Friedman Freeman Blog

This past summer I interned at CIGNA, which is a multinational health insurance company, in their corporate accounting department. From my experience there, I believe that they very much operate under shareholder management as opposed to stakeholder management. This was probably accentuated because I was working in the accounting and finance department where the bottom-line is the most important thing to them, but nonetheless it seemed to be company wide attitude. During my time there, I was lucky enough to be invited by my boss to a series of meetings with high-level executives where they discussed what special items they needed to disclose in the second quarter earnings release. In the final meeting, the CEO was present and they presented to him what special items they decided to disclose and the only part that he cared about was how everything was worded to look the best for the shareholders.

Milton Friedman would believe that CIGNA is operating socially responsibly because they are using shareholder management, and everything they are doing is to increase their profits within the rules and regulations of their industry. Executives are not acting for themselves by using shareholders’ money to do what they believe is socially responsible.

Working Conditions, Indifference, and Causes of Change in Organizations

Mike Daisy’s monologue about globalization, industrial production and Apple is a great application of theatre to confront social issues. While I think that Mike Daisy knew the story he wanted to tell prior to the interviews he did, I loved the theme of the piece. He looks at industrial facilities, the source products we use everyday, through a perspective that values humans. He blatantly takes a stakeholder viewpoint of how businesses should be run.

One of Daisy’s thoughts that stuck with me is the question of how change is created in organizations. Mike Daisy said that “change requires caring” and that stakeholders at all levels (Apple, consumers) have turned a blind eye to the working conditions in places like the one Mike visited in China. Mike Daisy makes this clear that we should feel concerned about the working conditions. Hearing about the working conditions makes me wonder how economists can argue that the free market is the solution for the ills of our society. If anything, Shen jen, an area that has had recent economic growth, is now making large profits for some while ruining the quality of life for many (sometimes to the point of suicide).

I thoroughly appreciated the issue that Mike Daisy’s monologue brings to light. He adds value and humanity into the story of the “stuff” that we use.

Apple (First Blog)

Apple has been criticized for at least the past three years for acting unethically and hiring cheap labor in China. Working conditions, work hours, and wages are most often condemned. Although these claims have hurt Apple’s reputation in the short term, it remains a leading innovator and contributor to the advancement of technology and communication specifically.  As Ed Freeman states in his “Business Ethics at the Millennium”, “business as an institution is a source of the creation of value…the creative force of humans is the engine of capitalism” (Freeman 177).  Though Apple may hire cheap labor in order to drive its profits or keep the price of its new iPhone affordable, it is Apple’s social responsibility to treat its employees ethically.

By continuing to be innovative and contributing to the advancement of society, Apple will remain profitable and can still please its stakeholders without being unethical. Innovation can be inhibited if values and ethics are ignored. Freeman supports this by stating, “if business is separate from values and ethics, and if change requires one to think about values and ethics, then change in business will be difficult” (Freeman 175).  In order to maintain its well-respected reputation, Apple should reconsider its values and continue to focus more on its innovation than cost cutting metrics.

Milton and Ed Post

Apple is the largest technology company on the planet with over $140 billion in cash and products sold across the globe.  Within the last two months, it has been the topic of major news events, such as the alleged price fixation of its e-books and its legal avoidance of billions of dollars in taxes.  Friedman and Freeman have very different opinions on the morality of Apple in doing these actions along with to who the company is responsible.

Milton Friedman would argue that Apple is doing its capitalistic duty, and thus its moral duty, in creating the most value possible for shareholders by legally avoiding taxes through subsidiary companies in Ireland.  He would argue that if Apple had not done this, it would essentially be taxing itself (even though the government would be taxing them) and spending shareholder money in a way that would help the government, and, very arguably, the citizens under it.  Friedman would say that this is socialistic and immoral because it is not their money to waste.

Edward Freeman, on the other hand, would believe that Apple has not considered its stakeholders and has separated its business policy from its ethical policy, which, in his opinion, is immoral.  The alleged fixation of e-book prices does not consider the stakeholders—the consumers of the products.  Freeman would believe that Apple drove up the prices solely to earn more profit and create greater returns for shareholders.  Apple did not consider the individual, as Freeman would believe, or see itself as a means to a stakeholder end.  Nor did it follow the Principle of Emergent Competition, but instead tried to “get the other guy” by attempting to take market share from Amazon.com.

Corporate Responsibility at JPM

Upon reading the articles by Milton Friedman and R. Edward Freeman, I instantly began thinking about one of my experiences working for JPMorgan Chase. Throughout my 10 weeks with the company, I continuously received emails and attended events preaching the importance of corporate responsibility, philanthropy, and community involvement. As a major bank in the high of financial scrutiny, it is not surprising that the company is so aggressive to push all that it has accomplished in these areas. Yet, at the same time, it is hard to determine how invested it really is in the hundreds of projects that it sponsors and donates money to.

In fact, one project that the company asked all of the interns to undertake was to research and pitch a philanthropic organization to which it should donate to. Though a very beneficial project to both us interns and the organization receiving the donation, the effort does not seem quite as sincere after taking a closer look. Seeing that the bank is the world’s largest in terms of total assets, the $5,000 it set aside to donate to the winning cause is insignificant and even shows that the company may not be all that concerned with the cause. On top of this, the company paid for the flights and hotel rooms of each of the interns who were part of a final group and were based outside of New York in order for them to come and pitch their organization in person. Undoubtedly, this expense ended up being more than the actual donation made.

