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Jobs and Growth are being Undermined by Corporate Behaviour: the Great Tax Hoax

Thursday, December 29th, 2016

The Coalition government in Australia and the policy of the incoming President of the US Donald Trump propose substantial decreases in corporate tax rates and assert this will stimulate growth and jobs.

However, consideration of past decreases in tax rates reveals the recent behaviour of corporations and their executives and boards as an increasing trend to devote retained earnings to share buy backs and dividend distribution. Thus additional revenue flowing from further tax breaks is likely to contribute to further enrichment of the already super rich including many at the helm of large corporations, especially in the financial sector. Few companies are paying the marginal tax rate and many are avoiding tax altogether.

The campaigns by business to downsize government, reduce wage growth, limit union influence and reduce regulation have been self-defeating. The behaviour of the super-rich is the principal driver of the significant increase in inequality over the last 40 or so years, especially the Global Financial Crisis. This has led to a stalling of demand. In Australia, substantial investment has been directed to property, now a vehicle for financial enrichment at the expense of those wishing to find somewhere to live.

It is vitally important to recall that rising prosperity benefiting the population generally does not depend simply on economic growth: unending growth is a concept believed in only by the naive and many economists. The United Nations Development Program Report for 2009, Real Wealth of Nations: Pathways to Human Development points out that improvements around the world in education and health have been due principally to cross border transfer of ideas: there is little if any correlation with economic growth! Growth in incomes is not unimportant but it is not the main reason for improved prosperity.

In other words we can learn a great deal from other countries and other domains: seeking out those lessons is vitally important. Most particularly the notion that for any individual country the growth of population is critical is nonsense. Indeed, countries where the birth rate has slowed are generally more prosperous and a significant influence on that is education of women.

Governments have a fundamentally critical role in both encouraging transfer of ideas, in the provision of education for women and in encouraging responsible and sustainable population policy. Many developed economies lack any coherent population policy.

In Australia weakening of institutions, increasing inequality, primitive approaches to debt, especially for infrastructure development and to deficit budgeting, ongoing downsizing of government along with poor investment in education, health and science and a lack of understanding of innovation and what drives it is putting Australia’s future at risk. Isolation from the ideas emerging in other countries is a major feature of public policy!

Continue to Managerial Firms and Rentiers: How Corporate Behaviour is driving Inequality

A postscript to the associated essay notes the recently published book on Neoliberalism by George Monbiot  and also deals with the behaviour of banks and the involvement of US administration officials in failing to prosecute bank executives for their behaviour which led to the Global Financial Crisis.

Related post:

Government Policy and the Economic Environment at the turn of the Year, December 2016: Health, Education and Corporations

A postscript to the associated essay “Managerial Firms and Rentiers” notes the recently published book on Neoliberalism by George Monbiot  and also deals with the behaviour of banks and the involvement of US administration officials in failing to prosecute bank executives for their behaviour which led to the Global Financial Crisis.

ICOM Australia Award 2016

Wednesday, July 27th, 2016

I thought it would be appropriate to place on the site the details of the ICOM Australia Individual Award “recognising sustained international achievement over a long period” which I received at the dinner at the Auckland War Memorial Museum for the Museums Australasia Conference in Auckland New Zealand 17 May this year, 2016.

Details have been published in the the ICOM Australia newsletter, Museums Australia Magazine 24(4), Winter 2016 (“ICOM Australia’s International Awards 2016” by Nancy Ladas) and Museum Matters for July 2016 published by Museums Australia New South Wales.

It was a great honour to receive the Award, presented by Dr Robin Hirst, Museum Victoria and past Chair of ICOM Australia

I was especially pleased that following the award to me, the National Museum of Australia was presented with the ICOM Australia Institutional Award for the exhibitions, Indigenous Australia: Enduring Civilisation, shown at the British Museum in 2015 and Encounters: Revealing Stories of Aboriginal and Torres Strait Islander Objects from the British Museum, shown at the NMA in Canberra over the Summer of 2015-2016. That award was accepted by Museum Director Mathew Trinca and colleagues.

The link is to the citation and my response.

My response draws on the ideas already presented on this website, not least in the paper presented to the conference for the late Stephen Weil.

Successful Museums – An Anniversary Tribute to Stephen Weil

Monday, December 7th, 2015

One of the Museum world’s most distinguished museum scholars, Steve Weil, died just over 10 years ago. He was a mentor and friend to myriads of people in many museums, of many ages, in many countries, at numerous conferences and elsewhere. Steve had been Scholar Emeritus at the Smithsonian Institution’s Center for Education and Museum Studies and longtime deputy director of the Hirshhorn Museum and Sculpture Garden of the Smithsonian.

