Wednesday, 7 December 2016

Corporate Folly

Self-Righteous Hubris

A free society allows people to do stupid things.  A price of freedom is its tolerance of folly, ignorance, stupidity, and sin.  Moreover, a free society is one which permits many to descend into Hades via their own path.  But, it is far far better to accept this as a price of freedom than force a "moral purity" or a particular version of truth upon others.

In the West it has become not unusual to see corporates and businesses brand themselves in the market place as being "values based".  This is believed to be part of what it means to be a "good corporate citizen" rather than a rapacious capitalist.  But it can rapidly develop into a double edged sword.  Almost inevitably it extends in some cases to businesses getting involved in political debates of the day.  In other words, the business becomes a front for a particular set of values associated with a particular cluster of political parties--whether left or right.

As a shareholder, this would be is disturbing.
  When people invest in a business--let's say a lawnmowing company--most shareholders are concerned about matters to do with the quality of the product or service and the culture of the company that produced the lawnmowers.  How effective is the company in recruiting, training, and retaining staff?  When did the company have its last strike?  What is the rate of labour turnover?  What is the abiding quality of the product?  But what they are far less concerned about is whether the company has taken a public, official position on socially contentious issues such as "white privilege" or immigration or abortion.

We are not suggesting that these contentious issues are unimportant. Far from it.  Rather, as a shareholder--and therefore part owner--of the business we would argue that it is not the business of the company to take views and positions on such matters.  Of course there are always exceptions--but one tends to find them on the lunatic fringe.  It is quite common, for example, for Greenists to rate companies according to a list of so-called green credentials.  The implication is that greenist value shareholders would rather invest in such businesses, at the expense, if need be, of  the commercial success of the company.

Apparently the cereal company, Kelloggs has not been shy about espousing certain social mores and values.  Apparently it wants to do business only with suppliers and service providers that share the same values (that is, that think the same way Kelloggs does about social and political matters).  This exposes the shareholders to significant risks.  Every third party affirmation of the company's views will be matched by another third party which is offended.  In other words, management has just increased the risk of the business by body-slamming half its customers.

And here is another risk.  Any company which stands up to criticise values which may be held by  its customers, its suppliers or  employees had better be purer than the driven snow.  If not, it is risking itself to exposure as grossly hypocritical.  For example, morbid obesity is a huge health problem: how much of this plague has been aided and abetted by Kelloggs over the years?

According to Fortune magazine, Kelloggs has decided to withdraw its advertising spend from Breitbart News.  Apparently that business airs views and beliefs which Kelloggs finds objectionable and contrary to its own corporate values.  Yet within a day of that announcement, stories started appearing on Breitbart News that portray Kelloggs to be not the good corporate citizen it would make itself out to be.
The progressive Kellogg cereal company, known for funding causes aimed at “white privilege,” “institutional racism,” and efforts to defeat voter ID laws, has been accused of standing by and doing nothing as employees at one of its New England distribution centers are daily subjected to mistreatment and racist name calling by management. One African American employee was even allegedly harassed with a picture of a baboon.  A number of employees of the cereal giant’s Franklin, Massachusetts, distribution center, which handles shipping of its Kellogg’s Keebler cookie products, have filed formal complaints and some lawsuits over alleged racial and sexual abuse by managers, according to a report by a local Rhode Island NBC affiliate.  [Breitbart]
Not as pure as the driven snow, then.   Co-incidentally, Amnesty released a piece accusing Kellogg and other companies of exploiting child labour in Indonesia to harvest palm oil.  Doubtless Breitbart took great pleasure in giving that story high profile.  And so it rolls.

Rest assured that every sin of Kellogg--real, imagined, or concocted--will be rehearsed in public now.  Doubtless Kellogg shareholders, both institutional and retail, will be shaking their heads at the hubris and folly of senior management.  Why, oh why did they get involved in such a needless stoush that inevitably will offend up to half their present customers?

Corporate hubris is a deadly trap.  Every company has got to be very aware of its limitations.  If senior management want to get into political and contentious social issues, resign and go on your merry way.  Don't attempt to make the company your political platform.

Shareholders and customers have a way of dealing with such folly.

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