“Neglecting Human Costs”: Harvard Business School’s Role In Widening Inequality
No institution is more responsible for educating the CEOs of American corporations than Harvard Business School – inculcating in them a set of ideas and principles that have resulted in a pay gap between CEOs and ordinary workers that’s gone from 20-to-1 fifty years ago to almost 300-to-1 today.
A survey, released on September 6, of 1,947 Harvard Business School alumni showed them far more hopeful about the future competitiveness of American firms than about the future of American workers.
As the authors of the survey conclude, such a divergence is unsustainable. Without a large and growing middle class, Americans won’t have the purchasing power to keep U.S. corporations profitable, and global demand won’t fill the gap. Moreover, the widening gap eventually will lead to political and social instability. As the authors put it, “any leader with a long view understands that business has a profound stake in the prosperity of the average American.”
Unfortunately, the authors neglected to include a discussion about how Harvard Business School should change what it teaches future CEOs with regard to this “profound stake.” HBS has made some changes over the years in response to earlier crises, but has not gone nearly far enough with courses that critically examine the goals of the modern corporation and the role that top executives play in achieving them.
A half-century ago, CEOs typically managed companies for the benefit of all their stakeholders – not just shareholders, but also their employees, communities, and the nation as a whole.
“The job of management,” proclaimed Frank Abrams, chairman of Standard Oil of New Jersey, in a 1951 address, “is to maintain an equitable and working balance among the claims of the various directly affected interest groups … stockholders, employees, customers, and the public at large. Business managers are gaining professional status partly because they see in their work the basic responsibilities [to the public] that other professional men have long recognized as theirs.”
This view was a common view among chief executives of the time. Fortune magazine urged CEOs to become “industrial statesmen.” And to a large extent, that’s what they became.
For thirty years after World War II, as American corporations prospered, so did the American middle class. Wages rose and benefits increased. American companies and American citizens achieved a virtuous cycle of higher profits accompanied by more and better jobs.
But starting in the late 1970s, a new vision of the corporation and the role of CEOs emerged – prodded by corporate “raiders,” hostile takeovers, junk bonds, and leveraged buyouts. Shareholders began to predominate over other stakeholders. And CEOs began to view their primary role as driving up share prices. To do this, they had to cut costs – especially payrolls, which constituted their largest expense.
Corporate statesmen were replaced by something more like corporate butchers, with their nearly exclusive focus being to “cut out the fat” and “cut to the bone.”
In consequence, the compensation packages of CEOs and other top executives soared, as did share prices. But ordinary workers lost jobs and wages, and many communities were abandoned. Almost all the gains from growth went to the top.
The results were touted as being “efficient,” because resources were theoretically shifted to “higher and better uses,” to use the dry language of economics.
But the human costs of this transformation have been substantial, and the efficiency benefits have not been widely shared. Most workers today are no better off than they were thirty years ago, adjusted for inflation. Most are less economically secure.
So it would seem worthwhile for the faculty and students of Harvard Business School, as well as those at every other major business school in America, to assess this transformation, and ask whether maximizing shareholder value – a convenient goal now that so many CEOs are paid with stock options – continues to be the proper goal for the modern corporation.
Can an enterprise be truly successful in a society becoming ever more divided between a few highly successful people at the top and a far larger number who are not thriving?
For years, some of the nation’s most talented young people have flocked to Harvard Business School and other elite graduate schools of business in order to take up positions at the top rungs of American corporations, or on Wall Street, or management consulting.
Their educations represent a substantial social investment; and their intellectual and creative capacities, a precious national and global resource.
But given that so few in our society – or even in other advanced nations – have shared in the benefits of what our largest corporations and Wall Street entities have achieved, it must be asked whether the social return on such an investment has been worth it, and whether these graduates are making the most of their capacities in terms of their potential for improving human well-being.
These questions also merit careful examination at Harvard and other elite universities. If the answer is not a resounding yes, perhaps we should ask whether these investments and talents should be directed toward “higher and better” uses.
By: Robert Reich, The Robert Reich Blog, September 13, 2014; This essay originally appeared in the Harvard Business Review’s blog.
