April 16, 2005

What's In A Name? Corporations

What do you do if you're a multinational corporation and you get a bad name? You change it. Philip Morris recently spent $250 million to change its name to Altria.

Philip Morris isn't alone. BadCorp.com lists other examples, including:

This is a tough era for satirists. Nuclear Engineering becomes US Ecology. Who could top that?

[Thanks, Maurice]

Posted by Jonathan at 02:54 PM | Comments (1) | Link to this

February 16, 2005

The "Ownership" Scam Corporations  Essays

[The following is inspired by the eye-opening article "The Divine Right of Capital" by Marjorie Kelly (available here, starting on p. 7). Quotations are from that article. References to "corporations" should be taken to mean "public corporations" — i.e., corporations that sell stock to the public.]

Shareholders Contribute (Almost) Nothing, Get (Almost) Everything

US corporations exist to maximize returns to owners of their stock (shareholders). They are, in fact, required by law to do so. I.e., corporations are legally bound to operate as if only shareholders matter. Not employees, not customers, not communities, not the earth — only shareholders. If a corporation treats employees well, it is only as part of its strategy to maximize returns to its shareholders.

But what do shareholders actually contribute to earn such treatment? In most cases, absolutely nothing. Zero. Zilch. Zip. Nada.

Strangely, it's axiomatic in American business that shareholders deserve their exalted status because they contribute needed capital to the corporation. But this is almost never the case: a shareholder’s money almost never actually reaches the corporation. In almost all cases, when you buy stock, you do not buy it from the corporation. You buy it from someone else who owned the stock before you. It's like buying a used car. When you buy a used car, your money doesn't go to the car manufacturer; it goes to the previous owner.

The only exceptions are the rare occasions when a new corporation "goes public" and sells stock for the first time or when an existing corporation issues additional stock. Only a tiny percentage of stock transactions are of this type. Among the Dow Jones Industrials, for example, "only a handful have sold any new common stock in thirty years. Many have sold none in fifty years...According to figures from the Federal Reserve and the Securities and Exchange Commission, about 99 percent of the stock out there is 'used' stock. That is, ninety-nine out of one hundred 'invested' dollars are trading in the purely speculative market, and never reach corporations." (Kelly)

Corporations do need capital, but they get very little of it from the sale of common stock. They generally issue stock only as a last resort; they are far more likely to borrow instead. "In 1993, for example, corporations needed $555 billion in capital. According to the Federal Reserve, sales of common stock contributed 4 percent of that." (Kelly) Four percent. Somehow, that entitles shareholders to be considered "owners."

But what about in the past? Surely, sales of stock played a crucial role in creating what have become the important corporations of the present day. Actually... no. Take the steel industry. An accounting study of capital expenditures in the steel industry in the first half of the twentieth century found that issues of common stock provided only 5 percent of capital. And that was during a period of intense growth in the industry.

Somehow, we have been brainwashed to think of shareholders as the rightful "owners" of corporations, even though they are almost always just speculators who have bought "used" stock from other speculators. Their contribution to the corporation is non-existent. In many cases, they have only the vaguest idea what it is the corporation does or where it's located. And yet, they are treated like feudal lords. It’s their plantation; the rest of us just work on it.

Marjorie Kelly put it this way:

[I]n the life of most major companies today, issuance of common stock represents a distant, long-ago source of funds, and a minor one at that. What's odd is that it entitles stockholders to extract most of the corporation’s wealth — forever. Equity investors essentially install a pipeline, and dictate that the corporation’s sole purpose is to funnel wealth into it.

The truth is, the commotion on Wall Street is not about funding corporations. It's about extracting from them.

The wealth of corporations is created by the human beings employed by them and by the communities and nations that provide them infrastructure and support. Shareholders are just along for the ride. Even banks that lend capital funds to corporations have a more legitimate claim on a share of corporations' profits than do 99% of shareholders. The fact that shareholders are, by custom and by law, placed at the top of the pyramid is simply a function of who wields power in modern capitalist societies.

We've been scammed.

Posted by Jonathan at 10:43 AM | Comments (0) | Link to this

February 15, 2005

Walmart Calls The Shots Corporations

Walmart and the US Dept. of Labor apparently have a deal whereby DOL agrees to notify Walmart in advance before investigating any of Walmart's labor practices. Excerpt from a DOL email:

The agreement includes provisions to the effect that Wage & Hour [Division of DOL] will not open an investigation of Wal-Mart without first notifying Wal-Mart's main office and allowing them an opportunity to look at the alleged violation and, if valid, correct the problem to everyone's satisfaction.

In addition, Walmart apparently has control over how its labor violations are presented to the public. See Labor Blog [via Atrios].

