Strategic CSR - Earnings guidance

Well, this isn't exactly the rationale I was hoping for, but the article in the url below notes that more companies are refusing to issue quarterly earnings guidance -- a blow to the short-term thinking (and misguided focus on shareholder value) that dominates our economic system: 

"Et tu, Walmart. Analysts covering the world's largest retailer will have to sharpen their pencils now that it has joined several other companies in scrapping quarterly earnings guidance (it kept it for the full year)."

It seems that the uncertainty injected into the economy, in recent months, is the 'excuse' CEOs are drawing on to avoid the glare of quarterly expectations:

"'Uncertainty' is practically a dirty word on Wall Street. After competitors scrapped their public forecasts, United Airlines instead took the unusual step last month of publishing two scenarios—one for a recession and another for an expansion."

As the author notes, however, the better approach might have been to scrap earnings guidance (i.e., not earnings reports) altogether:

"Unfortunately, that is a luxury mainly available to elite CEOs who are extremely secure in their jobs: Apple's Tim Cook, JPMorgan Chase's Jamie Dimon and, of course, Warren Buffett, who recently announced his impending retirement after six decades running Berkshire Hathaway."

Such a narrow focus on shareholder value, of course, is a relatively recent phenomenon, driven by neoliberal economic theory in the twentieth century (which resulted in most CEOs today being paid using stock options). But there is a strong argument to say that, not only is shareholder value a theory (rather than a legal fact), but that a singular (or even primary) focus on delivering it can be counterproductive to the long-term interests of the organization:

"Henry Singleton might be the greatest example of an executive who delivered with minimum regard for what Wall Street thought. Teledyne, the conglomerate he founded and ran for almost three decades, was a hot stock in the 1960s. … He was 'the smartest businessman I ever knew,' said the late Charlie Munger, who was vice chairman of Berkshire Hathaway."

 

Broad stakeholder support for not issuing guidance, particularly from the board and other key stakeholders, is what is required for CEOs to have the confidence to make decisions for the medium to long term, which is how the optimal level of value is created. While somewhat regular earnings reports are essential to allow for adequate oversight and governance mechanisms, quarterly earnings guidance is an unnecessary legacy of a disproportionate focus on shareholder value, which can be unhealthy, as noted in the article in the second url below:

 

"What would not be painful: a voluntary reduction in 'quarterly guidance,' or forecasts, by executives about how they expect their companies to fare. Warren Buffett of Berkshire Hathaway and Jamie Dimon of JPMorgan Chase recommended this change in a Wall Street Journal essay in 2018. Companies routinely use these forecasts to manipulate the expectations of financial analysts so that when earnings reports ultimately arrive, they constitute 'positive surprises' that set off rallies in the companies' shares."

 

While the article in the third url below suggests this development is gaining momentum and possibly being extended to earnings reports:

"The Securities and Exchange Commission is preparing a proposal to eliminate the requirement to report earnings quarterly and instead give companies the option to share results twice a year, according to people familiar with the matter. The regulator could publish the proposal as soon as next month."

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e  

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

 

Elite CEOs Don't Need Earnings Guidance

By Spencer Jakab

May 16, 2025

The Wall Street Journal

Late Edition – Final

B12

https://www.wsj.com/business/elite-ceos-dont-need-earnings-guidance-a0e5de93

 

Is The the Time to End Quarterly Earnings Reports?

By Jeff Sommer

October 5, 2025

The New York Times

Late Edition – Final

BU4

https://www.nytimes.com/2025/10/02/business/trump-earnings-reports-investing-stocks.html

 

SEC Prepares Proposal to Eliminate Quarterly Reporting Requirement

By Corrie Driebusch

March 16, 2025

The Wall Street Journal

https://www.wsj.com/finance/regulation/sec-prepares-proposal-to-eliminate-quarterly-reporting-requirement-1d700bbb

Strategic CSR - #boycott

The article in the url below raises a question that is central to the challenge of strategic CSR – how do firms know what their stakeholders truly care about? More specifically, it focuses on the intersection of strategic CSR and social media, and the extent to which firms should view online 'protests' as a valid indicator of stakeholder values:

"Amanda Booth first witnessed the phenomenon of labeling yourself progressive online while endorsing different values in real life when her white coworkers mentioned buying property in East Austin. The area is popularly known as a redlined neighborhood, primarily housing Austin's Black and brown community. Recently, the East Side has undergone major renovations with new modern houses, trendy bars, and local coffee shops, as gentrification pushes out the original inhabitants of the area. But when Booth, a 24-year old content designer in Austin, confronted her coworkers by explaining that Black and Hispanic people were being displaced from the area, her remarks were met with silence. 'Both of these guys proudly express themselves as being more on the progressive side of the Democratic party,' Booth said. 'Mind you, both of them have houses on the East Side now.' 'It's not enough to believe in racial justice and that Black people deserve things. White people need to begin giving up their privilege. The least they can do is try to plug into Austin's anti-displacement efforts. But I don't really see those people doing that,' Booth continued."

