Because poor people just don’t eat lobster

Image courtesy of Tom Curtis/FreeDigitalPhotos.net

Henry Blodget, a once-disgraced securities analyst, is now a successful and widely read blogger at Business Insider, a company he founded to provide news and insight about business, politics, the economy, technology, pop culture and other trends.

Whether he ever subscribed to the Cult of Capitalism, we don’t know. But if he did, he’s no longer drinking that KoolAid. In a recent post in which he bestows the Scrooge Award on Corporate America, Blodget provides data showing that American companies are now achieving the largest profit margins in history, while paying the lowest wages in history as a percent of the U.S. economy.

He writes:

“If you happen to be an owner of a big American corporation, these charts could be construed as good news: You’re coining it! If you happen to be a rank-and-file employee, however, – or someone hoping to be such an employee – this is bad news: You’re sharing less than ever before in the success of American industry.”

He points out the problem with this – one that’s been addressed many times before: If the working class that accounts for more than two-thirds of consumer spending is slowly being choked by stagnant incomes and lack of spending money, the economy itself is going to suffer a low, slow and painful suffocation as well.

He emphasizes the point by noting how some of our most successful corporations like Walmart, Starbucks and McDonald’s, have policies specifically designed to keep their employees living at or near poverty in order to maximize profits.

Just yesterday (Dec. 4 2012), for example, the Washington Post reported that the CEO of Darden Restaurants Inc., owner of Red Lobster, Olive Garden and LongHorn Steakhouse, complained in an earnings advisory that profits were down because of … drum roll … Obamacare. Actually, he admitted, it wasn’t the federal Affordable Health Care Act directly. It was all the bad publicity the restaurant chain received after trying to avoid providing health care to its employees by cutting their hours down to part-time.

The company isn’t scheduled to release earnings for another 10 days (Dec. 14, 2012) so it didn’t provide actual earnings numbers. But it is expecting earnings of about 25 cents a share on continuing operations –  a fraction of what it earned in 2010, when profits exceeded $400 million, according to Fortune and CNN Money.

The irony is that if Darden had simply put the money into its employees’ hands in the form of the required health coverage, its customers might not be staying away and, perhaps, even its employees might be able to afford to eat the company’s own dog food (that’s a Silicon Valley expression; not a judgment on the company’s food – which does, in our opinion, pretty much suck). Sure, under Obamacare the company’s profits might be down, but its business might be up. Go figure.

Blodget’s crowning point might be this:

“This is a private-sector issue, not a government issue. This is about persuading American companies to share more of their wealth with their employees, so the government doesn’t have to get involved. As many conservatives are fond of observing, the government cannot solve all the problems in this country. The private sector has to do it. So, it’s time the private sector started doing it.”

 

America’s distrust for big biz, big gov

The approval rating of Congress hit an all-time low in the months before the 2012 presidential election. And it’s not alone.

When asked “Do you approve or disapprove of the way Congress is handling its job,” just 10% of respondents said they approve, according to pollster Gallup Inc. That approval rating ties February 2012 as the lowest result Gallup has received in  the 38 years it’s been asking the question.

But there’s other news: In January 2012, Gallup asked people if they were satisfied with the power and influence of major corporations  in the United States. Only 30% answered yes – up one percentage point from the all-time low in 2011 of 29%. Clearly, a majority of people think corporations wield too much clout in policy and daily life. Right?

Unfortunately, the picture isn’t as simple as that. The question was asked as part of a political poll in which just 29% said they were satisfied with the power and influence of federal government. That figure was an all-time low, down from 31% in 2011.

 

Reprinted form Gallup. Click image for original.

But what seems really significant about the graphic is that this year represents the only time in the 11-year history of this particular survey in which the perception of government was worse than the perception of big business. Perhaps it’s the beginning of a trend.

But remember, this survey is taken in a political context – and during the heat of a political season in which the role of government is the dominant issue. And the results broke cleanly along political lines. Republicans tend to be more dissatisfied with the power and influence of the federal government (84% dissatisfied) and less dissatisfied with that of  big business (48% dissatisfied). Predictiably, Democrats tend to offer the opposite results (47% dissatisfied with the federal government and 71% with big business).