Among the defining characteristics of fascism: Corporate power is protected; Labor power is suppressed.

Posted by Jonathan at 03:17 PM | Comments (0) | Link to this

February 11, 2005

Reason Number 1001 To Hate Wal-Mart Corporations

There have always been a thousand reasons to hate Wal-Mart. Here's one more. Globe and Mail:

Wal-Mart Canada Corp. will close its first unionized store in Jonquière, Que., in the spring, saying it wasn’t able to reach a first contract that would allow the outlet to be profitable.

The closing is a setback for the United Food and Commercial Workers, which has been trying for more than two years to organize a union at a Wal-Mart and, just three weeks ago, was successful in winning certification at a second store in St-Hyacinthe, Que.

The union will file unfair labour practices charges with the Quebec Labour Relations Board because the closing is "clearly a violation of the workers' right to join a union," UFCW national director Michael Fraser said last night.

The world's largest retailer, Wal-Mart has been union-averse. [...]

The decision suggests that Wal-Mart is determined to return to its non-union status, said Richard Chaykowski, a professor at Queen's University's School of Policy Studies in Kingston, Ont. "It's pretty clear, in terms of labour relations, that Wal-Mart has been set back on its heels by the success of the unionization drives."

They'd rather close a store than pay the human beings who work there a decent wage. Meanwhile, the Walton family is worth something like $100 billion (with a "b") dollars.

In time, the unspeakable greed of corporations like Wal-Mart will be their undoing.

Posted by Jonathan at 05:36 PM | Comments (1) | Link to this

December 28, 2004

Big Pharma Whistle-Blower Corporations  Ethics  Politics

Peter Rost, marketing VP at Pfizer, has an op-ed in the LA Times today that should make some waves. Excerpts:

The Congressional Budget Office has estimated that average prices for patented drugs in 25 other top industrialized nations were 35% to 55% lower than in the United States. [...]

Americans spend about twice as much per person for healthcare as do Canadians, Japanese or Europeans, according to the World Health Organization. [...]

The U.S. has shorter life expectancies and higher infant and child mortality rates than Canada, Japan and all of Western Europe except Portugal, according to the WHO.

I'm a drug company executive who has spent 20 years marketing pharmaceuticals. And I'm troubled. I'm most troubled by the fact that we stick it to the people who can afford it the least.

For instance, elderly people who use a Medicare discount card and have to pay $1,299 annually for a drug that the Department of Veterans Affairs purchases for $322, according to a comparison by Families USA. Or middle-class families that lose health insurance and have to pay $29,500 for an overnight hospital stay, when Medicaid would have paid only $6,000, according to the Wall Street Journal. [...]

Our dirty little secret is that the drug industry already sells its products, right here in the U.S., at the same low prices charged in Canada and Europe. It's done through rebates. These are given to those with enough power to negotiate drug prices, such as the VA.

A 2001 study by the consumer advocacy group Public Citizen found that drug companies' favorite customers paid just a little over half the retail price. This leaves the 67 million Americans without insurance to pay cash, with no rebates, at double the prices paid by the most-favored customers.

The fight against re-importation of drugs is a fight to continue to charge our uninsureds full price while giving everyone else a rebate. [...]

15% of uninsured children and 28% of uninsured adults [went] without prescription medication in 2000 because of cost, and 87% of uninsured individuals with serious health problems reported trouble obtaining medication. [...]

In the next five years, branded drugs with annual sales of $72.9 billion are expected to lose patent protection. So we in the drug industry are fighting re-importation because we're worried about the bottom line. [...]

I joined this industry to save lives, not to take them. And that's the reason I've chosen to speak out.

Presumably, most people who work for drug companies are like Rost in wanting to save lives and help other people, even if they don't all have the courage to put their careers on the line by speaking out. This is one instance of a general phenomenon: corporations tend to produce outcomes antithetical to the ethical standards of the human beings who work for them.

Corporations are machines designed to follow one rule only — maximize profits — so it is in some ways unsurprising that they trample on other human values, but still it is astonishing that people accept that this is the way things should be, as if it's somehow ordained. Corporations were invented to serve humans, not the other way around. The root problem is the nature and legal status of corporations, which we'll return to in future posts.

Posted by Jonathan at 12:03 PM | Comments (0) | Link to this

December 03, 2004

Verizon Versus Free Wireless Internet, 2 Corporations  Media

As noted earlier, Verizon lobbied hard in Pennsylvania to get a law passed that says communities can implement wireless Internet networks for their citizens only if corporations like Verizon give them permission. Sadly, Gov. Rendell signed the bill and it's now law. WaPo:

From San Francisco to St. Cloud, Fla., an estimated 200 communities are toying with community-owned networks, sparking a battle with cable and telephone companies over how public, or private, access to the Internet should be.