A brief biography appeared in the Washington Post and also in the New York Times.

[This introductory post is a work in progress: it concerns one of my principal interests, how organisations work and how decisions get made and why. Additional paragraphs will be added from time to time.]

A very fitting conference supported in part by the Getty Leadership Institute, ‘A Tribute to Stephen Weil: Making Museums Matter, 2006’ was held at the University of Victoria BC, Canada September 11-13. The Institute commissioned this presentation and for support of that I am grateful.

Though parts of this essay have appeared elsewhere the entire piece has not previously been published.

The essay addresses the matter of accountability, how museums might be judged to be effective in the pursuit of their mission and responsibility. Weil was a long time advocate of an approach to this which went beyond the dreaded metrics so beloved of those who believe they are in a position to judge such things. As the decade since 2006 has progressed accountability has become much degraded as corporatisation has invaded museums as it has so many other non-commercial sectors.

Many museums have been increasingly active in embracing change, most particularly in engaging visitors in their learning journey where they make a particular contribution. Likewise in advocating for issues concerning meaning, the value of cultural activities in individual life and in other areas such as biodiversity and evolution and social justice in respect of minorities including Indigenous Peoples. Yet they nevertheless have fallen to the ongoing drive to reduce government expenditure and been affected also by cycles of economic collapse including the Global Financial Crisis.

How museums respond to these pressures is a daily concern of those who lead museums as well as most of those who work in or are associated with museums. How often are they recognised for their success? The Natural History Museum in London, the Melbourne Museum, the Monterey Bay Aquarium, the Queensland Art Gallery and Gallery of Modern Art. Many others.

At that vitally important level of leadership and governance how common is it to find superior performance? Too often government intrusion and the pressures to maintain the budget both through careful oversight and attracting greater community financial support comes to be the main concern. Too often, leadership ends up in the hands of those who believe they know about money, the law and marketing but understand little of the core mission of museums, the nature of their business and their history.

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The concluding paragraphs of the presentation outline the meaning of the (unusual) terms purposiveness and capability as Weil used them. What follows then is a list of issues which the board, the board and executive leadership together and leadership by itself should regularly review. Some may say this is far too process driven. Professional judgement should suffice. Those who say you don’t learn leadership you do it. But organisations are complex and judgements are critical but seldom effective if they are only the judgments of one person. The Cuban Missile Crisis and much of American foreign policy and that of other countries illustrates that convincingly.

Atul Gawande is a surgeon and writer practicing at major hospitals in Boston Massachusetts. He was the 2014 Reith lecturer for the BBC. In those lectures he recalled the importance of using lists which had to be checked off by everyone. These helped significantly in major recovery surgery, of people who had been overcome by avalanches on mountains, for instance. Reference was made to the checklists which airline pilots use. In his second lecture he said:

We have made tremendous discoveries, but find it’s extremely complex to deliver on them. We have inadequate homicide investigations, for instance. We have flawed software design. We have intelligence failures. We’ve had tottering banks. And what we see repeatedly, again and again, I think is that as we embark on the 21st century we have found that the 20th century has given us a volume and knowledge and skill that is beyond what any individual can simply hold in their head, can know how to deliver on, and simply do it on their own. The volume of knowledge and skill has exceeded our individual capabilities.

And so then we went to the medieval approach… We’ve issued standards and guidelines and regulations. We’ll take away your licence if you don’t do this. Or, if we’re being nice about it – we’ll pay you more, if you do it, we’ll give you incentives. And that did make improvements in matters, but only a bit. It didn’t get us to what we want. And what we want in the modern version of the world is that the norm is to do X. And the way that we make it the norm are systems. And they can be as simple a system as just checklists. It can be defaults, it can be feedback loops. The important insight is that what we have to focus on is how to deliver on the guidelines and standards and knowledge that we have discovered, how to make it easy for everybody to follow.

These are lists but they are not the simple recitation of statistics, performance indicators which supposedly tell us what has been achieved but lack any information about the factors contributing to the outcomes that have been measured. Worse such lists often reveal what has happened after it is too late to take action to change course or remove impediments. As the enterprise collapses the only course of action is to sack large numbers of staff, cancel programs or restructure with all the damaging outcomes that attend such action. None of that amounts to good governance or leadership! Ambiguity and uncertainty are everywhere and the systems in place have to manage that. That means the right oversight as well as the honesty to recognise when programs and policies don’t work.

