Friday, 18 December 2015

Corridors of power

For what will probably be my final post of the year I return, as no doubt I will many times next year, when it is likely to be held, to the UK Referendum on EU membership. For those interested in the global economic context of organizations, but also in the way that decision making happens in both politics and organizations, the current ‘renegotiation’ is fascinating.
The British Prime Minister, David Cameron, is seeking to renegotiate the terms of UK membership so as to be able to recommend to the British people that they vote to remain in the EU. The terms he is seeking, even if achieved, will not in any way change the minds of those in his own party and beyond who are implacably opposed to EU membership. And although I disagree with their opposition, they are absolutely right to see the renegotiation as a charade. Even if it succeeds, it will not in any substantive way change the terms of membership. So what is it about?
The answer is that it will enable Cameron to say to his party and voters that a deal has been struck that they can support. The more there seem to be huge difficulties and conflicts over getting the deal, the better it will be in terms of making that case. This is widely understood within the political class, the media and informed observers. So the only way that it can be successful is by its appeal to those undecided and/or only mildly anti-EU voters not following events closely and who only tune in during the run-up to the referendum (currently widely expected to be held in June 2016). They will hear that there has been a fundamental change and – if things go to plan – will vote to stay in.
Since I am strongly in favour of Britain’s membership of the EU I hope this works. But it is a risky and in many ways unsatisfactory strategy. It’s risky for two reasons. First, if Cameron doesn’t get even the limited deal he is seeking it won’t have much credibility. Second, it’s by no means guaranteed that those voters it is designed to appeal to will hear this message, rather than that of the campaign to exit. But it’s unsatisfactory because it repeats the errors of the past in failing to make a positive case for EU membership, and just trying to bamboozle a semi-detached electorate into making a half-hearted choice.
Outside of the government, the embryonic campaigns are both, to varying degrees, in trouble. Neither is as yet a single organization (although that will change when the Electoral Commission identify and fund the campaign groups). The ‘in’ campaign is dominated by Lord Rose’s (former head of Marks and Spencer) rather dull, accounting approach, stressing the benefits of membership for businesses, although something more sparky and populist is offered by Alan Johnson’s leadership of the Labour Party’s campaign. And the Labour leader, Jeremy Corbyn, remains at best lukewarm on British membership, a major danger for the ‘in’ campaign. Meanwhile the ‘out’ campaign is openly wracked by conflict between rival groups, a key issue being the extent to which Nigel Farage, the populist but divisive anti-immigration leader of the UK Independence Party (UKIP) will figure. Just today, UKIP’s only MP suggested that Farage should stand down as his party’s leader.
As readers of this blog will know, I was recently in Paris and whilst there had several conversations with people who expressed bemusement at the fact that this debate was even happening in Britain, and certainty that the outcome would be a vote to stay in. I am not sure that this is true, or at least that the vote will be decisive enough to prevent the question to continue to be raised. Opinion polls suggest that the result will be very close, although there is an interesting divide between internet polls (suggesting a close result) and telephone polls (suggesting an easy win for the stay in campaign). This may reflect the fact that the anti-EU movement (at least as regards UKIP) has a very well-organized online presence, and that views within the general population are rather different. It also seems likely that, unsurprisingly, the answer depends on how the question is asked.
Leaving aside the EU issue, I’m struck by how much of this has parallels with how decisions get made in organizations. Often there is a small group of highly involved and committed people on different sides of the argument, and a larger group of more or less uninterested or ambivalent people. Similar techniques are used of taking decisions and discussions to various forums and then bringing them to other bodies to make a final decision, with all the detail having been decided elsewhere. It is a perennially fascinating process about which much has been written in the organization studies literature. But, to bang on about another of my hobby horses, nowhere more insightfully than in the novels of C.P. Snow such as his 1964 masterpiece Corridors of Power.
As I said earlier, I will for sure be returning to these issues in 2016. In the meantime, a very Happy Christmas and New Year to all those reading this blog.