So once again, it all comes down to the independents. What do they say?  They hate everything (75% are dissatisfied with the federal government and 71% with big business.)

Here’s the big picture. The Gallup survey clearly demonstrates that our distrust for the largest institutions has grown over time. Except, perhaps, for the political parties that spend so much time and money dividing us.

 

For-profit education: More profit than educating

Image courtesy of Smokedsalmon/Freedigitalphotos.net

What happens when you mix education with for-profit corporations?

You get a whole lot more profit than educating. And much of that profit comes at the expense of taxpayers.

That’s the conclusion of a scathing report by the  Senate Committee on Health, Education, Labor, and Pensions. In a 2-year investigation, the Senate Committee looked at the operations and efficacy of such corporate-owned for-profit educational institutions as Vatterot, DeVry, Alta, Corinthian, ITT and Chancellor University.

Among its findings:

  • Collectively, the 30 schools studied took $32 billion in federal financial aid funding in the 2009-2010 academic year while more than half of their students attended a median of just 4 months before dropping out.
  • The schools spent more than $4 billion – nearly 23% of total revenue – on aggressive  recruiting practices  that  may have misrepresented the actual cost of obtaining a certificate or degree;
  • Bachelor degree programs at the schools cost, on average, 20% more than comparable programs at public universities, while 2-year associate degrees may cost 400% more than similar community college programs;
  • The corporate schools didn’t bother to make reaosnable investments in support services that have been demonstrated to help students succeed in school and the job market. As an example, the for-profit colleges studied in 2010 employed ten times more recruiters than career services staff.

Meanwhile, according to the report’s executive summary:

Publicly traded companies operating for-profit colleges had an average profit margin of 19.7 percent, generated a total of $3.2 billion in pre-tax profit and paid an average of $7.3 million to their chief executive officers in 2009.

In a news report by the LA Times, Sen. Tom Harkin, chairman of the committee, pointed to “overwhelming documentation of exorbitant tuition, aggressive recruiting practices, abysmal student outcomes, taxpayer dollars spent on marketing and pocketed as profit, and regulatory evasion and manipulation.” He added: “These practices are not the exception — they are the norm.”

In fact, according to the report, 86% of all revenues to the studied schools came from taxpayer programs such as Pell grants, Department of Education Federal Student Aid, and military and veterans benefits.

This might be acceptable if these schools were turning out their fair share of trained and qualified graduates. But that’s not what the report found. The target market for these schools tends to be non-traditional university students – parents, veterans and adults who are already working or changing careers.

According to the LA Times article, 96% of students at for-profit colleges take out loans; collectively they account for  for 47% of all federal student loan defaults and just 13% of total college enrollment.

One report, by CaliforniaWatch.org, profiled a handful of students who dropped out of such programs after disputes and dissatisfaction, owing $15,000 and more in student loans.

The Association of Private Sector Colleges and Universities – the lobbying association funded by the schools  – offered a statement rebutting the report, saying it “twists the facts to fit a narrative, proving that this is nothing more than continued political attacks on private sector colleges and universities.”

It also offered a background report that uses federal figures from other sources that refute a number of claims made in the Senate committee report.

Regardless of the APSCU’s position, the report concludes:

In the absence of significant reforms that align the incentives of for-profit colleges to ensure colleges succeed financially only when students also succeed … the sector will continue to turn out hundreds
of thousands of students with debt but no degree, and taxpayers will see little return on their investment.

Meanwhile, here’s a long and thoughtful piece in the Homeless Adjunct Blog on a closely related topic: Fives steps that have quietly undermined the American university system.

Chik-fil-A: Holier than thou (until it becomes inconvenient)

Chick-fil-A, the Atlanta-based fast-food chain,  has long made the spirituality of its founder a visible and public aspect of its operations.

