2012
Yes, it does pay to be good
If you remain unconvinced by our evidence that the “good guys” finish first, the beating that Wal Mart is currently taking should push you a little closer to that point of view.
My rough calculations indicate that the New York Times’ recent exposé on Wal Mart’s cover up of corrupt activities in its Mexico division has cost its shareholders over $19 billion in the last few days (which doesn’t even include losses from Wal Mart de Mexico, which trades separately).
Combine that with the $2 billion loss that Goldman Sachs’ shareholders incurred in the immediate aftermath of Greg Smith’s op ed piece on “Why I Am Leaving Goldman Sachs” and the ongoing loss that BP’s shareholders have incurred relative to the industry following the Gulf of Mexico disaster, and the picture seems pretty clear.
Greedy behavior is being severely punished, and by default, good behavior has its just rewards.
2012
Bad Apple: could the era of exploitation outsourcing be near its end?
Recent scathing stories about working conditions in the creation of iPads and iPhones are a telling moment for Apple Inc. and other global corporations. Could this latest episode of outrage over worker mistreatment at an outsourced factory signal that the age of exploitation outsourcing is waning? I think so.
You’ve probably heard about one or both of the stories that have rattled Apple’s massive customer base and the rest of the public. First, This American Life broadcast the first-person account of Mike Daisey, a self-proclaimed Apple enthusiast who traveled to China to see how Apple products were made—and was horrified at what he found.
Then the New York Times published a long story about harsh, dangerous working conditions at factories making Apple products. Daisey says he met with workers whose hand joints have “disintegrated” from repetitive work, while the New York Times piece centered on the tale of a young employee killed in an explosion of aluminum dust—not long after an advocacy group warned Apple of aluminum dust problems.
Apple is far from alone in tapping cheaper overseas labor employed by third-party firms. Many U.S. companies have tried to wash their hands of the actual making of things. They may have decent or enlightened labor practices for their direct employees. But by farming out production to suppliers in China and other low-wage countries with few labor protections, they often have outsourced not just work but worker abuse.
This is not a new story. In recent decades, the public has heard withering tales of clothing-makers such as Nike Inc. outsourcing to third-party firms that took advantage of workers in the developing world. Even in consumer electronics, substandard labor treatment in the supply chain has been proclaimed in the media since at least 2006. That’s when a British publication reported harsh working conditions in the making of the iPod at Apple supplier Foxconn—the same company at the heart of the recent allegations.
But for the most part, U.S. consumers have been willing to turn a blind eye to Apple and others. ANew York Times survey of Americans late last year found that only 2 percent mentioned Apple’s overseas labor practices as a concern.
In essence, consumers have focused on Apple’s remarkable products rather than how they are produced. That goes for me, too. I have written critically about labor issues at Apple. But I’ve had a series of Mac laptop computers for more than a decade. And as I compose this blog item, I’m listening to our family’s iPod.
Apple has addressed supply-chain problems in recent years to some degree. But our collective apathy about working conditions behind iPods, iPhones and the like has allowed the company to prioritize speed and profit over decent treatment of people.
“You can either manufacture in comfortable, worker-friendly factories, or you can reinvent the product every year, and make it better and faster and cheaper, which requires factories that seem harsh by American standards,” a current Apple executive told the Times. “And right now, customers care more about a new iPhone than working conditions in China.”
But that’s changing. In recent years, there has been a shift in attitudes among consumers toward a desire to do business with companies that show “kindness” in their operations. People also are increasingly identifying as “global citizens,” meaning they have more empathy for people on the other side of the world. What’s more, tools such as Facebook, Twitter and YouTube give people more opportunities to express themselves. This means companies increasingly face penalties for mistreating people—whether those workers are direct employees or not.
The New York Times story on iPad working conditions, for example, generated 1,770 reader comments. Many, if not most, blasted Apple or the overall system of cheap labor. And an online petition prompted by the This American Life piece that calls for Apple to protect Chinese workers has garnered roughly 166,000 signatures—and counting.
“We care about every worker in our worldwide supply chain,” Apple CEO Tim Cook reportedly wrote in a memo to employees in the wake of the stories. But the public isn’t buying it. It sees some rotten labor practices at the core of Apple. And, increasingly, people, including Apple’s own employees, will demand better of the company.
The bottom line for Apple and other companies is that a shameful supply chain is less and less viable. Happily, the age of farming out worker exploitation is coming to a close.
A version of this post originally appeared at Ed’s Work in Progress blog at Workforce.com.
