Please be sure to read this poignant post, in which friends and colleagues express their admiration of Heron's former President Sharon King, who passed away a few weeks ago.
Check out this cartoon from Khalil Bendib:
Instead of reflecting on what the prevalence of poverty in our society says about our existing economic systems, business curriculums foster cognitive distancing, a separation of “us” (successful college student business major) and “them” (undereducated poor) along with a sense that while select businesspeople may choose to become involved with poverty, business has no particular responsibility or role to play in addressing this challenge...Universities must begin to direct attention toward structural questions of poverty as they relate to our political and economic systems. Business schools in particular need to think more seriously about their connection to issues of poverty and opportunity and cultivate in their students a sense of moral obligation to build an inclusive economy.
In this Nation piece, Laura Gottesdiener looks at the two sides of Detroit, one "of wealthy enclaves and private guards looks nothing like the other Detroit, which is becoming more uninhabitable every day":
The foreclosure crisis of this century, fueled by racially discriminatory predatory lending, forced hundreds of thousands of residents out of the city. The governor’s office placed the public school system and then the entire local government under emergency management, suspending the democratic process in the “arsenal of democracy.” And now, after seven decades of these slow-moving storms, including acts that are almost impossible to see as anything but retribution against the city’s predominantly African-American population, Detroit is often viewed from afar as a cautionary tale, a post-industrial dystopia of vacant buildings and dormant factories. The truth, however, is more complicated. On the brink of a new, post-bankruptcy beginning, Detroit is really two cities. One is comprised of wealthy enclaves like Palmer Woods linked to a compact, rapidly redeveloping downtown. The other is made up of the rest of the 139-square-mile urban expanse, populated by longtime residents who have fought for decades to survive in an environment that has become increasingly uninhabitable.
Former White House official Laura Tyson looks at what growing income inequality has to do with politics. In the Washington Post, the Asia Group's Kurt Campbell says growing inequality hurts U.S. foreign policy:
It is also the case that other countries have long emulated aspects of the American Way in designing their own development models. Having access to higher education, creating conditions that support innovation and allowing for greater upward mobility have all been deeply attractive qualities to many nations. But it is the construction of a durable U.S. middle class that has been perhaps most compelling to highly stratified societies across Latin America, Asia and Africa. Now, however, the United States is moving in the other direction, toward an unstable society divided between astronomically rich elites and everyone else. This undermines a critical component of U.S. soft power and is a model for societal engineering that few would choose to emulate.
Still trying to figure out how inequality relates to market failure? So is your editor. This interesting report from Cornerstone Capital discusses inequality and investment implications for business:
[I]mproving transparency, investing in human capital, and increasing social standards can make sense for market players. Mitigating high inequality at the corporate level is not just possible. Empowering people, and taking into account social impacts in investment decision making, can be win-win strategies for long term firm performance, employees and communities.
The Supreme Court will hear arguments this week on the rule governing pregnant workers, this has implications for all women but likely poor, single women will be the most affected by the ruling. An issue is a complaint by UPS driver Peggy Young, who was put on leave with pay when she informed the company she was pregnant, reports NPR's Nina Totenberg. Over at FoxNews, Rachel Laser and Galen Carey, representing both the pro-life and pro-choice movements, say the Pregnancy Discrimination Act of 1978 was intended to prevent such a scenario:
The PDA was meant to ensure that a pregnant woman should not have to choose between the health—or existence---of her pregnancy, and her ability to participate in, and derive economic stability for herself and her family from, the workplace... Pregnant women like Young must be able to carry healthy pregnancies and be full participants in the workforce, as the PDA intended. This vital protection must not be left to the whims of employers. Now more than ever, women depend on their attachment to the labor-force. A record 40 percent of all households with children under the age of 18 include mothers who are either the sole or primary source of income for the family (nearly double the number at the time of the passage of the PDA).
The New York Times' Gail Collins expressed even more frustration at the lack of political will to make work more family friendly:
Our institutions cheerfully refuse to restructure themselves to reflect the fact that most families do not contain a non-working parent. Congress has been debating early education programs for more than 40 years and it has hardly made a dent. A great many of our employers don’t bother to make jobs more family-friendly; they don’t even bother to make modest arrangements to accommodate their pregnant workers. Everybody thinks this is extremely unfortunate, but almost nobody does anything about it because there is not a lot of political or financial reward for siding with working mothers.
