Comment on – New Poll Shows that U.S. Small Business Owners and Wall Street are not on the Same Page

Commentary on Wall Street – Main Street relations…and attitudes…and polling results.

 

First read the classic work, “Other People’s Money” by Louis Brandeis (published 1933). (Subtitled, “…and how the bankers use it!”)Judge Brandeis explored many topics of keen interest to Americans today, including the nature of “the financial oligarchy” (those who control banking, Wall Street and financial markets). Other People’s Money at work makes these interests happy and keeps the economy humming. (Common wisdom.)

 

Then consider, that Wall Street interests are working with vast volumes of OPM (other people’s money) while Main Street interests are using their own money — often, in limited supply at the moment (and hoped for wealth over the years if all goes well).

 

When you are wheeling / dealing in millions’ and billions’ of dollars and it is OPM (belonging to beneficiaries of pension funds, mutual funds, yours and my brokerage accounts and IRAs, foundation monies in trust, etc.) the attitude is assuredly different than that of the Main Street entrepreneur who —

 

— now has higher energy bills (including electric, natural gas, gas & diesel fuel)

 

— higher medical insurance fees for employees and themselves (with no relief in sight)

 

— higher property taxes (local government costs more to run now)

 

— worker shortages (causing in part the reliance on immigrant labor in some industries such as healthcare & hospitality)

 

— the uncertain state of employing such workers (does this invite a govt raid?)

 

— higher operating costs overall, thanks to the rising cost of many items

 

— more competition from big box stores if they are retailers nearby

 

— get the picture? It will be interesting to watch over the coming months if Republican or Democrat candidates for the presidency, the congress and statehouses “get it” in terms of what small business owners worry over and address their issues. So far, not much of real substance being offered. Wall Street interests are mostly always served — big lobbying bucks float around at fund-raising parties and all that. (Again, it’s usually OPM paying the freight.)

 

What keeps you up at night? On Wall Street, the possibility that OPM may stop flowing? On Main Street MY MONEY may stop flowing (cash in) or will flow “out” (of the cash register).

 

So this is about attitudes — first determine, whose money is it? (Mine, yours or OPM?) Then follow the polling numbers.

 

Stay Tuned to Elections 2008 and small business concerns…as well as…Wall Street concerns…ain’t the same thing, as the poll by American Management Services and Suffolk University make clear.

 

Hank Boerner

 

Editor – AC

Comment on – Aetna Will Fully Disclose Doctor Ranking Program

We’ve said it here in this space before — keep your eye on Attorney General Andrew Cuomo in New York State. Politically attuned, focused, risk-taker (taking on bigger opponents), experienced (he ran HUD in the Clinton era and was his father’s key advisor when Dad Mario Cuomo was in office).

 

This move with Aetna makes sense — maybe not for under-performing doctors, but for consumers of healthcare — and AG Cuomo makes waves with this move.

 

Stay Tuned — will other state AGs (or insurance commissioners) follow?

 

Hank Boerner

 

Editor – AC

Comment on – Yahoo To Pay Chinese Families; It Settles With Relatives Of Journalists Jailed For Dissent After It Revealed Their Names To Police.

Re: Yahoo! and its current problems with disclosure of confidential customer information about users (journalists) to China officialdom. We still are a nation based on the rule of law and Yahoo! enjoys tremendous benefits doing business here in the USA. (Intellectual property protection; access to capital; protection of law for many aspects of doing business; export assistance from government agencies; the Internet came out of Department of Defense research to allow the company to be created, etc.). There are obligations here, yes?

 

While Wall Street may shrug off the censure of Yahoo! it is not clear yet what consumers and business partners may be thinking and cranking into their analysis and decision-making.

 

Congressman Tom Lantos (himself foreign-born) is among those lashing CEO Jerry Yang (Taiwan-born) for the company’s actions — as a result of information-sharing with Chinese authorities, several people are in jail in China. Now, the company is attempting to make things right with compensation for the families.