“Will The House GOP Stop The War on ISIS?”: If You Hamper The War Effort Of One Side, You Automatically Help That Of The Other
So here, with Congress now trying to figure out what to do about President Obama’s request for funding for the Syrian rebels, we have a glimpse, as rare in its way as an eclipse or a meteor shower, of two Republican pathologies colliding head-on. The first is their biological urge to oppose Obama on all matters. The second is the House Republicans’ chronic eleventh-hour melodramatics about keeping the government funded every September. I could throw in a third—John McCain’s ever-mounting and ever-more-obvious personal bitterness toward Obama—but we’ll lay him aside for today and focus on this joining of the two pathologies, which in the worst-case scenario threatens to derail Obama’s anti-ISIS campaign before it even starts.
Fast background: Congress has to pass a continuing resolution by September 30 or we’ll have a government shutdown again. Actually, in practical terms, it has to pass it within the next few days, because the Jewish holidays are coming and Congress is going on recess so members can go back home and campaign.
In an election year, no one on the GOP side wants to risk a government shutdown (check that—Ted Cruz still kind of does!). The two parties are mostly arguing about the Export-Import Bank, the newest piece of coal for the tea party fire, but that’s the kind of thing they usually agree at the last minute to extend for another six months.
But that was the pre-ISIS state of play. Then we all saw the beheading videos, and fighting the Islamic State became a matter of urgency. Obama had asked Congress for $500 million in aid to the Syrian rebels back in June, but Congress, in its laconic, congressional way, was originally going to wait until next year to get around to that. But now the administration wants that $500 million—which is actually part of a larger $2 billion request that would include other money for operations in Iraq and Ukraine—to be passed now. And it wants it included in the “CR,” as they call it.
As you probably know, the House Republicans met Thursday morning in the aftermath of Obama’s speech to figure out how to proceed. As you probably also know, they didn’t figure it out. Some support Obama’s request—John Boehner does, and the relevant committee chairmen. Others, of course, don’t trust Obama. Some want to keep the Syria money in the CR. Others want to pry it out and have two votes, one on government funding and one on the Syria dough.
What would be the point of this? There is no point. Long Island Republican Peter King said something in Politico about how “it sends a stronger message” if it’s a separate vote, which is nonsense. Can you picture Bashar al-Assad sitting in Damascus talking with a top aide and saying, “Well, I don’t think $500 million is a serious amount of money,” and the aide says, “Gee, boss, I don’t know, I mean, they passed it on a separate vote”?
Please. The only reason to have a separate vote is to diddle the White House around. “Assert congressional prerogative” is the more euphemistic way to put it, but I can guarantee you that if President Romney were asking for this money, the only thing Republicans would be debating would be how many times they could each vote yea. Similarly, the shocking demand among some Republicans for greater action—for ground troops, even—is equally hypocritical. If Obama had proposed ground troops, they’d be hyperventilating about how scandalous it was of him to want to send our troops into harm’s way. They’re just looking for a hook—the handiest excuse to oppose Obama that they can find.
Obviously, passing the $500 million in the quickest way possible is what sends the strongest “message,” as if anyone even cares about such messages. What matters is that the money gets authorized. If the House Republicans pull it out of the resolution and make it a free-standing vote that will happen later, then all that accomplishes is that it gives talk-radio land and the conservative Twittersphere a few days to badger Republicans about casting a pro-Obama vote (and right before an election). And if that happens, and the right finds some excuse to work itself into a lather over this, Boehner may just decide that the easiest thing is to send them home without voting on Syria at all.
In one of his more famous essays, “Pacifism and the War,” George Orwell wrote that pacifism “is objectively pro-fascist. This is elementary common sense. If you hamper the war effort of one side you automatically help that of the other.” Orwell was writing of course about World War II, which I concede this is not (although I submit that it would be nice to see similar rhetorical restraint from the Republicans, who never tire of invoking Munich when they’re harping on Obama for not being tough enough). But if it isn’t World War II, neither is it the last Iraq War, which was completely unprovoked and based on lies. ISIS has killed Americans, and its threat to the region is clear and obvious. The Islamic State is evil by any measure. House Republicans may not trust the president and may prefer to see all this done differently. But without going as far as Orwell did (he later walked back the essay, after all) we can fairly ask if they want to have done nothing to check the Islamic State’s march.
I actually don’t think it will come to that. Even so, if I were a moderate Syrian Sunni, I wouldn’t be putting in orders for any tactical ballistic missiles just yet.
By: Michael Tomasky, The Daily Beast, September 12, 2014
“What A Deal!”: Koch Foundation Proposal To College; Teach Our Curriculum, Get Millions
In 2007, when the Charles Koch Foundation considered giving millions of dollars to Florida State University’s economics department, the offer came with strings attached.
