Archive for the ‘governance’ Category
Bribery at Wal-Mart de Mexico
Filed under: bribery, corruption, crime, governance, international |
Comments (5) Just when things seemed to be going so well at Wal-Mart!
Six years ago, just after I started blogging, I made a happy prediction about Wal-Mart. The company was subject to a truly enormous amount of bad press at the time, accused of everything from environmental infractions to falsifying employee time-cards. Nonetheless, I predicted that “within 5 years, Wal-Mart will be at the top of at least some business ethics / corporate social responsibility / corporate citizenship rankings.” I don’t think it was a particularly brave prediction: Wal-Mart has the money, and the organizational efficiency, to do just about anything it turns its mind to. And most of the bad things the company was being accused of weren’t central to its business model, so there didn’t seem to be any major barriers to the company turning over a new leaf in response to massive public pressure.
And my prediction turned out to be roughly right. While certainly not free of criticism, Wal-Mart has turned into an icon of environmental sustainability, and has indeed won a number of ethics-related awards. The bad press had dropped to virtually zero.
And then this.
If you haven’t yet read the stunning exposé on bribery at Wal-Mart de Mexico, you should. The short version: Wal-Mart de Mexico was apparently involved in an organized campaign to use bribery as an aid to its ambitious plans for expansion. When insiders notified Wal-Mart head office in Bentonville, Ark., of what was going on — the corruption, the devil-may-care attitude to law-breaking, the risk to corporate reputation — the big fish there basically swept the problem under the rug.
It’s a damning story, one that has vast implications all the way to the very top of the company’s world-wide operations. All kinds of questions arise. Where was the Board? What does this say about ‘tone at the top’? What role was played by international differences in law and custom? What damage will this do to Wal-Mart’s attempt to rehabilitate its reputation? What does this scandal say about the management skills of top executives at Wal-Mart de Mexico? Should heads roll? Or, more likely, whose heads should roll? To what extent does this pull the rug out from under the company’s sustainability and CSR efforts? I’ll explore a few of those questions here in the coming days.
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Citigroup Shareholders, Say on Pay, and Moral Suasion
Filed under: accountability, banking, CEOs, governance, leadership, shareholders, stakeholders |
Leave a Comment Shareholders at Citigroup have voted against the pay packages granted to the company’s top executives. Under Dodd-Frank, major firms are now required to hold shareholder votes on executive compensation at least once every three years. But the vote held Citigroup’s annual meeting on Tuesday was historic: it was the very first time that shareholders at a major financial firm have used this mechanism to express displeasure.
OK, now what? Well, that’s not entirely clear. Such votes are non-binding, and so the Board at Citigroup is legally entitled to ignore this recent vote entirely. But a widely-cited statement from the company includes the following assertion: “The Personnel and Compensation Committee of the Board will carefully consider their input as we move forward.” But really, what does that mean? And really, what should a Board of Directors do in the face of such feedback?
One problem is that a simple yea or nay vote is not very eloquent: there can be lots of reasons for saying “no” to a compensation package, and of course speculation is rampant. The Board (and its Personnel and Compensation Committee) now needs to talk to major shareholders — presumably it is already doing so — to find out what the problem is.
One analyst has been quoted as noting approvingly that this vote means the owners of big corporations are finally yanking the leash, a move towards getting things back under control. Mike Mayo, author of Exile on Wall Street, says that “[T[he owners of the big banks, namely the shareholders, are finally taking a greater amount of responsibility by speaking up.” The thinking here is that shareholders may have been objecting not just to Citigroup CEO Vikram Pandit’s $15 million dollar pay, but also to the $10 million retention payment awarded to him, and the general lack of correlation between Pandit’s pay and the company’s financial performance.
But then, while the idea that shareholders “own” the company is common, it is not uncontentious. The connection between most shareholders and the company is indeed pretty tenuous. And regardless of ownership claims, lots of people reject the idea that shareholders have any special role here, or that their voices should count for more than the voices of other stakeholder groups. Under such a view, a shareholder say-on-pay vote deserves little more than a shrug. After all, if shareholders are just one more stakeholder group, then evidence that they don’t approve of CEO pay is no more important than evidence of similar disapproval on the part of workers or suppliers or whomever.
