• Small business & sustainability vs Big Mining and environmental chaos


    image from www.ghosttowngallery.com--the Kennecott open-pit copper mine

    Callan J. Chythlook-Sifsof writes in the New York Times about the planned Pebble Mine in Bristol Bay, Alaska. The open mine pictured above is similar to what Bristol Bay will look like if the area is mined.  The photo at the bottom of this post is what Bristol Bay looks like now.  

    Callan tells the personal story of her family and her people in the NYT piece.  Their lives are built around salmon fishing, and would be completely destroyed if this area were mined. The tale of the broader implications of the mine project are addressed in this video:


    video from the link wildsalmonprotection.com

    According to the video, 92% of the world's wild salmon comes from Alaska, and 51% of Alaskan salmon comes from Bristol Bay. So those of us who eat salmon would also be affected. There are additional costs of this project in terms of displacement of families, toxic run-off from the mines, water pollution, changes to mammal populations dependent on salmon production, and unknown short- and long-term consequences to the environment.  Taxpayers typically bear the costs of most of these consequences.

    The mine project is pitting generations of several thousand small businesses against a big mining company's short term profits.

    "Good business says that putting a $300 million dollar per year resource at risk does not pencil out."
                                                                        wildsalmonprotection.com


    image from savewildgems.org:  this is the site of the proposed Pebble Mine

    Is it worth it to the thousands of small business-people (not to mention those who want to maintain the ecology of the planet) to keep Bristol Bay looking like this...or is the open mine at the top of the page an acceptable trade-off because of the gold and copper ore that will enrich Pebble Partnerships' owners?  This is almost the story that was told in the movie Avatar. Except it is sadder, and closer to home.

    Source:   "Native Alaska, Under Threat," by Callan J. Chythlook-Sifsof, New York Times Op-Ed, June 27,  2013.

    Follow up:

    • What possible factors could be valued in deciding whether to grant the Pebble Partnership permission to build this mine in Bristol Bay?
    • If "sustainable accounting" principles are applied--to include all costs of the project into the future--would the project still make sense to Pebble Partnership? If Pebble Partnership does not bear these costs, then who will?  Who profits? Who has losses? 
  • GUILTY: new standards announced by SEC for corporate wrong-doers

     


    image from execgate.tumblr.com

    It seems as though the SEC (Securities and Exchange Commission) is changing its policy with respect to allowing corporations accused of wrong-doing to settle out-of-court without admitting wrong-doing.  On Tuesday, June 25, 2013, at a Wall Street Journal CFO Network conference, Mary Jo White, SEC chair, said:

    “We are going to, in certain cases, be seeking admissions going forward. Public accountability in particular kinds of cases can be quite important, and if you don’t get them, you litigate them.”

    Internal SEC emails from the previous week noted that requiring admissions of guilt or proceeding to trial rather than settling would be appropriate in cases where there was:

    • “egregious intentional misconduct”
    • "obstruction of an SEC investigation" or
    • “misconduct that harmed large numbers of investors.”

    In a video interview, James B. Stewart, NYT "Common Sense" columnist, predicted that the relationship between Wall Street corporations and the SEC would become more adversarial, and that we would see more cases going to trial.  This would probably result in more transparency with respect to incriminating evidence and the likely follow-up of class action lawsuits.

    Other observers believe that the SEC will only use this option in a handful of cases, and will continue to rely on the settlement of cases--without the admission of guilt--in order to bring quicker justice to those wronged.


    Source:
       "SEC to require admissions of guilt," Video interview by Ben Werschkul, Pedro Rafael Rosado, Abe Sater, Erica Berenstein and Reem Makhoul, New York Times Business Live, June 21,  2013.

    "SEC to require admissions of guilt in some settlements," by Dina ElBogdady,  The Washington Post, June 18, 2013.

    Follow up:

    • What is the role of the SEC?  What are the hindrances to the SEC fulfilling this role?
    • What penalties should exist for the perpetrators of the "white collar" crimes investigated by the SEC?
  • Climate change and the economy

     


    image from climateshiftproject.org

    Obama gave a much-anticipated speech this week about climate change.  It was more about the possibilities for the economy than it was about consequences of global warming.  Obama's focus was a transition to a "low carbon economy."  As he sees it, this evolution is away from coal fuel and toward natural gas. The focus on renewable resources would be the next step, sometime in the future. 

