Farewell, James Marion Sims … And Hello, Kim Jong-un

When is it appropriate for us to engage in a public commemoration? Most would consider doing so when the honoree is a person, an event, or an idea that makes a permanent impact on society.

For instance, the Lincoln Memorial in Washington DC memorializes a suitable person. Local towns’ fireworks displays on Independence Day are worthy events. And the Statue of Liberty, in New York Harbor, is an exemplar of an appropriate idea.

But there are times when the progression of history modifies our perceptions about people, places, and ideas. When that occurs, permanent commemorations may become socially awkward, and may even be removed from view.

Consider, for example, last month’s decision by the City of New York to remove a statue of Dr. James Marion Sims from Central Park. The physician had been memorialized as the father of modern gynecology.

But there was a dark side to his fame. Prior to the American Civil War, Dr. Sims perfected his surgical skills by experimenting on human slaves without using anesthesia. In response to public protests, government officials in New York City decided to move the statue to his gravesite, and to present it in historical context there.

When the statue was first erected in the 1890s, Dr. Sims’ honorees could not anticipate the day when public opinion turned against his legacy. In other situations, though, the obsolescence of a commemoration is relatively foreseeable.

For instance, consider the commemorative coin that the White House of the United States recently issued in advance of a scheduled meeting between the American President Donald Trump and the North Korean leader Kim Jong-un. It portrays the two men in a head-to-head pose, and even refers to the latter as Supreme Leader.

Some commemorations, like the Sims statue, survive for more than a century. But the memorial coin immediately became a relic as soon as President Trump cancelled the meeting.

From large statues to small coins, our memorials are designed to remain in place forever. Nevertheless, their continuing presence is subject to changes in public opinion and the tides of history.

If Corporations Are People, Why Can’t Monkeys Be People?

It’s the Memorial Day weekend! As always, the holiday launches the summer vacation season in the United States.

It also marks the start of a heavy traffic period throughout America’s national park system. Throngs of citizens will drive their vehicles into forests, beaches, and other natural venues to enjoy the natural environment. And park rangers will struggle to protect the natural creatures from the massive invasive impact of tourists who come to visit them.

Earlier this year, People for the Ethical Treatment of Animals (PETA) explored an innovative legal strategy to protect one such creature. It sued in an American court to protect the rights of a macaque (i.e. a monkey) named Naruto to own his own image.

Why was that approach so innovative? PETA claimed that Naruto possesses rights that are normally attributable to humans. It then proposed to appoint itself to serve as the “Next Friend,” or legal guardian, of the animal.

PETA lost the legal case. But might it consider filing an appeal? After all, non-human entities have been granted various human rights in the United States.

No less a figure than Presidential Candidate Mitt Romney, for instance, once created quite a stir by addressing the question of non-human rights. His declaration that “corporations are people, my friend,” was enthusiastically supported by his political allies and roundly denounced by his foes.

But if a legal business structure can be granted certain human rights, why not an intelligent animal? After all, humans and monkeys are both natural entities that are born of the Earth. We can hardly say as much about corporations!

This might be worth pondering as you enjoy the Great Outdoors during your Memorial Day travels. If you disrespect Mother Nature, its “Next Friend” may sue you!

Campbell Soup Failed To Attract Healthy Consumers. Was Its Strategy Doomed From The Start?

Denise Morrison, the Chief Executive Officer of the Campbell Soup Company, suddenly and unexpectedly resigned yesterday. Why did she do it?

Some analysts believe that she was compelled to resign because she failed to turn around a brand that is stale with age. Campbell’s was founded in 1869, and its canned products gained universal fame in a 1962 painting by pop artist Andy Warhol.

But our perception of Campbell’s hasn’t modernized in the half-century after Warhol created his signature work. Although Morrison and others made many attempts to update its product line and introduce healthier complementary products, consumers continue to associate the Campbell’s brand with sodium-packed cans of soup.

That’s why Morrison lost her position. But was she truly to blame?

On the one hand, the contemporary consumer is undoubtedly demanding healthier foods and beverages. A persuasive argument could certainly be made in favor of improving the health content of Campbell’s product line.

But on the other hand, let’s try to identify other firms that have successfully implemented this strategy. How many purveyors of unhealthy goods have transformed their product lines into healthy ones? Has McDonald’s, for instance, truly succeeded with its offerings of salads? What of its ill-fated McLean Deluxe sandwich?