All of the chain’s 1,600-plus locations are closed on Sunday, and founder Truett Cathy was never shy about public statements that he sought out franchisees who shared his religious and moral beliefs. Charitable contributions by the chain to anti-gay organizations have been a contentious point among some consumers – and the source of an ongoing if ineffective boycott – for some time.

But Cathy’s son Dan, president and CEO of Chick-fil-A, recently used an interview with the Baptist Press to detail how his personal values are translated into corporate values. For example, he was quoted as saying:

“Our work should be an act of worship. Our work should be our mission field. As long as we are stateside, let’s don’t think we have to go on mission trips by getting a passport. … If you’re obedient to God you are going to be evangelistic in the quality of the work you do, using that as a portal to share [Christ].”

And:

“We are very much supportive of the family — the biblical definition of the family unit. We are a family-owned business, a family-led business, and we are married to our first wives. We give God thanks for that.

That’s the statement which sparked Jim Henson Co. to sever a promotional partnership between Chick-fil-A and The Muppets. Mini-Muppet puppets are no longer available with Chick-fil-A kid meals because, according to Business Insider, the Jim Henson Co…

… did “not wish to partner with them on any future endeavors” due to Chick-fil-A CEO Dan Cathy’s admission that he was “guilty as charged” when it comes to his Christian stance on the definition of marriage.

Chick-fil-A responded the next day by offering a very different version of the truth. It said the Muppets were pulled for safety reasons because they kept kept getting stuck on kids’ fingers.

That story was such a departure from the known facts that it almost makes you laugh out loud. Commentators have been accusing the company of lying ever since – not, one would assume, a core Chick-fil-A value.

It got weirder still when Chick-fil-A apparently began an abortive social media campaign to defend itself by allegedly launching a Facebook page that pretended to belong to a teenage girl who liked to quote the Bible and possessed an unusual knowledge of  details about the company’s promotional timeline.

Here’s a comprehensive review of the issue, published by MinnPost.

For a number of consumers, Chik-fil-A’s socially conservative position on homosexuality is the big issue.

But for us, that’s really not the point. Chik-fil-A’s owners can choose to run the company any way they like as long as they don’t violate anti-discrimination laws. If they want to risk alienating a certain percentage of their prospective customers, that’s their choice – and it would be hard to argue it’s failed the $4.1 billion company so far.

But now that position may be hurting the company in new ways. In Chicago, the opening of a new location is being stalled by a City Council member based, he says, on unsatisfactory written anti-discrimination policies.

And in Boston, Mayor Thomas Menino issued a public statement saying Chick-fil-A would be less than welcome if it continues to pursue expansion efforts there.

According to one wide-ranging if not necessarily scientific study, Chik-fil-A’s popularity has taken a whopping 40% tumble since Dan Cathy’s recent interview, according to a post at examiner.com.

What is Chick-fil-A’s response? It has decided not to assume the CEO’s missionary position after all. The company issued this statement:

“The Chick-fil-A culture and service tradition in our restaurants is to treat every person with honor, dignity and respect — regardless of their belief, race, creed, sexual orientation or gender… Going forward, our intent is to leave the policy debate over same-sex marriage to the government and political arena.”

So why write about Chick-fil-A at all? Because it has demonstrated the fallacy of the Cult of Capitalism, which espouses that society’s biggest issues can be resolved simply by turning them over to the money-makers and job creators.

What happened when Dan Cathy and Chick-fil-A tried to address what they perceive as a societal issue? They chickened out. They decided that what their religion says about homosexuality – and telling the truth – is less important than what the balance sheet says about the business.

Are you saying “Duh”?

So why does anybody believe the private sector’s pure instinct to amass capital can help us address any other societal issue, such as environmental custodianship, access to health care or preservation of the American Dream?

In a sad sidebar to this story, Chick-fil-A spokesman Donald Perry, vice president of public relations, died suddenly on Friday, July 27. Cause of death was not immediately available. He worked at the company for nearly 29 years.