Friday, 11 December 2015

Bitter chocolate

At one point in the book on which this blog is based, I discuss the chocolate firm Cadbury’s as an example of how the ‘new capitalism’ works:
“This was a firm with a history dating back to the nineteenth century and marked by a strong interest in worker welfare. In 2009 a hostile takeover bid from Kraft, a giant US food corporation, was rejected but subsequently, in 2010, a deal was agreed. The deal generated an estimated £240 million in fees for the investment banks and advisers involved. One especially controversial aspect is that Cadbury’s had had plans to close its factory in Somerset and move production to Poland, but Kraft undertook that this would not happen if they took over. However, after the takeover the factory was closed in favour of the Polish location, and amongst the hundreds laid off were families who had worked for Cadbury’s for decades. So here a workplace rooted in a history and a community was eviscerated. Is this just ‘the way things are’? No, because such situations arise from particular regulatory regimes and, as the former chairman of Cadbury’s has argued, the UK regulation of overseas takeovers is especially lax.” (p.106)
My point here was about the fracturing of links between organizational ownership, communities and places. But this connects with another issue, also mentioned briefly in the book (p.118) but more extensively on this blog, namely corporate taxation. For it has now emerged, perhaps unsurprisingly, that Cadbury’s under its new owner Mondelez International, a spin-off of Kraft, paid no UK corporation tax last year. This was not because it was unprofitable (Cadbury’s made £96.5M profit in 2014) but because it used a complex, albeit perfectly legal, device to avoid paying the tax. Briefly, the tax liability was avoided using interest payments on an unsecured debt, listed as a bond on the Channel Islands’ stock exchange, which were then offset against the profits made leading to a zero corporation tax liability.
The use of tax avoidance techniques such as these is widespread. Facebook, Starbucks and Amazon are amongst high profile cases and the recently announced 'reverse takeover' of Pfizer by Allergan is another variant. Here Pfizer – the bigger firm – is formally being taken over by the smaller one, allowing it to headquarter the new entity in the lower corporate tax regime, in this case the Republic of Ireland; so-called tax inversion. These techniques link to the wider issue of organizations and localities because they reflect the freedom of companies to locate globally and the absence of any legal or for that matter normative commitment to any particular country or community.
The problem here is not – or not simply – one of abstract morality. It is that corporate tax avoidance leads to the erosion of the tax base. It is remarkable that with so many countries pursuing policies of fiscal balance there is so much more attention paid to government spending than to government revenues. Yet what the OECD refers to as Base Erosion and Profit Shifting (BEPS) has become a major problem, especially in the developing world leading to a set of proposals for reform being presented to the G20 last October. The OECD initiative, and that of the EU, may in time have an impact (although in the case of the EU proposals they have, depressingly, been rejected by the UK). However, it is equally likely that corporations and their advisers will find new ways to circumvent these rules, and in any case I am not clear that they would have any traction in cases such as Cadbury’s. One problem here is that both national, and these new transnational, rules are immensely complex and it is that very complexity which gives rise to new loopholes.
Apart from legal and regulatory changes to the tax system, the only other game currently in town is consumer action and boycotts. There is some evidence that these can be effective, with Starbucks responding to a UK boycott threat by moving its headquarters to London in 2014, although it has been questioned whether this really made much difference to tax revenues. In any case, such an approach is only ever going to be applied to a few high profile cases. How many consumers will, or could, apply pressure to all the corporates involved in tax avoidance? It’s difficult to imagine many users of Viagra boycotting its maker, Pfizer, to protest against the abstruse-sounding tactic of reverse takeover to facilitate tax inversion!
Whether through changing tax laws or exerting consumer pressure, both these approaches suffer from the fact that they are after the fact attempts to address problems arising from the fracture of ownership and places, especially countries. Thus I continue to think, as implied in the extract from my book that I quoted earlier, that the more important issue is the regulation of international mergers and acquisitions. We can’t put the genie of globalization back in the bottle but there are pragmatic and eminently workable ‘glocalized’ approaches to organization.
It is already the case that takeover rules in Germany, say, are far tougher than in the UK. One consequence of this is the strength of the Mittelstand – medium-sized, often family-owned, businesses – that are the bedrock of German manufacturing and exports. These are firms which are plainly local, and maintain a strong link between ownership, community and employment. Yet this is not an ‘anti-globalization’ argument for the Mittelstand is most certainly global in its clientele. A combination rather like Cadbury’s, in fact, in the days before it was taken over.

Monday, 7 December 2015

Three years on

A rather inward-looking post today. It’s now about three years since this blog started and at this time in previous years I have taken a look at how many people are viewing it and where from (for last year’s report see here). Overall, there have been 17,800 page views since the blog started, up from 7,055 this time last year meaning there have been over 10,700 views this year. In the last month there have been 985 views compared to 364 in the equivalent month last year. So it seems as if the audience is increasing, although it is also the case that I have posted more often this year (40 this year so far as compared to 24 in 2014).
The countries from which people view are shown below (with last year's figures in brackets). Overall it is a similar mix to last year (China has dropped out of the Top 10, Sweden come in), but the United States now tops the chart.

United States (2)
4608 (1761)
United Kingdom (1)
3830 (2206)
Russia (7)
965 (198)
France (6)
871 (209)
Norway (4)
751 (243)
Ukraine (3)
688 (350)
Ireland (8)
646 (147)
Germany (5)
501 (216)
Netherlands (10)
315 (98)
Sweden (-)
190 (-)

 The rising US readership seems to be linked with the fact that by far the most-read post now (846 unique page views) is Reviewing Organization Studies, posted on 3 July 2014 and most of its readers are US-based. I’m guessing that someone in the US organization studies community linked to it. In some ways I slightly regret this as mostly in this blog I try to write about the wider world rather than focussing on narrowly academic matters. But I am certainly not complaining.
Last year I also looked at some of the online reviews of the book, and amongst the new ones this year, I’m particularly amused by this one, posted by ‘smallkids’ on Amazon, which is almost a Haiku:
“HI grey
The words are too small
BUt thx as it is cheap”
And particularly pleased by this one, posted by ‘M Bal’, also on Amazon:

“The author provides a critical overview of organisational theory that is accessible to all who might be interested in the topic, not just academics. He follows a historical perspective in a way that makes approaches to the study of organisations both digestible and contextualised in their contemporary cultural and social ideas. This facilitates the development of a critical perspective on the views of how organisations are "best" managed today in order to stimulate further thought and reflection that could translate to meaningful practice for those possessing some influence in their organisation. Some (introductory) familiarity of organisational theory and management are likely to be beneficial prior to reading the book”.
Overall on Amazon there are 7 reviews of the third edition, averaging 4.4/5 and 14 reviews of the second edition, also averaging 4.4.
Whether any of this is even fairly interesting to anyone but me I don’t know, but it’s not just reasonably cheap but free, and at least the words aren’t too small. At all events, many thanks to those of you reading this blog, wherever you may be reading from.