Truck and Barter

Comments

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j wrote:

I actually work for Cypress and I can confirm that TJ is a great CEO.

If you enjoyed that article, I am sure you will enjoy the rest of his writing.

http://www.cypress.com/aboutus/ceo.cfm

Be sure to read his famous "letter to a nun".

I knew I joined the right company when I learned that one of our core values is, and I quote "We deplore politicians".

-- May 20, 2004 12:55 PM ∞

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Kevin Brancato wrote:

Folks--j's not kidding:

"We deplore politicians"

It does make a great unifying principle for the right group of people. Thanks for the link.

-- May 20, 2004 1:21 PM ∞

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Caleb wrote:

"It is immoral for any CEO not to run his company in the best possible financial way for his shareholders."

Why isn't there any moral obligation to your employees?

"To me, it's simply wrong to trash the retirement funds and the college funds of my shareholders so that I can wave the American flag and talk about keeping jobs in America."

But yet it's *not* wrong to trash the paychecks (not to mention the retirement funds and college funds) of your employees? Huh.

-- May 20, 2004 9:19 PM ∞

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Kevin Brancato wrote:

Caleb,

As your objection shows, it is commonly known that it is wrong to take contractually agreed to promised monies from employees, so I think it makes sense for TJ to focus on the moral responsibilities of employees to their employers.

TJ is suggesting that employees have a moral responsibilty to make the most money for their employers--given that making-money is what they're hired to do. That is not commonly thought of as a moral responsibility.

TJ is an employee of his shareholders. Are you suggesting that they have a set of moral obligations to him? I would agree that thet do--they should hold up their end of their contract with him--but that set does not include hiring only Americans or paying employees what other people think they're worth.

Or are you suggesting that TJ acts in an immoral way toward Cypress employees? What way would that be exactly? Has he illictly taken employee's paychecks or retirement funds? Not that I know of. Or that he hasn't met his side of the mutually-agreed to contractural arrangements? As we see above, Cypress employees love his management.

Or are you suggesting that CEOs in general act in a more immoral fashion toward their employees than they do their shareholders? Or that CEOs in general act in a more immoral fashion than anybody else--politicians, generals, university professors, etc.?

-- May 21, 2004 6:38 AM ∞

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j wrote:

While some of us will roll our eyes when he starts to talk about the Packers during a company meeting, I can assure you that if anything, TJ cares too much about his employees.

TJ very clearly understands that the best way to make Cypress strong is to ensure that its employees are the best in the world (another core value), which means Cypress is going to have to go out of its way to keep such people working for them when it would be so easy to work for some other company. The main way this is done is through ownership of the company through stock option grants. Unlike many other companies, the stock options in Cypress are spread throughout the entire company, with the non-senior management holding more than the top brass (the number is around 80% in fact).

To give another example, we just got out of a rather large (biggest in the history of the company) downturn. This caused a few rounds of lay offs. Each time people were let go they were all given months of paid (full salary) time to look for something else and finish up their lose ends. The company paid for retraining classes for people who wanted them, and also brought in employment specialists to help them find other work or other careers. While it was not as good as keeping a job, it is far better than was necessary.

Another sign that the employees are taken good care of can be seen when old employees return to the company. Many times they have run off to join some start up looking to get rich quick. Other times they joined one of our competitors. When they come back they all say it was a mistake to have left, and that they missed Cypress while they were gone. These are experienced people who are not just taking any job they can get, they clearly came back to Cypress because they wanted to.

If you do not trust my data, feel free to read the following article:
http://www.cypress.com/cfuploads/pub/sjm_top50.pdf

As the founder of the company, one of the older ones in Silicon Valley these days, TJ knows that long-term value is important. The best way to serve shareholders is to make sure that he keeps his workers happy, not screw them over for some short-term gain.

