corporate karma

we all know about karma, the law of moral causation whereby an action causes an entire cycle of cause and effect. in buddhism the effects of all actions are viewed as actively shaping one’s past present and future experiences. in other words you reap what you sow. this is by now well understood, even in western societies.

i was reminded of pierre bourdieu recently, a famous french sociologist, whose writing i always found rather dry yet profound. amongst other things he introduced the concepts of cultural, social or symbolic capital as applied to societies, countries and structures/superstructures within societies.

this got me thinking about karma. we usually apply karma to individuals. what about groups of individuals, corporations, even countries. surely, every group of individuals carries the individual actions of its members, and as such, it would not be farfetched to conclude that the sum of these actions create a aggregate karma for that group. just imagine the implications for an individual who belongs to a group with a “heavy” karma, due to the actions of other members, and who will suffer the consequences as a result. alternatively, imagine a group that will be unduly karmically burdened by the actions of some of its members. and imagine how group karma can take a life of its own after years of actions and reactions from its individual members. are you starting to see the picture?

now apply this reasoning to corporations, and the field of business gets changed drastically. mind you, i am not talking about mere business decisions and end results, such as a poorly thought marketing campaign resulting in subsequent sales decline and operating losses. no, i am talking about something more insidious, more ethereal, that would permeate more the fabric of businesses and how they interact with society. picture gm for example and think of all those years when it fought against any type of regulation to make cars safer – seat belts, manufacturing standards – or pollute less – emission standards, starting with the early 50’s til now. and on some level you get a corporation that acted in a certain way, poorly some would say and whose actions certainly added to a heavy karmic burden. now, how gm was treated by the obama administration and the general public may be understood even better adding this corporate karmic dimension. you do reap what you sow. if it seems esoteric, well, you are right, it is. but wait there is more! think of corporate karma as a variable that gets constantly updated by the sum total of individual actions, much like a corporate karma “bank account” which would fluctuate depending on “good” or “harmful” actions. nothing is set in stone and a “heavy” corporate karma can certainly be tended to over time.

moving along i will distinguish between business ethics and corporate karma. business ethics aims at determining the fundamental purpose of a company. these purposes may range from:
- maximizing shareholder returns
- maximizing shareholders returns while balancing stakeholders interests
- behaving like a good corporate citizen
- treating employees and customers decently
or any combination thereof.

any deviation from a corporation’s ethical purpose is then deemed unethical. traditional business ethics is certainly far removed from the notion of corporate karma i am wrestling with. first intent is narrowly defined as far as any business ethic concerned, second intent and the aggregation of individual actions as they relate to a resulting group karma are eluded. going one step further, a branch of general business ethics called corporate social responsibility is concerned with dealing with the ethical rights and duties of corporations with society, thereby including public interest into the decision making process of the corporation. people, planet, profit comes to mind. this is certainly a step in the direction towards acknowledging, even subconsciously and indirectly the existence of corporate karma. the rise of consumer consciousness, social awareness, education, of our understanding of how we impact the planet through economic activity, of the various corporate scandals that have hit us towards the end of the 20th century have all helped in pushing for social accounting and reporting of corporate actions. i will note the ftse4good index, the iso 14000 environmental standard, the united nations global impact program, the good corporation standard developed by the institute of business ethics as examples of programs driving at furthering and spreading corporate responsibility.

as usual, the lack of individual awareness of the fundamental law of karma in some individuals subvert the best intentions. corporations such as bat, bp, mcdonald’s and shell have been at one time or another accused of employing corporate social responsibility programs as mere marketing gimmicks to distract the public or government from looking into questionable core operations. in my humble opinion intent is the operative concept. intent permeates every action and determines karmic consequences and a corporation’s behavior and karma starts with each of its individuals intent.

let’s go back to business ethics in general. a set of rules is narrowly defined, actions outside that set of rules are deemed unethical. an individual’s intent, or the aggregate intent of individuals is left out. traditional business ethics is thus not concerned with karmic law and potential corporate karma.

as for corporate social responsibility programs even though the field of “responsibility” is widened, individual intent is still absent. only the law of karma takes intent into account.

getting back to corporate karma, i shall also make a distinction between intent and business decisions.

- good intent will lead to actions that do no harm and “positive” karma (although applying good or positive words to karma does miss the point of what the law is about)
- sound business decisions will lead to profitable end results.

hence a) good intent and poor business decisions may have positive corporate karma results but negative accounting ones = not sustainable, b) negative intent and sound business decisions may have negative corporate karma results but positive accounting ones = and still be not sustainable over the long run, while the magic spot of c) good intent and sound business decisions seems to be the elusive holy grail and be sustainable over the long run. i am quite sure i would need to add a sprinkle of luck and serendipity to the above axioms!

rather than defining naked greed as the engine of capitalism, i would love to switch to naked intent, pure intent, and see how corporate karma will fare for the next 50 years.

currency auguries

the london g20 summit obviously got me thinking, first in terms of a new world order, see my previous post, and now in terms of what it would mean to world currencies.

we have now lived for roughly sixty years with the $ as our world currency, the us being the only global power. a helpful tool which the us has yielded to further its global interests whether economic, diplomatic or military. my guess is that such an era is closer to its end that its beginning.

now that a new world order is slowly shaping up, further eroding us global power, it is not unrealistic to posit, even predict that currency markets will see changes ahead, notably with various challenges to the $ as the world currency. for sure, any major change seeing the rise of one or several reserve currencies will not happen overnight, so let’s project ourselves ten years hence to 2020 – mere baby forecasting steps for chinese strategists mind you.

i see two natural challengers to the $: the euro and the yuan.

