Category: Commentary

Here in the U.S., entrepreneur and multi-billionaire Elon Musk proposed to buy Twitter and give it new management with a new purpose and so different business objectives from those pursued by its current owners.  His new purpose for the company is to respect freedoms of thought and speech on the part of users of its technology.

His business plan is controversial.  Some, like the current management of Twitter, question the legitimacy of his purpose.  They prefer a business model where the purpose of the company includes the power to censor user comments at variance with the morals and beliefs of the owners.  Such censorship denies users access to the public community of Twitter users and those who might see and respond to “tweets.”

Musk’s takeover offer for shares of Twitter at a nice premium over their market price brings out into the open very real world and immediately actionable issues of what capitalism should be.

“Free speech is the bedrock of a functioning democracy and Twitter is the digital town square where matters vital to the future of humanity are debated,” Musk said in a statement.  “I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots and authenticating all humans. Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it.”

Yesterday, the current management gave up defending its business purpose for Twitter and agreed with Musk that he can buy shares of the company and take it private.  Under the terms of the agreement, Twitter stockholders will receive $54.20 in cash for each share of common stock that they own upon closing of the proposed transaction.  The purchase price represents a 38% premium to Twitter’s closing stock price on April 1.

Twitter’s independent board Chairman, Brett Taylor, said the company “conducted a thoughtful and comprehensive process to assess Elon’s proposal with a deliberate focus on value, certainty and financing.”

Musk has secured approximately $46.5 billion to finance the transaction, including $25.5 billion of fully committed debt and margin loan financing and $21 billion in equity financing.  The transaction is expected to close in 2022, subject to the approval of Twitter stockholders, the receipt of applicable regulatory approvals and the satisfaction of other customary closing conditions.

On one hand, Musk seems to challenge the norm that capitalism is about making profits, that earning money is legitimate purpose enough to justify both enterprise and a free market for private property and private goods and services.  He is challenging the way Twitter currently makes its profits.  He wants the company to have a different social justice agenda and presumes that enough profit will be made by it doing what he prefers it to do.

On the other hand, there is an argument that a business model enshrining the ideal of free thought and free speech will enjoy greater demand and so garner more customers, thus earning more profits.  Thus, Musk’s business is still only plain-vanilla capitalism.

Evidence for this is provided by Twitter’s Chairman.  When he referred to the Twitter board considering only “value, certainty and financing,” he was admitting that the outgoing board was focusing on profit for current shareholders, not some social justice agenda of using Twitter to police speech and thought among the public.

But there is a category error here: users of Twitter are not its customers, but its suppliers.  The social justice issue is more exactly exploitation of suppliers who have little power to protect their moral integrity.  Users of Twitter do not pay money for access to its service of getting them before a mass audience.  Twitter earns its money from others who are its real customers.  Those are the advertisers who pay for access to information on Twitter users which Twitter provides to them in order for them to better to sell to such providers of data.  Twitter is an intermediary between certain sellers and their potential customers.  Twitter needs users to supply it with information that holds value for other companies.

Twitter’s core business is the collection and sale of information – data.  Providing users with a communications service is its way of tilling fertile soil to get a bumper crop.

Thus, the concerns raised by Twitter’s business practices and Musk’s alternative business model can be seen as universal across our digitized global community.  What is the best practice for internet platforms everywhere?  Some countries, like China, demand that internet platforms accessible to everyone are public utilities under government control and license.  Thus, censorship of expression and opinion is defined by law as a public good, seeking to improve the morals, welfare and behaviors of those subject to the state, uplifting the common good and suppressing the cruel, malignant, perverse, divisive, upsetting, the unwanted detritus of the deplorables.

So, when we apply the model of stakeholder capitalism as the standard for corporate social responsibility and a more moral capitalism, what kind of stakeholders are the users of Twitter?

I would like to suggest that they are citizens first and foremost, members of the community. What, then, should be the ethics of a company which serves citizens?  To answer that, we first need to consider the moral duties of citizen and then recommend how internet platforms can affirmatively support citizens in doing what they should.

First, we need to consider citizens as members of what kind of polity – a constitutional democracy, an oligarchy, a one-party dictatorship, a kleptocracy, a theocracy, etc.  In most authoritarian polities, whether ruled by an elite or a mob, the proper office of a citizen is to obey the state; very Hegelian.  Such polities don’t have citizens, only subjects, much like the free particles in Brownian motion, which enjoy erratic random movement in a fluid as a result of continuous bombardment from molecules of the surrounding medium.