Alternative examples abound of such purveyors “doubling down” on the unhealthy pleasures of their product lines. Burger King, for instance, unapologetically sells a Rodeo King sandwich that contains 82 grams of fat, 2,270 milligrams of sodium, and 1,250 total calories. Yes, you can order a large side of fries with that!

Likewise, it’s hard to imagine that many consumers would be attracted to a healthy version of a deep-fried Twinkie. Even if a small niche of customers were to demand such a product, they might not trust Hostess Brands to create it.

So let’s be fair to Denise Morrison. It’s easy to blame her for failing to execute Campbell’s transformation into a healthy foods brand. But it’s possible that this strategy, adopted by Campbell’s Board of Directors, was doomed to fail from the start.

Perhaps, in contrast, Campbell’s should have embraced the authentic and unalterable image that it has earned over many decades of canned soup production. And perhaps, like Burger King, it will only find future success by being true to its image.

How AT&T Turned Its “Big Mistake” Into An Example Of Ethical Behavior

When was the last time you heard a corporate officer unequivocally acknowledge a serious error?

Did it occur after United Airlines instructed police officers to assault a passenger who declined to surrender his oversold airplane seat? CEO Oscar Munoz eventually expressed regret, but only after his firm “seemed to go on the offensive when it circulated a letter in which (it) appeared to blame (the passenger), saying he “defied” the officers …

What about BP’s declaration of contrition regarding its massive Gulf oil spill? Indeed, its Chairman Carl-Henric Svanberg did express sympathy for residents of the region, but he was later compelled to apologize for his self-described “clumsy” choice of words when he referred to Gulf residents as “small people.”

So it is downright refreshing to hear a corporation clearly and unambiguously acknowledge a major blunder. When such an acknowledgment is honestly proffered, we may be able to encourage such behavior in the future by simply recognizing its ethical value.

Consider, for instance, AT&T CEO Randall Stephenson’s recent comment that its consulting contract with President Trump’s personal attorney Michael Cohen was a “big mistake.” Shortly after the election of 2016, AT&T agreed to pay Cohen’s firm $50,000 per month for advice regarding a “wide range of issues.” One such issue was its battle with the federal government to approve its merger with Time Warner, a battle that rages on today.

Special counsel Robert Mueller is now reportedly inquiring about the appropriateness of AT&T’s motivation for signing the contract. How has the corporate giant responded?

Stephenson could have simply stated that he would not comment about the matter. Or he could have noted that the contract concluded at the end of 2017, and thus is no longer a current concern of his firm. Instead, the CEO candidly confessed that “There is no other way to say it – AT&T hiring Michael Cohen as a political consultant was a big mistake.

Was Stephenson’s behavior impeccable? No, not perfectly so. Instead of issuing his statement to the public, he included it in an internal company memorandum that was shown to the Reuters news service.

Nevertheless, if blunt and unvarnished honesty is an indicator of ethical behavior, then AT&T should be recognized for this example of appropriate action. Honesty is not always practiced throughout the corporate realm; thus, whenever we manage to find it, we should be willing to commend it.

Why The Post Office Might Choose To Continue Delivering Amazon Packages While It Loses Money On The Contract

If you support the United States Postal Service, you must have experienced mixed feelings about last week’s fiscal announcement. On the one hand, package volume increased significantly over last year’s comparative levels. But on the other hand, financial losses worsened significantly.

Huh? How can an organization serve more customers and yet suffer more losses? There are usually two possible reasons why such a mixed outcome is possible. The first is that the entity may be losing money on each customer served, and thus more volume generates worse financial results. And the second is that the entity may be facing a problem that is unrelated to customer volume, and that is suddenly generating losses.

Evidently, President Trump has not taken a position on this question, having simply tweeted that “Only fools, or worse, are saying that our money losing Post Office makes money with Amazon. THEY LOSE A FORTUNE, and this will be changed.

But the President has not considered the possibility that the Post Office might choose to continue its relationship with Amazon while it continues to incur losses on the contract. Why? Imagine, for the sake of argument, that you decide to pay freelance drivers to deliver packages in competition with the Postal Service.

Let’s assume that your only significant operating payments are $100 per day to rent a small office, and $10 per delivery for each service rendered. You charge and collect $15 per delivery, and thus earn a gross profit of $5 per delivery before paying the rent. You would thus need to deliver 20 packages per day to pay the rent and break even.