But a shareholder vote has to count as more than just one more bit of moral suasion. For better or for worse, shareholders are, under most companies’ systems of governance, the ones to whom all insiders, including the CEO and Board of Directors, swear allegiance. Managers don’t promise to make a profit — such a promise would hardly be credible — but they do promise to at least try to make a profit, to have something left for shareholders after the bills are paid. It’s the one bit of accountability that every CEO, regardless of political persuasion, pays homage to.
Apple: The Ethics of Spending $100 Billion
Filed under: accountability, boards, charity, decision-making, economics, environment, governance, shareholders |
Comments (4) What’s the best thing to do with a hundred billion dollars? Apple — the world’s richest company — gave its answer to just that question, when it announced yesterday how it will spend some of the massive cash reserve the company has accumulated.
Of course, spending the whole $100 billion was never on the agenda. The company needs to keep a good chunk of that money on-hand, for various purposes. Then there’s the fact that a big chunk of it is currently held by foreign subsidiaries, and bringing it back to the US to spend it would require Apple to pay hefty repatriation taxes. But any way you slice it, Apple has a big chunk of cash to spend, and so its Board faces some choices.
In the abstract, there are lots of things one could do with that much money. Financial analysts had rightly predicted that Apple company would decide to pay out a dividend (for the first time since 1995). Some were predicting bolder moves, like buying Twitter (which would use up a mere $12 billion). But what could Apple have done with that much money, aside from narrow strategic moves?
The money could have, in principle, been spent on various charitable projects. That amount of money could also do a lot towards helping developing countries combat and adapt to climate change. Or it could revolutionize the American education system. Closer to home, the company could spend a bunch on improving working conditions at its factories in China, conditions for which the company has been widely criticized. All of these, and many more, are (or rather were) among the possibilities.
But business ethics isn’t abstract; Apple’s Board faced a concrete question. And the Board has ethical and legal obligations to shareholders. Those aren’t its only obligations, but once workers are paid, warranties are honoured, expenses are covered, and relevant regulations are adhered to, the main remaining obligation is to shareholders.
Now, there’s a significant strain of thought that says that a company’s managers (and its Board) are not there just to serve the interests of shareholders, but also to carry out shareholders’ obligations. So, if you believe that Apple shareholders have an obligation to fight climate change or to promote education or to improve conditions for workers, then maybe it makes sense to think that the company ought to help shareholders to act on that obligation. But keep in mind that Apple’s shareholders are a rather amorphous group. Shares in corporations change hands incredibly frequently, and the interests and obligations of shareholders vary significantly, so a Board ‘represents’ shareholders (or acts as their agent) only in a rather abstract sense.
The alternative, of course, is for Apple’s Board to give itself some leeway, forget about what shareholders’ collective obligations might be, and go back to thinking abstractly about what to do with that big pile of cash. They can simply decide whether the shareholders’ financial interests outweigh their collective obligation to do some good with that money, and simply decide which of the various worthy causes it should go to. But of course, lots of people are rightly uncomfortable with the idea of well-heeled corporate boards arrogating to themselves that kind of power. The question for discussion, then, is this. Which is the greater evil? For corporations not to step up to the plate and contribute to social objectives, or for corporate leaders to presume to spend vast sums of money as if it were their own?
Greg Smith, Goldman Sachs, and Corporate Culture
Filed under: banking, corporations, culture, employees, ethics, governance, trust |
Comments (5) By now everyone has heard that a guy named Greg Smith wrote a letter this week. Who is Greg Smith and why does anyone care? Why is Greg Smith’s letter getting attention from anyone who isn’t a Goldman Sachs employee, customer, or shareholder? Sure, he’s a mid-level executive at one of the world’s most powerful financial institutions. So he’s certainly not a nobody. And sure, Goldman, like other big financial institutions today, is seen by many as the corporate embodiment of evil, and so people are bound to be fascinated by an insider’s repudiation of the firm — especially accompanied, as it was, by a good dollop of juicy details. But there’s more to it than that, and the “more” here is instructive.
I think the key to understanding why Smith’s letter caused such an uproar is the fact that Greg Smith’s letter taps into the deep, dark fear that every consumer has, namely the fear that, somewhere out there, someone who is supposed to be looking out for us is instead trying to screw us. Smith’s letter basically said that that is exactly what is going on at Goldman, these days: the employees charged with advising clients about an array of complex financial decisions are, according to Smith, generally more focused on making money than they are on serving clients.
