Free Exchange for Mutual Benefit: Sweatshops and Maitland’s “Classical Liberal Standard”

Ian Maitland defends sweatshop labor on the grounds that “A wage or labor practice is ethically acceptable if it is freely chosen by informed workers” (he calls his view “the Classical Liberal Standard,” CLS). I present several examples of economic exchanges that are mutually beneficial and satisfy the requirements of the CLS, but, nonetheless, are morally wrong. Maitland’s arguments in defense of sweatshops are unsuccessful because they depend on the flawed “CLS.” My paper criticizes Maitland’s arguments in defense of sweatshops, but I do not claim that his conclusions are false—I do not claim to have shown that the labor practices Maitland defends are morally wrong. I argue that some of the disagreements about sweatshops between Maitland and his critics depend on disagreements about the answers controversial questions in ethical theory. In the absence of definitive answers to those questions, there are no decisive arguments for or against Maitland’s view about sweatshops.     

Managers,Workers, and Authority

In this paper, I examine the case made by Christopher McMahon for managerial democracy. Specifically, I examine the extent to which McMahon’s account is able to address a series of objections against the case for managerial democracy as articulated by Thomas Christiano. Christiano articulates two sets of objections. First, Christiano argues that McMahon does not succeed in ruling out the possibility that managerial authority is best understood as promissory in its basis, in which case there is no presumption in favor of its democratic exercise. Second, Christiano raises a series of objections to the effect that even if we accept McMahon’s account of the nature of managerial authority, the conclusion for the democratic exercise of that authority by workers at the level of individual economic enterprises does not follow. In the end, I argue that McMahon’s account contains the resources to address these objections if one adopts a specific view about the moral limits to relationships that involve the submission of the will on the part of one person to another. Adoption of this view, however, appears to come at the expense of what I take to be the account’s commitment to liberalism. As such, what I understand this paper to reflect more generally is the apparent difficulty for liberals in arguing that there is something inherently morally troubling about capitalist work relations.     

RATIONAL FORMATION OF EXPECTATIONS: KEYNESIAN UNCERTAINTY AND DAVIDSON'S (NON)-ERGODICITY-CRITERIUM

In this paper Davidson's argument that expectations formation according to the Rational Expectations Hypothesis (REH) may be irrational is evaluated from the viewpoint of Keynes’probability theory. Although Davidson's conclusion is supported, it is contended that his arguments are not derived from and at some points are even incompatible with Keynes’theory of probability. It is further shown why (REH) should be rejected in the light of Keynes’probability theory. Finally, two alternative ways to treat expectations which are consistent with both rational behaviour and Keynes’probability theory are sketched.     

Authority and Democracy in Corporate Governance?

Although McMahon offers a potentially valuable extension of Joseph Raz's conceptualization of authority by distinguishing three different kinds of authority, this paper argues, first, that his account of the conditions and considerations that would justify managerial authority is problematic because it relies on a conception of reasons for action that excludes precisely the kind of rationality that plays an important role in the␣explanation and justification of authority in economic␣organization. This paper explains, second, why McMahon's thesis of the justificatory similarity of authority in governments and nongovernmental organizations can also be seen to hold for corporate governance of publicly owned firms more specifically. Finally, this paper raises some critical objections against McMahon's presumption of democratic governance in governments and NGO's alike. The thrust of these objections is that democratic corporate governance does not make sense in the publicly owned firms because: (1) it will not produce results that are fair or welfare maximizing, and (2) it will undermine the legitimacy of managerial authority in such firms. J. (Hans) van Oosterhout holds an M.A. in political science from Leiden University and a PhD in organization theory from RSM Erasmus University, where he is currently an associate professor. His research involves the positive and normative theory of organizations and institutions, with a current emphasis on corporate governance and comparative economic and political organization. Earlier publications have appeared in: Academy of Management Review, Organization Studies, Journal of Business Ethics and Futures.     

Does It Make Sense to Be a Loyal Employee?

Loyalty is a much-discussed topic among business ethicists, but this discussion seems to have issued in very few clear conclusions. This article builds on the existing literature on the subject and attempts to ground a definite conclusion on a limited topic: whether, and under what conditions, it makes sense for an employee to offer loyalty to his employer. The main ways in which loyalty to one’s employer can contribute to human flourishing are that it makes the employee more trustworthy and therefore more valuable as an employee; makes it easier to form authentic relationships in other areas of the employee’s life; expands the employee’s field of interests and gives her or him a richer identity; provides greater motivation for the employee’s work; makes it possible to have a greater unity in the employee’s life; improves the performance of the organization for which the employee works; contributes to the protection of valuable social institutions; and, in so far as many employees share an attitude of loyalty towards the organization which employs them, it becomes possible for this organization to become a true community. Last, but not the least, loyal relationships have an inherent value. The article also reviews the main arguments that have been offered against employee loyalty and concludes that none of them offers a reason why it would be inappropriate in all cases for an employee to be loyal to her or his employer. The force of these arguments depends on the specific attributes of the organization for which the employee works. The main conclusion of the article is that while being a loyal employee involves risk, it has the potential to contribute significantly to the employee’s fulfilment. The main challenge for employees is to identify employers who are worthy of being loyal to.     