First, the curriculum it funded must align with the libertarian, deregulatory economic philosophy of Charles Koch, the billionaire industrialist and Republican political bankroller.
Second, the Charles Koch Foundation would at least partially control which faculty members Florida State University hired.
And third, Bruce Benson, a prominent libertarian economic theorist and Florida State University economics department chairman, must stay on another three years as department chairman — even though he told his wife he’d step down in 2009 after one three-year term.
The Charles Koch Foundation expressed a willingness to give Florida State an extra $105,000 to keep Benson — a self-described “libertarian anarchist” who asserts that every government function he’s studied “can be, has been, or is being produced better by the private sector” — in place.
“As we all know, there are no free lunches. Everything comes with costs,” Benson at the time wrote to economics department colleagues in an internal memorandum. “They want to expose students to what they believe are vital concepts about the benefits of the market and the dangers of government failure, and they want to support and mentor students who share their views. Therefore, they are trying to convince us to hire faculty who will provide that exposure and mentoring.”
Benson concluded, “If we are not willing to hire such faculty, they are not willing to fund us.”
Such details are contained in 16 pages of previously unpublished emails and memos obtained by the Center for Public Integrity.
While the documents are seven years old — and don’t reflect the Charles Koch Foundation’s current relationship with Florida State University, university officials contend — they offer rare insight into how Koch’s philanthropic operation prods academics to preach a free market gospel in exchange for cash.
In 2012 alone, private foundations controlled by Charles Koch and his brother, David Koch, combined to spread more than $12.7 million among 163 colleges and universities, with grants sometimes coming with strings attached, the Center for Public Integrity reported in March.
Florida State University ranked a distant second behind George Mason University of Virginia as a recipient of Charles Koch Foundation money. In a tax document filed with the Internal Revenue Service, the foundation described its Florida State University funding for 2012 as “general support.”
Some schools’ professors and students were aghast at the funding, arguing that such financial support wasn’t widely known on their campuses and could threaten schools’ academic freedoms and independence. Others argued that colleges and universities — long bastions of liberal academics — would be well served by more libertarian courses of study.
Separately, Charles Koch is the financial force behind a “curriculum hub” for high school teachers and college professors that criticizes government and promotes free-market economic principles. He’s also funded programs for public school students, and this year, his foundation donated $25 million to the United Negro College Fund.
At Florida State University, Benson noted in a November 2007 memorandum that the Charles Koch Foundation would not just “give us money to hire anyone we want and fund any graduate student that we choose. There are constraints.”
Benson later added in the memo: “Koch cannot tell a university who to hire, but they are going to try to make sure, through contractual terms and monitoring, that people hired are [to] be consistent with ‘donor Intent.’”
A separate email from November 2007 indicates that Benson asked Charles Koch Foundation officials to review his correspondence with Florida State associates about potential Koch funding.
Trice Jacobson, a Charles Koch Foundation representative, did not respond to questions, although Benson and Florida State University spokesman Dennis Schnittker each confirmed that the emails and documents are authentic.
But Benson noted that the documents were meant for internal use and reflect the “early stages of discussion” well ahead of a 2008 funding agreement signed by the university and the foundation.
That agreement, initiated in 2009, has earned Florida State $1 million through April, according to the university. Until it was revised in 2013, an advisory board would consult with the Charles Koch Foundation to select faculty members funded by the foundation’s money.
Benson also said that while he continued serving as Florida State’s economics department chairman until 2012, Charles Koch Foundation money wasn’t a factor.
While the foundation initially discussed providing money to help fund Benson’s salary, “that idea was taken off the table very early in negotiations,” he said. “I continued as chair because I felt I could still make a valuable contribution to the department.”
The 2008 agreement between the school and the foundation nevertheless faced harsh criticism from some professors and students who argued it indeed gave the foundation too much power over university hiring decisions.
The school and foundation revised their agreement in 2013 “for clarity” and to emphasize the “fact that faculty hires would be consistent with departmental bylaws and university guidelines,” Schnittker said. “Our work with CKF [Charles Koch Foundation] has always upheld university standards.”
Those guidelines, spelled out in a Florida State University statement about the foundation from May, say the money will not compromise “academic integrity” or infringe on the “academic freedom of our faculty.”
Ralph Wilson, a mathematics doctoral student and member of FSU Progress Coalition, doesn’t buy it.
Florida State University “willfully and knowingly violated the integrity of FSU by accepting funding meant only to further Koch’s free-market agenda,” said Wilson, whose student group works to “combat the corporatization of higher education.”