Now, first a couple of words about the letter. It goes without saying that we should take such a letter with a grain of salt. It’s just one man’s word, after all. Now that doesn’t make Smith’s account of the tone at Goldman implausible. He’s not the first to suggest that there’s something wonky at Goldman. It just means that we should balance his testimony against other evidence, including for example the kinds of large-scale surveys of Goldman employees that the company’s own response to Smith’s letter cites. Then again, such surveys are themselves highly imperfect devices. Either way: buyer beware.
(Note: one group that must take this stuff seriously is Goldman’s Board of Directors. A loyal employee taking a risk like Smith has is not a good sign, and his story deserves to be investigated thoroughly by the Board.)
OK, so let’s bracket the reliability of Smith’s account, and ask — if it accurately reflects the tone at Goldman — why that matters.
It matters because of this awkward fact: in many cases, in business, all that stands between you the customer and getting ripped off is that amorphous something called “corporate culture.” Most of us are susceptible to being ripped off in all kinds of ways by the businesses we interact with. That’s true whether the business in question is my local coffee shop (is that coffee really Fair Trade?) or a financial institution trying to get me to invest in some new-fangled asset-backed security. My best hope in such cases is that the business in question fosters a culture within which employees are expected to tell me the truth and help me get the products I really want.
Now culture is a notoriously hard thing to define, and harder still to manage. Culture is sometimes explained as “a shared set of practices” or “the way things are done” or “the glue that holds a company together.”
Why does culture matter? It matters because, other things being equal, the people who work for a company won’t automatically feel inspired to spend their day doing things that benefit either the company or the company’s clients. People need to be convinced to provide loyal service. In part, such loyalty can be had through a combination of rewards and penalties and surveillance. Work hard, and you’ll earn a bonus. And, Treat our customers well, or your fired. And so on.
But sticks and carrots will only get you so far. Far better if you can get employees to adopt the right behaviours voluntarily, to internalize a set of rules about loyal service and fair treatment. An employee who thinks that diligence and fair treatment just go with the turf is a lot more valuable than one who needs constantly to be cajoled. And, humans being the social animals that we are, getting employees to adopt and internalize a set of rules is a lot easier if you make it part of the ethos of a group of comrades. Once you’ve got the group ethos right, employees don’t act badly because, well, that’s just not the sort of thing we do around here! In the terminology used by economists and management theorists, culture helps solve ‘agency problems.’ Whatever it is that you want employees to be focusing their energies on, corporate culture is the key.
Of course, there’s still the problem of what exactly employees should be focusing their energies on. Should they be taking direct aim at maximizing profit? Or should they be serving customers well, on the assumption that good service will result in profits in the long run? In any reasonably sane market — one without ‘TBTF‘ financial institutions — the latter strategy would be the way to go, practically every time. And that fact is precisely what makes large-scale commerce practical. Consumers enjoy an enormous amount of protection from everyday wrongdoing due to the simple fact that most businesses promote basic honesty and decency on the part of their employees.
Unfortunately, it’s far from clear that Goldman operates in a sane market. So it is entirely plausible that the company could have allowed its corporate culture to drift away from seeing customers as partners in long-term value creation, toward seeing them as sources of short-term revenue. I don’t know whether Greg Smith’s tale is true, and representative of the culture at Goldman Sachs. But if it is, that means not just that Goldman isn’t serving its clients well. It means that Goldman embodies a set of values with the potential to undermine the market itself.
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If Facebook Were a Country, Would Zuckerberg Be King?
Filed under: accountability, CEOs, corporations, governance, shareholders |
Comments (1) I’m serious. Is Mark Zuckerberg aiming to be the hereditary sovereign of the Kingdom of Facebook?
Amid all the ballyhoo about the Facebook IPO, concerns have arisen about the ownership structure — and, hence, governance structure — structure that the company’s plan implies. As Matt Yglesias recently outlined, the current plan implies considerable continuing power for Zuckerberg. Given the number of Class B shares he owns, along with proxies he controls, Zuckerberg effectively has “57 percent of the voting rights over the company.” In addition, his control will be transferred to whomever inherits his fortune.
Is this a good thing or a bad thing? A couple of points, both having to do with how Zuckerberg will use his power.
One is that, interestingly, Zuckerberg has (in a letter to investors) disavowed a focus on profits:
“Simply put: we don’t build services to make money; we make money to build better services.
And we think this is a good way to build something. These days I think more and more people want to use services from companies that believe in something beyond simply maximizing profits….”
