Category — Corporate Governance

“Business that is everything to everyone is not anything at all in itself.”

 - Elaine Sternberg,  Just Business: Business Ethics in Action. Oxford University Press, 2000, p. 33.

No doubt his handlers have given Al Gore the word: go easy on climate warming (aka climate change). The issue has little traction. You are the wrong voice for the cause. Solyndra. Climategate 2.0. Winter snows…. Not now, Al.

Take it up a notch! they must be telling him. Think bigger. Subsume the issue…. And so Gore’s new piece in the Wall Street Journal barely mentions his pet issue of (man-made) climate change but something much larger and amorphous.

“A Manifesto for Sustainable Capitalism,” coauthored with David Blood, calls for “abandoning short-term economic thinking for ‘sustainable capitalism’.” Such is code for that subjective, holistic, anything goes doctrine of corporate social responsibility, which I elsewhere questioned as follows:

The discipline of business ethics should be reoriented around a more sophisticated understanding of capitalism proper. Business ethicists should also respect methodological individualism given that in both the primary and final analyses, businesses do not act, individual businessmen and businesswomen do. Because corporate social responsibility (CSR) speaks to the elusive whole more than to the parts, much business-ethics thinking has become prone to a central- and social-planning mentality.

Think Enron! As I wrote in this rebuttal letter published yesterday in the Journal:

Al Gore and David Blood’s “A Manifesto for Sustainable Capitalism” (12/14/11) reminded me of nothing so much as Enron Corporation, whose demise ten years ago is still the topic of debate and learning.

“We believe that incorporating environmental and social considerations into the way we manage risk, govern our projects, and develop products and services will help us maintain our competitive advantage,” Ken Lay stated Gore-like. “As we move forward, we will leverage our intellectual capital and innovative capabilities to promote sustainable business practices around the world.” [Read more →]

[Ed. note: This week marks the 10th anniversary of Enron's bankruptcy filing (December 2, 2001). Enron's view of energy sustainability drives the Obama Administration today. Yesterday, this series looked at Enron's Kyoto moment.]

 In the fall of 2001, Ken Lay set the tone for what would be Enron’s last Environmental, Health, and Safety Management Conference:

We believe that incorporating environmental and social considerations into the way we manage risk, govern our projects, and develop products and services will help us maintain our competitive advantage. As we move forward, we will leverage our intellectual capital and innovative capabilities to promote sustainable business practices around the world.

At this meeting, Enron’s Corporate Social Responsibility (CSR) task force listed its “Accomplishments to Date,” which were:

• Secured board oversight of social/environmental performance
• Expressed support for Universal Declaration of Human Rights
• Completed corporate responsibility task force
• Developed and pilot-tested human rights audit
• Developed security and human rights guidelines
• Established formal partnerships with WBCSD [World Business Council on Sustainable Development], IBLF [International Business Leaders Forum], and CI [Conservation International]
• Identified language to strengthen code of ethics
• Providing project support—Calypso, Transredes, Dabhol and Cuiabá
• Responding to stakeholder concerns on an ongoing basis

The goals for 2002 included:

• Formally adopt CERES Principles
• Complete indigenous peoples’ policy
• Specify social/environmental expectations in formal relationships with vendors and contractors
• Review results of stakeholder survey and develop strategy to address outcome
• Create awareness of social/environmental trends among [Enron’s] origination and investment groups
• Add corporate responsibility performance attribute to PRC [Performance Review Committee] process
• Present task force recommendations to Dr. Lay and senior management

Make no mistake—Enron was trying to practice CSR, so that it could monetize its “green” energy model. This had been Lay’s strategy for a decade with natural gas, as well as internationally, as with Enron Global Affairs’s 1999 launch of the Social and Environmental Responsibility Program. [Read more →]

Call it the iron law of political economy: Government goes to those who show up.

The good news is that limited-government groups are showing up. And they are not pro-industry (such as the natural gas industry) but pro-consumers, pro-taxpayers, and pro-marketplace. The bad news is that too many business leaders–and think T. Boone Pickens in this instance–are using their resources to politicize industry.

