The Progressive Ensign

insights and analytics to build an economy that works for all

Category: Corporate Nation State (Page 3 of 3)

Corporations Are Making Decisions Now in Midst of Trade Uncertainty

 

Image: mikaeldacosta.com

Our President just threw the trade dialog for a loop this afternoon requesting his trade team come up with another $100 billion in tariffs against China on top of the already $50 billion he has announced.  He thinks that by starting a verbal trade war with a protracted ‘up to 6 months’ negotiation with China and other countries that the US economy will come out the winner.  The winning outcome will likely never happen! Why?  Because corporate leaders are already factoring in an incredibly slow negotiation.  Corporations abhor uncertainty, the policy uncertainty index with this President is off the charts.  Executives are making decisions on investments for the next 3 – 5 sometimes 10 years out into the future.

Source: Factset, Stanford, Northwestern, University of Chicago, The Wall Street Journal 4/4/18

Professors Baker of Northwestern, Bloom of Stanford, and Davis of University of Chicago developed an uncertainty index based on mentions of ‘certainty’ and ‘uncertainty’ in newspaper articles.  With a relatively quiet economy and the first 12 months of President Trump’s administration now behind us, we expect the ‘uncertainty’ mentions to soar with trade war, stock market prices falling and cross industry conflicts about which industry should be sacrificed for another one.

The major stock indexes have fallen as much as 10 % year to date and yesterday, the Dow Jones Average was on a roller coaster down as much as 510 points then closing at 210 points up at the close.  Money managers hate uncertainty too, as they need to make daily decisions in regard to investments of millions of dollars in trusted to them to grow for retirement programs, trusts, endowments and investors looking out 5 and 10 years.

The present trade war was started by our President because he said it would be ‘easy to win.’ Yet, he has little experience in complex global product and services trade.   Treaties that he is ready to tear up took years to negotiate, analyze the complex trade data and gain buy in from all parties.

Executives are looking at data, researching alternatives, hiring consulting firms and looking to figure out a long term plan now – with alternatives if the trade war is won by the US or if it is lost by the US or their industry.  They will make decisions based on the present level of ‘uncertainty’ and see alternatives now, not waiting to see the outcome.  Business leaders cannot wait, they have businesses to run today, shareholders to report to, employees to manage, and products or services to build and sell.

In the steel sector, companies in the US are already stockpiling steel before the tariffs on imports start, spiking prices then there will be a glut of product with prices falling.  Soybean farmers in the US already reeling from competition from Brazil and other countries will feel the immediate fall of sales from China, as Chinese customers seek lower cost ‘safe’ non US suppliers for products like pork.  Pork futures prices that farmers use to price their hog products have already dropped 15 % in the last month and a deep spiral down of 2.58 % today. Prices are already dropping customers and suppliers are making decisions to reduce uncertainty and these decisions will cause market chaos leading to a recession or worse.

Next Step:

We need to wind down the brinksmanship now, focus on the real issues behind trade imbalances that have been developing for decades, and confront intellectual property theft on a straight on policy basis not through tariffs. We need to use the international forums like the WTO that have been carefully built over the past 50 years to ensure prosperity across the world for all economies and at the same time protect US worker jobs, incomes and future career opportunities.  We have said in previous posts that the time is now to reverse direction before it is too late and the global economy is severely damaged.

Corporations Are Not Protecting Us from Identify Theft

Image: consumer.ftc.gov

There is a contract between users and the online service provider that our privacy and identity will be protected called a User Agreement.  When Internet platform providers do not protect our privacy and account information they are violating the agreement and should be held legally accountable. These voluminous agreements are completely written from the company point of view forcing the user to turn over content rights to the platform provider.  This is just not fair it is our content we created it, like writing with a pen, the pen company does not own the article I just wrote. Neither should Internet platform providers like Google, Facebook and Apple be allowed to do whatever they want with the content I create – they didn’t create it and should not own it.

We bring this starting point up because in the latest data breach announced belatedly by Facebook of 50 million users is another case in point.  Executives causally looked at the problem as their spokesman would not even call it a breach because ‘no passwords were broken into’ no instead Facebook just gave access to Cambridge Analytica and then sent a form asking if Cambridge had deleted the data, the respondent checked a box that said Yes.  Facebook never bothered to do the due diligence on the firm to see if the 50 million records were actually deleted that to begin with the firm never should have had access.