 

Starbucks’ best intentions can’t help U.S. small business – but yours can

Beginning today (Tuesday, June 12) Starbucks is selling a new ceramic coffee mug for $10. The novelty in this is that the mug is made in America – East Liverpool, Ohio, actually, which I’ve just learned was once the nation’s pottery capital. The mugs have their own display, separate from all the other ceramic mugs and travel cups that Starbucks sources from China.

For $5, Starbucks is selling a bracelet made in America; for $10 you can get a coffee mug – all in the name of helping U.S. small businesses. Or you can go the direct route – by spending your money at an actual American small business. They're practically everywhere.

This is part of an initiative by Starbucks CEO Howard Schultz to help rebuild American manufacturing. In addition to the mugs, for example, he has sourced production of Starbucks’ Via line of instant coffee to a new plant the company is building in Georgia, which will eventually employ 140 people, according to media reports.

I read about this in the New York Times. Ironically, I’ve just sent you to read the original article via a link at the India Times. Why? Two reasons: First, the New York Times‘ metering technology to limit the amount of free reading you can do seems to be glitchy today and won’t show me the story; second, it’s interesting that folks in India – the beneficiaries of so much of our own outsourcing – find it newsworthy when an American company chooses to employ American workers.

It’s good that Starbucks and CEO Schultz have turned their attention toward American employment. Americans are, after all, the people who still purchase 69% of everythingStarbucks sells – despite the company’s agressive international expansion.

In the company’s most recent (2011) annual report, here’s what Schultz has to say about Starbucks’ initiative to support American workers:

Most recently we have focused on the high unemployment plaguing the United States, and I am proud that, as an organization, Starbucks is doing its part while appropriately supporting our business. We added approximately 3,700 net new jobs last year, and plan another 12,500 globally for 2012. But we can do more. That is why, in association with the Opportunity Finance Network, we launched Create Jobs for USA through which our customers can donate toward restarting the nation’s jobs engine through loans to community businesses. In addition to $5 million seeded by The Starbucks Foundation, approximately $2 million has been raised in the first two months and loans have begun flowing to small companies and community businesses across the country. Like Starbucks ethical sourcing, environmental and volunteer efforts, the Create Jobs for USA initiative is right for Starbucks because it authentically reflects the times we live in while being relevant to our brand.

At C Jones Books & Tea, you can buy coffee directly from owner Carl Jones, who roasts and grinds beans in small batches on premises – which beats buying a corporate-sourced bracelet claiming your solidarity with people just like Carl Jones.

I’m not the least bit cynical when I say that Schultz’ comments are welcome and helpful. It’s wonderful that Starbucks has seeded small business development efforts with $5 million of its own money; that’s nearly 0.3% – or 5 hours worth – of its 2011 profit of $1.73 billion.

Starbucks’ new mug promotion is credited with saving American Mug & Stein Co. – reportedly one of the last two remaining commercial potters in East Liverpool. American Mug is said to have doubled employment from this deal;payroll is now up to about 20 (another report put it at eight) and the owner says they’re considering adding some machinery for the first time in order to speed up production of their hand-made mugs.

So let’s see, if the entire Fortune 500 list of America’s largest companies would follow the example set by Starbucks, the company’s Let’s Create Jobs For USA initiative would be responsible for 10,000 manufacturing jobs (at companies that haven’t bothered to update their processes in about a hundred years). That’s just about the number of jobs cut across the United States between 2-4 p.m. on Thursday, Feb. 19, 2009 – the moment in time when I was delivered from corporate America.

I know how this sounds. Snarky, cynical and negative. That’s not because I have anything against Starbucks (OK, I think their coffee is somewhat bitter and overpriced, but other than that….)

Starbucks really is being a good corporate citizen. But the point is that Starbucks isn’t the problem any more than it is the solution. We are.

My home town, a Cleveland suburb of less than 50,000 people – is host to two Starbucks stores. There are at least four other independent coffee shops that I can count – five if you include a place that’s really just a bakery but offers a pretty good cup of coffee on the side.

