From James Surowiecki at the New Yorker , an explanation of why consumers continue to do business with companies that have ripped them off:
It’s true that services are not the same as products, and that people can trust an agent of a company they distrust, but I think there’s more to our addiction to buying from corporate wrong-doers than that. There are well-publicized campaigns to boycott the products of Microsoft (monopolistic practices), Monsanto and ExxonMobil (environmental damage), McDonalds, Disney, the Gap and Nike (domestic and foreign employment practices), P&G (animal cruelty and war profiteering), and a host of other companies (unhealthy and defective products). But even those who are vaguely aware of these boycotts continue to buy their products. Why? Part of the reason is the conspiracy of silence between the corporations and the media to squelch public awareness of corporate wrong-doings and the protests against them. After all, the media depend on these same corporations for their livelihood, so their conflict of interest is blatant. There are also massive marketing campaigns to present guilty corporations in the best possible light, including, as the current Nike case illustrates, outright lies to the consumer, lies that these corporations consider their constitutional right. Beyond that, we are a part of the conspiracy. We don’t want to hear bad things about the things we buy, because it makes the buying decision more difficult and makes us feel guilty as well. We don’t want to feel guilty. For the same reason people on a diet don’t want to know the calorie count of the foods they’re addicted to, we don’t want to know that the company that makes the shoes we like, the bank or broker we trust, our favourite family vacation spot, are all corporations guilty of criminal activities. Just like discovering our favourite restaurant is a Mafia front, our first reaction is to say “that’s not my business, it has nothing to do with me or my decision to do business with them”. But of course it does. If boycotts and corporate criminal behaviour received the same publicity as other public and criminal events, we would all be embarrassed into finding other suppliers, and the wrong-doers would quickly be out of business. But we’ve now been conditioned to believe that large corporations are really “all the same”. Is Reebok really any better than Nike, Shell than ExxonMobil, Six Flags than Disney, Unilever than P&G, broker X than Merrill Lynch? Truth is, we don’t know, because it’s in no one’s best interest to tell us. Armies of corporate lawyers stand ready to sue anyone who suggests wrong-doing of their clients, as Consumer Reports, which faces constant litigation for simply reporting the most blatant product flaws, can attest. Whistle-blowers in corporations risk losing their jobs and litigation if they reveal what’s going on in their companies. The media and the politicians don’t want to risk losing the huge cash flow from these companies that they depend on. Fixing the problem won’t be easy. We can’t expect political or legal solutions — those guys are part of the problem . What we need is a place where consumers can get information from an objective source. A consumers’ Corporate Ethics Clearing-House, perhaps a collaboration between Consumer Reports and consumer watchdog groups, could be established which would keep a score-card on every major company’s ethical history. To support this we need additional protection for whistle-blowers, acting in good faith, from the wrath of the corporations they expose. And we need national standards associations like ANSI and UL to establish standards for corporate conduct, a requirement to report on corporate conduct in accordance with those standards in the annual report, and a mechanism for audit of those corporate conduct disclosures. I think the Corporate Ethics Clearing-House is all we need to get started. The rest will take time, but will occur inevitably as both buyers and investors begin using the Clearing-House in making purchasing and investing decisions. We may yet prove that Knowledge is Power. |
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Man, these Wall St. guys are getting away with murder! The part about us being part of the conspiracy reminds me of discussions that often go on in the African-American community. Every so often a scandal will surface about discrimination at corporation X. The immediate rally cry is “let’s boycott X, they’re racist…” Before too long though, we come to realize that corporation Y isn’t much different than X. So unless we want to give up on corp X’s particular product/service category we end up sucking it up and continuing as if nothing ever happened.Oh.. thanks for the link to my site, Trader Mike. But when you get a chance would you update the URL to http://www.tradermike.net
Done. Don’t know if I ever mentioned that I worked for a prokerage firm about 3 decades ago.
Well, that should be ‘brokerage’ firm of course.
Do we need to create a meme?
Christopher: Don’t think we need one on this for 2004 — it’s a bit complicated for voters. But maybe by 2008. I’m going to talk to Consumers Union about the Ethics Clearing-House and see if they’re interested. BTW, let me know if there’s anything I can do to help get your Sunday pictures showing up on your blog.
No Dave, you never mentioned that to me. Were you a broker? Trader?
As you might have guessed, Mike, I was in research. I ran simulations to help the research analysts assess mining and exploratory oil companies’ worth, and produced the first statistical reports in Canada that went direct from the computer printer (back in the days when the paper was perforated) to the printing room. There was only one source in Canada to get stock data from in those days, and it cost a small fortune to subscribe.
I could see you as a researcher. :-) The changes in that industry are truly amazing. The internet really broke a lot of the pricing power of market data and commissions. Even just back in 1996 firms could charge $60 commissions for an online trade! No wonder these guys have come up with all the chicanery – they had to replace all that revenue.
Mike, I should probably take this offline since it’s completely OT, but when I recently applied the old ‘theoretical P/E’ formula 30 – 230*TbillYield + 9*OneYearGrRate + 23*FiveYearAvgGrRate, I came up with an expected value for the Dow of 6800. What do you think, too pessimistic?
It sounds very reasonable to me. SOme guys who’ve commented over at my site are looking for numbers like Dow 4,000 and 1,000 ! Now that’s pessimistic