Sunday, December 30, 2012

On a Tax Scandal in Greece, and How to Get a Diverse and Free Press

Along with its bond payment troubles, austerity measures, unemployment, and protests, Greece is experiencing a scandal over possibly undeclared income and unpaid taxes among its elite. The story is interesting and confusing, and it involves the press as a key actor.

Some facts (omitting lots of details) are: In 2010 France handed over to Greece’s finance ministry a list of Swiss accounts held by Greek citizens. Italy and Spain also received similar lists. Because the money could be undeclared income hidden from tax authorities, France, Italy, and Spain started investigating whether the owners of the accounts could show that they had paid tax on it. Greece’s list held 2,062 names. The head of the Greece’s tax police testified that he received 10 names to investigate. The rest of the names were not acted on, but the successor of the finance minister allegedly received a list of 2,059 names. No further action was taken, until the press started applying pressure. The existence of the list was published. Then, and this is important, the small magazine Hot Doc published the names of the individuals on the list.

What happened? First, the journalist behind Hot Doc, Kostas Vaxevanis, was arrested for violating privacy laws. He was found not guilty and released. Second, many members of the business and political elite of Greece have been shown or alleged to be on the list. The most recent revelation involves the difference between the 2,062 names held by the first finance minister and the 2,059 (allegedly) passed on to the second: the three missing names are relatives of the first finance minister. So the scandal rolls on, and is likely to strengthen the anti-austerity protestors, as well as the tax police’s ability to pursue tax cheats with political connections.

We have come to think of the press in many different ways: idealist journalists pursued by the government, big corporations who restructure everything from newsroom to printing operations, and paparazzi photographers who ambush celebrities’ private occasions and parts. But what is the origin of all this diversity? To answer that question, it is necessary to go back to the beginning of publishing, as Heather Haveman, Jacob Habinek, and Leo Goodman have done in a recent article in Administrative Science Quarterly. They looked at the background of the people starting magazines in the US in the 18th and 19th century (magazines are a good site to investigate because they are easier to start than newspapers, and are still - like Hot Doc - an influential part of the press).

What did they find? As in many industries, many early founders of magazines were from a related industry, in this case printers or other publishing professionals. But the origin of the press as an outlet for opinion as much as a profit-making enterprise was clear from the background of other early founders. They were intellectuals and professionals, a social background that also matched many of the writers, who were hobbyist writers expressing opinion in essays or writing poetry and prose. They used professional writers for getting content, but very few magazine founders were professional writers.

Did the magazine industry become more professional? In content and presentation it no doubt did. But in ownership the opposite happened. The proportion of industry professionals among founders declined dramatically, and the proportion of individuals in other professions (priests and doctors) as well as writers increased. But more remarkably, they came from much more modest means. Whereas the typical early magazine founder was highly educated and often wealthy and well-known before starting the magazine, the later founders were more likely to be common people – and this is even though access to education improved between the 18th and 19th century. Haveman and coauthors conclude that the elite background of the early magazine founders helped making magazine founding easier, paving the way for the later ones with fewer resources. It likely also helped usher in some of the protections that the US press currently enjoys, but did not have when the magazine industry started. As a result, the press became a place with broad diversity in founder background and magazine mission.

In the US, as in many other places, the press isn’t just seen as being a complex mixture of idealists, profit makers, and celebrity hunters – it really is all of those things. And the current state of the press is a direct result of its origins.

Sunday, December 16, 2012

Post of Posts: One Year of Organizational Musings

I was planning to write a blog entry today, but I lost the spark. I have seen too much news about the tragic school shooting in Newtown, CT, and it is hard to write about the latest news and research in management with that fresh in the mind. Instead, let me just give a list of the top blog posts of last year. The end of the year is a time for reruns anyway, and this happens to be the 50th blog post for me, so I have some reason for looking back.

The all time hit is my little note in honor of Judea Pearl's book on causality, and its link to how organizations learn, but not always correctly.
Also popular was the post on how the black turtlenecks of Steve Jobs became dark shirts in his successor Tim Cook; a nice case of symbolic management.

People were interested in some posts on careers, including the post on the cost differences between transferring, promoting and hiring people and the post on how leader networks are shaped by their employment histories.

Posts on organizational misbehavior also drew reader attention, including the posts on insider trading and on avoiding responsibility for the Costa Cruises accident.

The most-commented post was on how network theory could inform policy makers about the effects of drone attacks in Afghanistan and elsewhere.

The post with the most recommendations was on risk-taking effects of deadlines in American Football.  

Of course, rankings like these will always be unfair for the newer posts that have not had as much time to accumulate hits. I am guessing the ranking will be different a year from now, but this is what it looks like now. 
There will of course be more posts on this blog later! 

Sunday, December 9, 2012

Your CEO’s Child: How it Affects your Wages

We can all recall or imagine the scene seen in many firms, large or small: Somebody has a child, and the employees are gathering to celebrate the happy occasion. Let's make the scene more concrete by saying that the person celebrating the birth of a child is the CEO (chief executive officer), who happens to be a man. Now, if workers are celebrating a CEO becoming a father, there might be some tensions in the room. Some are especially eager to congratulate, thinking of it as good career management. Or maybe they are just especially happy for him, but their coworkers suspect them of doing career management. Things are never completely easy around CEOs.

If they had known about the research by Michael Dahl, Cristian L. Dezso, and David Gaddis Ross in Administrative Science Quarterly, there would have been even more tensions in the room. Chances are that these employees are about to get robbed. Dahl and coauthors looked at the effects of the CEO fathering a child on employee pay, because it would be a way to explore an interesting tension. On one hand, becoming a father might change his values to be more helpful to others. Some CEOs are thought to be short on those values, so a child might help. On the other hand, becoming a father might instead make the CEO think more of providing for his family, and so use more company resources on own rewards rather than employee pay. Either effect would be stronger for the first child. Either effect could happen unconsciously, but given CEO power over pay could be really consequential for the employee.

But now I have teased you long enough with the remark that the employees were about to get robbed, followed by a story of fatherhood and values. What were the findings? Employee pay changed following fatherhood – it fell. That’s right, the finding was not that the growth in employee pay was reduced. It was a drop in employee pay. The effect was larger for a first child. But, there is more. For employee pay, it is especially bad if the CEO has a first-born son, and it is especially bad if the employee is also male. It is less bad if the CEO has a first-born daughter, and it actually good for pay if the employee is female.

Got that? So the first child does change CEO values. Later ones do too, but not as much. The CEO becomes more helpful if that child is a daughter, and seems to especially appreciate female employees more. But at the same time, the conservation of resources for the family happens too. The CEO conservation of resources hits male employees especially hard, and especially if the child is also male. If you described these findings to me, but replaced CEO with “dominant gorilla,” employee with “gorilla tribe member,” and pay with "food" I would totally believe them, but these are humans working in formal organizations. This is pretty amazing.

Europeans might note that this is just an indication of how US CEOs can do anything they like to their employees, unlike in Europe where rules and unionization prevents such mischief. Sorry, but Dahl and coauthors used Danish data, so all this happened under a set of labor rules made to prevent pay cuts for no good reason.

So what should you do if you are attending a party celebrating the birth of your CEO's child? Have some extra cake; you might be paying for it later.