If these shops behave like other independent merchants, they contribute far more to the local economy than Starbucks. Local merchants tend to donate more to community fund-raisers and local programs than national chains. Their owners spend profits close to home, while Starbucks’ corporate headquarters in Seattle tends to expect a hefty share of profits for itself.

There is, of course, nothing wrong with that. Corporations exist to make profit. But unlike the U.S. Supreme Court’s Citizens United ruling, I make a distinction between corporations and individuals. Individuals don’t exist for the will of corporations; it’s still the other way around, if only we individuals would keep that in mind.

We all still have options. Even though Wal-Mart insists that we’re idiots for shopping anywhere else, we can still choose to do so. And if we want to choose U.S. products over those made in China, India, Malaysia and wherever else, we need to choose independent businesses over corporations. Because independent merchants are more likely to buy from American sources.

If we want to choose U.S. employment over outsourcing to foreign lands, then we need to choose independent businesses over corporations. Because independent businesses are likely to hire most or all of their employees here at home, while corporations like Starbucks depend on international hiring to fuel their need to grow.

If we want to choose unique communities and walkable neighborhoods, then we need to choose independent businesses over corporations, because corporations favor high-traffic venues like strip malls and power centers over comfortable commercial districts like Coventry Village, where I live.

If we want to choose rugged individualism over bland sameness, we need to choose independent businesses over corporations. Because independent businesses look for unique products that will capture our attention, while corporations look for high-volume goods that can be promoted and sold through economies of scale.

If the entire population of of my home town would change its habits – moving just $100 a person in annual purchases from big chains like Starbucks and Wal-Mart and Home Depot to little stores like The Stone Oven, Zagara’s Marketplace and Heights Hardware, we will have matched the seed money that giant Starbucks has dedicated to its small business development fund.

And we will be richer for it, because we will have provided more money to local independent merchants to spend with the schools, clubs, institutions and other businesses where they live. Which happens to be here rather than Seattle.

However many jobs it creates in America this year, Starbucks will create more jobs overseas, because that’s where it can achieve the easiest growth.

And someday – probably before the year is over – the novelty of those ceramic mugs from East Liverpool, Ohio, will expire. People will stop buying them. Starbucks will stop selling them. Somewhere between 10 and 20 people will lose their mug-making jobs.

And then what?

How Bank of America Execs Hid Losses—In Their Own Words

June 7: This post has been updated and corrected.

When Bank of America announced it was buying Merrill Lynch in September 2008, bank execs told their shareholders that the merger might hurt earnings a touch. It didn’t turn out that way. Losses at Merrill piled up over the next two months, before the deal even closed. Yet the execs kept painting a prettier picture to shareholders — even though it turns out they knew better.

As the New York Times detailed this morning, a brief in a new lawsuit filed in federal court in Manhattan recounts sworn testimony and internal emails in which execs admitted to giving bad information to shareholders and that they had worried about the legal ramifications of doing so.

According to the filing, Bank of America’s then-CEO Kenneth Lewis admitted in a deposition that what he told shareholders about the financials of the merger was no longer accurate on the day they approved it.

We’ve pulled out the most revealing parts of the suit, which tell the story of how the deal went down.

On Sept. 15, 2008, Bank of America announced its agreement to buy Merrill Lynch. In the press release announcing the deal and other presentations, Bank of America said it would cause a 3 percent decrease in earnings in 2009, and that by 2010 the deal would break even or do better.

In October, concerns started to emerge about Merrill’s financials. As it became clear the company was going to lose $7.5 billion that month, one exec emailed another the numbers with the message “read and weep.”

Merrill kept losing money in November. Late that month, Bank of America ordered Merrill to sell off assets to try to stabilize its finances:

After current Bank of America CEO Brian Moynihan admitted in a deposition that this sale meant the deal was less valuable to shareholders:

On Dec. 1, Bank of America issued a $9 billion debt offering. Publicly, they said this was “for general corporate purposes.” But private communications showed that they were trying to raise money to cover Merrill’s losses:

Bank of America’s then-treasurer, Jeffrey Brown, wrote in emails just before the shareholder meeting that they needed to disclose that the Merrill losses were behind the debt offering. He also testified that he told other execs they could be committing a criminal offense by not disclosing the losses:

On Dec. 5, Bank of America shareholders met to decide whether to approve the merger. They questioned Lewis about the financial impact of the deal, and he reassured them:

That day, shareholders voted to approve the merger.