The Charles Koch Foundation, meanwhile, “is using our universities solely to further their own agenda and plunder the very foundations of academic freedom,” Wilson said.
At the end of 2012, the foundation reported having almost $265.7 million in assets, according to its most recent tax return filed with the Internal Revenue Service.
In his 2007 memo to colleagues, Benson acknowledged the school’s relationship with the foundation would invite blowback.
“I guess I am trying to say that this is not an effort to transform the whole department or our curriculum,” Benson wrote. “It is an effort to add to the department in order to offer some students some options that they may not feel they have now, and to create (or more accurately, expand) a cluster of faculty with overlapping interests.”
Benson also predicted entering into an agreement with the foundation carried some risk.
“There clearly is a danger in this, of course. For instance, we might be tempted to lower our standards in order to hire people they like,” Benson wrote, in advocating that the university not do so. “We cannot expect them to be willing to give us free reign to hire anyone we might want, however, so the question becomes, can we find faculty who meet our own standards but who are also acceptable to the funding sources?”
The Koch brothers are best known not for their educational efforts but for controlling a constellation of conservative, politically active nonprofit corporations.
For example, this election cycle alone, six nonprofits connected to the Kochs have combined to air about 44,000 television ads in U.S. Senate races through late August, with the ads typically promoting Republicans or criticizing Democrats.
By: Dave Levinthal, The Center for Public Integrity, September 12, 2014
“The New Campaign Theme: Fear”: Republican Candidates Are Rediscovering How To Use Fear In Campaigning
There’s a new narrative emerging about the midterm elections. After months in which political reporters essentially wrote the same stories over and over with only small variations — it’ll be a good year for Republicans; the Affordable Care Act is a disaster for Democrats; oh, wait, maybe not — we now have a brand-spanking new storyline to play with.
Now, the elections are all about security and terrorism and foreign policy.
Fear is back! Which, of course, is great for the GOP.
There is some evidence that the elections may be shifting on to these topics. But like the threat from the Islamic State, it may be being overhyped by a news media eager for excitement.
One of my theories about the ebb and flow of political coverage is that any new development that promises change is unusually attractive to political reporters. Polls that never change are boring. And if America is about to embark on a new military adventure, then change must surely be in the air.
So we’re seeing a whole raft of articles claiming that the election is now all about security, like this one and this one and this one.
Yes, the news has been dominated by the Islamic State question for the past couple of weeks, and people respond to what’s in the news when they’re asked what they care about (this is called agenda-setting). There is some public opinion data showing more people expressing concern about terrorism.
But the question is: Is there any clear evidence that the public is actually gripped by terror, that the elections are going to look any different next month than they did last month?
If the public were actually terrified, that would almost certainly be good for the GOP. Research has shown that if you make people afraid or remind them of their own mortality, a significant number will gravitate toward Republican candidates. A lot of news stories about shadowy foreign terrorist groups could be enough to do the trick.
A complicating factor, however, is that Congress is pretty much abdicating its responsibility for oversight over the escalation. What’s more, Republican candidates don’t have much to say about what’s going on in the Middle East, as GOP strategists admit:
For candidates, there’s a difficult balance to strike between using the issue to beat the drum against Obama and getting too far in the weeds on actual strategy proposals. Most GOP strategists agree that the way to talk about foreign policy this fall is to make it a broad argument about leadership and stay out of such details as whether or not the U.S. should put troops on the ground.
“I don’t think that many Republicans are going to rush out there with detailed foreign policy initiatives in their own campaigns,” said GOP pollster Wes Anderson. “I don’t think there’s any market for it — what voters want to hear is that somebody is going to take initiative and show leadership.”
Having no actual ideas hasn’t historically stopped Republicans from exploiting an issue, of course. And there are some signs that Republican candidates are rediscovering how to use fear in campaigning (see here or here), which is its own story worthy of examination.
But House Republicans are actually showing surprising unity with Obama on how to respond to ISIS. The disagreements among Republicans over how to proceed seem procedural more than anything else, and they are likely to give him what he wants in terms of training the Syrian rebels, which could undercut efforts by GOP candidates to use this against Democrats. On balance, it’s probably too early to say that the election has been transformed.
By: Paul Waldman, Contributing Editor, The American Prospect; The Plum Line, The Washington Post, September 12, 2014
“A Crass Political Stunt”: Christians Enraged With Cruz Over Pro-Israel Comments
Christian writers are incensed with Sen. Ted Cruz, and argue that the Texas senator is putting politics before his fellow religious brethren.