Source: Identity Theft Resource Center – 2017

The majority of the breaches are into businesses while banking and credit institutions are bringing down the number of incidents.  Yet, the percentage of incidents that involve social security and credit card numbers is holding steady as hacking into systems increases. Experts at the Identity Theft Resource Center estimate for 2017 that 171 million records compromised, with a 44 % increase from 2016.  Based on announced incidents the 171 million records compromised is probably on the low side of all the incidents during the year.

Today, Orbitz announced a breach into payment records for 850,000 users, Equifax disclosed last fall that 148 million users had their payment records compromised, though now they say it was ‘only partial driver’ license numbers and names’, not social security numbers or full drivers’ licenses or credit card numbers.  Yahoo discovered that in 2013 over 1 billion user accounts were compromised 2 years later.  The list goes on and on, what is clear is that the online industry is approaching user privacy and security in too causal a way.

Next Steps:

During the Obama administration a bill was introduced to strengthen privacy protections and make corporations accountable for data breaches.  Senator Elizabeth Warren (D-MA) and Senator Mark Warner (D-VA) has introduced a bill to force credit reporting agencies to pay fines when data breaches occur, providing immediate disclosure and tools for remedying the problem to consumers.  Senator Warner also introduced a bill to require that credit agencies make credit freezing services available free of charge. Firms like LifeLock actually had an agreement with Equifax on a per user basis to make money from the breach when Equifax users signed up for identity protection.

Plus, we propose a complete review of all online User Agreements to force platform providers to insert clauses protecting user data from hacks with accountability, noting that content is user owned and allowing for class action law suits in the event of a breach to remedy the damage to users who need to repair their credit records and financial information from identity theft.

Blackrock CEO To Corporations: Focus on Social Responsibility Too, Are They Listening?

Image: ipleaders.in

Laurence Fink, CEO of Blackrock with $6.3 trillion of assets under management sent a letter to one thousand CEOs outlining that in the future they will be evaluating companies on their societal impact not just profits.  Blackrock manages major index funds which require that they invest in firms included in the index even when they don’t like the direction management is taking the company or take actions that are detrimental to their employees or community.  Fink tells executives that a new age has arrived where shareholders and company management need to be more actively engaged. Plus, companies need to take the long term view related to rising automation,  slow wage growth and climate change and explain their plans to shareholders.

Next Steps: 

We applaud Fink’s focus on social responsibility by corporations.  As he notes governments maybe way behind in the seeing the needs of society and solving those problems.  Corporations can even add value, as Deloitte observes in five ways: creating new market opportunities, taking regulatory relationships from reactive to proactive, retaining top talent, enhancing brand value,  and building sustainable supply chains. Now, let’s make this a priority on Wall Street.  Fink in an interview on NPR’s Marketplace today, clarifying that Blackrock was not Wall Street.  We have a ways to go with Wall Street expectations for quarterly results – we can hope that Wall Street was listening to a major investor like Blackrock.

Corporate Nation-States Run The Country: They Should Be Accountable, Ensuring National Interest First

leviathan_by_thomas_hobbes

The View:

Corporations provide the means for all of us to make a living, innovate new services and products and enjoy a better life.   Plus,  Entrepreneurship Can Tip The Inequality Scale . Yet, the character and sheer power of corporations over our lives and country has led to a ‘set of corporate nation-states’ running things by their own rules.

When this author worked at Hewlett-Packard in the computer systems group, Bill Hewlett and Dave Packard still ran the company, visited employees at their desk, bought a redwood park for employees and their families, always included families in quarterly celebrations. When things got tough, we all took a one tenth pay cut for the tenth were were asked to voluntarily work, we worked anyway to help get the company back and rolling – saving thousands of jobs. Personal and family life was respected, supported and separated for from work life.
Today, things are different at a middle sized fast growing software company last December. During an All Hands meeting our CEO declared ‘happy holidays’ then made a demand – request, ‘enjoy spending thirty minutes with your families, then back to work…’.  That requirement for a complete focus on the needs of the company says it all – now we are expected to return emails, text messages, and cell calls on a 24/7 basis. We are expected to hold conference calls on our vacations, bring our laptops to do conference screen sharing events, and complete assignments from our hotel or getaway lodge – making sure they have Internet access. Oh, don’t forget to get a plane flight that provides Internet support.  While, we are on the Internet, companies track our every click, own our comments on Facebook, target advertising on the last search we did and track our physical movements via smartphone GPS signals, stored for future marketing purposes.  Their control of us individually is all but complete (we can still turn links off if we chose).