Also, in such polities, internet platform companies will also take their direction from the state, so there will be few occasions when they will need to decide for themselves what degree of free thought and speech should be provided their users.  Such regimes have no citizens, only subjects.  To borrow from the woke American narrative, they have only two classes of people – the oppressed and the oppressors.

Here is a chart from The Economist of who among us lives in what kind of political system:

In proper democracies, those which honor human rights and the rule of law and which use fair and open elections to select governments, the office of a citizen is one of autonomy and integrity, responsibility and foresight.  The true citizen shapes the medium, which is the collective, not vice-versa.

To perform the duties of such a station, citizens need access to information and the opinion of others.  Without freedom of thought and freedom of speech, true citizens cannot meet their obligations of sustaining justice and right.  A fundamental duty of citizens in democracies is to search for truth among the chaotic clashing of competing and inconsistent personal narratives.

Internet platform companies, therefore, have a social responsibility to support that open-ended, unsettled, search for truth.  Their higher purpose, their vocation, is to seek profits as best they can in the course of facilitating that search.  Thus, they provide a process which, when used by citizens, gives reassuring meaning to worthy cultures and societies.  That is their social justice function.

The Caux Round Table’s Principles for Government provide a standard for the operation of internet platforms, as they, too, impact the application of public power:

Discourse Ethics Should Guide Application of Public Power.

Public power, however allocated by constitutions, referendums or laws, shall rest its legitimacy in processes of communication and discourse among autonomous moral agents who constitute the community to be served by the government.  Free and open discourse, embracing independent media, shall not be curtailed, except to protect legitimate expectations of personal privacy, sustain the confidentiality needed for the proper separation of powers or for the most dire of reasons relating to national security.

When taking responsibility for users as citizen stakeholders in a community of moral discourse, internet platforms serve a civil function, not unlike that of a civil society organization.  Internet platforms, therefore, have an additional responsibility:

The Civic Order Shall Serve All Those Who Accept the Responsibilities of Citizenship.

Public power constitutes a civic order for the safety and common good of its members.  The civic order, as a moral order, protects and promotes the integrity, dignity and self-respect of its members in their capacity as citizens and, therefore, avoid all measures, oppressive and other, whose tendency is to transform the citizen into a subject.  The state shall protect, give legitimacy to or restore all those principles and institutions which sustain the moral integrity, self-respect and civic identity of the individual citizen and which also serve to inhibit processes of civic estrangement, dissolution of the civic bond and civic disaggregation.  This effort by the civic order itself protects the citizen’s capacity to contribute to the well-being of the civic order.

Now, if we are to consider the status of all persons, regardless of the nature of the polity in which they live, we can award them the status of person as affirmed by the international law of human rights and by many religions such as Buddhism, Confucianism, Taoism, Christianity and Islam.

It should, therefore, be the aspirational responsibility of internet platforms to empower all persons with freedoms if they were, in truth, genuine citizens.

Some of the most intriguing issues of corporate social responsibility which, moreover, implicate millions of lives are bound up in social media platforms.  These platforms have generated vast wealth in terms of share values and salaries paid to employees and yet, their business practices, not to say their services, are controversial with many.

Our colleague, Shirley Boyd, has keenly analyzed some less well-examined aspects of who should use what data derived from users of social platforms. You can read her commentary here.

Shirley is a retired VP and Associate General Counsel of Cargill and now teaches a class on ethics and legal compliance at the University of Minnesota.

We welcome Shirley to our community of those concerned for a moral capitalism.

So, President Putin has invaded Ukraine.  In the U.S., with its increasingly therapeutic culture, there is a new recommendation to screen children for anxiety and depression.

Now, Putin’s “special operations mission” did not cause American children to lose their grip on self-confidence and optimism, but something did.  What does that say about Americans and their moral orientations over the past 30 years?

How does one build a moral capitalism where, today, tomorrow’s leaders are anxiously self-absorbed?

Here is the report from the Wall Street Journal:

By Brianna Abbott
Apr. 12, 2022

All children should be screened for anxiety starting as young as 8 years old, government-backed experts recommended, providing fresh guidance as doctors and parents warn of a worsening mental-health crisis among young people in the pandemic’s wake.

The draft guidance marks the first time the U.S. Preventive Services Task Force has made a recommendation on screening children and adolescents for anxiety.  The task force, a panel of independent, volunteer experts that makes recommendations on matters such as screening for diabetes and cancer, also reiterated on Tuesday its 2016 guidance that children between ages 12 and 18 years old should be screened for major depressive disorder.

