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Corporation and Society Restoring Confidence in the Corporation

Corporation and Society Restoring Confidence in the Corporation. Costas Kataras. Athens University of Economics and Business AUEB, MBA International Program 14 December, 2009. Restoring Confidence in the Corporation- Why? Two Valuable Corporate Pillars are Collapsing. Corporate Trust

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Corporation and Society Restoring Confidence in the Corporation

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  1. Corporation and SocietyRestoring Confidence in the Corporation Costas Kataras Athens University of Economics and Business AUEB, MBA International Program 14 December, 2009

  2. Restoring Confidence in the Corporation- Why?Two Valuable Corporate Pillars are Collapsing.. • Corporate Trust (Corporate Confidence Erosion is Growing) • Brand Importance is Going Down (The Death of the Brand is Near?)

  3. Lecture TopicUnderstanding the Root Causes of Confidence Erosion....with a little help from Mathematics

  4. What Happened to our Dream of Freedom? The Fall of the Berlin War.. ..but the Legacy Remains

  5. From Cold War to…Cold Hearts!! Creating aMathematically Modeled Society

  6. Characteristics of a Mathematically Modeled SocietyThe Rise of the “So Long Sucker” Attitude • Mathematically Modeled Society (ie data, statistics, targets) • Friderich von Hayek (No room for altruism ) • James Bucanan (No Public Interest, only Governing Bureaucrats / only money matters) • Richard Dawkins (Selfish Genes / no room for altruism but human selfishness / Nice Guys Finish Last ?) • John Nash FILM: The Trap: What Happened to Our Dream of Freedom ,BBC documentary ( By Adam Curtis) http://www.youtube.com/watch?v=T_zk2X92kxY

  7. Cold Hearts: “Hard” Implications- War Games and Games Theory John Nash, Nobel Winner/ “So Long Sucker” and ”Fuck the Buddy ” Theories

  8. Cold Hearts: “Soft” Implications- A TV Series Dark and Cynical.. ..dark and cynical…an example of the effects of corporate culture, marketing and the more individualistic strands of feminism in presenting women's empowerment as mainly tied to achieving coupledom, beauty, and personal upward mobility, rather than collective organization for progressive change

  9. Using Mathematics to Understand Business, Marketing and Societal Phenomena The Battle between the Good and the Evil.. Graph “Normal”/ Random Distribution “Power” / Extreme/ Abnormal Distribution

  10. From Mental Disorders to IQ: a “Normal” Nature Depression By Age / IQ Scores in Population

  11. Businesses after Globalization Have an “Abnormal” , “Power”, Nature • Greece, ICAP (2008 :33.717 companies= 237 bil. Sales) • Top 20 companies (or 0,06 %) = 49 bil (20 %) • Top 500 companies (or 1,5 %) = 134 bil (57%) • Top 200 corporations’ combined sales • are bigger than the combined economies • of all countries in the world, minus the biggest ten • While sales of Top 200 are equivalent • of 27,5% of world economic activity, • they employ only 0,78 % of the world’s workforce

  12. Introduction Key-Message 1: We are living in a New World, Governed by the “Power Law”, Producing Extreme & Abnormal Corporate Behavior and Results

  13. “Food” for Thought Consumers are Threaten by the Growing Food Industry Power.. Source: McKinsey,2006 Global Survey

  14. ..and they are Right ! Example ?Coca Cola and its Dasani Bottled (Tap !!) Water are Deceiving Consumers • It comes from the same source as local tap water • Result :Coca Cola withdraws bottled water from UK (2004) and admits that Dasani is nothing but tap water

  15. Welcome to the Corporate Antisocial Era Secrets of “Value Creation” by the Most Admired & Valuable Brands / Corporations in the World Deceiving, cheating, controlling, killing, dehumanizing, suppressing, imprisoning our mind, claiming ownership of natural resources, owning our genes, etc

  16. “Value Creation” Strategy(?) : The “Power Way” Media and other “Gate Keepers” Manufacturing Consent in a “Business Sponsored” World

  17. Introduction Key-Message 2 : The situation is hopeless… but not serious !!

  18. Understanding the Landscape

  19. Understanding the Landscape (1/2) Understanding the Landscape of Business Ethics can be Problematic • Business Ethics / Integrity /Practices (ie how to conduct business responsibly ) • Corporate Compliance ( ie focused on complying with laws and regulations ) • Corporate Governance (ie policies and practices that stockholders, executive managers and board directors use to manage themselves and fulfill their responsibility to investors and other stakeholders )