2011
Amazon’s Price Check app and bad company behavior
Amazon focuses on low prices, selection, and convenience. In selling books, CDs, and many other products, Amazon provides customers with high-tech, low-touch, and highly reliable service. The giant online retailer also has taken steps to improve the service level of partner merchants, including user ratings to keep merchants on their toes and a program to ship items on behalf of partners. BusinessWeek reported in 2009 that Amazon was the top company in customer service. In short, Amazon has a lot going for it.
So why are a U.S. Senator, a New York Times best-selling author, the president of the American Booksellers Association, and people all across the country outraged at Amazon?
Amazon recently offered customers another way to save money: the Price Check app. Go into your local bookstore, browse around, scan into your mobile device the barcode of an item you’d like, share the in-store price, and order it for less from Amazon. In short: spy and help Amazon build a database of pricing information from thousands of stores.
There is a negative effect associated with this app that needs to be explored: the social cost associated with helping a giant become a leviathan. Amazon can often offer items for a couple of bucks cheaper than your neighborhood store because they don’t have to pay high rent in a high traffic downtown store. Amazon.com often doesn’t have to pay state tax because they only have a physical presence in four states. Because there is no state tax collected on many purchases, those are fire trucks, library books, and school teachers your state goes without. Financially supporting your local community is challenging to do when you buy exclusively online.
The lowest price does not always equal the best deal. Customers can rely on bookseller expertise – especially when those sellers get to know you personally. The experience of an alluring book store atmosphere with enticing book covers just inches away is difficult to replicate staring at a screen from a desk under fluorescent lighting. Salon.com’s Will Doig captures the appeal of bookstores succinctly: “To many, the store itself is seen as at least as important to the community as the product it sells.” Online retailers cannot easily offer the pleasure of hearing authors read from their books in person.
Amazon’s Price Check app is crossing over into bad company behavior. Good companies ensure that their employees, their customers, and the environment all win when business is transacted. This cannot be done when one company asks customers to exploit the resources of a competitor. Many others agree – hence the rise of the “Occupy Amazon” movement.
All companies need to be cautious not to overstep their bounds – customers are sensitive to this and can turn on them quickly in this social media era of Twitter, Facebook, and public blogging. Amazon has done well by their customers and has earned a place in the market. But it has gone too far with its Price Check app, and has damaged its reputation in doing so.
2011
Black and blue over Black Friday
Black Friday could leave a black mark on retailers’ reputations.
You probably heard something about the controversy. Major retailers like Macy’s, Target and Best Buy decided this year to push back their shopping hours on the day after Thanksgiving. Several are opening at Midnight the evening of Thanksgiving. Walmart reportedly is offering some deals at 10 p.m. Thanksgiving night.
An earlier start to what’s traditionally known as “Black Friday” is a bid to grab a greater share of Americans’ holiday spending. To be sure, retailers are under pressure to compete. And holiday dollars are crucial. But the change has sparked a backlash, with some employees and customers rejecting the way the extra shopping time crimps family time.
The most prominent rebellion is an online petition calling on Target to cancel the midnight opening. As of early Wednesday, it had close to 200,000 signatures.
“A midnight opening robs the hourly and in-store salary workers of time off with their families on Thanksgiving Day,” the petition states. “By opening the doors at midnight, Target is requiring team members to be in the store by 11 p.m. on Thanksgiving Day. A full holiday with family is not just for the elite of this nation — all Americans should be able to break bread with loved ones and get a good night’s rest on Thanksgiving!”
Such protests have touched a nerve. In recent years, Americans have grown more focused on values—not just a great value. The public cares more about labor matters, as seen by the initial sympathy for the Occupy Wall Street movement and its attention to the wealth divide.
Already, workers report high levels of stress on the job—to the point that productivity may be suffering. And many lower-wage employees have to hold down more than one position to make ends meet.
“Many families’ work schedules make it impossible to have weekends or even dinner together,” Judy Ancel, director of the University of Missouri-Kansas City Institute for Labor Studies, wrote in a recent essay. “That’s why holidays provide the only opportunity for so many extended families to see each other. … The just-in-time workforce means just no time for the family.”
It may be no coincidence that Macy’s, Target, Best Buy and Walmart all failed to crack the top 10 retailer list that Laurie, Dan and I recently compiled to help holiday shoppers do business with worthy companies. The Good Company Retail Index ranks major retailers based on their records as employers, sellers and stewards of the environment—it is a list similar to the one we crafted of the Fortune 100 for our Good Company book.