In every consideration of policy and achievement a major focus should be on creativity and how people work together. I find it interesting that organisations highly successful in research and development share some features with other types of successful organisations. In the former, considerable effort is put into encouraging staff from different parts of the organisation to meet frequently to discuss issues central to the organisation’s main activity: people have morning tea or coffee and/or lunch together and the most senior staff attend those events. In one, lunch tables have places for a maximum of eight people because it is difficult for a larger number of people to conduct a single conversation. In one, staff have to present a seminar each year on a topic outside their own field of research. In another there are whiteboards in the foyers between section laboratories, and in the garden, which staff use during their discussions.

In a recent discussion on the ABC RN Late Night Live program journalist Laura Tingle, discussing her latest Quarterly Essay, Political Amnesia How we forgot how to govern, mentioned that at the Reserve Bank of Australia, a successful organisation which has mostly escaped the depredations of the efficiency experts at the Department of Finance, all the staff go to morning tea.

The point is that in almost all organisations ideas are central to the future and ideas get worked through by conversation where they are evaluated and challenged. Without those discussions ideas may become solidified and enshrined as articles of faith, immune from challenge. That is precisely why boards, when they meet, benefit from a chairperson skilled at encouraging the exchange of views. A relevant story concerns a chairman who put forth a proposal and then asked for contrary views: when none were offered he postponed the meeting for a week by which time he said he wanted to receive contrary opinions.

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Too often those responsible for governance do not see their role as both encouraging above average performance by the museum’s leadership, as Peter Drucker would say, and defending the museum against the depredations of those who would marginalise the museum as of little relevance and deserving of less support. The result is inevitable decline. What this essay contributes is, I believe, as apposite now as it was when delivered. There are too few Steve Weil’s around to urge us to think about what is really important.

OWL’S HOOTS No 15: RETURNING ACCOUNTABILITY TO THE EMPLOYEES BY BEING PREPARED TO ACT

Saturday, October 30th, 2010

Richard Branson and Vinit Nayer have vitally important lessons for us. Both emphasise trust and openness and take risks, both focus on employees whom they recognise as being the source of a successful future.

First I have to apologise to the reader. This is the first post since February. I promised that the next post would deal with climate change: I drafted a note but was diverted by numerous other things. However, I expect a number of posts to appear in the next two weeks; one of them will deal with climate change.

Meanwhile back to another of my favourite subjects or more.

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I have written on numerous occasions that organisations depend for their future on the way people work together. I do not hold to the notion that the world has changed so fast that what we have learned about human behaviour is outdated. Equally I reject the vision of humankind forced on everyone by the market economists and their utility maximisation-self interest mantra. (Another post will report concluding comments by Professor Tim Jackson of Surrey University in his Deakin Lecture based on studies in social psychology and behavioural economics.)

At this time here is a quote from Professor Amartya Sen, Noble prizewinner in economics, at a recent seminar about Adam Smith published in the Erasmus Journal:

“While some men are born small and some achieve smallness, it is clear that Adam Smith has had much smallness thrust upon him.”

It is fair to say that the 21st century, or at least the first couple of decades, are years of the brain. The emerging understanding about the flexibility of the brain, brain plasticity, and how different parts of the brain work are truly amazing. There are implications not least for education and learning. (For more on this go to the ABC Radio National’s website for the program “All in the Mind” presented by Natasha Mitchell.)

What has been happening in most organisations is decreasing attention to employees, an ever increasing retreat to routinisation. Even in the medical field – mixed practices – doctors are being told how long they can spend with patients and being sued if they don’t accept the instructions. To an extent this is a further development of the ongoing application of neoclassical economics.

So to encounter examples of this all being put aside, of attention being paid to an employee focused organisation is refreshing. I have previously mentioned one outstanding example of this in the firm Semco and also pointed up a couple of aspects of Southwest Airlines.

Another organisation well known for concern for employees is the Virgin group of companies. The founder, Richard Branson, was in Australia a couple of months ago and was extensively interviewed. At the end of the interview on ABC TVs ‘Talking Heads‘  presenter Peter Thompson asked him about stress.

Here is his response:

PETER THOMPSON: You always seem quite fresh and not very stressed, which is remarkable considering the circumstances of your life.

RICHARD BRANSON: I should be fairly stress-free, in that I have the most incredible life. I’ve got the most incredible group of people around me. And I love learning. Every day I’m learning something new. And I love people. So I love life. So I certainly have no difficulty keeping going and challenging myself.

Earlier in the interview:

PETER THOMPSON: One of your trademarks is a special relationship with the Virgin staff.