Some will rejoice at this. But of course, when a company says it’s going to aim at things beyond profits, there’s no particular reason to think that they’ll aim instead at goals you approve of. Facebook is a powerful company, grounded on a potent technology. Whomever controls it has the power to do a lot of good, or a lot of evil. And as I’ve pointed out before, Zuckerberg holds some dangerous views about, for instance, things like privacy.
Some of the comments under Yglesias’s piece have suggested that Yglesias exaggerates just how unique Facebook is in this regard. Other companies have been controlled by powerful central figures. Fair enough, but Facebook isn’t your average company. In a very real way, Facebook is becoming part of the infrastructure of modern life. In its role, it is more like a public utility than a private company. That puts the company — and its leader — in a very different position than, say, Ford or Exxon. Facebook really is more like a nation, and so he who controls it really is more like a political leader. This casts a very different light on how we evaluate not just the man, but the processes that are in place to guide his judgment.
Should Penn State’s Board Resign?
Filed under: accountability, boards, education, ethics, excuses, governance, public relations, sports, stakeholders, transparency, trust |
Comments (4) In the wake of the Sandusky sex-abuse scandal the question has arisen whether Penn State University’s Board of Trustees should tender its collective resignation. And now, following the death of Coach Joe Paterno on Sunday, the question has taken on additional emotional resonance. The university’s Faculty Senate is scheduled to discuss a motion to strike an independent committee to investigate the Board’s role in the whole affair, and indeed has seen at least one motion calling for the entire Board’s resignation.
So, should the members of the Board be asked to resign? And if not, should they do so of their own volition?
To answer these questions, here are some questions that need to be considered:
Fist, did indeed the Board fail in its fiduciary (‘trust-based’) duties? It’s worth noting that the Board has been under fire from two different directions, here. Some think the Board failed in not staying sufficiently ‘on top of’ the Sandusky situation, and in resting satisfied with whatever dribbles of information the university administration saw fit to feed them. (The only detailed account I’ve read so far paints the Board in a rather sympathetic light, in this regard.)
Others think the Board failed in firing — in their eyes, scapegoating — the beloved Paterno. Both sides think the Board screwed up, but for very different reasons. Of course, both can be right at the same time. Perhaps the Board has just generally done a bad job, first by letting the situation get out of hand and then second by botching the task of responding to it. Rather than cancelling each other out, maybe these two sets of complaints just compound each other.
Next, we need to ask, if the Board failed, was it a failure of people or a failure of structure? A board, after all, is both an institutional structure and a set of people occupying that structure.
If it was a failure of structure (and, as governance expert Richard Leblanc wrote back in November, there are serious problems with how Penn State’s board is configured) then there’s little reason to think that a change of personnel on the Board is either necessary or sufficient to fix the problem. And if instead it was a failure of people, then getting rid of them all is a blunt, but perhaps effective, way to solve the problem — providing, of course, that the new people brought in to replace them are better.
Of course, the problem is that it’s difficult to distinguish between a failure of people and a failure of structure, in a case like this. Perhaps people better-suited to the job would have risen above the confines of a poorly-structured board, or lobbied to have its structure revised. Human behaviour and institutional structure shape each other.
And finally, regardless of the above questions about the sources of failure, it might be the case that the removal or resignation of the Board is necessary in order to restore public confidence. That is, even if the individuals currently on the Board are not in any way to blame, the fact that key stakeholders have lost faith in the Board might be sufficient grounds for calling for the entire Board to go. Without the confidence of key stakeholders, any Board is going to find it hard to do its job.
But then, while the current Board certainly faces challenges, so would an entirely new Board. The loss of continuity that would result from a 100% change in membership could seriously impair the Board’s functioning, and make it even more reliant on — and susceptible to control by — university administrators. There’s a good reason why well-governed boards have careful plans in place to make sure that new blood is brought in regularly, rather than en masse. In the end, it seems to me that the best prescription is this. The Board of Trustess at Penn State needs to see substantial structural change. It also needs enough new blood to restore confidence, while retaining enough of the old guard to ensure continuity. Beyond that, the Board is just going to have to do its best to muddle through whatever challenges lie ahead, with whatever strengths and limits it possesses, just like any other board.
Must the CEO Go Down With the Ship?
Filed under: accountability, CEOs, contract, decision-making, disaster, ethics, excuses, governance, leadership, shareholders |
Comments (2) 
Two days ago, I asked — in the wake of the Costa Concordia disaster — whether the captain is duty-bound to “go down with his ship.” The question, I said, bears not just on the obligations of sea captains, but on individuals in positions of responsibility at organizations of all kinds. It also has implications for how organizations enculture individuals so that they see following through on promises as more than just a contractual obligation.