In his deposition for the lawsuit, Lewis said that what he told them was not accurate. Bank of America had already revised their numbers to reflect Merrill’s losses:

Just days after the deal was approved, on Dec. 12, a law firm for Bank of America prepared documents making the case that they could back out of the merger, based on Merrill’s new financial woes:

On the 17th, Lewis took that argument to then Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke, who, according to the lawsuit, were stunned by Merrill’s losses:

According to the suit, Lewis raised the possibility of a bailout then:

But it wasn’t until January that shareholders — and the public — learned how bad things were. Bank of America stock dropped precipitously, and taxpayers ultimately padded the bank’s bailout funds with an extra $20 billion to cover the losses. The SEC has actually already settled its own charges against Bank of America over misleading shareholders on the deal. The bank paid $150 million — and didn’t admit any wrongdoing.

Bank of America didn’t comment to the Times on the new lawsuit, and didn’t immediately respond to a request for comment from us.

Update (6/7): Kenneth Lewis and Bank of America have also filed motions in the suit. Lewis’ motion states that he relied on Bank of America’s law firm’s recommendation that disclosure of Merrill’s losses was not required. Bank of America’s motion asserts that the plaintiffs cannot tie the losses they claim to the non-disclosure.

Correction: This post has been corrected to show that Kenneth Lewis did not say the words “no longer accurate;” instead, it was attorneys paraphrasing his position.

 

FB FU: Facebook’s unfriendly IPO

Photo credit: Freedigitalphotos.net

Big money has done it again. Since 2008, Wall Street banks have been trying to convince the public that the financial collapse was just an aberration, and that less government oversight of banking practices will be better for everyone.

Just as the public, with its notoriously short memory and forgiving attitude, was beginning to let bygones be bygones, Fac

ebook and investment bank Morgan Stanley have reminded us that allowing big money to regulate itself is a lot like … well, er … putting your money into the hands of an irresponsible, greedy stranger.

The story is that Facebook’s highly publicized initial public offering released stock at the price of $38 a share; the initial flurry quickly raised that price to as high as $45. While large, institutional investors reportedly kept their money in their pockets, individuals bought up a good percentage of the available stock. And within two days, the price had dropped almost 20%.

Only then was it disclosed certain large investors may have received verbal guidance that Facebook was about to deliver a big disappointment in its quarterly earnings. No wonder they sat out – satisfied to watch as the suckers who didn’t have access to the relevant financial information tossed their cash into a stock that was now seen as overpriced and certain to be a bad

short-term investment.

Eventually the large investors will buy up Facebook stock. Experts are speculating that will likely happen when small investors get scared and disgusted and start dumping their $38-a-share purchases at prices as low as $22.

The comeuppance is that Facebook and its lead underwriter, investment bank Morgan Stanley, now face a series of lawsuits – filed less than a week after the yawn-inspiring IPO – for allegedly failing to share material information equally with all investors.

There is plenty of irony in this episode. Facebook has been perceived as among the most egalitarian of media, where individuals were assumed to be in charge. Facebook users who bought stock hoped to leverage their own passion for social media into a solid financial gain. Instead they’ve been exploited, just as they are every time Facebook users their data to throw unproductive advertising at them.

It’s also ironic because Wall Street’s big money machine has spent the last four years trying to convince the public that government-imposed constraints were a primary cause of the financial meltdown and sluggish recovery. But like the mortgage crisis and the more recent explosion in banking fees, this most visible IPO in history demonstrates another dynamic – that Wall Street’s true concern is to take care of its own, even at the expense of its customers.