In prior newsletters, I have highlighted instances where companies acted in ways that led to consumer/public backlash (including negative headlines and #boycott protests online), but that did not affect future performance (e.g., Strategic CSR – Uber, Strategic CSR – United, and Strategic CSR – United Airlines). Clearly, all such examples are complicated and, to some extent, idiosyncratic. But, the fact that there are multiple examples suggests that, just because an online #boycott campaign erupts, that should not necessarily be taken as a sign by companies that their stakeholders actually mean what they say (or, at least that a meaningful proportion of them are serious in their online pledges to boycott).

So, what is the takeaway – that firms should not care what is written about them online? Probably not, but I do think that asking stakeholders what they care about is likely the least effective way of finding out. Much of what happens on social media is performative and, at best, captures the social temperature at a moment in time. Such momentary indicators should probably not drive firm strategy. Much better to ensure all action is consistent with the firm's professed values (which should be determined via discourse with stakeholders), and then ride out any criticism that follows. I am guessing if Budweiser had done that over the summer, for example, they may still be making the best selling beer in the U.S.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

White clicktivism: Why are some Americans woke online but not in real life?

By Brianna Holt

December 9, 2020

The Guardian

https://www.theguardian.com/world/2020/dec/09/white-liberals-social-media-activism

 

Strategic CSR - Disney

The article in the url below says something interesting about our society. At least, it says something about Disney, the company, and the place it holds in people's minds (and hearts):

 

"At 7:30 in the morning on a recent Saturday, 14 people gathered on the 10th floor of Disney's Riviera Resort in Orlando, Fla. … These 14 adults — a mix of stay-at-home moms, young professionals without children and middle-aged parents from across the country — aren't just Disney fans. They are now considered experts."

 

They are experts because they had been selected and trained for part-time jobs helping holidayers plan their vacations with Disney. But, they are not only experts – these people are serious fans. Given the current shut-down of, essentially, the whole vacation industry, Disney will need fans like this when everything starts back up again:

 

"During breakfast, Mickey Mouse walked into the restaurant and most members of the group rushed to give him a hug and take photos. When Minnie Mouse arrived, others got up, complimented her dress, hugged her and asked for pictures. Group shots, selfies and posed photos were all taken. By 8:15 a.m., when Donald and Daisy Duck arrived, the panelists were too excited to contain themselves — they clapped and danced to the music as the characters put on a performance."

 

And, because there are so many fans out there, this was not an easy job to get. First, there was the training:

 

"The group had been together in Orlando since Wednesday, receiving training about how to be panelists. They learned how to ask each other for help, how to answer a question politely, how to urge someone to try something new."

 

But before that, there was the application process:

 

"They beat out more than 10,000 other applicants to become members of the 2020 Disney Parks Moms Panel, a website where people planning to go on a Disney cruise, or visit a Disney park or Disney Vacation Club in the United States, can ask questions and get responses from these experts. The company will announce the panelists on Wednesday morning. Eleven of this year's new panelists are women, three are men and two are not parents. The panel also has an additional 28 panelists returning from previous years."

 

OK, that's a little weird but, so far, so good, right? Or, maybe it gets weirder. What is interesting about this particular job is not so much what is expected of each employee, but their compensation package:

 

"The panelist position, while a Disney contractor role with an intensive application process, is not paid. In exchange for answering these questions every week, the panelists get a free stay at a Disney park or vacation club of their choice for five nights and can bring three people along. For this group, the trip is more than enough payment."

 

The idea that avid 'fans' would work for Disney for free reminded me of a Southwest case that I teach in my strategy class where the firm's passengers routinely take paid holidays from their jobs to help Southwest recruit new flight attendants. When asked why in the case, one respondent says, "Well, this is my airline, too." I am always left amazed that you just can't buy an endorsement like that. Who would do that for United, American, or Delta? And, what does it say about Southwest (and Disney for that matter) that that is the case? At some level, it has to speak to the culture the organization has created, combined with the meaningfulness that we crave in our lives. Those firms that can create significant overlap between the way we work and the way we live are doing something special:

 

"For [the] panelists, who like Dr. Chlon work full-time, working for Disney in this capacity is something of an honor. It's also an opportunity to contribute to a company that has sentimental and nostalgic meaning."