Ultimately, the reasoning behind writing about this experience is the fact that it is very relevant to the points made in these two articles, particularly to those made in Milton’s article. In the article, Friedman talks about the difference between acting truly socially responsible and doing so out of self-interest to generate goodwill. In this case, Milton would most likely argue that the latter point is more relevant. Clearly, the company was not greatly committed to the cause given the insignificant sum provided and was mostly acting because it felt it ‘ought’ to do so. Almost every major bank partakes in intern projects such as this one, and so it becomes quite clear that the project was created as a way to stay competitive with its counterparts and increase its external image. Just as Milton indicates in the article, it is hard to fault the company for creating a project such as this as it does contribute to social betterment. However, it is important to be able to distinguish efforts made to truly act responsibly from those that are partly/entirely done to benefit the company. In the end, Milton would most likely view the company’s efforts as problematic in that it is not something that it would be inclined to do without the pressure of outside forces.

Warby Parker: Public Identification of Stakeholders

I’ve been doing some outside research on an eye glasses supplier, Warby Parker, that has created record earnings over the past two years. Warby Parker is a eye glasses company that sells vintage, hip frames for roughly $100, which is much less than the stylish competitor (where designer frames can cost $200- $400 more). Business Week interviewed the founders of the organization after it met its revenue goals in the first three weeks of opening.  While the organization is incredibly profitable, their vision and goals would align with the way that Ed Freeman views organizations.

The organization has the potential to make much more than they currently do in profit, but instead it gives glasses to visually impaired people in less developed countries with its “Buy a Pair, Give a Pair” program. The organization extensively identifies the stakeholders affected by their business and are not shy to let people know, via their website. The company labels itself a “Good Company,” and has information on the organization’s influence on their employees, customers, community, and environment (they even sponsor a local little league team). As Ed Freeman said in his article, “In Colins and Porras’ ‘Built to Last’ they have detailed company after company that has outstanding performance in part because the companies have a sense of purpose, a sense of meaning that is transferred to their employees” (p. 174). I believe Freeman would applaud the employee management at Warby Parker. Online, the business lists ways and manners in which they are helping their employees flourish.  All of this involvement is great to generate goodwill, as Milton Freedman would stress, their involvement outside of profit generating activities stress the firm’s societal concerns.

Milton Freedman would most likely be critical of Warby Parker for addressing societal concerns that they are not necessary qualified to change. But the organization is not publicly owned, so he may argue that if the owners’ preferences are being adhered to, then let the firm do as it is.

 

The Gap, Inc.

Gap, Inc. believes in community investment. On their “social responsibility” page they explain the mantra, “Be What’s Possible”. They focus community investment on under privileged children in the US and women in developing countries. It is clear, according to Gap, Inc. that those they aid in investing are not considered just investments but partners. They can say this truthfully because they do not just contribute cash, but innovation. Problem solving for the Gap involves solving social problems creating solutions worldwide. Gap, Inc. maintains this theory with what they term the “Virtuous Cycle”.  The virtuous cycle delivers a collective benefit to the community, shareholders, employees, and consumers. Gap believes that is all can move forward, everyone wins and that is what they strive for in investing in the community.

I think Milton would have a problem with Gap’s thinking. He would most likely believe it is too unanimous and that social responsibility is not that easy. Milton would argue that community investment must in some way have a negative effect on at least one of the parties in the “virtuous cycle” Edward would most likely find that Gap has found a way to merge the Separation Thesis. In creating meaning for the employees and consumers, the Gap goes beyond the economics of business to create virtue and meaning to the work done and money spent.

With its community investments, Gap, Inc. seems to be a stakeholder manager. They provide aid beyond monetary value to partners worldwide and seem benefit all collectively in the process. While their model is a but optimistic, it is on the right path to creating higher stakes than just economic benefit.

Google

A company that came to mind after reading about the four managerial problems in Ed’s article is Google. From my prospective the four managerial problems all stemmed from the employee not feeling that their work was meaningful. From this stemmed the disconnect between self and work which causes conflict with business ethics.
At Google headquarters, they are constantly trying to improve the environment. The executives want to make you feel welcomed and home, along with letting you know they care about your family. This setting enables their employees to feel their work is meaningful, that they are supported and truly wanted. If Ed were to look into the company dynamic he would see how Google is working hard to counter act the common four managerial problems that so easily occur in corporations.

http://www.google.com/about/jobs/lifeatgoogle/benefits/

Welcome, Grab Your Paint Brush

Welcome.  Blogging is an essential part of this class.  WordPress is a software tool, a platform, that enables us to produce content, comment on our writing, and build an audience of readers and of interaction amongst ourselves as well as with the wider world.

As the blog grows over the semester, it will become more dynamic.  Yes, it looks a little bare now.  But that is by choice.  It is like a blank canvas, waiting for all of us to pencil in the outlines and color in the many hues.

While you are, here, play around with the dashboard, with your user profile, with your post.

Challenges:

1) Can you add a picture to your user profile?

2) Can you give yourself a profile name ( a display name) that the rest of us can remember (as in , NOT hgr345)

3) Can you add Tags to your post?

4) Can you add any multimedia to your post?

5) Super-advanced: can you figure out how to turn on zemanta content like this post has (with the suggested posts below).

Related articles

• The Value of Users Generated Content – Part 2 (benchmarkemail.com)
• 5 reasons why you should consider blogging (zemanta.com)
• Following or Unfollowing a Blog (wallacecass.wordpress.com)