1) the euro: the eu has emerged as a slight winner from the g20 summit in london. what with the deft handling of the georgian crisis, the diplomatic expertise dealing with russia, the coordinated response towards the global crisis, further political, diplomatic, economic and now even military integration, the eu – with growing pains – will become even more powerful on the world stage. this will bring about more clout to the euro, to the point where it will become an instrumental tool either political or economic in the hands of eu politicians, much like the $ has been for every us administration since the end of ww2. i expect increased currency, options, swaps, futures, debt markets in euro, increased euro denominated trade, and if the european central bank keeps to its ideologically bent german roots, an enhanced status as a reserve currency. two factors will combine to make the euro a credible challenger. first, continued enlargement of the eu with more eastern european countries joining and at some point north african countries de facto pegging their currencies to the euro – or even accepting tighter economic integration. second, the uk will join the euro and finally ditch the pound – maybe not tomorrow but certainly within the next ten years. the latter move will provide an incredible boost the the euro. i also see two wild cards, in the form of a) a potential inclusion of turkey to the eu which is being talked about with much emotions everywhere in europe – this automatically bringing closer some middle eastern countries closer to the euro than the $; and b) a tighter integration of russia with europe whether this results in the euro being the quasi official currency of russia or not will de facto reinforce the euro. after much turmoil enlarging the eu, expect european businesses to come out more competitive on world markets, low inflation in the euro zone, more stability, higher investments and higher employment, and also expect more diplomatic might overall.

2) the yuan: china has already flexed its muscles and fired a few salvos, asking for a new global currency to replace the $ – presumably because chinese officials are terrified by potential losses to their $ assets if the $ were to depreciate over the coming years. the yuan is of course far from being a credible world currency, but i suspect the chinese government has already drawn a long term plan to further the reach of the yan, make it tradable in open markets across the globe and recognized as a credible alternative. it will take time, but that is their master plan. as proof i am interested to read about efforts by chinese officials to draft bilateral agreements to expand currency swaps involving the yuan with most of its asian neighbors, forcing chinese provinces to settle trade withe the yuan rather than the $, and consolidate hong kong and shanghai as dominant financial centers for the future. undoubtedly china will face many obstacles, but the wheels are already in motion and the practical and symbolic results will be far from minute when the yuan becomes a recognized currency internationally.

what does this mean for the $, what does this mean for the us over and above diminished global might? nothing will happen overnight of course. but over time, this means further erosion to us dominance, lower fiscal and monetary flexibility for future us administrations, and a completely different playing field for us corporations doing business abroad, whether selling or buying. expect more currency risk, relatively less attractive us assets for foreign buyers, and even more focus on productivity and creativity as competitive factors for us businesses. also expect further erosion of the $ over the next ten years – much like the slow erosion of the pound once british might started to weaken on the world stage.

an alternate option would have the world powers strengthen even more the imf and focus on special drawing rights – sdr – as the new world currency, which the chinese have hinted at. a forward looking us administration may see the writing on the wall and try to avert the rise of the euro or the yuan by insisting the new world order rely more on sdr. a tricky gambit, but one that might smoothen the ride for the us while softening the rise of other trading/political blocks. this would require chinese like long term thinking in the us. the benefit might be less instability globally.

new world order? what with this ls depression, absolutely!

the g20 summit in london is immensely instructive in several ways. from a governance point of view i am quite sure that we can say goodbye to the old imf and world bank dominated by the usa and europe. other countries have been invited to the table and will have a say: china, russia, india… this has been helped by the global aspect of the recession and the willinginess of the new us administration to concede it cannot go it alone anymore – a point brought home by the diminished pull of the usa due to its current economic weakness and the havoc wreaked by eight years of “my way or the highway” bushism. from a governance point of view again, all major nations have realized that this recession – no one dares call it the ls depression yet, ls standing for “low simmer” – has struck the death of a certain interpretation of capitalism, extreme free markets capitalism. and that is a major achievement. yet, none of the major nations understands the severity of the crisis and what a new world order should and will look like.

anglo-saxon countries want more stimulus packages, in the belief that with some tinkering at the edges, business as usual will soon point its rosy cheeks. european countries, leery of inflation – germany in particular – want more structural changes and less stimulus, in the belief that the rules need to be changed before said rosy cheeks reappear. thusly they all collectively mid-wived a lopsided agreement which calls for more dry powder for the imf, some money to ensure markets stay open and a assortment of statements of intent to end tax havens, regulate hedge funds and more bank regulation. although this agreement goes in the right direction, it lacks a proper international stimulus package and any enforcement teeth behind the proposed new regulations. effectively, european positions blocked much needed stimulus and anglo-saxon positions blocked real effective new regulations. still we are heading in the right direction and i fully expect more meetings, and more proposals, and more changes, ultimately bringing about a new world order.

each country is right now unsure and afraid to make a first move, or just afraid it will end up being the main looser in that new world order. still everyone has more to loose by doing nothing. so expect more changes. the us and europe want russia to morph from an erratic bear to a more manageable animal. china is terrified it will loose much if the dollar erodes – it holds too much $ denominated assets. the us realizes it cannot dominate as much as it has in the last 60 years and will readily cede some power and say to europe, china, russia, india; but not too much and not too fast. europe is unsure how to further its integration diplomatically, militarily and economically. india wants to keep integration in the world economy. each has its own set of domestic politics, policies and election variables to deal with. yet, all have faced the possibility of a meltdown and are convinced coordination on more solid ground is needed. so, again – hate to repeat myself… – expect more decisions over the coming 12 months towards a new world order both financially and economically.