 

Interesting question we can pose here: With all the complaints about the American plaintiff bar (and too many “nuisance suits”), and the US high rates of litigation vs. other countries…would Yahoo! have settled with the families if a lawsuit was not filed in San Francisco federal court? Perhaps we won’t know…but…were there other effective remedies the families could have employed? Were there advocates for them (certainly not the US government, now in debt to the China interests up to here and looking to keep US-China relations on a good footing). Not the business community — not prominent trade organizations — not many could speak up with as much effectiveness as a publicized lawsuit and then congressional hearings broadcast to the nation. (As the saying goes, “Sunshine is the best disinfectant!”)

 

Re-read Alex Pham’s story in the LA Times —

 

The journalists’ families filed suit in a federal court in San Francisco in April against Yahoo and Alibaba, a Chinese Internet company in which Yahoo owns a minority stake.

 

But it was not until after congressional hearings last week that the company engaged in settlement talks, said Morton Sklar, executive director of the World Organization for Human Rights USA, which represented the families.

 

“It took a tongue-lashing from Congress before these high-tech titans did the right thing and coughed up some concrete assistance for the family of a journalist who Yahoo had helped send to jail,” Rep. Tom Lantos (D-Burlingame) said Tuesday. “What a disgrace.”

 

And this: The case highlights the difficulty of technology companies doing business in emerging markets that don’t carry the same values and laws as the United States, said Barry Parr, an analyst with JupiterResearch.

 

He’s right — but that shouldn’t mean that US-based companies should lose sight of their values (which should be US values) and clear responsiblities to customers (re privacy protection)and “accountabilities” to stakeholders. Would you as business leaders want to be called “moral pygmies” by members of the US Congress? (As the Yahoo! CEO was.)

 

We are all on notice, it would appear — the content of Accountability Central is designed to carry lessons (good and bad) of these types of incidents and to help leaders “do the right thing for the right reasons…”

 

Your comments are welcomed here.

 

Hank Boerner

 

Editor – A-C

Comment on – Safety Panel’s Chief Says Taking Paid-for Trips Is Good Policy; She Tells Congress That When Regulated Firms Pick Up The Tab, It Saves Resources For Testing And Education On Standards.

“Optics” — a popular new buzzword in business circles — meaning the appearance of things and the impressions made…the optics of this are troubling.

 

There are legal aspects to government officials’ behaviors and there are ethical considerations. These trips are troubling from the ethical point-of-view even if “legal” or that is, not “illegal.”

 

The head of the public sector agency intended by statute (creation of agency), by federal implementation rules, by popular acceptance, and by stakeholder expectation (what do you expect from this official in terms of protecting you and your family?) — the optics of this fail betray our expectations on all counts. Better to save travel money by accepting free trips from those companies that you have oversight responsibilities for? Huh?

 

This also goes in our growing category of catchall news bits — “What Were They Thinking?” Maybe we don’t wanna know.

 

So as imported lead contaminated toys flood into US retailer shelves for the holiday season the CPSC is jetting around on the corporate host’s plane (or dollars) to promote “safety”? She’s “educating toy makwers?” Does that make you feel better now?

 

Remember, and be guided by conservative activist Grover Norquist’s sage advice to the right — “Starve the Beast!” Even if you have a statute-created CPSC, and a book of rules, and lots of stakeholder expectations — if you cut off the cash flow to regulatory agencies whose work you don’t like, you can starve them and reduce their effectiveness. Change is clearly needed here. Congressman Jan Shakowksy sums it up for us:

 

“It’s legal,” said Rep. Jan Schakowsky (D-Ill.). “But it is clearly an abuse of discretion. It exhibited at best enormous insensitivity and at worst outright disdain for the ethical principles of government service.”

 

Hank Boerner

 

Editor – AC

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 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

The comments are those of the Author and reflect only his views - Not those of any organization.

 

Contents - By Governance & Accountability Institute, Inc 2007 - Please credit author and Accountability-Central.com if you use this content.