    Several observers had a negative reaction to Obama's plan.  Stock prices for coal companies fell. Environmentalists opposed to fracking (a primary technology for extracting natural gas reserves) were disappointed that the focus would not immediately be on solar and other renewable energy sources. Those opposed to any talk relating to climate change were also not pleased. Some called the plan an "energy tax."

    Nevertheless, small business owners reacted optimistically. Energy production and consumption affects many aspects of the global economy and every American business. Therefore, having a public and transparent plan helps create a more stable planning environment.



    image from www.psmag.com

    Sources:   "Obama on climate change: It's the economy, stupid," interview with Scott Tong, Marketplace, American Public Media, June 25,  2013.

    "Small business owners support Obama’s clean energy and environmental policies, poll shows," by J.D. Harrison, Washington Post, June 27, 2013.

    "Develop and Secure America's Energy Resources," the White House position paper, June 2013.

    "Facts on Fracking: Three Things You Need to Know," by Jessica Kennedy, energybiz.com, June 7, 2013.

    "Fracking for shale gas: the right way forward?" by Mark Lynas and David Santillo, The Guardian (UK), December 13, 2012.

    Follow up:

    • What would be the main features of a "low carbon economy"? What industries would be affected? What are the pros and cons? (Read BOTH fracking articles for a balanced perspective.)
    • Does this possibility of a "low carbon economy" have any impact on your personal future plans?
    • What is an "externality" in energy jargon and how does it relate to sustainability?
    • The headline used on the Marketplace story refers to the famous quote: "It's the Economy, Stupid." Where did that quote originate and what does it mean in terms of marketing and communicating to the American consumer?
  • Product downsizing: Getting less but paying the same


    image from newsnet5.com

    Let's talk about how value is communicated. One way is with words: 8 ounces costs $2.00, for example. Another way of communicating value is visual.  If a can of coffee that is about 6 inches tall cost $6.00 when you bought it a month ago,  when you buy the same size can today, you probably expect the same amount of coffee is inside. The size of the container is one way of communicating the volume of product. For example, the "pint" of ice cream above, and the redesigned dish-washing soap below...



     image from www.post-gazette.com

    Marketers of processed foods and other household items use this downsizing technique to influence what customers perceive visually. Technically, the product purveyors are not lying, because the words on the container communicate accurately what is being sold. Still, particularly in a time when sustainability issues suggest less packaging, it is disconcerting to note that marketers might be wasting packaging material but delivering less volume. This seems to be happening world-wide:



    image from Australia: couriermail.com.au

    David Segal addresses this issue in a recent column. A woman had written to him (in his role as "the Haggler") complaining that her Baker's chocolate package no longer contained 8 ounces, but had shrunk to 4 ounces, with no concomitant decrease in price. Kraft, the company that makes Baker's chocolate, had several rationalizations for the change, and for the price increase. One rationalization was that they were "competitively priced."

    In other words, they are not the only company using these techniques to increase profits.

    Caveat emptor:


    image from www.packagingdigest.com

    Source:   "Halving the Portion but not the Price," by David Segal, New York Times The Haggler, June 22,  2013.

    Follow up:

    • What does "caveat emptor" mean?  In what other situations might this warning apply? How does this concept relate to business ethics?
    • What, according to Kraft representatives, should be in percentage increase price of the 4 ounce package of Baker's chocolate, based on their suggested retail prices?
    • What products, in your personal experience, have been affected by the type of change in packaging described above?
  • Major stockholder aims to block sale of meat company to China


    image from www.chicagotribune.com

    One of last week's stories was that a Shuanghui International, hungry for more pork products for Chinese citizens, made a play to buy Smithfield Foods, the largest U.S. pork producer. Shuanghui International is a Chinese entity. One of my F-1 Visa students responded to the post I'd done on this story with this comment:


    "To be honest, as a Chinese who lives in the U.S., I don't really like the idea that a China firm will be owning the largest meat producing company in the U.S.. They bring home the bacon, they also produce meat for American. To me, it possibly means quality might be lowered in order for more profit. Food safety has been a critical problem for years in China. If a China firm is the owner of the largest meat producer in the U.S., it is very likely to bring the food safety issue here as well."

