Your "25 ideas for a changing world" was a very interesting series (Cover Story, Aug. 19-26). In "After Enron: The ideal corporation," you noted: "The single-minded focus on `shareholder value'will diminish." I certainly hope so. Better yet, let's redefine shareholder value as that of a viable company with a future-- rather than as the maximum stock price at a particular point in time. Wall Street has always suffered from an overdose of short-termism. Product and project life cycles do not fit neatly into calendar quarters and years.
Keynes did say that in the long run we are all dead. But it was blind short-term greed that destroyed billions in shareholder value.
Among the 25 ideas for a changing world, "The mea culpa defense" is very appropriate for the times (Cover Story, Aug. 19-26). I fully agree with the goal, but I suggest there is a need to be clear about what we want from such an ethic, even though it is the minimum one can expect from "gentle corporations."
I have observed and experienced through research as an academic in the field of customer services that champions of service are ready to make a sincere apology, to recognize their mistakes, and to employ more than enough effort to restore promises made to customers. However, they seldom need to do this, because they have invested a lot in preventing errors. But in other companies where this investment is not accompanied by the appropriate commitment, the bored customer gets only the stereotypical "We do apologize," and little will actually change [unless] the correct values are respected and enforced.
Consequently, the "mea culpa defense" could be seen not as a curative style but as a platform for asking what values we need in order that corporations don't have to say mea culpa.
Jean Fr?d?ric Mognetti
HEC School of Management
"The rich get richer, and that's O.K." writes Michael Mandel, your chief economist (Cover Story, Aug. 19-26). No, it is not O.K., on three tests. First, it is equivocation and not economics to compare a relative measure of wealth (the share of income going to the top fifth of households) with an absolute measure of poverty. If the European poverty measure of half the median income had been used, quite the opposite result would have emerged.
Second, five years ago, concerned plutocrats--led by Warren Buffett--set up the Campaign for Responsible Taxation because they feared the republic would be socially and economically damaged by an aristocracy of the wealthy. Just as it would be absurd to select the U.S. Olympic team for 2020 from the children of the Olympic winners in 2000, Buffett thought it wrong to exclude from future leadership all but the children of today's wealthy. Obviously, Mandel does not share Buffett's concern that the well-being of the republic requires real equality of opportunity for all.
Third, Mandel should check with the many black and Hispanic women who will have exhausted their welfare entitlements in 2002 to see whether they will join him in saying "that's O.K."
J. Jerome Casey
"Small is profitable" (Cover Story, Aug. 19-26) was right on the money. The 4 billion to 5 billion poor are, indeed, a potential market. But it is one that already has trillions in assets, since the poor have always earned and saved--and quite successfully, at that. It is just that legal systems and, so, official statistics don't "see" that potential wealth. It is extralegal.
The Institute for Liberty & Democracy (ILD) in Lima, Peru, has been studying extralegal economies all over the world for 20 years. Conservative estimates of the savings of the poor (mainly in extralegal houses but also businesses) is nearly $10 trillion worldwide. And this is just replacement value. Were these assets legalized (really just recognized by the law), their market value would be orders of magnitude larger. Then, poor entrepreneurs could borrow using traditional banking practices rather than the peer-group lending forced on them by the lack of legal status of their houses and businesses.
In addition to loss of value, there are many other economically dysfunctional conditions that exist because these assets are "invisible" to the law. It affects tax structures, delivery of utilities, and even inflation and currency. It skews our foreign aid, development-loan lending, and even International Monetary Fund programs. The ILD solution? We adapted U.S. and European property-law reforms from the 19th century to modern times. Until these houses and businesses are legal, they aren't capital--they are only things. And you can't have capitalism without capital.
Peter F. Schaefer
Senior Fellow and Counselor
Institute for Liberty & Democracy
"Small is profitable" is apropos, although it may be difficult for your readers and businessmen, and maybe even some economists--who think in terms of megamillion bucks in capital investment and hundreds of thousands or millions in customer base in any enterprise--to understand the cooperatives. And few will appreciate the big improvement in health and the quality of life it has made in countries such as India.
Your example of Unilever and Hindustan Lever marketing three-inch squares of margarine in India brought memories to my mind of Hindustan Lever more than 59 years ago, distributing to the public products cooked with the same margarine called Dalda in Bombay. Now you know the business success of Hindustan Lever.
With the pace of change now faster and more confusing than ever, you provided a much-needed compass to help guide us onward. It was particularly refreshing to read "Lessons from the fastest-growing nation: Botswana?" (Cover Story, Aug. 19-26). As a frequent visitor in years past, it always struck me that Botswana was seldom recognized internationally for not only maintaining one of Africa's most envied economies but also using the wealth it generated to uplift its people, rather than enrich a privileged elite. A shining example to the entire continent.
I totally agree with the trend of putting a key executive in charge of assessing corporate risk ("A yardstick for corporate risk," Cover Story, Aug. 19-26). But what good will this serve if the corporate-risk officer is working under the wing of a CEO? In most corporate scandals we have seen in recent days, the CEO is the culprit. CEOs are the ones who decide what information is delivered and sometimes deliberately withhold information that investors crave. The ideal way to monitor and report risk factors involved in debt financing, covenants, earnings, profits, etc., would be a neutral body that the board members appoint and demand direct reporting of key findings.
In the Netherlands, we have the Chipknip, a little chip on your bank card that is used as your electronic wallet ("Abolish paper money," Cover Story, Aug. 19-26). It is especially meant for micropayments. You can load the Chipknip in banks, universities, corporate restaurants, and even at home. In many cities, you can pay only by Chipknip when you want to park. It's very user-friendly, and retailers don't need change, so [potential] thieves will capture less. This year, we expect in the Netherlands 75 million payments; of those, 15 million will come from the elderly.