The companies are lobbying furiously to block such plans, fearful that their businesses would be hurt. Their efforts most recently paid off Tuesday night in Pennsylvania, where a new law bans local governments from creating their own networks without first giving the primary local phone company the chance to provide service.

Consumer advocates denounce the new Pennsylvania law. They say it amounts to governments now needing a permission slip from entrenched monopolies to put a vital economic and educational tool within everyone's reach. [...]

Companies such as Verizon Communications Inc., which helped shape the Pennsylvania law, argue that telecommunications firms would have little incentive to build networks if they have to compete with government-subsidized service. [My emphasis]

This has become standard operating procedure: lobbyists for corporations affected by a law participate, alongside politicians to whose campaigns they've contributed, in writing the law. Democracy in action.

One question. If corporations are so much more efficient than governments, as conservatives never tire of claiming, then why can't corporations like Verizon simply beat governments in the marketplace? Why must their "competition" take the form of campaign contributions, lobbying, and legally protected monopolies?

Gov. Rendell, sad to say, is a Democrat.

Posted by Jonathan at 12:25 PM | Comments (0) | Link to this

November 30, 2004

Verizon Versus Free Wireless Internet Corporations  Media

A number of cities, including Milwaukee, Cleveland, St. Louis and Philadelphia, are planning to provide free or low-cost wireless Internet access to all. Verizon wants to stop them:

In Pennsylvania, for example, the legislature passed a bill with a deeply buried provision — inserted after intensive lobbying by Verizon Communications — which would make it illegal for any city or other "political subdivision" in the state to provide low-cost Internet access to its citizens unless a corporation like Verizon gave them permission. [My emphasis]

Governments need corporations' permission now before they can act?

American Progress has an online email petition to urge Pennsylvania Governor Ed Rendell to veto the legislation. He has until midnight tonight to do so. Sign the petition here.

Posted by Jonathan at 12:07 PM | Comments (0) | Link to this

November 12, 2004

Corporatization Corporations

Someone at a potluck I attended last night had a suggestion that I like. In place of "privatization," he suggested, let's use the term "corporatization."

It's a bit of a tongue-twister, but it communicates what's really going on. "Privatization" suggests that control is being returned to private parties like you and me. "Corporatization" says who's really getting control.

Posted by Jonathan at 12:22 PM | Comments (0) | Link to this

October 12, 2004

Sinclair's Stake Corporations  Media  Politics

This USA Today report probably gets closer to the heart of what Sinclair Broadcasting hopes to gain by ordering its stations to show the anti-Kerry film in prime time:

[M]any believe Sinclair's provocative decision shows how much the company has riding on the election.

With its heavy concentration of Fox and WB affiliates, ranking in the middle of the pack in mostly midsize markets, Sinclair is barely profitable and laden with debt. It had a net profit of $14 million on revenue of $739 million in 2003.

Sinclair hopes to change that by solidifying its hold on local markets by controlling, for example, two stations in more cities and sharing operating and news-gathering costs. But it needs the federal government to relax several media ownership restrictions.

Sinclair wants officials to permit a company to own two or more stations in more communities than allowed now. It also wants the FCC to ease a restriction that bars a company from owning TV stations reaching more than 35% of all homes, and to lift the rule that keeps companies from owning newspapers and TV stations in most markets.

Large corporations exist to maximize profit and market share. In the absence of regulation, it is inevitable that media ownership will be concentrated in the hands of fewer and fewer giant corporations, who will bend media content to further their own interests, as Sinclair is doing. It is irrational to expect them to do otherwise. It's like expecting a shark to be a vegan.

That is why it is essential for democracy that the concentration of media ownership be rolled back and some kind of fairness doctrine reinstated.

In the meantime, it is important to fight back against Sinclair. If Sinclair proceeds as planned, a precedent will have been set and the flood gates may well open. Contact Sinclair's sponsors directly and tell them to withdraw their support.

Posted by Jonathan at 09:34 PM | Comments (1) | Link to this

September 29, 2004

The News Is What We Say It Is Corporations  Media  Politics

The world’s largest corporations are more powerful than most nations, and they know it. International in scope, they are no longer (if they ever were) loyal to any country. Their loyalty is to themselves alone. They protect their own interests, not ours, not the country's.

When such corporations own major US news media, the results are predictably toxic to democracy. The corporate parent can make its influence felt without ever interfering directly in the newsroom, but a couple of recent stories illustrate direct interference of the most blatant sort. I am not talking about Rupert Murdoch and Fox News here, though that is surely the most egregious case. I am talking about "respectable" media: CBS and NBC.