How much control do corporations have in our society and government today?  A few research data points tell the story:

  1. By 2014, Wall Street’s largest 5 banks held 45 % of all banking assets up from 25 % in 2000. The financial industry overall spent $3.3 billion dollars on lobbying from 1998 – 2014 to the federal government. The Center for Responsive Politics found that Wall Street spent $1.5 million per day on lobbying activities in 2014!
  1. In 2014, the top five US drug manufacturers controlled over 24 % of the world-wide drug market of $1 trillion dollars, to ensure their control in the US they paid for 1,100 lobbyists in 2014 and spent over $2.9 billion from 1998 to 2014 on federal lobbying efforts.
  1. We know how Internet pervasive Amazon, Microsoft, Apple, Facebook and Google, they ensure their control with corporate lobbying of nearly $40 million in 2013 alone, with Google becoming a leader in lobbying dollars spent in 2014.
  1. Agri-businesses like Monsanto controls 24 % of the seed business and Dupont (Pioneer) owns 17 % market share globally, the agri business induatry spent $132 million in lobbying efforts in 2015 alone, supporting over 1,000 lobbyists in Washington. Up from $70 million spent in 1999.

So are we getting the laws that represent us versus the vast corporate lobbying juggernaut?  No, Gilens and Page (Professors at Princeton and Northwestern) looked at over 1779 federal laws and found no laws that were enacted based on what the public majority opinion was on the topic!  Little wonder we don’t get the laws we want compared to the lobbying and campaign efforts of Fortune 500 corporations.

To have a country ‘by the people, for the people and of the people’ as Lincoln eloquently noted in his Gettysburg address. We need to bring corporate nation-states into governance by the people for the people and of the people.

The Action:

Corporate Taxes – Fair Share

  1. Corporate taxes need to be simplified and increased to a total of 7 % of GDP (1954) not the present 1 %.
  1. Corporate profits generated overseas need to be taxed at 35 % if not invested in jobs, training, education, new plants here in the US.
  1. Stock Transaction Tax – on transactions generated in both public exchanges and dark pool exchanges.
  1. Tax Executive Pay – at regular corporate rates and end the corporate deduction for stock compensation above $1 million.

Corporate Regulation – Save Lives, Save Dollars

  1. Drug Company Prices – generate a list of ‘patient critical medicines’ that Medicare and Medicaid can negotiate prices for everyone to pay.
  1. Single Payer Health – it does not make sense to still leave 32 million Americans out of the health services system, and it does not make sense to have two national ‘accounts payable’ groups; private insurers and Medicare the overlapping operations costs billions of dollars and the lives of many patients.
  1. Food Supplement Industry – today the supplement industry can introduce their products without prior certification of health or contents, these supplement products need to fall under FDA oversight with prior product health certification prior to product launch. Industry lobbying has stopped  a bill authorizing the FDA, this law must be passed.
  1. Chemicals and Toxic Substances – the old TSCA (Toxic Substances and Control Act) law of 1976 has not been updated, new legislation to bring substances into compliance and regulation prior to product launch (the policy in the European Union) has been brought to Congress and stalled due to industry lobbying, it must be passed.

Corporate Governance – Represent employees and community, stock transparency

  1. Employee Representatives on Board – The Top 500 corporations by revenue would be required to have at least one employee council representative (councils will be formed by vote of employees).
  1. Community Representation on Board – The Top 500 corporations by revenue would be required to include up to 30 % of board representatives from the communities they do business in.
  1. End Stock Manipulation – The Top 500 corporations by revenue would be required to end stock buybacks, disclose all stock activities within 24 hours as they occur, and use GAAP accounting practices first, with non – GAAP reporting second. All overseas sales, profits and operations would be fully disclosed, with any material changes disclosed as discovered to the general investor community immediately. SEC funding would be increased to enforce these changes.

Corporate Lobbying – Level the Field with Voters

  1. End Super PAC and Corporate PAC donations, with single donations to campaigns at individual rate $2700.
  1. Corporate lobbying would be limited to one representative per firm, full disclosure of meeting with government officials within 24 hour after the meeting on a federal government website.
  1. Corporate disclosure in funding all political advertising, would need to show the corporate name and individuals who approved the funding.

(Note:  The Story with detailed research analysis, plus more information on The Action will be forthcoming in this in depth look at corporate nation-states. The Editor).

Page 3 of 3

Powered by WordPress & Theme by Anders Norén