-- May 21, 2004 5:26 PM ∞

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Caleb wrote:

Who are TJ’s employees? A group of Americans. Who are TJ’s shareholders? Another group of Americans. How can you possibly argue that TJ has a “moral obligation” to enrich the second group at the expense of the first? That is exactly what happens when he lays off American employees and outsources their jobs abroad. Indeed, one could with more justice argue that the shareholders have a moral obligation to accept diminished profits in order to allow their fellow Americans to have decent jobs.

I would not have a problem if TJ argued that he had a legal or pragmatic obligation to maximize his shareholder’s profits, but to couch this in terms of moral obligation is absurd and offensive. Gee, isn’t it interesting that TJ’s morality coincides exactly with his own best interests? His personal wealth and status depend precisely on how well he maximizes profits for the shareholders, so naturally that’s the only right and moral thing to do. Uh huh. Whatever it takes to help him sleep at night, I guess.

Anyway, do you really think that the ONLY moral obligation of a company is to make money and to obey contractual agreements? Or that if there are any moral obligations within a company, they only flow in one direction (upwards, from employee to employer)? If so, I couldn't agree less, although to be sure that was my own view when I was a callow undergraduate.

Many companies could easily maximize their profits by polluting the environment and ignoring workplace safety EVEN THOUGH they did not technically violate environmental or safety regulations while doing so. I hope we can agree that this would be morally wrong even when "legally right". This approach would also be very risky in this country, since it would only take one lawsuit to destroy all the profits the company gained this way. But this is exactly what companies wish to achieve when they shift production overseas – to move to a country with few or no environmental or safety regulations, and thus maximize profits in a legally correct but morally questionable way.

Similarly, I think it is "morally wrong even when legally right" to treat your workers as disposable "cost centers" with no rights such as health care or collective bargaining. Companies can only do this to a certain extent in this country, and generate all sorts of bad publicity when they do (e.g. WalMart). But, when they shift jobs overseas, the grubby foreigners don't demand health care, sick leave, vacation time, or union membership. Thus, profits are again maximized in a legally correct but morally questionable way. Moreover, this goes largely unnoticed, since working conditions and pollution in the Third World rarely make the news here.

In short, I don't see how anyone could claim that companies have a "moral obligation" to do things overseas that they would never be allowed to do here. It may be legally permissible and good for the shareholders (at least in the short term), but don't tell me it's also the "moral thing to do", because that's unadulterated Bravo Sierra.

This discussion is ultimately moot, of course, since the outsourcing debate will not be resolved on the basis of morality or even economics. When push comes to shove, the decision will be political. American voters can only be told to “eat your free trade spinach” for so long before they will fling the plate on the floor and demand radically protectionist legislation. Economists need to come up with better arguments than “sorry you lost your job, but we all benefit in the long run” if they don’t want this to happen.

Parenthetically, I do think that CEOs generally act in a more immoral fashion towards their employees than towards their shareholders. We have countless examples of this. If forced to compare the morality of those professions, I would say CEOs are more moral than politicians, but less moral than Generals or University Professors. The first two groups have greater incentive to misbehave than the second two.

-- May 22, 2004 12:31 AM ∞

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Kevin Brancato wrote:

Caleb,

You're telling me that US companies in China shouldn't pollute. This is not how an economist approaches this subject. Pollution is decreasing in wealthy societies because we're willing to spend resources to produce our goods with less environmentally-hurtful methods. The environment is relatively more important to us than improvement in real wages. This was no so in our past, and is not so today in countries with an average household income of $2000 US. If the choice is a polluted environment with some hurtful health effects but with indusrial development and far higher incomes vs. little pollution and better nature and lower wages, what would you choose?

Companies should be allowed to do things overseas that they cannot do over here. We are not part of the polities of India and China, and we cannot determine for them how companies should act.

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If the price of healthcare increases, should companies or workers pay for it? "Cutting costs" doesn't mean reducing real wages to employees. It can mean keeping the real amount a company pays in benefits (the amount not given to the employee in money) the same, but increasing the amount a worker pays, in proportion to the higher amount of service the worker receives. (With health care, everybody discusses the higher costs, but rarely the higher benefits of quantity received).