That arithmetic is not difficult to follow, is it? But now let’s assume that Amazon offers to guarantee you $600 per day to deliver 50 packages. You might estimate that you’re charging your customer $12 per package. On a per-delivery basis, that’s a loss of $3 in comparison to your normal $15 price!

But now look at the situation in total. You’ll earn $600 from Amazon alone. You’ll pay $100 in rent and $500 (i.e. 50 packages @ $10) for deliveries, yielding total payments of $600. You’ll actually enjoy a guarantee of breaking even on the Amazon contract alone! And you’ll start to earn a profit on the very first package that you deliver for any other party.

So when you read that the Postal Service is losing money on its Amazon deliveries, it may indeed be true. And yet, perhaps paradoxically, the government agency might choose to continue serving Amazon while it loses money on the contract.

Why? Because, as we can see from our example, it might be reasonable to do so.

Why Jurisdictions From Maine To California Are Questioning The EPA’s Definition Of Transparency

California. Delaware. The District of Columbia. Iowa. Maine. Minnesota. Pennsylvania. New York.

Those jurisdictions cover a fairly broad geographic swath of the United States, don’t they? Last week, they joined forces to send the U.S. Environmental Protection Agency a simple two paragraph letter that questioned its fundamental understanding of science.

What did the letter say? In effect, not much. It simply asked the EPA to consult with other organizations and gather feedback about its controversial transparency rule. According to this new policy, the Agency will only rely on the results of scientific studies if the researchers make their research data available to the public.

Who can argue with the principle of open and freely available information? In principle, no one can. But in practice, many types of data are kept confidential because of valid privacy concerns.

Consider, for instance, a researcher who collects Protected Health Information (PHI) from individuals who live in the vicinity of a toxic oil spill. Under federal law, such information cannot be shared with third parties, and certainly cannot be made public, without consent.

In such cases, many individuals are willing to share health information with private researchers. But they understandably balk at sharing their information with the public.

And what of all the older studies that researchers still rely upon to develop new research activities? If the scientists who produced those studies have destroyed the original data in accordance with standard confidentiality practices, will the Agency begin to act as if the older studies never existed?

Whether you support or oppose the transparency rule, it’s reasonable to ask how the Agency plans to address these pragmatic issues. Indeed, would any one be harmed if the Agency slows down, takes a deep breath, and gathers more feedback before it implements the rule?

FirstEnergy Scores One For Free Market Capitalism

Did you hear about last month’s appeal by FirstEnergy Solutions to the United States Department of Energy? It may have been one of the most unusual requests that was ever directed to a Cabinet-level Department of the United States government.

FirstEnergy, a struggling coal and nuclear energy producer of electricity, asked the Energy Department to declare a national emergency and order its customers to pay it above-market prices for its power. In theory, the federal government possesses the authority to do so under the Great Depression era Federal Power Act, derived from an earlier law that was first enacted in 1920.

Why did FirstEnergy need this support? Its coal and nuclear generated electrical power plants have been struggling to compete against less expensive and cleaner energy facilities. So FirstEnergy appealed for direct price intervention by the federal government, asserting that the insolvency of nuclear and coal plants would constitute a national energy emergency.

Department of Energy Secretary Rick Perry declined to grant the request. And how did FirstEnergy respond?

Instead of intensifying its political lobbying activities in hopes of a direct government intervention, the struggling company reached an agreement with the creditors of its nuclear and coal division. Although the firm is not yet on stable footing, it appears to be negotiating a path through its period of financial distress.

So let’s score one for free market capitalism. Although it must have been tempting for the Presidential administration of the United States to respond to the appeal of a struggling coal energy producer, it opted instead for a non-interventionist market based response.

That’s not to say, of course, that all of the parties acted in a perfectly consistent manner. FirstEnergy did issue the original appeal for a highly questionable government declaration of a national emergency. And it did take Secretary Perry more than one week to express skepticism about the request.

Eventually, though, the private corporation and the government entity both embraced a free market strategy. Their decisions represented an unremarkable, conventional conclusion to a remarkable, unconventional appeal.

How A Fat Finger At Samsung Securities Committed A $100 Billion Error

It might be the silliest excuse ever concocted by the financial services industry. When someone erroneously authorizes a ridiculously gargantuan trade on a trading platform, the firm blames it on a “fat finger.”

So what on earth is a fat finger? Both literally and figuratively speaking, it’s a sluggish human digit at the end of a hand. Can you visualize someone, with such an extremity, who types too many zeroes into a keyboard?