How do standard setters define materiality and why does it matter?

Material information is a core aspect of a firm's governance and reporting activities. If corporate information is material, then the firm has a responsibility to disclose it. Currently, firms must judge information as material largely based on a confusing set of standard setters’ definitions. I analyze the particular conditions laid out by each standard setter and explain the ethical implications that result from materiality judgments made by firms using these varied standards. Importantly, this analysis underscores that regulators, firms, and researchers alike must consider the impact of these implications on the fiduciary duty and promise-keeping that firms make as well as the potential for unfairness and financial harm to others’ welfare that could result.     

Impact of personalization and privacy concerns on information disclosure and pricing

Advances in IT have enabled some firms to offer personalized products according to the private information disclosed by consumers, while others are still offering standardized products, which brings about asymmetric competition. For consumers, disclosing private information for personalized products leads to reduced misfit cost as well as privacy loss. To illuminate the impact of consumers' trade-off between the benefit of information disclosure and the associated privacy concerns on firms' asymmetric price competition, we consider a setting where only one firm is capable of product personalization based on consumers' personal information. The capable firm makes a profit from selling the product and monetizing consumers' information. We demonstrate that as the capable firm becomes more adept at personalization, he may raise or lower the price depending on his profit foci, and an improvement in his capability does not always guarantee a higher profit. Counterintuitively, an increase in the unit misfit cost (i.e., greater product differentiation) can, under certain circumstances, intensity price competition, making both firms worse off and leading to higher consumer surplus. We also show that when consumers are more privacy-concerned, there exists an indirect effect that weakens the impact of an increase in price on the monetization of consumers’ information, and hence price competition can be mitigated and both firms can be better off. Furthermore, we demonstrate that product personalization with misfit-reducing effect always increases consumer surplus under the asymmetric competition. Our findings provide firms and policy-makers with great managerial insights.     

The Right Angle: Visual Portrayal of Products Affects Observers’ Impressions of Owners

Consumer products have long been known to influence observers’ impressions of product owners. The angle at which products are visually portrayed in advertisements, however, may be an overlooked factor in these effects. We hypothesize and find that portrayals of the same product from different viewpoints can prime different associations that color impressions of product and owner in parallel ways. In Study 1, automobiles were rated higher on status‐ and power‐related traits (e.g., dominant, powerful) when portrayed head‐on versus in side profile, an effect found for sport utility vehicles (SUVs)—a category with a reputation for dominance—but not sedans. In Study 2, these portrayal‐based associations influenced the impressions formed about the product's owner: a target person was rated higher on status‐ and power‐related traits when his SUV was portrayed head‐on versus in side profile. These results suggest that the influence of visual portrayal extends beyond general evaluations of products to affect more specific impressions of products and owners alike, and highlight that primed traits are likely to influence impressions when compatible with other knowledge about the target.     

Family firms’ investments, uncertainty and opacity

This paper contributes to the literature on family firms in two ways. First, it focuses on a largely neglected but important issue of family firms’ investment decisions. Second, it uses a novel and rich data set about Italian private firms; this complements the literature, which typically focuses on publicly traded companies, in an important way, given that most family firms are private and relatively little information is available on their behaviour. Our results suggest that family firms’ investments are significantly more sensitive to uncertainty than nonfamily firms. We find evidence that the greater sensitivity to uncertainty is basically due to the greater opacity of family firms and to their higher risk aversion, rather than to the degree of sunk fixed capital as is typical in the literature on investment decisions.     

Strategic Implications of Keeping Product Value Secret from Competitor’s Customers

Customers can sometimes learn unanticipated or hidden use value of a firm’s product whereas the non-customers remain uninformed about that extra value. A monopolist will increase its profit by informing the non-customers of its product’s hidden value. However, our analysis reveals that this may not be true when the firm faces competition in the market—the firm may actually make a higher profit if it keeps its hidden value secret from its competitor’s customers even if advertising to inform those customers is costless. This is because no advertising leads to information heterogeneity among consumers about the existence of the firm’s hidden value, which gives an incentive for both firms to continue targeting their own existing customers rather than poaching each other’s customers, alleviating price competition and increasing firms’ profits. This beneficial strategic effect of keeping some product value secret from the competitor’s customers can persist even when the firms anticipate the hidden value and compete more aggressively for customers in the early period. Our research suggests that firms can benefit from an “under-promise and over-deliver” strategy if they refrain from communicating their extra value to the competitor’s customers. Moreover, positive word of mouth about a firm’s product will not necessarily benefit the firm and can in fact make all firms worse off.     