RICHARD BRANSON: Yeah, I think a good leader is a good listener. And last night I was at the Holiday Inn in Potts Point, where I’ll stay any time that I come to Sydney, because all our staff stay there. And drinking with them, but most importantly listening, and having pocketfuls of notes by the end of the evening, which I’ve already gone on and dealt with today. So…

PETER THOMPSON: Yes, you’re famous for having an exercise book in which you write things down.

RICHARD BRANSON: Yeah. It’s very important. If you don’t write things down, you don’t remember. And I think an exceptional company is a company where you get all those little details right.

Continue to essay: “Leadership: Vinit Nayer and Employees First, Customers Second

OWL’S HOOTS No. 14: ADVOCACY: GRASP THE POLITICAL

Thursday, February 18th, 2010

Hoots No. 14 – 18 February 2010: Advocacy: Grasp the Political

Downsizing: another silly idea promoted by advocates for small government and “New Public Management” and should be resisted.

(The next hoot will deal with global climate change and the fact that evidence for change includes evidence for increasing instability, not only warming: museum scientists should be actively promoting the evidence and not leave it to others.)

Twenty years ago Daniel Thomas, then Director of the Art Gallery of South Australia and President of the Art Museums Association of Australia, wrote an article entitled “Grasp the Political” (Adelaide Review March 1990)

He wrote, “What art museums most need in the 1990s is to become politically and economically conscious.  They must not only equip themselves with arguments as to why they should exist, but also with hard statistical data about their costs and their benefits.

“At the same time they must be very cautious about positioning themselves within the entertainment industry.  There the user-pay principal reigns; the showbiz needs of popular exhibitions can displace special-interest exhibitions, such as scholarly art-history exhibitions or difficult, adventurous contemporary art exhibitions.”

I just wonder how many people took any notice of these important statements.

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This hoot comes from sunny San Francisco – well it was when I started to write this –  with its many museums including the wonderfully redeveloped green California Academy of Sciences and De Young Museum of Art, currently showing the truly astounding exhibition of Tutankhamun (see recent articles on the ABC Science site on this Egyptian Pharaoh who died mysteriously when 19 – younger even than John Keats and Giovanni Battista Pergolesi who both died aged 25) and the always marvellous San Francisco Museum of Contemporary Art.

It is also time to again recommend the Global Museum site managed by Roger Smith, now Director – Online Operations (East Asia) at the British Council. Like the Arts Journal Global Museum gathers together interesting articles focusing on museums all over the world; the site also has sections on travel, jobs, resources and links to various documents as well as links to podcasts, which can be downloaded, from many museums.

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I have argued for years if not decades that museum people need to do a number of things to advance the goals of their museum:

There are a few museums where staff have taken the argument up to the frontlines and tried to convince those in government and the community that a certain approach to a situation is appropriate and that some others are not.

Layoff the Layoffs” is the title of an article in Newsweek for Februrary 5, 2010

Pfeffer’s recent article is a good summary of why the downsizing of organisations, which has been quite a fad for some decades and has been popular in the last couple of years as a device for coping with the GFC, is anything but economically positive quite apart from its often devastating effects on the people involved. Museum executives faced with the demands of downsizing, especially when it is part of “encouraging organisations to be more entrepreneurial” have a responsibility to their museum and their staff to make it clear to those who are promoting the “solution” that they do not agree with it. Unless there are the most convincing and carefully thought through justifications!

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Jeffrey Pfeffer is the Thomas D. Dee II Professor of Organizational Behavior at the Graduate School of Business, Stanford University where he has taught since 1979. He is the author or co-author of thirteen books including The Human Equation: Building Profits by Putting People First, Managing with Power: Politics and Influence in Organizations, and Unconventional Wisdom About Management, a collection of 27 essays about management topics, as well as more than 120 articles and book chapters. Pfeffer’s latest book, tentatively entitled Power: An Organizational Survival Guide is to be published early 2010 by HarperCollins.

These quotes give a sense of where Pfeffer is coming from:

Power centres around scarce and critical resources and in times of uncertainty those with established credibility tend to be favoured as the enlightened. Those in power tend to define problems in ways which institutionalise their power. The more institutionalised the power is the more likely it is that the organization will be out of phase with its environment (from a 1977 paper with Gerald R. Salancik)

Organizational success comes more from managing people effectively than from attaining large size, operating in a high-growth industry, or becoming lean and mean through downsizing – which, after all, puts many of your most important assets on the street for the competition to employ.