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TJ has a moral obligation to meet his stated committments to his employer. That means maximizing profits and meeting the company's committments to other employees.

There is no moral committment to pay wages that you or I think should be paid, and no moral oligation to pay wages other than those voluntarily agreed to.

Should companies pollute? On the margin, hell yes. But policy helps determine those margins. Should companies shift production overseas is asking a morally neutral question if companies are following the desired rules of the game overseas.

Also, companies have been maximizing profits for a long time--and wages have increased dramatically as a result. There is no moral obligation for companies to not cut costs so that some people can benefit today at the expense of those living tomorrow.

You raise serious arguments, but I have a fundamental disagreement about the source of moral action. I simply do not believe that one can judge the morality of wages based on their size; one must examine all alternative opportunities.

For instance, I'm perfectly comfortable with companies that insist on paying higher than market wages--if they makes this businss strategy a clear part of its charter.

For a company to advertise itself as a profit maximizer, in order to sell shares to investors at the highest price, and then to turn around to tell shareholders that maximizing profits is not a company goal is nothing but fraud--and is clearly immoral.

-- May 23, 2004 12:58 PM ∞

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Caleb wrote:

"You're telling me that US companies in China shouldn't pollute. This is not how an economist approaches this subject."

No, no, no, you're getting all distracted. This is not about economics, this is about morality, and the only reason we're talking morality at all is that TJ - mendaciously, in my view - tried to couch his economic argument in moral terms. He asserted that outsourcing was the only "moral" choice, and I cannot agree. If he had said outsourcing was a sound *economic* choice (at least in the short term for his company), I would not have contested the claim.

"Companies should be allowed to do things overseas that they cannot do over here. We are not part of the polities of India and China, and we cannot determine for them how companies should act."

True, but we should not claim that doing business with them is a "morally correct" decision on our part. Furthermore, we might have no power to determine the corporate behavior of countries that permit slave labor or gross pollution, but that doesn't mean we should smugly congratulate ourselves and our shareholders when we move business there to take advantage of the resulting low costs.

As a country, we can and should try to shape the behavior of other countries away from heavily polluting industries and other "bad" behaviors. Needless to say, we are not doing so.

"If the price of healthcare increases, should companies or workers pay for it?"

The distinction between "the company" and "the workers" is false. What is a company if not all the people who work for it? I say this as a person who works for a very large, for-profit corporation. Without the collective brainpower of our scientists and engineers, the "company" would be nothing but another cluster of three story office buildings in suburbia.

"TJ has a moral obligation to meet his stated committments to his employer. That means maximizing profits and meeting the company's committments to other employees."

I see that as a contractual and practical obligation, with no moral component. I don't think the shareholders have a "moral" claim on the company's profits at all - and certainly not a claim that precedes the moral claim of the employees to be treated decently and to derive some benefit from the profits THEY generated. (Legally, of course, the employees have no such claims.)

"There is no moral committment to pay wages that you or I think should be paid, and no moral oligation to pay wages other than those voluntarily agreed to."

Again, if you said "legal" instead of "moral", I would 100% agree with you. If we are instead talking morality, then certain aspects of the sentance are questionable. Does anyone in America today really "voluntarily" choose to work at some crappy job in WalMart or a fast-food joint, with low pay, few benefits, and no protection against instant dismissal? Or is this something they do because they live paycheck to paycheck, and absolutely need any job, even a crappy one, in order to make ends meet? In short, a lot of these people are "agreeing" to low wages with a gun to their heads.

"Should companies pollute? On the margin, hell yes."

Not only is this morally foolish, it is bad long-term strategy. In this country, at least, eventually you WILL get sued.

"Should companies shift production overseas is asking a morally neutral question if companies are following the desired rules of the game overseas."