 

And that enthusiasm is conveyed through these volunteers:

 

"This is why the panelists aren't paid, according to [Leanne O'Regan, director of public relations for Disney Parks, Experiences and Products]. There is an 'authenticity of getting advice from someone who isn't being paid to give you advice,' she said. 'We want them to be honest when they answer questions.'"

 

On the other hand, however, this story also reminded me of the AoM meeting that was held a few years ago in Orlando at Disney World, and what an unmitigated disaster it was. Disney is, if nothing else, a company created by management consultants. And their attempts to get us to part with more money than we would otherwise voluntarily do was so transparent as to be insulting. Maybe it is the cynic in me, but every time someone at Disney told me to have "a wonderful Disney day," my heart sank. Clearly, however, many people out there are not management professors and simply love what it is that Disney does:

 

"This year, Disney put out the call for applications in August and kept the application portal open for one week in September. Many people apply for years before becoming panelists. Tamela Hansen, 45, finally made it onto the panel after 12 years of applying. Ms. Hansen said that she feels like she has been preparing to be a panelist for her whole life; she knew her time would eventually come. After all, she has been to Disney World from Alabama, where she grew up and currently lives, at least 100 times."

 

My question, therefore: Is Disney different from Southwest, or are they both tapping into something similar and fundamental? If so, why do I (largely) enjoy interacting with Southwest (apart from some of those annoying safety videos on YouTube), while Disney makes me feel weird?

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Work for Disney without Pay? 10,000 Applied

By Tariro Mzezewa

January 19, 2020

The New York Times

Late Edition – Final

TR1, TR8

https://www.nytimes.com/2020/01/08/travel/disney-parks-moms-panel.html

 

Strategic CSR - United

Given that many of you in the U.S. will be travelling this week for the Thanksgiving holiday, the article in the url below covers the progress airlines are making on reducing the environmental impact of their core product. It details a one-off plane trip from Chicago to LA, operated by United, designed to demonstrate the range of new policies and practices the company is exploring to achieve carbon neutral plane flights. The airline has previously committed to reduce its emissions "by more than 50% by 2050," and this flight was designed to demonstrate its progress to date:

 

"The meals were served on compostable or recyclable plates; hot beverages were served in recyclable paper cups, an industry first, according to the airline. The cutlery was compostable. In first class, passengers' meals were covered with a beeswax wrap instead of the usual plastic and there was no plastic ring around the napkin."

 

A reduction in waste was the first of four areas of operations that United was using the flight to demonstrate. The other three areas were:

 

• Fuel: "The Boeing 737-900 flight, with 161 passengers, was powered not just by traditional jet fuel; 30% was biofuel made from agricultural waste."
• Efficiency: "Pilots used single-engine taxi procedures instead of using both engines to reduce fuel burn on the runway."
• Offsets: "The airline purchased carbon offsets to cover the remaining portion of flight where it didn't achieve zero emissions."

 

Although this was only a one-off flight, United reported zero waste from the flight, with the exception of waste generated separately by the customers:

 

"The goal: zero cabin waste instead of the average 65 pounds of garbage taken off a United flight. (They got it down to 14 pounds, all of it passenger garbage.)"

 

What I find interesting about the experiment, however, are the customer reactions. The article reports a limited sampling, but all the comments are either superficial or negative:

 

"Annika Bjorklund, 17, … and her father, Steve, were on Flight 310 but didn't know the special events were planned. 'I think it's a really cool thing,' she said. Steve Bjorklund praised the airline's sustainability efforts but said they wouldn't dictate his choice of airline. 'I'm a United flyer,' he said. 'I'm going to fly United anyway.' Joanne DeTrana watched the festivities somewhat skeptically from the B11 gate area. … 'I believe in sustainability but I think sometimes you can carry it to the Nth degree,' she said. 'To me, that's not a big marketing sell.' DeTrana said it wouldn't factor into her ticket buying decisions. 'Price and comfort top that list, she said."

 

In other words, United goes to all that effort and its passengers merely shrug their shoulders. This still may be useful for the firm if it motivates its employees but, in order for United to continue these efforts, a key stakeholder group needs to demonstrate that it wants and appreciates them. Otherwise, what is the point?

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Biofuel, beeswax wraps and recyclable coffee cups: United debuts 'eco-friendly flight'
By Dawn Gilbertson
June 6, 2019

USA Today

https://www.usatoday.com/story/travel/flights/2019/06/06/united-airlines-eco-friendly-flight-biofuel-cabin-waste-recyclable-cups/1358168001/
 

Strategic CSR - Oversight

The article in the url below acknowledges how, by some measures, companies today face greater scrutiny than ever before:

 

"Chief executives are now exposed to all that the digital, connected world can throw at them. Social media provide a torrent of feedback from customers, ranging from the quality of sausages to customers' stance on Chinese intellectual-property laws. Companies' supply chains, whether mines in the Congo or sewing factories in Bangladesh, are watched and documented by activists, who ask difficult questions about pollution and labour conditions that many firms once chose to ignore."