    Hmmm. She is not the only one with misgivings. Starboard Value, an "activist hedge fund," wrote a letter to Smithfield's Board of Directors claiming to represent a 5.7% share, and complaining that Smithfield would be worth far more to shareholders if sold separately rather than being sold to the Chinese as a whole entity. 


    Starboard claimed that, over the years, Smithfield itself asserted that its vertically integrated operations
    were worth more separately. Another former investor, Continental Grain Company, made the same claim as Starboard regarding the greater value of separate entities, but took the action of selling off its stake in the Smithfield, rather than fighting for what they believed, as Starboard appears to be doing.

    Let's see what happens over the next few weeks.

    Sources:   "Activist Investor Calls for Breakup of Smithfield Foods," by Michael J. de la Merced, New York Times Dealbook, June 17,  2013.

    Threaded discussion in course management system for summer class, Teri Bernstein, Santa Monica College.

    Follow up:

    • Check the news. What companies are merging this week, rather than being urged to split up?
    • What does "vertically integrated" mean in general?  For Smithfield, what types of companies make up its vertical integration?
  • "Dorm-ster diving": the other economy


    photo by Teri Bernstein

     

    This snack display is actually a "find" from the "dorm-ster diving" outing of my younger daughter and her friends in Davis, California. The situation? Students moving out of the dormitories at the end of the school year often find it easier to discard items in the dumpsters behind their dorms than to move them home or ship them home.

    Others, who might call themselves "freegans," take advantage of others' willingness to discard usable goods. My younger daughter, who just graduated from Davis in Sustainable Agriculture, is one of these "freegans." Their motivation is more sustainability-based than need-based, but their actions still have a minor impact on the economy.

    My daughter and her housemates have some rules for "dorm-ster" diving:

    • Only inspect goods in sealed plastic bags.
    • Unopened items within the sealed plastic bags are the best.
    • Items that still have price tags or gift boxes are also top picks.
    • Cleaning supplies--usually unopened--have very high cost/benefit.
    • Shampoo, conditioner, and other health and beauty aids in plastic screw-top containers are a good bet.
    • Always wear plastic gloves, boots, and bring plenty of hand sanitizer.

    Some of the items retrieved from this Spring's dumpster-diving included unworn shoes, 2013 calendars, laundry detergent, toilet bowl cleaner, packs of sponges, packs of pens, packs of pencils, at least 15 unused spiral notebooks still in plastic, a leather briefcase, books worth over $1000, sealed packs of trail mix and almonds from Trader Joe's, and several sealed boxes of packaged snack foods, such as those pictured above.

    I recognize the snack foods pictured above, because the University of California at Davis encouraged me, as a dorm parent a few years ago, to send my daughter an "exam week rescue pack."  These were the contents. Hmmm...


    Sources:
       "Survival Guide to Dumpster Diving," by Bill Maher, YouTube, May 31,  2013.

    "All in a Day's Dumpster Dive," by Rebecca et. al., NBCnews.com, June 19, 2013.

    Follow up:

    • Google "hippie Christmas" and "freegan". What "meetup" events are in your neighborhood? 
    • Why does Rebecca dumpster-dive? (NBC video) What does this say about the economic conditions of the lower-middle-class? Would you ever dumpster dive? Why or why not?
    • Is dumpster-diving a good thing or not? Is it legal? Is it ethical?
    • Estimate the "profit" from dumpster diving for one hour, based on the list of found items above. Factor in the time that would be spent re-selling items, if you wish. What is the "hourly wage" of these dumpster divers?
  • Advice from interviewers: Don't do these five things


    image from buildcredit.dnb.com

     

    In order to get the job, you have to first make the "paper cut"--have a good enough resume. Then, you have to get through at least one and sometimes several layers of job interviews. But think about the person on the other side of the interview...What do they want? They have to interview who-knows-how-many-people every day or every week. They must have some pet peeves, right?