  20. Understanding the Landscape (2/2) Understanding the Landscape of Business Ethics can be Problematic • Corporate Responsibility ( ie fulfilling the responsibilities or obligations that a company has towards its stakeholders. For example profit vs environment ) • Corporate Social Responsibility ( ie as above, but with greater stress upon the obligations a company has to the community. Sometimes encompasses all responsibilities to stakeholders-ethical, social and environmental ) • Corporate Sustainability ( ie aligning an organization's products/services with stakeholder expectations, thereby adding economic, environmental and social value)

  21. Business Ethics: The Definition Challenge “ ..achieve commercial success in ways that honor ethical values and respect people, communities, and the natural environment..” ( Source: Business for Social Responsibility- nonprofit CSR Ass., US )

  22. Restoring Confidence in the CorporationTopics -What Happened to Our Dreams of Freedom? -Understanding the Landscape / Definitions • 1.The Business of Business… • 2. The Rise of Corporatocracy • 3. Corporation and Society • 4. Restoring Confidence • 5. Social Issues Become Strategic • 6. Government and Society: A Larger Role • 7. “Nice” Capitalism ( Wanted !!)

  23. 1.The Business of Business…

  24. The Long-Running DebateTwo Contrasting Ideological Positions “ the business of business is… business” vs “ corporate social responsibility “

  25. And the Winner is .. …Prof. Milton Friedman & the School of Chicago “ ..the business of business is business..” “ ..social responsibility is a fundamentally subversive doctrine..” “ ..managers that will invest recourses to deal with ethical issues should be fired..” Naomi Klein, in her book The Shock Doctrine, accuses Friedman of being complicit in military coups in countries such as Chile and Indonesia that were used as a way to shock the population into accepting unpopular neoliberal policies for the benefit of foreign multinational companies. ( Milton Friedman, 1912-2006 )

  26. ..Killing Mrs Anderson vs General Motors (1980) • Chevrolet Malibu cars fuel tank, not sufficiently protected in collisions • GM cost- benefit analysis shows : Repair cost : 8,59$ / per car Anticipated fatalities (Human Life): 500 If pay the cost of each human life , ie 200.000$ /per life the average cost is: 2,40$ per car • Result : Decide not to repair the cars !!!

  27. ..CheatingStarbucks coffee 200% more expensive in Athens than NY • A cappuccino costs : 4,65 $ in Athens, 2,35$ in New York, +100% • Average PP of an American : + 100% • Result : +200% Plus : Cheating and stealing the tips of personnel .”California court orders Starbucks to return $100m in tips to baristas”

  28. ..Controlling Monsanto’s Terminator Technology • Controls genetically engineered seeds (ie rice, corn, etc) for which farmers pay high prices • Terminator technology is used to sterilize crops, ie the seeds lose their ability to reproduce • Result : 80% of farmers committing suicide in India, are farmers not able to pay off their debts / loans used to buy expensive GM seeds

  29. ..Staff Suicide Machines The ( Dead) Employee of the Month • a wave of staff suicides • 23 employees killed themselves since February 2008(Sep 2009) or 1,2 per month • blaming job stress and misery at work • (Twenty-nine France Telecom staff took their own lives in 2002 and another 22 in 2003 )

  30. ..Plus • Dehumanizing- Labor Camps (ie Nike, Gap) • Suppressing – Military Coups (ie United Fruits ) • Imprisoning our Mind- PCs controlling Users (ie Microsoft Defender /Kill Switch • Claiming Ownership of Natural Recourses-Privatizing the Rain in Volivia (ie Bechtel and Mrs G.Shultz, C.Weinberger ) • Owning our Genes – A Nation’s Genetic Code for Sale (ie Iceland and deCODE/Hoffman La Roche) , plus the case of Mr Moore vs University of California

  31. Corporations Disregard all Human Laws Carl Marx was Right “ ..companies with 10% profits feel secure enough.. with 50% became adventurous.. with 100% disregard all human laws and with 300% can even take the risk of committing crimes ” ( Carl Marx )

  32. 2.The Rise of Corporatocracy

  33. CorporatocracyTowards a Definition “The accumulating corporate power and the evolution, and finally transformation, of the corporation to a social institution ( pseudo- authority ) dominating the civil society and nations, with the support of banks, the financial establishment, powerful elites and powerless governments” (Kataras)

  34. CorporatocracyThe Meteoric Rise.. • 1720 : The creation of a corporation, as a legal entity, constituted a serious crime in the West (England) entailing serious punishment • 2000 : Of the 100 largest economies in the world,51 are corporations and 49 are countries (in GDP and sales terms)

