Time for capitalism to get ethical…

Michael Lewis wrote a great piece in the August issue of the Vanity Fair. Entitled “The Man Who Crashed the World,” it’s about Joseph Cassano, former head of AIG’s Financial Products unit.  I always admired Mr. Lewis’ writings for his no-nonsense approach to business, based on his first-hand experience on Wall Street, and his remarkable prescience about the financial industry train wreck to come described in his book Liar’s Poker published in 1989.

What grabbed my attention in the article about Mr. Cassano were his personal traits. He was described as “a guy with a crude feel for financial risk but a real talent for bullying people who doubted him. …Joe would bully people around. He’d humiliate them and then try to make it up to them by giving them huge amounts of money.” When Bernie Madoff was sentenced, “Judge Chin pointed out that no friends, family or other supporters had submitted any letters on Mr. Madoff’s behalf that attested to the strength of his character or good deeds he had done.”

Bullying, lack of character and good deeds seem to be the common denominators that fallen financial wizards have demonstrated in spades. What ever happened to the old values that characterized capitalism until the 1980s, when personal greed and profit became the norm rather than an exception?

Peter F. Drucker, one of the greatest business thinker whose “writings are landmark of the managerial profession,” according to Harvard Business Review, was no socialist.  This is what he had to say about social responsibilities of every business: “The third task of management is managing the social impacts and the social responsibilities of every enterprise. None of our institutions exists by itself and is an end in itself. Every one is an organ of society. Business is no exception. Free enterprise cannot be justified as being good for business; it can be justified only as being good for society.” (The Essential Drucker, published by Collins Business Essential. Italics are mine.)

Drucker continues: “Asked what a business is, the typical businessman is likely to answer, ‘An organization to make a profit.’ The typical economist is likely to give the same answer. This answer is not only false, it is irrelevant.”  Mr. Drucker’s thinking may come as a revelation to many fallen captains in the financial industry who think that ethics is a precocious Greek wine.

A real example of an ethical, socially responsible business is a story in Sunday’s New York Times about Trumpf, a family business employing some 8,000 people and based in Ditzingen, Germany.  While the current economic crisis may force the owners to lay off employees by the end of the year, this business is run like nothing we’re used to in North America.

“About 15 years ago, Leibinger père put together his family’s principles in a written 20-page codex outlining rights and, above all, the responsibilities of Trumpf’s stewards. The imperative is to run the business in an ethical manner, to take care of employees and to earn a decent profit, which is largely reinvested in the company.” You can find the Company Principles section here.

Just compare that article to one in last week’s Financial Times, The town that Wal-Mart built.  To the Wal-Mart town’s citizens, it’s all about size: the biggest this and the biggest that, topped by this quote from the journalist’s guide: “‘Look at the girls walking their little dogs,’ he says proudly as we cruise past leggy women in shorts. ‘You could be in New York.’”  He’s right. You couldn’t be in Ditzingen.

Social media and blowing smoke at Starbucks

Adam Broitman’s piece in iMedia Connection – “Social media: whose job is it anyway? – asked six thought leaders to define social media.

Here are their responses:

1. Social Media is the creation, sharing, and commenting on digital content.

2. The sharing of information between people.

3. Any form of media that alows for immediate, public consumer response that’s incorporated into the content produced.

4. Social media is media in any form for any platform created by, for, and with consumers.

5. Social media is simply talking *with* — not at — your constituencies (customers, friends, partners, prospects, etc.) & engaging them online.

6. Tools and processes used to connect, share, and to organize and collaborate with others.

Twitter rules were followed, so each answer had to be 140 characters or less. If Twitter had more characters, perhaps they may have expanded their answers to include social activism, but answer #5 covers it best from my perspective, with one caveat: without the right message (content) and strategy, you’re not going get results with social media.

PR Week Breakfast Briefing had an interesting item about a social media campaign reported by Los Angeles Times this morning. Starbucks Chief Executive Howard Schultz was targeted as anti-union, with his company exploiting workers. The campaign – launched last week by Brave New Films of Culver City – has its own website, stopstarbucks.com, and a video called “What do Starbucks and Wal-Mart have in common?” The video should be watched by every corporate and executive communications department.
It starts with Mr. Schultz’s interview on 60 Minutes, which goes downhill for him in a blink of an eye, thanks to Scott Pelley, the 60 Minutes correspondent.
While the interview was generally favorable to Starbucks, Mr. Pelley zeroed in on a Starbucks’ message that had come back to haunt them:

“One of our colleagues coined a phrase a long time ago and said, ‘We’re not in the business of filling bellies.
We’re in the business of filling souls,’” says Schultz.

“Oh now, come on,” says Pelley. “No wait a minute. That’s too … this is a company. This is a corporation. Come on.”

“OK, it is a corporation,” Schultz acknowledges.

“You’re blowing smoke now,” Pelley replies.

Now, the Vatican may get away with saying it’s in the business of filling souls, with a little smoke as a part of the ritual, but Starbucks? Ten years ago, the interview would have been sitting in the archives. But thanks to new media, it became an opening line in the union organizing effort, exploited brilliantly by the smart people at Brave New Films. By using social media, including Twitter, to hijack Starbucks’ own campaign, the union-organizing effort may or may not succeed. But consider this: the video was watched by nearly 40,000 people and an online petition demanding that Schultz “quit following Wal-Mart’s anti-union example” was signed by 12,000 people. And the damage to Starbucks reputation? Now that’s something to think about before you write the next, hopefully not a nebulous, message for your CEO without a proof point.