Pfeffer opens his Newsweek article by pointing out that when the tragedy of September 12 2001 struck there was vast uncertainty about the future of airline flights. Almost all US airlines, and many other corporations, immediately laid off staff. Southwest Airlines did not. (I have written about this company before in “Lessons from Southwest Airlines” and “A chat with Herb Kelleher“) Southwest, which in fact has never laid off staff in its entire history, is now the biggest domestic carrier with a market capitalisation bigger than all other domestic carriers combined. Southwest’s former head of human resources once told Pfeffer: “If people are your most important assets, why would you get rid of them?”

Layoffs, Pfeffer observes, have become an increasingly common part of corporate life, some firms seemingly in permanent downsizing mode. If an industry is declining downsizing would seem inevitable. But in industries where demand is fluctuating? When a company lays off staff in a downturn, staff  have to be when the upturn comes and demand increases. In the process considerable costs have been incurred!

Here is a quote that will surprise some and anger others even more: “A recent study of 20 Organization for Economic Cooperation and Development economies over a 20-year period by two Dutch economists found that labor-productivity growth was higher in economies having more highly regulated industrial-relations systems – meaning they had more formal prohibitions against the letting go of workers.” So much for the notion of employment flexibility leading to economic growth!

Here are myths dispelled by studies of the effects of downsizing:

The negative consequences of downsizing are particularly evident in R&D-intensive industries and in companies that experienced growth in sales.

Layoffs lead to lower morale leading to employees looking for another job at the first sign of better times, greater distrust of management and greater likelihood of stealing from the firm.

Layoffs also have a significant negative effect on the economy since laid off workers spend less, may demand social services payments from government, their houses may end up having to sold because of mortgage default and so on. The consequences to employees themselves can be devastating! Pfeffer says, “Layoffs literally kill people”.

(In the US those who lose their jobs also often lose their medical insurance which, as well as expected outcomes, can also lead to violent behaviour. Reviewing Michael Moore’s latest film “Capitalism: A Love Story ” Chris McGreal  (The Guardian, 30 January 2010) writes, “Early on, Moore sets out the meaning of “Dead Peasants” insurance. It turns out that Wal-Mart, a company with revenue larger than any other in the world, bets on its workers dying, taking out life insurance policies on its 350,000 shop-floor workers without their knowledge or approval. When one of them dies, Wal-Mart claims on the policy. Not a cent of the payout, which sometimes runs to a $1m (£620,000) or more, goes to the family of the dead worker, often struggling with expensive funeral bills. Wal-Mart keeps the lot. If a worker dies, the company profits.)

Governments around the world have adopted the strategy of downsizing claiming this will lead to working smarter. The consequences of such downsizing have often led, as in business, to poorer service. At the same time as downsizing, outsourcing has also been promoted as allowing the organisation to fous on its core business. But as with downsizing it is now realised this seldom works to benefit the organisation as tasks and skills critical to the enterprise are realised as having to be in-house where they can be influenced appropriately by the culture and the staff involved interact with staff in the “business core”. One of the problems is that the downsized organisation seldom has the skills to develop an appropriate brief and project management regime for the outsourced contractor.

Most importantly, a downsizing operation seldom is accompanied by a clearly explained strategy for the future which will lead to a better company which is clearly explained to employees, those affected and those who are to remain. One of the critical jobs of leadership is not done!

These outcomes have been evident for some time and the failures in museums are the failures in business.

For instance, Right Associates (“Lessons Learned: Dispelling the Myth of Downsizing”, Philadelphia, 1992) found that in 66% to 75% of companies which had downsized neither profitability or [productivity] had increased. They argued that companies must investigate alternatives, define the new organisation, plan the downsizing, develop a communication plan and nurture the survivors. Observing that outplacement assistance fosters positive career growth they emphasised that change has to be embraced: no person or organisation can escape the consequences of downsizing.

In the study of museums around the world it was found that the museum organisations that were perceived by staff to have achieved successful change outcomes, were also perceived to have managed the change process through a strategically linked vision of the future state and communicated in ways which enabled participants to know what would happen and how they would be affected by the change, provided appropriate financial, human resource and training in support of the change the change; executives were prepared to devote the time to meeting with people and created the energy to get the change initiated and sustained by leadership action which emphasised patience and support and leading by example through modelling the appropriate change behaviours. (See Morris Abraham, Des Griffin & John Crawford, “Organisation change and management decision in museums”, Management Decision 37/10, 736-751, 1999.)

Museum executives faced with the demands of downsizing, especially when it is part of “encouraging organisations to be more entrepreneurial” have a responsibility to their museum and their staff to make it clear to those who are promoting the “solution” that they do not agree with it. Unless there are the most convincing and carefully thought through justifications! (Note that the responsibility of boards and executives is in the first place to the future of the organisation.)