Competition and product innovation in dynamic oligopoly

We investigate the relationship between competition and innovation using a dynamic oligopoly model that endogenizes both the long-run innovation rate and market structure. We use the model to examine how various determinants of competition, such as product substitutability, entry costs, and innovation spillovers, affect firms’ equilibrium strategies for entry, exit, and investment in product quality. We find an inverted-U relationship between product substitutability and innovation: the returns to innovation initially rise for all firms but eventually, as the market approaches a winner-take-all environment, laggards have few residual profits to fight over and give up pursuit of the leader, knowing he will defend his lead. The increasing portion of the inverted-U reflects changes in firm’s investment policy functions, whereas the decreasing portion arises from the industry transiting to states with fewer firms and wider quality gaps. Allowing market structure to be endogenous yields different results compared to extant work that fixes or exogenously varies the market structure.     

Servitization of Global Manufacturing Business

This study examines important but understudied issues in the servitization of global manufacturing firms. We begin with a review of the literature that suggests that global manufacturing firms can grow by integrating services into traditional products in a rapidly changing business environment. We fill a gap in the literature by considering exogenous (i.e., country-level and industry-level) and endogenous (i.e., firm-level) antecedents of servitization. We posit that home-country institutional development has a positive effect on global manufacturing firms’ servitization. We also posit that a high level of industry competition is favorably associated with servitization and that a firm’s technological capability and geographic diversification are related to servitization. To test these arguments, we made a comprehensive data set by using the Thomson Reuters database, which provides the financial information of 301 global manufacturing firms in the 2015 Forbes Global 1,000, and by using annual reports published on the websites of the firms.

     

Why some are more equal: Family firm heterogeneity and the effect on management’s attention to CSR

Research at the family firm–Corporate Social Responsibility (CSR) nexus lacks agreement about whether family firms are more or less socially responsible than their non‐family counterparts, which leads discussion relating to the bright and dark side of socioemotional wealth (SEW). We add to this ongoing debate in two different ways. First, we build on family firm heterogeneity and argue for a gray side to SEW, located between the bright and dark sides that is dependent upon the kind of family firm ownership. Second, we assume that prior research on a diverse set of CSR behaviors may, to some extent, explain the contradicting results; thus, we propose going back a step and focusing on management’s attention to CSR as an important antecedent of CSR behavior. By analyzing the letters to the shareholders of German HDAX firms from 2003 to 2012, this study finds that family ownership positively affects management’s attention to CSR, mainly driven by founders and family foundations. The research adds to our understanding of the family firm–CSR nexus by scrutinizing the role SEW plays in management’s attention to CSR when it comes to family firm heterogeneity.     

Variations in entrepreneurship

This article is written in the style of a “bildungsroman,” a fictional autobiographical “coming of age story” about the author’s experiences of his beginning to recognize the: great diversity of entrepreneurs, many types of startup firms, multiple ways entrepreneurs go about starting firms, and innumerable situations in which entrepreneurial activity takes place. In this remembrance of things past, the author realizes: the phenomenological underpinnings of his understanding of entrepreneurship, his belief in the primacy of facts as the arbiter of theory, that his theory predisposed him to look only for certain kinds of facts and ignore others which then makes theory paradoxically the arbiter of the facts found, and, finally, that knowledge is hard won and wisdom elusive. “Nothing is more uncertain, more contradictory, more unsatisfactory than the evidence of facts”—William Godwin     

Motivators of Mobilization

Using data on shareholder-initiated class action lawsuits in the US, I investigate the corporate scandals of US-listed foreign firms. The shareholders of scandal firms suffer considerable loss in both the short term and the long term. I document that firms domiciled in countries with weak institutions are more likely to be embroiled in corporate scandals, but such a relation can be moderated by the presence of Big 4 auditors. Investors automatically adjust for undiscovered misconduct when valuing the stocks of non-scandal firms (i.e., the spillover effect). Investors rely on the audit quality to form their expectations about the severity of undiscovered misconduct, and thus impose less negative spillovers on firms with Big 4 auditors, especially when the firms are from countries with weak institutions. Taken together, my results suggest that listing on US exchanges does not fully compensate for weak local institutions; voluntarily bonding to a more stringent audit process has an incremental effect on protecting shareholder interests and enhances the confidence of investors in firms’ financial integrity.     