    According to this article, here are five interviewee behaviors or responses to avoid:

    • Not coming prepared: you need to research your company thoroughly and have a strategy for presenting yourself.
    • Giving canned, predictable responses: A "stellar work ethic" won't do it. Bring examples of what you have accomplished and how you have successfully handled difficult situations.
    • Having an online presence that doesn't match up with your reality: You need to clean up the partying or unprofessional business presence that may exist on various social media sites. Your online persona should be professional, but it should also be you--the same person who shows up for the interviews.
    • Wearing inappropriate clothing: Your physical appearance communicates who you are. Err on the side of overdressing and conservatism...with a scarf, tie or other accessory that has a bit of "personality."
    • Looking bored: Sometimes, when a person is nervous, they create a defensive shell that appears to be bored and disinterested to an outside party. Stay present and engaged if you want the job.

    Face it: more than one person is going to be applying for the job you want. Do whatever you can to rise above the pack and get the positive attention you want.

    Source:   "5 Mistakes Job Interviewers Secretly Hate," by Alan Carroll, Mashable, June 17,  2013.

    Follow up:

    • What were you asked on your last interview?
    • What do you wish you had been asked?
  • Insurance companies overstating net assets according to NY regulator


    image from investopedia.com 
    NOTE: assets minus liabilities = "net assets" also known as "equity"

    New York State's Superintendent of Financial Services, Benjamin M. Lawsky, has found evidence that life insurance companies, in recent years, have used secretive practices to inflate net assets and set the stage for another taxpayer bailout. He described the shady transactions involved as "so opaque" that it took his office more than a year to untangle the mess and understand the transactions and the legitimate underlying value.

    Good insurance company practices and insurance company regulation procedures rely on fairly straightforward principles:

    • future payouts can be reasonably predicted by actuarial analysis
    • investments must be made now, to guarantee the cash flow for future payouts
    • conservative investments must be maintained to so that reasonable solvency can be sustained
    • insurance companies must also maintain sufficient reserves of cash to manage current payouts
    • surplus reserves must be maintained to allow for a unexpected contingencies

    The current and future assets must exceed the current and future liabilities. That part is straightforward. A creative, but acceptable practice, also involves "reinsurance." When legitimately set up, an insurance company spreads out some of its risk by buying insurance on its own losses from another insurance company. These second-tier insurance policies have to be with third-party, arm's-length businesses to be legitimate. In this way, by paying a fee (insurance expense), a company could "offload" some of its liabilities to a third party.  The insurance would cost less than the asset it would otherwise need to balance the liability.

    What Lawsky's regulators found was that corporations in foreign or otherwise un-auditable locations were being created by life insurance companies. These were company-owed, related-party businesses that were nevertheless being used as re-insurers to "offload" liabilities. Therefore, the liabilities on the main company's books became understated, making their net assets overstated. The value of these offloaded policies was over $5 trillion. Very sneaky. Lowered liabilities mean that insurance companies would under-invest to allow for future liabilities. Policyholders and stockholders could  suffer losses as a result. Because these are "big" insurance companies, if they are deemed "too big to fail," the American taxpayer might again be asked to foot the bill.

    Unfortunately, Lawky's clout only extends as far as New York State. The problem he discovered is recognized as widespread by the National Association of Insurance Commissioners, but because insurance is regulated at the state level rather than the national level, Lawsky's discovery and whatever crackdown measures he takes will only affect New York.


    Source:
       "Insurers Inflating Books, New York Regulator Says," by Mary Williams Walsh, New York Times Dealbook, June 11,  2013.

    Follow up:

    • What business reasons might an insurer have for wanting to "inflate" their books in this way? (The article, towards the end, states several reasons cited by insurance companies)
    • What, precisely, does the term "net assets" mean? What are the various ways that net assets can be manipulated?
  • Movie studio should have PAID their interns, judge rules


    Under U.S. Federal law, it is illegal to have people work for you in a business and not pay them for their work.  But an "internship" lies in a gray area. The Department of Labor has guidelines to help employers determine if an internship position meets the criteria for an "unpaid internship," or whether minimum wage regulations apply. These guidelines state that an unpaid internship:

    • should "not be to the immediate advantage of the employer,"
    • should be made up of activities that are similar to training in an educational institution,
    • must be for the benefit of the intern, by providing valuable experience, and
    • should not displace any regular employees.