But then don't have some pompous CEO tell me that this was a "moral duty" as well as expedient and profitable for him and the shareholders.

"Also, companies have been maximizing profits for a long time"

War and slavery have been around for a long time, too. =)

"and wages have increased dramatically as a result."

Have they? I keep hearing that the average real wage has been falling (or has been pretty stagnant) for the last 40 years, but you'd know best about that, not me.

"There is no moral obligation for companies to not cut costs so that some people can benefit today at the expense of those living tomorrow."

TJ did not ask us to "think of the future generations". He asked us to believe that morally, some people (shareholders) deserve to benefit *today* at the expense of other people (employees) who deserve to suffer *today*. This may be legal, expedient, and profitable, but it's not at all clear that it's moral.

"I simply do not believe that one can judge the morality of wages based on their size; one must examine all alternative opportunities."

I don't think a lot of people have alternative opportunities today. What exactly are the alternative opportunities for a 50-something welder or programmer who gets laid off when they moved the work to India? I certainly think there is a moral obligation to retrain such workers and ease their transition to other career paths, rather than just throwing them out in the street. Are we doing that?

"For a company to advertise itself as a profit maximizer, in order to sell shares to investors at the highest price, and then to turn around to tell shareholders that maximizing profits is not a company goal is nothing but fraud--and is clearly immoral."

Strawman. I do not advocate this, nor does anyone.

Why should absolute maximum profits necessarily be a goal, advertised or otherwise? Many people have observed that the relentless quest for maximum quarterly profits is not always a good thing. Why not some of your profits into new plant or new knowledge skills for the workforce, to ensure solid, sustainable long-term competitiveness? The shareholders may get less than the maximum possible in the short term (though how would they know this?), but they would get good, stable returns over the long run. Let them learn the virtues of deferred gratification!

From another perspective, why have external stockholders at all? Instead of those parasites siphoning off profits, you could give the profits back to the workers (via employee-owned stock) and thus ensure a motivated, high-quality workforce that wants to stay with you over the long term.

-- May 25, 2004 2:49 AM ∞

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Kevin Brancato wrote:

I don't have time to consider all of what you've written.

But to answer why have external stockholders at all? is to ask why have stock at all. We have stock because it is a voluntary means of aggregatating the capital necessary to form a large company. We have stockholders because we have stock. If you want to eliminate stockholders, you want to eliminate stock, and the voluntary means of capital formation.

And it is not a strawman that people want companies to sacrifice profits for wages--when the companies have been formed to maximize profit. This is precisely what activists and unions now want from Wal-Mart.

I wrote "Should companies shift production overseas is asking a morally neutral question if companies are following the desired rules of the game overseas." in the context of your objection that it was morally wrong to pollute in foreign countries, not wrong to outsource jobs to them. I should have written, "should companies shift pollution overseas." I still maintain that TJ is absolutely doing nothing wrong by outsourcing.

I agree with you that a 50 year old with obsolete skills has few alternatives to use those skills. I agree that he is made worse off if his job is outsourced. But many others are made better off. I do not see a morally superior action in making him better off at others expense, especially if he and his employer contracted at will.

And no, I don't think there's a moral obligation to retrain them. Is there a moral obligation to pay them cash? No. So why is there a moral obligation to give them company scrip redeemable only for "training"?

Decisions about who to employ with whose capital are made on a voluntary basis in complex multilateral and bilateral transactions. Restricting outsourcing does not make decisions about who to employ (and where) involuntary, but such outstourcing restriction narrows the sphere of voluntary exchnage and thins the market nexus. I submit that the restriction of the voluntary sphere, as a legal rule, is immoral--regardless of the impact on any one specific individual.

Also, do you really think the large bulk of Americans are worse off economically than they were in 1964? I'll go into the data some other time, but I'm talking about ease and comfort of life, and the type of products and services people are able to buy, and how long they have to work to get them

-- May 25, 2004 9:30 AM ∞