Earlier this month, a Samsung Securities broker with a fat finger typed an accidental issuance of $100 billion of company shares to employees. By the time the error was detected and reversed, sixteen employees had sold the shares and collected significant proceeds.

Were those employees acting unlawfully? The legal system has not yet determined an answer to that question. But the incident has raised uncomfortable questions about the security of the global financial system.

After all, if a single keypunch error can result in the issuance of $100 billion of shares, how vulnerable is the system to the work of hackers? Or to even larger erroneous — or even intentional — cash disbursement transactions?

Indeed, if we believe that Samsung’s error is merely an isolated mistake, we may be basking in a false sense of security. Perhaps, instead, we should ask how often Samsung’s system of internal control fails to prevent such simple errors.

The Most Unusual Example Of Longevity Risk, Ever!

Are you concerned about longevity risk? If not, you might wish to consider your priorities. After all, your lifestyle may be severely damaged if you outlive your retirement savings.

Pension plans and life insurance companies are often concerned about longevity risk as well. They establish plan contribution and premium levels that are based on assumptions about the life spans of covered members. If they under-estimate the longevity of those members, they may “under-price” their financial obligations.

But one of the most unusual examples of longevity risk was recently experienced by an organization that provides no financial services at all. The organization was the cable television network FX, which produced a series entitled Feud: Betty and Joan.

The series elaborately portrayed the bitter rivalry that existed between Hollywood film legends Olivia de Havilland and Joan Crawford. The actresses’ careers blossomed in the 1930s, when de Havilland starred in movies like The Adventures of Robin Hood and Gone With The Wind, and Crawford appeared in numerous romantic comedies with Clark Gable.

So how did longevity risk affect an FX series that portrayed the lives of film stars who feuded eighty years ago? Apparently, a lawsuit was filed by someone who claimed that FX misrepresented the relationship between the actresses. And who was the person who sued FX?

Olivia de Havilland herself.

Olivia de Havilland? The famed actress in films of the 1930s? How is that possible?

Apparently, de Havilland remains alive. She was born more than a century ago, and she still remembers the feud that she experienced with Joan Crawford. She sued FX, claiming that they defamed her personal character in their series.

FX was vindicated by the legal system. The Court decided that de Havilland may have lived through her experiences with Joan Crawford, but that she “does not own history.” Nevertheless, FX learned an unusual lesson about longevity risk.

And what is that lesson? Before any film studio produces a film about historical characters, it should always take the time to confirm that those characters have actually died.

Who Is Actually Managing The Dow Jones Sustainability Indices?

Dow Jones, a bedrock institution of Wall Street, has been providing financial information and data analysis to the investment markets in the United States for more than 130 years. Many American investors naturally assume that they can depend on the Dow Jones Sustainability Indices (DJSI) to identify corporations with superior sustainability track records.

But when they do so, are they actually relying on Dow Jones’ expertise? According to a 20 year old Swiss organization named RobecoSAM, it (and not Dow Jones) is the firm that “assesses the world’s largest companies via its Corporate Sustainability Assessment (CSA), which uses a consistent, rules-based methodology to convert an average of 600 data points per company into one overall score. This score determines inclusion in the DJSI.”

Hmm. According to this information, American investors who depend on the DJSI are really relying on the expertise of RobecoSAM. So, if they trust the analytical capabilities of RobecoSAM’s analysts, they can presumably depend on the DJSI. Can’t they?

Perhaps not. According to a different 20 year old Swiss organization named RepRisk, it (and not Dow Jones or RobecoSAM) produces data that “is used for the Media and Stakeholder Analysis component of the assessment. RepRisk’s ESG risk screening, identification, and analysis complements the detailed industry-specific questionnaire and extensive documentation that companies provide as part of the annual CSA for the DJSI.”

Yikes! So American investors who depend on the DJSI are really relying on the expertise of RobecoSAM and of RepRisk. Those two firms are performing the analytical work on the indices. Dow Jones, meanwhile, is simply adding its brand name to the product.

Is that a concern? To be fair to RobecoSAM and RepRisk, perhaps not. After all, their analysts may be skilled and objective professionals.

And yet there is a reason why the DJSI isn’t named the RobecoSAM and RepRisk Sustainability Indices. American investors would clearly prefer to rely on the Dow Jones Sustainability Indices. But do those investors truly understand who is actually managing the DJSI?