    The film industry has a reputation for stretching the responsibilities of interns.  Interns have sometimes viewed this "working for nothing" as a necessary evil to gain needed experience. But Fox Searchlight was recently sued by two men, Eric Glatt and Alexander Footman, who worked as production interns on the movie "Black Swan." They claimed that they should have been paid for working full-time doing duties such as:

    • taking lunch orders
    • answering phones
    • arranging travel plans for other employees
    • taking out trash
    • assembling office furniture
    • tracking purchase orders

    Judge William H. Pauley, in Manhattan, agreed with them:

    "Undoubtedly Mr. Glatt and Mr. Footman received some benefits from their internships, such as résumé listings, job references and an understanding of how a production office works. But those benefits were incidental to working in the office like any other employees and were not the result of internships intentionally structured to benefit them...Searchlight received the benefits of their unpaid work, which otherwise would have required paid employees.”

    The judge also said that receiving academic credit was not a factor in determining whether interns should be paid, and that the Department of Labor guidelines must be followed.


    image from the another Twentieth Century Fox movie The Internship

    A spokesperson from Fox said that they would appeal the decision. Nevertheless, observers expect this ruling to have wide influence on the way that human resource departments view their internship programs.

    Sources:
       "Judge Rules That Movie Studio Should Have Been Paying Interns," by Steven Greenhouse, New York Times, June 11,  2013.

    Cartoon by Aaron Bacall from www.bacallcartoons.com and cartoonstock.com

    Follow up:

    • Have you ever had an internship? What were your duties? How many hours a week did you work? How did you benefit? Do you think, under the guidelines laid out in this article, that your position fell under the guidelines of "paid internship" or "unpaid internship"?
    • Do you think the rules regarding internships should be adjusted in times of economic downturn? Why or why not?
    • What are the possible positive and negative consequences of this ruling for entry-level employees?  Check out "NYT: Room For Debate" for ideas.
  • Drones delivering pizza?


    image from money.cnn.com

    "Pepperdroney"?  "Flyin' Hawaiian"? No...its the "DomiCopter"--Domino's Pizza's drone for delivering pizza. This is outsourcing to Robotville! Domino's hired a British creative company, T + Biscuit, to develop and test an "octocopter drone" that will deliver two large pizzas in a standard Domino's insulated sack, within a 4-mile radius. What will become of the iconic pizza delivery guy?

    That's not the only question: Are these drones going to have to file a flight plan?  Are they affected by the government's pledge to cut back on drones? Nope.  Because they fly less than 126 meters off the ground, they are exempt from regulation. What a marketing coup they might be if they are ever really put into action.

    These drones might end up being pretty darn cost-effective--No wages, no health care, no auto insurance, no worker's compensation, no traffic tickets and no parking issues.  But if they can only carry two pizzas at a time, how many drones would a storefront have to keep on staff to have efficient deliveries?


    image from isatv.com

    A question also remains for the customer: Will the drone expect a tip?...


    Sources:
       "Dominos Pizza is Testing Pizza Delivery Drones," by Mike Flacy, Fox News, June 4,  2013.

    Related video at Huffington Post.

    Follow up:

    • My 24-year-old daughter says she'd rather have pizza delivered by a drone than a human. She is not an introvert--she is social, outgoing, and connected. Why do you think she might prefer drone delivery? How could marketers reach her if they had drone delivery as an option?
    • What are some of the other risks and issue related to drone implementation?
  • Samsung wins this round over Apple in "Fight of the Century"

     


    image from www.tabtimes.com

    The International Trade Commission (ITC) banned the imports of older iPhones and iPads in a ruling on Tuesday, June 4, 2013. The reason? The older Apple products violated patents regarding data transmission that were held by Samsung.

    Ironically, in 2012, the situation was reversed. Samsung lost a $1 billion lawsuit to Apple: it was found to have copied the layout on iPhone and iPad screens. (That award has been reduced to $600 million in the interim time period.) The battle continue: Apple has another case pending with the ITC, scheduled for a decision in August.

    What an expensive way to negotiate the common ground in smartphone and tablet technology demanded by consumers!