But today I’ll make explicit the analogy that is likely on the minds of most readers of this blog: never mind sea captains…what about CEOs? Does the CEO of a “sinking” company have a duty to “go down with the ship?”
First, it’s worth pointing out that sea captains don’t literally have to go down with the ship: closer to the truth is that they’re supposed to be the last ones off, or as close to last as is possible and permits them to do their duty to preserve the lives of crew and passengers. Similarly, bankruptcy for the company doesn’t literally have to imply bankruptcy for the CEO. In some cases, surely, bankruptcy isn’t the CEO’s fault, and there’s no reason to think that justice demands that a blameless CEO walk away penniless. But they should stick around to see the job done, even if that implies some financial risk to themselves.
Second, it seems to me that, as in the case of sea captains, the answer here has to depend a lot on the details of the situation. Sometimes staying aboard will genuinely help, and sometimes it won’t. Also, a CEO’s ill health might be a decent excuse, in some cases. And indeed, some corporate “captains” aren’t even wanted on a sinking ship: in 2008, for example, the US government forced Robert B. Willumstad to resign as CEO of the faltering AIG, and replaced him with Edward M Liddy. The idea that the captain should stick around to help only makes sense where the captain’s services continue to be seen as having value.
Third, there are several different ways in which a CEO can “abandon ship,” and they might not all be equally ethically bad. Abandoning ship could mean selling shares that are about to tank, or it might mean resigning prior to bankruptcy. Or it might mean resigning prior to an inevitable criminal investigation: several rats are known to have abandoned Enron’s sinking ship — Jeff Skilling, for example. Worst of all, perhaps, are “take the money and run” situations. Arranging a bonus for yourself just prior to declaring bankruptcy is the moral equivalent of looting the ship’s safe (or perhaps scuttling all the lifeboats) prior to prematurely abandoning ship.
As always, we need to be careful when engaging in moral reasoning by analogy. A company is not a boat, and bankruptcy is not the same as sinking. But what’s certainly true is that in both cases, the ethical requirements of leadership don’t end at the first sign of trouble.
The Virtues of Local Ownership
Filed under: accountability, corporations, CSR, decision-making, entrepreneur, governance, retail, shareholders, SME, stakeholders, values |
Leave a Comment There’s plenty in the news these days about the supposed virtues of “buying local.” Buying local usually means buying from small businesses. As I’ve argued before, in at least some cases buying local also means opting for small-scale, inefficient production processes. And in other cases, it means an unhealthy kind of insulation from the outside world.
But what about the virtues of specifically local ownership, when the ownership in question is ownership of what is otherwise a standard-issue department store, replete with goods ‘Made in China,’ as the stereotype goes?
The New York Times recently reported on an effort by a small town in upstate New York to ensure its residents have access to some sort of local department store. When the local Ames department store went out of business a few years back, residents of Saranac Lake — pop. 5,041 — took matters into their own hands. They raised the capital, at $100/share, to open their own department store.
It’s a charming story, and an interesting experiment, but we ought to exercise some caution before attaching too much significance to it.
First, it will be tempting to see this as radical re-visioning of modern capitalism. To see examples of such a temptation, see the 2004 Avi Lewis and Naomi Klein documentary, The Take, about the takeover of a defunct Argentinian factory by its former employees. Lewis and Klein portray that takeover as an example of the pursuit of a real alternative to capitalism — despite the fact that the cooperatively-run factory is still buying inputs on the open market, selling goods on the open market, and so on.
Were it not for movies like The Take, it might go without saying that innovations in ownership structure don’t eliminate the fundamental challenges of capitalism, and certainly don’t eliminate the standard ethical issues that face all businesses. The department store in Saranac Lake is — setting aside a few nods to local sourcing — just a regular department store. It’s got employees, so it will face questions about how those employees are treated. It’s smaller than your typical Walmart, but it will still face questions (or at least it should) about where its products come from, the conditions under which they’re manufactured, and so on. And its managers will still face questions about how to balance the good of the community as a whole with their obligation to be fiscally responsible. And so on.
Not that we need to be entirely cynical about the Saranac Lake experiment, and others like it. There’s at least a prima facie case to make for the significance of local ownership. Managers of a locally-owned store have at least some sense of what kinds of things shareholders would want them to do, and hence seem less likely to violate the trust placed in them. When you know your shareholders by name, you can ask them what they want, and they can tell you what obligations they feel to the community, and they can then ask you, their representative, to make good on those obligations.