…

More than one-in-three high-school students reported experiencing poor mental health during the pandemic through June 2021, according to a Centers for Disease Control and Prevention survey of more than 7,700 students.  About 44% said they had persistent feelings of sadness or hopelessness within the 12 months before the survey.

…

A survey of primary-care physicians found that 76% believe in the importance of talking to adolescent patients about mental health but that only 46% said that they always brought it up with their patients, the task force said.

Screening children for anxiety and other mental-health disorders is often done through questionnaires for patients or parents, often at regular checkups.  Some hospitals or medical centers also screen pediatric patients that come into the emergency room.  Mental-health and pediatric experts said the benefits of screening include flagging mental-health risks in children who might not exhibit symptoms or whose symptoms overlap with other conditions.

“Not only does that open the opportunity for interventions for the children, but it enables the parents to learn skills and strategies to respond to their kids’ anxiety that can be helpful in the long term,” said R. Meredith Elkins, director of the McLean Anxiety Mastery Program at McLean Hospital in Belmont, Mass., who isn’t a member of the task force.

Panelists who drafted the new mental-health screening recommendations reviewed 78 studies related to screening and treatment for anxiety, depression and suicide risk.  None directly compared the effectiveness of screening with the effect of no screening.  Instead, panelists analyzed the accuracy of screening tests as well as potential benefits and harms of treatment.

There wasn’t enough evidence to make a recommendation for or against screening for suicide risk among asymptomatic adolescents, a leading cause of death in the age group, the task force said.

In the CDC report on youth mental health in the pandemic, about 20% of surveyed high-school students said that they had seriously considered attempting suicide in the 12 months before the survey.

Our Chair Emeritus, Lord Daniel Brennan, just spoke to me about the impact of our times on bringing into question the optimism necessary for a work such as that attempted by the Caux Round Table.  He suggested making a statement incorporating many wisdom traditions to the point of having faith and, from faith, being courageous.  Here are my thoughts for your reflection.

No doubt responding to concerns over the growing inequality of wealth between the top 1% and 10% of families and the far greater number of “other” families, the Biden administration is proposing an innovation in taxation.

The proposal is to tax accumulated wealth directly, not income earned.

The proposed wealth tax is cast as a minimum tax which would assess 20% of the combined income and the increase in value of assets of households worth more than $100 million, some 20,000 households in the U.S.

The tax on unrealized gains of financial holdings and imputed to closely held businesses would bring to the government a share of increasing prosperity reflected in rising prices of equity stocks (and perhaps other financial assets).  So, if speculation and trading push nominal stock prices up, the owners of such shares, even if they don’t sell their shares, would pay money to the government.

Similarly, if the economy grows and private companies become more profitable, an imputed new capital value for the company would be determined and a tax in real money would be paid based on that imputed value.

The proposal has its complexities and would generate more money for governments during times of inflation, when real values are constant or falling.  But the proposal focuses attention on the moral question of what do very wealthy people owe to the society which permits them to so thrive.

In my classes, I like to make the point that discussion of business ethics, CSR, sustainability, stakeholder capitalism and moral capitalism are relevant to real business decision-making and profitability.

Here’s an example of this:

Howard Schultz, the founder of Starbucks – very successful and very wealthy – is returning to the company as its CEO – for the second time, his third term at the helm.  Why?  Can’t a profitable company just keep on making money?

The news report mentioned challenges in its Russian and Chinese markets and rising costs.  My guess is that it is a third challenge or rather, threat, which had brought the founder out of retirement to again revamp the business model.

This third challenge is unionization of employees.  When baristas are union members, what will happen to the quality of Starbuck’s product – not coffee, but shopping experience?

Schultz said, “I know the company must transform once again to meet a new and exciting future where all of our stakeholders mutually flourish.”

Institutional investors worry that the unionization campaign has the potential to cause reputational damage – i.e. loss of customers and pricing pressure.  They will have more confidence in the company with Schultz back at the helm and so keep its stock price up.

The lesson here is that employees are a capital asset, not just a cost.  They are social and human capital contributions to profitability and need to be appropriately compensated, tangibly and intangibly.  Starbucks needs to offer an alternative to whatever a union might offer employees, otherwise, employees will vote for a union and the company will suffer from the entropic forces so often associated with union shop stewards.

The CEO is also a human capital asset.  Unlike dollars or euros, CEOs are not fungible, one replaceable by another.

Moral capitalism is all about the conjunction of social and human capitals with financial capitals.

It takes more than money to make money.