    Paul M. Barrett at Bloomberg Businessweek says these are the "take-away" lessons from this conflict:

    • There are unforeseen and dangerous consequences to starting a patent war in court.  Steve Jobs was the initiator of this war, and he may have crippled the future for Apple.  The upside risk is small--at best, a few competitors may be forbidden from using a technology...but that technology will be obsolete soon anyway. The downside risk, however, is big: market leaders, weakened by lawsuits, may lose market share to other competitors.
    • The real issue is between Apple and Google, not Apple and Samsung.  Apple has a proprietary (unshared) operating system, and Google gives away its operating system (GOOG) to any developers of Android products. Samsung is just one of the players...and is actually an Apple supplier. In many ways, they are on the same team.
    • Some observers think that there is now so much at stake that the court fight will continue or escalate. But the companies may realize that they have too much to lose, and may come to a settlement that will enable them to get back to what they do best: creating new products.

    Sources:   "Apple v. Samsung: Three Lessons from the Smartphone Patent Fight," by Paul M. Barnett, Bloomberg Businessweek, June 5,  2013.

    "The U.S. Bans iPhone Imports: Big Deal or No?" by Joshua Brustein, Bloomberg Businessweek Technology, June 4, 2013.

    Follow up:

    • If Apple has shifted its energy from innovation (exciting new products) to litigation (trying to protect market share by limiting other companies), what does this mean for Apple's customers and shareholders?
    • If the "war" really is Android vs. iPhone, what would be the best resolution of this conflict for the consumer? What about for each of the two companies involved, Samsung and Apple?
  • Visionary Outsourcing: a win-win


    from TaskUs: Reading is so last year


    I was surfing the net on the topic of "outsourcing," when I stumbled on the above cartoon video. It was produced by the company TaskUs, which happens to have an office in the city where I teach. As I am wary about outsourcing--both as an accounting professional and someone who occasionally deals with customer service departments--I was surprised at how engaged I was in the marketing message of this little video.

    What was it that worked?  I think there were two messages that came across:

    • The successful-and-busy-person's dream could be a reality: Someone else could tackle tedious or annoying tasks on a regular basis.
    • The people taking on the tasks were energetic and liked what they were doing--therefore they seemed trustworthy and reliable...even though I didn't know them (yet).

    The video demonstrates the keys to many successful marketing tools:

    • identifying a need, and
    • demonstrating that this "product" would be the best way to fulfill that need.

    I was curious about the culture of the company that produced the video, so I read further. It seems as though there is a visionary management plan that underlies their marketing message. A recent corporate blog entry makes the tenets of this vision transparent:

    • Open communication--a recent "book club" discussion on the book Crucial Conversations is one example
    • Bringing everyone together as much as possible--an annual celebration is held in the Philippines that includes all U.S. employees.
    • Good old-fashioned competition--intra-company team rivalries that include sports and battles-of-the-bands
    • Define the role and importance of every team member--from data entry clerk to top manager, every single individual is valued
    • "Work hard, have fun"--These signs are posted on office walls and remind people--who are spending a lot of time at work--to enjoy themselves while they are at it.

    It seems as though providing great service is truly "calling" for these managers. I trust that they really do provide "Ridiculously Good Outsourcing" (their motto) as a "win" for their customers as well.

    Source:   "Five Ingredients for A Great Company Culture," by Bryce Maddock, TaskUs blog, May 30, 2013.

    Follow up:

    • Watch the video. What is your reaction (both pro and con)?
    • Check out the Glassdoor website.  I found it while researching this outsourcing company, but it is a great resource for job-seekers wanting the "inside scoop" on what it is like to be an employee at any given company.
  • Job seekers lack skills


    image from ledgerlink.monster.com

    Last year, employers said that 13% of its job searches were difficult because of the "talent shortage." This year, that number is up to 19%. Several types of jobs are difficult to fill, both on a domestic and global level, including:

    • Sales reps
    • Information Technology staff
    • Accounting and finance staff

    Employers are doing several things to counteract this shortage:

    "U.S. employers are tackling the talent shortage by expanding training and development for existing staff (23 percent), recruiting from 'untapped talent pools' (20 percent), and hiring people who have the potential to learn skills and grow in their position."

    How does this information affect your own job search and resume?

    Source:   "Skilled Trades Top Most Difficult Jobs To Fill in 2013 in Talent Shortage Survey," by Beth Goodbaum, Industry Market Trends Career Journal, May 29, 2013.

    Follow up:

    What were six of the most difficult jobs to fill BOTH world-wide and in the USA? You will need to look at both lists in the linked article to answer this question.