Before Thanksgiving, your editor noted workers of big box stores were increasingly finding it difficult to spend time with their families during the holidays. So you may be interested in this Demos report looking at the political lobbying by such stores, check out these charts:
The NYT's Steven Greenhouse profiles the Los Angeles Alliance for a New Economy, or Laane, which is fighting for higher wages for workers in the city. Meanwhile this Wall Street Journal piece looks at why there are so many part timers in the economy, here is one chart:
In the Guardian, Nichole Gracely says being homeless has been better than her time working as an order picker for Amazon:
According to Amazon’s metrics, I was one of their most productive order pickers – I was a machine, and my pace would accelerate throughout the course of a shift. What they didn’t know was that I stayed fast because if I slowed down for even a minute, I’d collapse from boredom and exhaustion...Superb performance did not guarantee job security. ISS is the temp agency that provides warehouse labor for Amazon and they are at the center of the SCOTUS case Integrity Staffing Solutions vs. Busk. ISS could simply deactivate a worker’s badge and they would suddenly be out of work. They treated us like beggars because we needed their jobs. Even worse, more than two years later, all I see is: Jeff Bezos is hiring. I have never felt more alone than when I was working there. I worked in isolation and lived under constant surveillance. Amazon could mandate overtime and I would have to comply with any schedule change they deemed necessary, and if there was not any work, they would send us home early without pay. I started to fall behind on my bills.
Similarly, in this piece, Michael Lee Stallard says the real reason people are quitting their jobs is because they basically suck:
Survey research has shown that seven out of ten Americans are not engaged at work. This has not improved for more than a decade. Unhealthy workplace cultures make people feel unsupported, left out or lonely.
Over at McKinsey, a number of economists were gathered for a discussion on automation and thew future of work. You may also want to watch this 15 minute video on how technology is in jeopardy of replacing us all. Check it out:
That's the bad news, but the federal government offered up some positive news with a new jobs report showing the numbers are stronger than they have been in years, reports Neil Irwin in the New York Times. Check out this chart:
GMO Asset Allocation's James Montier discusses the idea of shareholder maximization using IBM and Johnson & Johnson as evidence against it:
In contrast to IBM’s transient objectives, Johnson & Johnson has stuck with a mission statement written by itsfounder (Robert Wood Johnson) as part of its IPO documentation in 1943, which reads as follows: “We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products...We are responsible to our employees...We are responsible to the communities in which we live and to the world community as well...Our final responsibility is to our stockholders...When we operate according to these principles, the stockholders should realize a fair return.” The contrast between the two firms couldn’t be much greater. Whilst IBM targeted SVM, Johnson & Johnson thought shareholders should get a “fair return.” Yet, Johnson & Johnson has delivered considerably more return to shareholders than IBM has managed over the same time period.
Meanwhile, the Economist argues caution on going too far against short-termism:
It is easy to see why long-termism has become so fashionable. Repeated financial-market crises, including the one in 2007-08, have reinforced a view that short-term traders are nothing but trouble. Germany’s relatively strong performance over the past decade seems to be an affirmation of its stolid corporate virtues. But there is a danger in going too far. Long-termism is no guarantee of success. In the 1980s fans of Japan’s economic model argued that it would pull ahead of America because its firms preferred slow consensus-building and could rely on their core shareholders, the banks, to stand by them for the long term. But between 1990 and 2013 the American economy grew by 75% in real terms, whereas Japan’s only managed 24%... All this is not to say that we should start chanting: “Short-term good, long-term bad”. Rather, it is an argument for nuance. Long-termism and short-termism both have their virtues and vices—and these depend on context. Long-termism works well in stable industries that reward incremental innovation. But it is a recipe for failure in such businesses as social media, where firms are constantly forced to abandon their plans and “pivot” to a new strategy, in markets that can change in the blink of an eye.You also maybe interested in this World Economic Forum report, which looks at the role family offices can play as impact investors.
On the flip side we have a 2012 report looking at six factors authors say lead to the 2010 BP oil spill and how investors, particularly institutional investors, can play a role in preventing future crises. The report argues "for a fundamentally different mindset that includes, among other things, acknowledging the importance of 'sustainable cash flow' and 'ESG beta,' the authors highlight a practical management agenda for long-horizon asset owners who have a twenty-first-century understanding of fiduciary duty":
Institutional investors who have a long horizon should acknowledge that they routinely risk poor portfolio performance through weak attention to the drivers of long-term sustainability risk / return, not least because these factors are generally absent from the models used by the mainstream. This weakness is typically not monitored, thanks to the prevalent use of measurement tools that do not take these factors into account (e.g., relative benchmarks and cap-weighted indices). These false intellectual “security blankets” should be discarded or replaced.
You also maybe interested in this World Economic Forum report, which looks at the role family offices can play as impact investors. Rural America is suffering and according to a recent Nonprofit Quarterly report philanthropy has not been able to keep up:
With scant resources and weak data, we have been doing our best to examine slices of philanthropic support for rural America, beyond what might be grantmaking to entities in nonmetropolitan areas that don’t actually use the funding for anything particularly rural—other than themselves.