For its part, Morgan Stanley claims it did nothing wrong, and that it followed the same procedures it follows for all IPOs. If that’s the case – and it certainly may be – then it may be time for the Securities Exchange Commission to take another look at the regulations. And it’s certainly reasonable for small investors to question whether they can ever get a fair shake with Wall Street.

For everybody else, it’s simply a fair reminder that you don’t leave the fox in charge of the henhouse.

 

Obama: Government is not a business

Finally, somebody with a really big soap box has taken on the fundamental assumption of the cult of capitalism.

Mitt Romney’s primary campaign position has been that his business experience will allow him fix what’s wrong with the federal government. While Gov. Romney may be a well-qualified presidential prospect, treating government like a business is unrealistic, simplistic and likely to exacerbate the nation’s largest societal problems.

When taking questions at the close of the NATO Summit in Chicago earlier this week, President Obama concisely confronted the assumption that what the United States needs is a government run like a business. As quoted in a variety of media, including this ABC news report, Obama said:

“Understand that their [business executives'] priority is to maximize profits. And that’s not always going to be good for communities or businesses or workers. And the reason this is relevant to the campaign is because my opponent, Governor Romney, his main calling card for why he thinks he should be president is his business experience. You know, he’s not going out there touting his experience in Massachusetts. He’s saying ‘I’m a business guy. I know how to fix it.’ And this is his business…”

Obama continued, by saying, when one is president…

“…as opposed to the head of private equity firm, then your job is not simply to maximize profits, your job is to figure out how everybody in the country has a fair shot. Your job is to think about those workers who get laid off and how are we’re paying for their retraining…. My job is to take into account everybody, not just some.”

While it’s the first time Pres. Obama may have said it so clearly, it’s not the first time the point has been made. In a February Wall Street Journal commentary, Robert Reilly, a former Reagan special assistant, wrote:

When Mr. Romney was running for president four years ago, he said in an interview that the first thing he would do in the White House would be to bring in some business consultants. In other words, Washington is a management problem.

This is a profoundly mistaken Republican notion that goes back at least to Herbert Hoover, a successful mining engineer, businessman and progressive politician who was an advocate of the “Efficiency Movement,” an attempt to manage government better.

…Mr. Romney has a tendency to treat his business autobiography as a policy prescription… Like Hoover, Mr. Romney wants to be president because he thinks he can manage things better. But my advice to any person who seeks to move American politics through his ability to succeed in business is: Stay home. It will be better for you and for your country.

Why Parliament is wrong: Murdoch is perfectly fit

The United Kingdom’s Parliament had it exactly wrong when its report on the News Corp. phone hacking scandal declared media mogul Rupert Murdoch unfit “to exercise the stewardship of a major international company.

Murdoch, 81, has built one of the world’s largest and most powerful media companies, with unmatched global influence. Its holdings include such U.S. powerhouses as The Wall Street Journal, Harper Collins Publishing, Fox Broadcasting and 20th Century Fox. Worldwide, it earned just shy of $3 billion last year on revenue of $33.4 billion.

Although its financials took a tumble in 2009 – like every other major media company during the recession – News Corp. has shown nothing but solid growth over the years. If a global corporation’s primary mission is to deliver growth and profit for its owners/investors, then you can’t argue Murdoch has been anything but successful.

What Parliament really seems to mean – and what they should have said – is that Murdoch’s success was achieved in a manner incompatible with the interests of society. Specifically, it believes News Corp. has violated laws and widely accepted  rules of behavior by building power through the hacking of private phone and e-mail messages, the buying and bullying of public officials and other behaviors that – legal or not – are widely consider anti-social and unethical.

These accusations are not only pointed at his now-shuttered News of the World operation, but also other global holdings. They are intended to paint his entire empire with broad strokes of conspiracy, influence peddling, and amoral greed.

Is anybody surprised by this? Murdoch is commonly described as a ruthless competitor (def.: having no pity, merciless, cruel). He sees himself as being on a mission to upend individuals and institutions with whom he disagrees, according to a 2010 profile in New York magazine. And since the 1980s, he has built his empire by toppling adversaries like so many dominoes.