Elements of the gas industry want to use special government favor to increase demand and thus prices of their product. A quick summary of the New Alternative Transportation to Give Americans Solutions Act was given by the Leftie group DeSmogBlog:

As stated in an earlier article, “The bill is 24-pages long and rewards [natural gas vehicles] with tax [subsidies] to help ‘drive’ consumption. The bigger the vehicle, the more tax credits given.” The bill’s main purpose is to build up a massive fueling and vehicle infrastructure for the natural gas industry, which currently does not exist in the United States.

The NAT GAS bill was written by and for natural gas insiders, chief among them energy magnate T. Boone Pickens, Chesapeake Energy CEO Aubrey McClendon, and Clean Energy Fuels CEO Andrew Littlefair — referred to in an earlier post as the “self-enriching trifecta.” The bill currently possesses 183 bipartisan co-sponsors and until finally getting a hearing Friday, had sat in the Congressional coffers since early April. [Read more →]

The U.S. Department of Energy publishes periodic reports (see the latest) on federal government subsidies to energy production in the U.S.  These reports total up the costs of direct financial support for various energy technologies, tax incentives, research related to marketing and implementation and price support.

Federal support for energy in FY 2010 alone includes the following activities:

Direct Expenditures to Producers or Consumers – $14.3 billion. Federal programs involving direct cash outlays that provide a financial benefit to producers or consumers of energy.

Tax Expenditures – $16.3 billion. Provisions in the federal tax code that reduce the tax liability of firms or individuals who take specified actions that affect energy production, consumption, or conservation.

Research and Development (R&D) – $4.4 billion. Federal expenditures aimed at a variety of goals, such as increasing U.S. energy supplies or improving the efficiency of various energy consumption, production, transformation, and end-use technologies.

Loans and Loan Guarantees – $1.6 billion. Federal financial support for certain energy technologies.  .  .  [in particular] innovative clean energy technologies. ¹

Electricity programs serving targeted categories of electricity consumers in several geographic regions of the country – $0.6 billion. Theses are primarily activities of the Tennessee Valley Authority (TVA) and the Power Marketing Administrations (PMAs), which include the Bonneville Power Administration (BPA) and three smaller PMAs.

Of this total of over $37 billion, about $21 billion went to energy production, the remaining $16 billion was spent on electricity transmission & distribution, conservation and efficiency and automobile programs.  This paper focuses on federal subsidies to energy production. [Read more →]

“They about had an orgasm in Biden’s office when we mentioned Solyndra,” read a Feb. 27, 2010, email from [Ken] Levit to [Steve] Mitchell. A follow-up email from Mitchell to Levit later that day responded, “That’s awesome! Get us a [Department of Energy] loan.”

- Quoted in “Emails Reveal Biden Team’s Enthusiasm Over Solyndra Loans,” Fox News, November 9, 2011.

Kids in the taxpayer candy store. That describes the heady days when Solyndra executives and lobbyists gleefully found out that the politicians loved their speculative, defective product. It turns out that Solyndra was a photo-op for President Obama and his “dream ‘green’ team”–one that may well end up being their undoing. (Does Obama use the term ‘green jobs’ anymore?.)

Enron was the canary in the renewable-energy coal mine. Ken Lay had a vision for Enron to become the world’s leading renewable energy company, part of the company’s green and Corporate Social Responsibility imaging. [1]

Enron’s investments in solar and wind produced financial losses in each year of operation, but many photo ops were generated, including a solar project that duped the New York Times.

Solyndra’s orgasmic glee in Vice President Biden’s office reminds me of the dreamy memo by John Palmisano, Enron’s lobbyist in Kyoto, Japan, written the day after the Kyoto Protocol was ratified in late 1997.

With the tenth anniversary of Enron’s bankruptcy filing just weeks away, this is an opportune time to remind one and all of just what the whole global warming crusade meant for the most rent-seeking of all rent-seeking companies, Enron. Excepts follow…. [Read more →]

The longtime chairman of the Cato Institute, William N. Niskanen, passed away last week at age 78. We shared the podium a few times on energy issues, and I admired his Enron project at Cato that resulted in two books, Corporate Aftershock: Lessons from the Collapse of Enron and Other Major Corporations (2003) and After Enron: Lessons for Public Policy (2005).

Like virtually everyone else who knew him, I remember Bill as a scholar and gentleman. He had one tone of voice and reliably imparted insightful logic. He was what I like to call a scholar’s scholar, role model for the rest of us.