To its credit, Target has addressed the Black Friday/Black Thursday issue directly. In a question-and-answer posted on its site, Executive Vice President of Stores Tina Schiel argued that many if not most employees look forward to the early opening:
“When I heard from several stores that news of the midnight opening was met with enthusiasm from the majority of our team members, I wasn’t surprised one bit,” Schiel said. “While it’s hard work, there’s just this great frenetic energy about the day. Put simply: it’s a lot of fun.”
Schiel has a point. I remember working in restaurants on some holidays and enjoying a festive vibe. Still, it seems to me Schiel and other retail executives are going too far here, letting business objectives blot out the bigger picture about the holidays and ignoring a cultural shift away from crass commercialism.
Companies opening at midnight or earlier Black Friday may ring in more revenue. But they also may be bruising their good name.
A version of this post originally appeared at Ed’s Work in Progress blog at Workforce.com.
2011
Walmart’s low prices financed by employees and US taxpayers
Today, Walmart announced a new price matching strategy – if you buy something at Walmart and find a lower price someplace else, they will refund the difference. There’s no question that this will create a real advantage for Wal-Mart — at least in the short run — and a way for them to grab a bigger share of Christmas spending.
But this announcement, coming on the heels of Friday’s news about major cuts in health care benefits to Walmart’s employees, strongly suggests that this advantage is being created on the backs of employees and US taxpayers (who end up picking up the health care bill for many Walmart employees whose earnings are so low that they qualify for Medicaid)
According to Mercer, few companies have made similar cuts. So it may well be that Walmart is creating a short-run advantage for itself, but doing long-run harm to its reputation. Ultimately, moves like Friday’s benefit cut are the kind of actions that often cause such strong community resistance to overtures to open new Walmart stores.
Bottom line? The price guarantee may be clever, but combined with growing evidence of Walmart’s position as a less-than-responsible employer, the overall long-run effects could be negative for the company – and are definitely negative for employees as well as all taxpayers.
2011
The reputation economy arises
The scandal that has battered News Corp. shares and given legendary leader Rupert Murdoch a black eye could be remembered as the moment that corporate reputation became really important.
That’s the argument Geoff Colvin, Fortune magazine senior editor-at-large, made in the publication’s Aug. 15 issue. I agree.
Colvin notes that News Corp. lost about $5 billion of value in the few weeks after phone hacking and alleged bribery by the company became headline news.
“Previous major scandals were mostly financial: the numbers were lies. Not this time. The damage so far derives entirely from behavior—phone hacking and possible police bribery—that appears to be illegal but has nothing to do with reported financial results,” Colvin writes. “Whether it’s illegal doesn’t matter anyway; it’s slimy, and that’s enough. News Corp. is deeply tarnished, and the financial effects could be significantly bad.”
That privacy invasions and the possibility of bribery could so badly damage News Corp.’s stock and its prospects dovetails with our belief that the business world is at the dawn of the “Worthiness Era.” In this new economic epoch, people are setting higher expectations for the companies in their lives. A reputation for upstanding behavior, for example, is becoming a key part of consumer calculations.
Consider a 2009 paper by researchers Remi Trudel and June Cotte. They found that customers will pay a premium for ethically produced goods and punish companies (by demanding a lower price) that are not seen as ethical. What’s more, Trudel and Cotte discovered, a bad rep is particularly bad for business: “The negative effects of unethical behavior have a substantially greater impact on consumer willingness to pay than the positive effects of ethical behavior.”
How did News Corp. get into unethical habits? Colvin says one answer is the “one-man problem.” That is, too much power has been concentrated in the hands of Murdoch himself, which led good-governance group the Corporate Library to give News Corp. an “F” grade for six years straight.
Thus far into the controversy, not much has been written about the long-term effects on the News Corp. corps of employees. But that too is likely to suffer. People—especially civic-minded Millennials—are going to think twice about casting their lot with Murdoch and his sullied empire. A 2009 study by public relations firm Edelman found that globally, 56 percent of people want a job that allows them to give back to society versus 44 percent who value personal achievement more. Slimy stuff like hacking into the phones of families of slain soldiers is like the opposite of giving back to society.
When public outrage persisted despite his shutting down a tabloid and dropping a bid for greater control of a satellite TV firm, Murdoch turned to Edelman itself to help manage the hacking scandal. It’s not clear whether that move will salvage the company’s reputation. But it’s another sign that a good name now matters like never before.
This post originally appeared at Ed’s Work in Progress blog at Workforce.com.