Guess what? This is not unique in the corporate world.

The real point is that this is precisely why the Cult of Capitalism has it wrong.

The main theme of the Cult of Capitalism – of which Murdoch is both a respected symbol and a hands-on activist – is that the world would be more efficient and much improved if markets were unshackled from burdensome regulation.

What this episode reveals yet again is the questionable outcome when that assumption is put in practice.

If you’re OK with the Parliamentary conclusion that the social power of Murdoch’s media empire has been built on anti-social behavior, then congratulations: You’re qualified for membership in the cult.

Otherwise, the logical conclusion is that the game of capitalism – like all other games – requires some rules (and referees to enforce them) that assure corporations achieve success within a range of behaviors that are generally seen to be compatible with society.

In a message to employees, Murdoch  – the embodiment of unfettered capitalism – agrees to be bounded by these rules. But don’t expect any real change from him.

If News Corp. and others choose to play safely within societal boundaries, it’s only because those boundaries are well defined and enforced by regulators. Within the Cult of Capitalism, that practice is still referred to as wasteful and job-killing government spending.

Show us your backbone Wal-Mart; yeah that’s what we thought

In 2005, according to a New York Times report, top officials at Wal-Mart were alerted to the possibility that its Mexico subsidiary had made widespread use of bribery in efforts to gain marketshare. Wal-Mart de Mexico is the company’s largest foreign subsidiary.

Such activities, they were told, could be in violation of both U.S. and Mexican laws.

Wal-Mart looked into the matter; here, according to The New York Times, is what investigators learned:

They found a paper trail of hundreds of suspect payments totaling more than $24 million. They also found documents showing that Wal-Mart de Mexico’s top executives not only knew about the payments, but had taken steps to conceal them from Wal-Mart’s headquarters in Bentonville, Ark.

At that point, Wal-Mart leaders might have chosen to disclose the problem. It may have lead to prosecution in Mexico and financial consequences in the United States. It might have generated embarrassing headlines for awhile.

But Wal-Mart is a big company. It employs more than 2 million people; it would be easy to make the case that employees sometimes do things that are against the rules and top executives can’t be expected to know everything that’s going on all the time.

The disclosure wouldn’t likely have brought much economic hardship to the company or its stakeholders; Wal-Mart’s worldwide operations that year generated $10.2 billion in earnings. (Just 6 years later, according to its current annual report, earnings have grown more than 50% to $15.8 billion.) Its credit is pretty good.

So the disclosure would have been an unpleasant short-term blip. It might have even done some good, such as demonstrating the sincerity of the company’s sweeping  Global Ethics promise:

The Global Ethics Office is responsible for sustaining Walmart’s culture of integrity. This includes developing and upholding our policies for ethical behavior for all of our stakeholders everywhere we operate.

This would be meaningful because Wal-Mart makes a lot of pledges – about things like diversity, sustainability, treatment of employees, etc. – that are sometimes viewed with skepticism by outsiders. For instance, its Women’s Economic Empowerment Initiative was announced in late 2011, just a few months after the U.S. Supreme Court neutered the arguments of a high-profile, decade-long effort to bring a class action suit against Wal-Mart for discrimination against women.

Let’s be realistic: A company that has spent 50 years becoming the world’s largest retailer is going to have accumulated a lot of enemies. It’s going to be a target for sour grapes and discontent.

So at this moment of moral fiber, when Wal-Mart leadership had one of those defining opportunities to choose the right thing over the expedient thing, which way did they go?

You already know the answer to that; if they did the right thing the story would have been long-forgotten by now. Instead, according to The New York Times, they essentially allowed the Mexican subsidiary to investigate and exonerate itself.

Only in late 2011, when Wal-Mart reportedly learned that The Times was onto a story about corruption in Mexico, did it reveal to the U.S. Justice Department that it was conducting an internal investigation, The Times reports.

Better late than never? Not everybody would agree.