Cruz was the keynote speaker Wednesday evening at a dinner put on by In Defense of Christians, a group dedicated to raising awareness about persecuted Christians in the Middle East. During his speech, the Texas senator argued that Christians have “no greater ally” than Israel. Soon after, heckling from the crowd cut off his remarks, and an address that started by emphasizing the unity of Christians ended with shouting and disagreement.
“If you will not stand with Israel and the Jews, then I will not stand with you,” Cruz told the audience as he walked off the stage.
Much of his pro-Israel conservative base would have had no problem with these comments, so Cruz may not have expected a backlash. But the response among key Christian thinkers and writers was fierce and immediate.
Cruz was accused of ignorance about the dynamics of Middle Eastern Christianity; of suggesting that he would not stand with Christians who didn’t agree with his political stance on Israel; even of orchestrating a crass stunt on the backs of persecuted Christians.
“Sen. Ted Cruz suggested that holding the same political views on Israel was more important than the fellowship we share as Christians,” Mollie Hemingway, a senior writer at The Federalist, a conservative website, told The Daily Beast. “We shouldn’t fight the global persecution of Christians only if the victims share our political views.”
Added Mark Tooley, the president of the Institute on Religion and Democracy: “Must overseas Christians pass a political litmus test, even if it further endangers them, to gain American support and sympathy?”
Jeff King, the president of the watchdog group International Christian Concern, said that Cruz was “off-topic and rude” (the crowd was rude too, King added), but mainly did not understand the nuances of the persecuted Christian minority groups he was addressing.
“They can’t be pro-Israel where they live, because they will get the snot beaten out of them or worse. If you don’t understand the dynamics going in… you’ve got to question what he was thinking,” King said. “He just doesn’t understand the reality of Middle Eastern Christians.”
Others went so far as to question whether Cruz purposely went to the conference as a stunt, that he was aware of the dynamics and wanted to show that he would support Israel in front of an audience where this would be unpopular.
“He used arguably the most persecuted and powerless minority in the world, Middle Eastern Christians, who are supposed to be his brethren in Christ, as a prop for a self-aggrandizing political stunt,” said Pascal-Emmanuel Gobry, a Catholic writer, in The Week.
New York Times columnist Ross Douthat was particularly scathing, pointing out that Cruz’s “co-religionists are being murdered.”
“[B]y making a statement at *this* event, he basically flipped the bird to people and churches that are dying right now,” he tweeted.
Some conservative websites weighed in in support of Cruz, but may have overstepped in doing so—with two websites implying that the Middle Eastern Christians present at the event were not Christians at all.
Both Breitbart News and Townhall wrote defenses that put the word “Christian” in scare quotes—as if those who heckled Cruz might not appropriately be termed so. Breitbart has since taken down the quotation marks.
Christian writers were mixed on whether Cruz’s remarks could have an enduring political effect.
“There are potential repercussions—particularly if this becomes a trend. To be sure, there is often a stark dichotomy between so-called opinion leaders and rank and file believers. But there’s a reason they’re called leaders,” Daily Caller writer Matt Lewis, who was critical of Cruz’s speech, told the Beast. “The folks who have voiced concern about his actions buy ink by the barrel and paper by the ton, and people turn to them for interpreting events. There is always the potential for this sort of thing to trickle down.”
Countered Tooley, “Religious persecution has rarely been major issue in electoral politics.”
Democrats might also seek to capitalize on Cruz’s statement. Michael Wear, a strategist who led White House evangelical outreach during President Obama’s first term, said that Republican “voters will be looking for a candidate who can support Israel without demeaning an audience gathered to defend persecuted religious groups, a cause Senator Cruz has now distracted from in order to defend himself.”
Catherine Frazier, a Cruz spokeswoman, told the Beast that the senator will continue to speak out on behalf of religious minorities everywhere, and has made a point of bringing public attention to persecuted Christians in particular.
“He does not agree or stand with those who do not believe that Israel has the right to exist as a Jewish state,” Frazier said. “But that does not change his passion and priority for standing with persecuted Christians across the region and across the world.”
In the meantime, however, Cruz’s remarks appear to have at least temporarily shattered Christian solidarity on the issue of persecuted Christian minorities.
“Fighting persecution of Christians is a unifying message among voters, particularly on the right,” Hemingway said. “For better or worse, Cruz’s political speech may have broken that unity.”
By: Tim Mak, The Daily Beast, September 12, 2014
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