CBS — As the Wall Street Journal reported on Friday:

[T]he chairman of CBS's parent company [Viacom] chose Hong Kong as a place to drop a little bomb. Sumner Redstone, who calls himself a "liberal Democrat," said he's supporting President Bush.

The chairman of the entertainment giant Viacom said the reason was simple: Republican values are what U.S. companies need. ... Mr. Redstone declared: "I look at the election from what's good for Viacom. I vote for what's good for Viacom. I vote, today, Viacom. ...

"[F]rom a Viacom standpoint, we believe the election of a Republican administration is better for our company." [My emphasis]

The only relevant consideration is what's best for Viacom — the country be damned.

The very next day, CBS announced that it would delay until after the election its broadcast of a "60 Minutes" segment that digs into the Bush administration's use of forged documents to make the case that Iraq had tried to obtain uranium from Niger. "We now believe it would be inappropriate to air the report so close to the presidential election," CBS said. It wouldn't be good for Viacom, you see.

NBC — Turning now to a just-published account of the 2000 presidential election. You remember that the networks called the election for Bush in the wee hours on election night. By so doing, they created the impression that Bush had won and that the ensuing controversy was therefore an attempt by sore loser Gore to steal what he had failed to win fair-and-square. It's probably not too much of an exaggeration to say the networks won Bush the election.

If you saw Fahrenheit 9/11, you know that on election night George Bush’s cousin, John Ellis, was the man at Fox News who first made the call for Bush. The other networks quickly followed suit, which is where NBC comes in. NBC is owned by GE, whose CEO at the time was the much-lionized Jack Welch.

From True Lies by the folks at Guerrilla News Network, an account that draws on information developed by Rep. Henry Waxman (D-FL):

According to Waxman's sources, [GE CEO Jack] Welch had posted himself next to NBC's director of elections, Dr. Sheldon R. Gawiser, almost immediately after arriving in the studio early on election night. Gawiser was in charge of interpreting the data coming in from the since-disbanded Voter News Service (VNS), and Welch apparently wanted to be as close to the source as possible. Witnesses described Welch as "hovering" over Gawiser and refusing to leave.

After a crash course on interpreting VNS raw vote counts from Gawiser, Welch started doing his own calculations. With Florida data coming in, he concluded that Bush had taken the state and began demanding that NBC’s staff make the call. ...

At almost this same time, John Ellis over at Fox News called both the Florida and national election for his cousin, George W. Bush. According to the eyewitness sources,

Immediately after this announcement, Mr. Welch was observed standing behind Mr. Gawiser with a hand on his shoulder, asking why NBC was not also calling the election for Mr. Bush.

Shortly after this, Dr. Gawiser informed the control room that NBC would declare George W. Bush the winner. ...

[...]

This was not the first time Welch is alleged to have used his corporate leverage to mold news coverage when it served his [corporation's] interests. During the 1987 stock market crash, Welch called then-NBC News chief Larry Grossman and told him to stop using negative language to describe the crash. As Grossman said, "We were describing it as Black Monday and the 'plunge'....he thought we were making it worse and undercutting the stock value of the company." (Less than one year after Black Monday, Larry Grossman was fired by Jack Welch.) [My emphasis]

The most pervasive effects of corporate ownership on news content are far more subtle than the cases above. Corporate cultures effectively communicate what is considered appropriate and what is out of bounds. Career-minded journalists know which way the wind is blowing and self-censor accordingly.

Still, these cases do illustrate unmistakably the fundamental fact: large corporations exist to maximize profit and market share. They have no conscience, no sense of civic duty. They are voracious machines that are absolutely single-minded in the pursuit of their goals. The people who head them act accordingly, or the corporation finds someone else who will.

Niceties like civic duty and journalistic ethics don't stand a chance if they are left undefended, at the mercy of giant corporations. It is irrational to expect otherwise. It's like expecting a shark to be a vegan.

Posted by Jonathan at 10:51 AM | Comments (0) | Link to this

September 09, 2004

Corporate Globalization Corporations  Musings

Reading Arundhati Roy's An Ordinary Person's Guide to Empire, I had a tiny epiphany occasioned by her use of the phrase "corporate globalization." It struck me, reading that, that it might be well to make a practice of always using that phrase, "corporate globalization", in preference to just the "globalization" we're always hearing about.

"Globalization" sounds like something we are all participating in, like a process of which we are all the beneficiaries. "Corporate globalization" reminds us that the "globalization" project now underway is something being done by corporations, for corporations. It's their thing, not ours.

Someday soon, one hopes, we'll have global movements and global institutions created by people, for people. Then let us speak of "globalization."

Posted by Jonathan at 09:07 PM | Comments (1) | Link to this