Career

William Arthur Niskanen Jr. (1933–2011), born in Bend, Oregon, graduated from Harvard University with a degree in economics in 1954. He earned his economics doctorate in 1962 from the University of Chicago.

After teaching at the the University of California at Berkeley, Niskanen Joined Ford Motor Company in 1975. Forced out at Ford (see below), Bill worked as an economist at the Rand Corp., the Department of Defense, and the Office of Management and Budget.

Niskanen then joined Ronald Reagan’s Council of Economic Advisors (1981–85), after which he joined Cato where he served as chairman for 23 years before becoming chairman emeritus in 2008. He was the ‘establishment’ figure that Ed Crane needed badly for Cato to reach the next level, and Ed pulled off the deal to make it happen.

‘Blunt Libertarian Economist’

The New York Times obituary described Niskanen as “a blunt libertarian economist.” But Cato’s Gene Healy, in his tribute Farewell, to the Most Honest Man in Washington, brought attention to the “vastly more interesting and admirable” side of the man. “Bill Niskanen had the kind of character that’s vanishingly rare in Washington DC,” wrote Healy. “He was a man who put principle above partisanship and personal gain.”

Bill Niskanen will be remembered for various things. One was his root insight into how the government really works as versus the romantic view of government.

The bureaucrat, in Niskanen’s words,  “is a ‘chooser’ and a ‘Maximizer’ and … not just a ‘role player’ in some larger social drama.” [Bureaucracy & Representative Government. New York: Aldine Atherton, 1971, p. 5.]

Ford Motor Company: A Great Freedom Moment [Read more →]

“Sorry to bother you with this…. Rob is obviously not a fan of renewables or the global warming issue.  Unfortunately, he works for a company that is.”

- “Rob Bradley’s Writings.” Tom White [chairman & CEO of Enron Renewables Energy Corp. ] to Ken Lay [chairman & CEO of Enron Corp.], June 8, 1998.

The Confluence, a blog advertising itself as “Democrats Putting Principle Over Party,” recently criticized a new initiative of the Institute for Energy Research, Stop the Energy Freeze. After reciting some peak-oil arguments against IER’s case for expanding access and production of domestic oil and gas resources for new jobs and greater BTUs, the post Sunday: Spreading the mess to YouTube goes after yours truly.

I also bothered to look up who was behind this Stop the Energy Freeze campaign.  It’s the Institute for Energy Research and it seems to be particularly concerned with oil that is currently off limits in the Gulf of Mexico, for some strange reason.  Maybe that’s because they’re based in Houston?  Or maybe it’s because it’s because it’s been touted by Rush Limbaugh who hasn’t met a resource (natural or human) that he hasn’t considered exploitable?

Ahhh, this little tidbit is interesting.  The co-founder and CEO of The Institute for Energy Research is some dude named Robert L. Bradley.  And HE used to work for Enron and Kenneth Lay.  You know, the Smartest Guys in the Room?  The ones whose traders used to yuck it up about how they were going to f$^& over some Granny in California by manipulating the energy market?  The company that made all of its employees invest in Enron stock in their 401Ks and then locked them out of their accounts when the price plummeted so that they lost EVERYTHING? 

Yeah, that Enron.  Bradley was the PR guy.  He’s also an adjunct “scholar” of the Cato Institute.  How charming.  Is that where he learned to deceive unsuspecting youtube viewers?  Is the liberty to make the end really justify the means ensconced in the Constitution somewhere?  Are we free to pull the wool over citizen’s eyes with bullshit?  I guess it’s the responsibility of every rugged individualist to be on his guard.

Well, I founded (not co-founded) IER, and headquarters is in Washington, D.C. (not Houston where I continue to work). And most importantly, I was a quite arguably public-policy whistleblower against “green” energy inside the company. [Read more →]

Previous posts at MasterResource have been critical of the energy-related positions of the U.S. Chamber of Commerce, such as The U.S. Chamber’s Energy Security Index: Where’s the Definition? by Robert Michaels and Dear U.S. Chamber of Commerce: Why Attempt to Resuscitate a Brain Dead Climate Bill? by yours truly.

The Chamber, in fact, was waxed and waned for and against the free-and-neutral market for virtually its whole existence. Such is life in political capitalism where special government favor is sought and received by business.

John T. Flynn’s 1928 essay, “Business and the Government”   (Harper’s Monthly Magazine), criticized the Chamber motto More Business in Government and Less Government in Business as ”sloganeering.”