Website-generated market-research data Tracing the tracks left behind by visitors

Entrepreneurs and big firms alike now have access to an unprecedented marketing-research tool: the server's log files that track visitors as they explore a website. Unlike traditional surveys that measure attitudes, opinions, or intentions, server log files measure actual behavior. This digital data source provides detailed information on consumer interaction with a business's website, such as what other website brought them to the site, where they entered, how long they stayed, and from which page they left. A case study of a Florida seafood restaurant illustrates this new research tool's practical value. Upon analyzing his site's log files, the restaurant owner was able to create links with noncompeting businesses to increase his own hits; was able to redesign the home page to encourage repeat hits and click-throughs; and learned that outdated website material should remain available for interested consumers.     

The Unsatisfied Fringe in Britain, 1930s–80s

This article considers the longevity of the criticism that the financial system in Britain has failed to provide adequate funding to small or fast-growing companies. It considers, first, some of the advantages which an economy might gain from having a vibrant and healthy small firms sector. It then discusses the financing difficulties faced by small firms and some of the attempts which have been undertaken to ‘solve’ these problems. The paper suggests that the size of the unsatisfied fringe of creditworthy borrowers in Britain has been consistently over-estimated, since none of the ameliorative measures have displayed significant success. Small firms may require additional financial provision, but this has to be justified by recourse to social welfare and externalities, rather than financial efficiency, arguments.     

Marketing (as) Rhetoric: paradigms,provocations, and perspectives

ABSTRACT

In this collection of short, invited essays on the topic of marketing (as) rhetoric we deal with a variety of issues that demonstrate the centrality of rhetoric and rhetorical considerations to the pursuit of marketing scholarship, research and practice. Stephen Brown examines the enduring rhetorical power of the 4Ps; Chris Hackley argues for the critical power of rhetorical orientations in marketing scholarship but cautions us on the need to work harder in conceptually connecting rhetorical theory and modern marketing frameworks; Shelby Hunt explains how rhetorical processes are incorporated in his inductive realist model of theory generation, using one of his most successful publications as an illustration; Charles Marsh demonstrates what Isocrates’ broad rhetorical project has to teach us about the importance of reputation cultivation in modern marketing; Nicholas O’Shaughnessy uses an analysis of Trump’s discourse to argue that political marketing as it is currently conceived is ill-equipped to engage effectively with the rhetorical force of Trump’s ‘unmarketing’; Barbara Phillips uses Vygotsky’s work on imagination to investigate the important of pleasure and play in advertising rhetoric; and finally, David Tonks, who in many ways started it all, reiterates the need for marketers to recognise the strength of the relationship between marketing and persuasion.     

Should Corporations Have the Right to Vote? A Paradox in the Theory of Corporate Moral Agency

In his 2007 Ethics article, “Responsibility Incorporated,” Philip Pettit argued that corporations qualify as morally responsible agents because they possess autonomy, normative judgment, and the capacity for self-control. Although there is ongoing debate over whether corporations have these capacities, both proponents and opponents of corporate moral agency appear to agree that Pettit correctly identified the requirements for moral agency. In this article, I do not take issue with either the claim that autonomy, normative judgment, and self-control are the requirements for moral agency or the claim that corporations possess them. I claim that if both of these claims are correct, then corporate moral agency entails that, in a liberal democracy, corporations should have the right to vote. I show that under the conception of democracy supported by most liberal political theorists, all parties subject to the law are entitled to the right to vote, and all parties that possess autonomy, normative judgment, and self-control are subject to the law. Therefore, if the proponents of corporate moral agency are correct, then corporations satisfy the requirements for the right to vote. I then consider potential objections to this argument. I show that the strongest objection to the corporate right to vote is undermined by Pettit’s own argument for corporate autonomy. I then show that objections derived from other arguments for limiting the rights of corporations are equally unavailing. I conclude with some observations about the implications of my argument for the question of corporate speech rights.     

Business Ethics and the ‘End of History’ in Corporate Law

If social scientists take natural science as a model, they may err in their predictions and may offer facile ethical views. MacIntyre assails them for this, but he is unduly pessimistic about business, and in rejecting the separation thesis he raises some difficulties about naturalism. Aristotle’s views of the good life and of the close relationship between internal and external goods provide a corrective to MacIntyre, and in fact suggest how virtues can support social capital and thus prevail within and among firms in competitive markets. Aristotle’s views are not necessarily inimical to those underlying modern democratic capitalism, but they raise questions about the limits to the good life. The separation thesis misses the importance of addressing the questions with both empirical and ethical resources.