  35. Corporatocracy.. ofCorporate Global Power • Of the 100 largest economies in the world, 51 are corporations and only 49 are countries • Top 200 corporations’ combined sales is equivalent to 27,5% of World GDP (from 25% 15 years ago ) • Top 200 corporations’ combined sales are bigger than the combined economies of all countries in the world, minus the biggest ten • While sales of Top 200 are equivalent of 27,5% of world economic activity, they employ only 0,78 % of the world’s workforce • U.S. corporations dominate the Top 200, with 82 slots (41%), followed by Japanese firms with 41 slots • Almost 50% of U.S. corporations in Top 200, did not pay the full standard 35% federal corporate tax during 1996-1998. Seven actually paid less than zero ( ie Texaco, Chevron, PepsiCo, Enron, Worldcom) Source :Institute for Policy Studies, 2000

  36. Corporatocracy.. in Numbers (GDP/Sales, 1999) • General Motors > DENMARK • Exxon Mobil > GREECE • General Electric > PORTUGAL • Shell > IRAN • IBM > IRELAND • Nestle > HUNGARY Source :Institute for Policy Studies, 2000

  37. CorporatocracyThe Global Pyramid of Power

  38. CorporatocracyHow Corporations Became so Powerful ? • Arrogant, Selfish, U.S. Capitalism and the School of Chicago creating inequality in the society (Disaster vs Nice Capitalism books, Naomi & Costas) • Gate Keepers (Media) manufacturing/ engineering consent (The Century of the Self ) • Technology / Globalization/De localization/Export of Jobs (Lou Dobbs, etc ) • The “Other Hollywood Effect”-Weak Political Leadership (Myth of the Powerless State / Nation)

  39. CorporatocracyTwo Prophetic Books.. June 24, 2008 July 22, 2008

  40. Topology of Factors Undermining the Future of the Corporation Brands’ Overdose (5) INDIVIDUAL SOCIETY Scarcity of Human Attention (9) Rise of Eclecticism (11) Loss of Entrepreneurial Spirit (6) Information Economy Extreme Market Polarization (8) Violent Emotional Detachment from Brands (12) Arrogant Corporation Increased Complexity & Unpredictability (1) Collapse of Information Asymmetry (3) Explosion of Consumer – Generated Personal Media (10) Brands’ Insignificant Impact on ROI & Parent Company Stock Price (2) Frenetic Time Acceleration (4) ENVIRONMENT TECHNOLOGY Dramatic Erosion of Middle Class (7) ECONOMY

  41. Mega – Trends : A SynopsisCorporations in a New, Hostile, Terrain • Complexity • Society • Technology plus • Corporate Confidence Erosion

  42. ComplexityThe Butterfly Effect • Have you ever been wondering how the current bank and financial crises started? • Have you been aware of a company Fanny Mae or Freddie Mack ?

  43. SocietySociety Dominates Corporations The Coca Cola , Dasani case

  44. Technology The Trojan Horse ? OPPORTUNITIES • Productivity • Globalization • Delocalization • Etc THREATS • Transparency • Reduced Information Asymmetry • Empowered , Educated, Never Satisfied, Distant, Unreachable Consumers • etc

  45. Corporate Confidence Erosion Route Causes • Increased Income Inequality / Power Distances in Society • U.S. Losing Favor in the West • A Growing Sentiment Against Globalization in All Rich Countries • Corporations: Lack of Trust in Business is Growing • Brands :Consumers are Falling out of Love with Brands…a corporation’s most valuable asset (30-80%)

  46. Inequality: A Roadmap to Crisis Source :PricewaterhouseCoopers, World Economic Forum, UNDP, World Bank (2007/8)

  47. InequalityUS Income Data (Kevin Philips: Bad Money) …το ετήσιο εισόδημα στις ΗΠΑ, μετά από φόρους, την περίοδο 1970 έως 1990 του χαμηλότερου πέμπτου (20%) του πληθυσμού, μειώθηκε από 9.300 σε 8.700 δολ. ..Του μεσαίου πέμπτου (20%) , από 31.800 αυξήθηκε ελάχιστα σε 33.200 δολ. … Και του υψηλότερου και πλουσιότερου 1% του πληθυσμού από 2.560.000 δολ, έγινε 600.540.000 δολ. Δηλαδή οι διάφοροι Μπιλ Γκέητς και άλλοι πλούσιοι που ζουν στο ¨Πλουτιστάν¨, την ¨νέα χώρα¨ που δημιουργήθηκε μέσα στις ΗΠΑ (βλ. Robert Frank: Richistan ), έγιναν 300 φορές πιο πλούσιοι, ενώ από τους φτωχούς έκοψαν και 600 δολ το χρόνο !!! (βλ. Kevin Philips: Bad Money)

  48. US Losing Favor Across Europe and the West Source :PricewaterhouseCoopers, World Economic Forum, Pew Global Attitudes Survey (2008)

  49. The Growing Sentiment Against Globalisation in All Rich Countries Source: Financial Times , Harris Research , 2007

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