In the end, I think experiments in capitalism are good. Indeed, the way it fosters experimentation is one of the great virtues of capitalism. We ought to keep a careful eye on such experiments, both for what we can learn about their particular virtues, and for what we can learn about the nature and structure of capitalism more generally.
Why $100-million Is Too Much
Filed under: accountability, boards, CEOs, compensation, corporations, energy, governance |
Comments (3) It was widely reported yesterday that former CEO of Nabors Industries Ltd., Gene Isenberg, will be the recipient of a $100 million severance payment. Except, he’s not leaving the company — he’s staying on as Chairman of the Board. Confusion and criticism has ensued.
For the most part, I think that executive compensation, even outlandish executive compensation, is in principle a private matter. If a bunch of shareholders want to pay their CEO a gazillion dollars — whether because they think he’s the one guy who can build long-term value or because they just think he’s a swell guy — well, that’s none of my business. I may think those shareholders are fools, or spendthrifts. But there’s little reason for me to be morally concerned. I don’t tell you how much to spend on your babysitter or your dry cleaning or your car. And I shouldn’t tell you how much to spend on your CEO.
In principle.
But two factors get in the way of applying my in-principle argument to the present case.
One factor begins with the observation that shareholders don’t, in fact, generally make the decisions regarding how much total compensation the CEO gets. That task is delegated to the Board of Directors, who in turn generally delegate it to their Compensation Committee. Now again, in principle, this is purely a private matter. If the Board isn’t serving the shareholders well, the shareholders have cause to complain, and (yet again, in principle) they can always fire the Board if they feel sufficiently poorly served. But we have ample evidence that shareholders very often aren’t well-served by boards. Add to that the fact that proper functioning of corporate governance (and hence of capital markets) is clearly a matter of public concern, and you have at least the beginnings of a public-interest argument for interference in what would otherwise be a private matter.
The other reason why excessive pay isn’t always a purely private matter has to do with the government’s (i.e., the public’s) role (and support of) an industry. Note, for example, that Nabors is an oil-drilling contractor. So the $100 million that Isenberg is getting isn’t merely a share of privately-gained profits. It’s a share of the profits from a heavily-subsidized industry.
So boards of directors do have some public obligations related to how they choose to compensate executives (even if, as I’ve argued before, outsized compensation isn’t automatically unfair). Corporate directors are not just part of private institutions; they’re part of a system justified, in part, by its public benefits. And the more they seek to gain private benefits in the form of subsidies, the greater their obligations to the public become.
World Standards Day: Celebrate or Mourn?
Filed under: experts, governance, international, regulations, standards, trade |
Comments (2) Today happens to be World Standards Day, a day that honours the work of the thousands of experts involved in setting the huge range of voluntary international standards that regulate production and trade in a globalized economy. Depending on your view of globalization, it’s a day either to be celebrated or mourned.
The standards in question include various standards established by groups like the International Electrotechnical Commission (IEC), the International Organization for Standardization (ISO), and the International Accounting Standards Board (IASB).
I’m currently reading a very good book on just this topic, namely The New Global Rulers: The Privatization of Regulation in the World Economy, by Tim Büthe and Walter Mattli. The book examines the wide and growing range of international, private (i.e., non-governmental) standards being set by groups like the IEC, ISO, and IASB. As Büthe and Mattli point out, such standards are a double-edged sword.
On one hand, they facilitate the international flow of goods and services, making it easier for companies to ship products overseas or set up branch offices in foreign countries without learning entirely new, idiosyncratic local standards. And (being established by international groups of experts) they do this without the direct participation of governments that may not have the financial or technical capacity to set such standards. On the other hand private, international standards don’t bring benefits equally to all: not all companies are equally-well equipped to switch from older national standards to newer international ones, and some countries’ internal regulatory regimes make the switch even harder. And regardless, as Büthe and Mattli point out, adopting new standards always brings costs, including things like the costs of training, the cost of redesigning products, and even paying licensing fees for proprietary technologies.
It seems appropriate, at this juncture — while the Occupy Wall Street movement is a) lamenting the nature of government-industry interaction, and b) deciding whether it is or is not part of the anti-globalization movement — to give some serious and well-informed thought to the desirability of regulatory regimes that are both non-governmental and international.