Flynn noted that new laws were coming far less from the imaginations of legislators as from “the legislative program committees of trade associations or from the special counsel of trade groups … backed often by resolutions from trade conventions and chambers of commerce.”

The Chamber, complained Flynn, was falsely selling a view of business “as a huge giant, gagged and shackled like a moving-picture galley slave to his oar,” to which Flynn forwarded his own ideal for the Chamber: Less business interference in government and more statesmanship in business. (Quoted in Bradley, Capitalism at Work, chapter 6, pp. 172–74.)

Flynn, early on, captured the essence of free-market capitalism and Principled Entrepreneurship™.

The September 5th Letter

The September 5^th letter from the Chamber of Commerce to the U.S. Congress and President Obama, reprinted below, is noteworthy for its free market flavor. With government running on empty, and the public mood against Big Government in most areas, the Chamber has come a long way from its disappointing cap-and-trade position on carbon dioxide (CO2) emissions and its watered down energy White Paper.

The six point jobs plan was singed by Thomas Donohue, president and CEO of the Chamber. [Read more →]

[Editor Note: With T. Boone Pickens (et al.) trying to get natural gas vehicles off the ground with a $80,000 per vehicle special tax break, it is worth examining the origins of the political means versus the economic means to business (profit/loss) success. All roads lead to Franz Oppenheimer (1864–1943), a German sociologist/political scientist who saw capitalism's business leaders at work.]

“I propose in the following discussion to call one’s own labor, and the equivalent exchange of one’s own labor for the labor of others, the ‘economic means’ for the satisfaction of needs, while the unrequited appropriation of the labor of others will be called the ‘political means’.”

- Franz Oppenheimer, The State. New York: Free Life Editions, 1908 (1975), pp. 24-25 (full quotation at end of blog).

MasterResource sharply distinguishes between enterprise that is motivated by and dependent upon consumer demand in a free market, and profit-seeking that is abetted by special government favor (SGF). SGF can be a special provision in the tax code, a check from the U.S. Treasury, or a regulation that benefits a company or whole industry at the expense of consumers or taxpayers.

The useful terms economic means and political means were introduced by Franz Oppenheimer in 1908 (see above) and have become part of libertarian political economy as explained at Wikipedia: [Read more →]

“The two greatest enemies of free enterprise in the United States … have been, on the one hand, my fellow intellectuals and, on the other hand, the business corporations of this country.”

- Milton Friedman. “Which Way for Capitalism?” Reason, May 1977, p. 21.

Special government favor. A little something for nothing at the other’s expense…. Sure, a particular business or industry can gain in the short run. But when everyone is getting the booty, almost all lose.

Just look where government is today. The chronic, gargantuan federal budget deficit is testament to the Enrons then, GEs now  receiving government subsidies from either the U.S. Treasury or the tax code. The rest of us pay (or will pay) what the rent-seekers are getting and not paying for (outside of their lobbying costs).

Business has been a force for regulation. In the twentieth century, the energy industry was behind the large majority of major government intervention with oil, natural gas, and coal. As I concluded in Oil, Gas, and Government: The U.S. Experience:

As a rule, the free market was the “default” situation into which government intervention was introduced to achieve business objectives. In the great majority of cases, identifiable industry coalitions led the way. The history of regulation of the oil and gas industry is the story of how compromise and pragmatism, in the absence of principle, created interventionist pressure at every turn. When it was costless, the industry proclaimed its support for the free market in principle. But this philosophical leaning meant little when more was at stake. (1)

The same is true with electricity, a story that my forthcoming book, Edison to Enron: Energy Markets and Political Strategies, will detail through the rise and fall of the father of the modern power industry, Samuel Insull.

And so it is with 21th-century energy interventionism. Whether Enron saving the domestic wind industry or Pickens trying to politically wedge natural gas in the transportation market by T. Boone Pickens, political capitalists are expanding the government side of the mixed economy.

T. Boone Pickens circa 1987, 2000

Guess what? The pre-Pickens Plan T. Boone gave ample warning against the very behavior that characterizes him today.

If I were a congressman questioning Pickens under oath, I would read him the following quotations and ask him for comment–and then get to the sour economics of whatever he is pushing for the government to push on consumers.

Four quotations (with references) follow: [Read more →]