors Learn Firms’ ABCs Financial Data Easier To Use The Technology Is Putting Complex Financial Reports Into An Interactive Format

Attention corporate executives — don’t shrug this off. XBRL is going to revolutionize accounting and corporate [financial] reporting.

 

Standard dictionaries (“taxonomies”) are in development by a number of cooperating agencies with SEC in the vanguard: The Commission is investing more than $50 million to make XBRL a reality in the coming months.

 

Watch for early December release of important information for your firm (if you are an issuer) — this will be a powerful movement for dramatic change in financial reporting, financial analysis and other aspects of the capital market in 2008 and beyond.

 

Check out the SEC Web site and the XBRL USA (not for profit arm of the global XBRL coalition in the USA) for details.

 

The editors are assembling a package of XBRL news, commentary and research for you (as a “Hot Topic”) as the SEC announcements and provider announcements roll on…

 

Hank Boerner

 

Editor – AC

 

Hank Boerner

Comment on – Coke, Kellogg’s Cop Bad Product Awards

So you take years, decades, centuries perhaps to build the brand, win the loyalty of customers, fine-tune the marketing and promotion, establish your distribution channels, and constantly perfect your business model.

 

Then consumer [product] tastes change. Behaviorial expectations (on the part of consumers toward corporations) change. Best-known brand products come under more attack than generic or unknown brands (the price of market leadership?). The demand for greater ACCOUNTABILITY becomes more widespread among stakeholders. Maybe like Malcolm Gladwell’s “Tipping Point” explanation — something triggers the crisis.

 

And now we have three old-line, global brand manufacturers in the advocates’ crosshairs. Coca-Cola has its issues worldwide and they seem to be growing, both in scope and intensity. Mattel has a real dilemma — where do they source now for completed products or key components (of Barbie, for example) now that consumer confidence is dropping like a stone. What can they do before the Christmas toy binge? And good old Kellogg’s — rapidly growing consumer, media and public sector interest in (and concerns about) the obesity issue and over-sugared hyper-active kids issue put the company and its sugar-cereal products in focus. (Irony: The Company’s legacy is its establishment as a nutrition- and health-based food manufacturer by Dr. John Harvey Kellogg.)

 

While this is an Australia-based story today there have been various expressions of the same concerns about Coca Cola, Mattel and Kellog’s in the North American, European and developing markets. These companies may find more media devoting space to the stories about them and their products in the days ahead. And being public companies, we can expect some variations on the themes in this story will be incorporated in 2008 proxy contests.

 

There are rising expectations that corporations marketing consumer products — and especially children’s products (all three here) — will be more accountable to end users for their actions, marketing and product stewardship. Watch for company reactions to these allegations.

 

Here’s Kellogg’s Australian page: http://www.kelloggs.com.au/DisplayPage.asp?PageID=323&sectionid=1

 

Here’s Coca Cola Company page: http://www.thecoca-colacompany.com/

 

And Mattel Toys: http://www.mattel.com/index.asp?f=true

 

All have news about their “corporate responsibility,” aspects of corporate accountability (including Mattel voluntary recall, for example) and are worth tracking to get all sides of the story.

 

Hank Boerner

 

Editor – AC