 

But, the article questions whether this is the 'right' kind of scrutiny. In many ways, firms remain opaque – held to account on superficial metrics, but not sufficiently challenged on the details of day-to-day operations:

 

"Yet even as those theatrical forms of scrutiny have soared, the other kind [by financial analysts] – methodical, detailed, financial and often dry – is declining. This is harder to spot than grandstanding, but is no less important. People who depend on share prices rising or falling are among the best at holding firms to account. They ask the questions that chief executives find most awkward to answer. The work required to do that can be achingly dry; the best financial analysis is rigorous to the point of rigor mortis. But some information that seeps out serves a wider purpose. An investor might demand that a company's management detail how its underfunded pension pot will impact results in the third quarter, for example."

 

The article attributes this decline in oversight to two main reasons – first, increased regulation has constrained what executives can or cannot say about their firm, which encourages them "to say as little as possible," especially when pressed or the issue is 'controversial.' And second, the number of the kind of analysts who usually initiate these interrogations ("sell-side analysts") "has tumbled" in recent years as multiple financial crises have highlighted the fact that "they could be prone to conflicts of interest:"

 

"The biggest firms still get lots of attention, for now. But firms in the FTSE 250 index of mid-sized British companies, have seen coverage dwindle to seven analysts each, down by over a fifth in a decade."

 

The decline of this detailed oversight (combined with the increase of more superficial 'governance') has consequences – for example, it explains how United Airlines can face a massive online backlash to its less than ideal customer service, yet deliver record profits the next quarter (see Strategic CSR – United and Strategic CSR – United Airlines). A similar story played out for Uber (see Strategic CSR – Uber). Although a large part of strategic CSR focuses on diminishing the role of shareholders in business today, it still recognizes them as an important stakeholder – one of many, but important nonetheless. Detailed oversight of finances and operations is the most important role they can play:

 

"While the modern firm is constantly interrogated about its conduct and ethics, it is increasingly able to keep its performance under wraps. That makes companies look responsive but in the long run could mean the economy works less well for everyone."

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

 

Instructor Teaching and Student Study Site: http://studysites.sagepub.comstudy.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

One eye open, one eye shut

December 15, 2018

The Economist

Late Edition – Final

65

https://www.economist.com/business/2018/12/15/time-tested-ways-of-holding-business-to-account-are-crumbling

 

Strategic CSR - Corporate 'Stakeholder' Responsibility

The article in the url below demonstrates vividly a core tenet of Strategic CSR and the difference between CSR in theory and practice:

 

"On the list of companies I dislike, Amazon ranks near the top, for putting bookstores out of business everywhere and destroying the ability of authors and publishers to earn a living. Having fed itself to monstrous size on such small potatoes, the company has now moved on to gut the rest of Main Street retail and cut the heart out of communities everywhere. And yet I shop at Amazon. My lame excuse is that it's now a 25-minute drive to the nearest independent bookstore, it's convenient to have a book turn up at my door, and the price looks right."

 

This basic hypocrisy is rampant because it is core to who we are as human beings (for recent examples, see: Strategic CSR – Uber and Strategic CSR – United). We are compelled to say we support something that seems like the 'right' or 'popular' thing to do, but then surreptitiously do the opposite if it benefits us. In making his point, the author quotes recent research that captures this phenomenon empirically:

 

"This inconsistency isn't just an issue for left-leaners like me. Starbucks faced a right-wing boycott early this year when it responded to President Trump's immigration ban with a pledge to hire 10,000 refugees. But new research by Brayden King at Northwestern University's Kellogg School of Management shows 'zero correlation' between public commitments to that boycott and subsequent purchasing behavior by pro-Trump consumers. That is, our failure to vote with our wallets crosses political lines. Withholding our cash from companies that cause harm or behave badly is one of the few avenues of protest we have as consumers. So why are we so bad at boycotting?"

 

In Strategic CSR, I discuss this effect of individuals professing to support a social good, but in fact seeking individual benefit, via the concept of 'corporate stakeholder responsibility' (4e, Chapter 5). That is, it is up to us, all of us as stakeholders, to hold firms to account for the behavior we truly want them to demonstrate. We are all (collectively) stakeholders who interact with firms in different guises – as consumers, employees, journalists, regulators, suppliers, distributors, and so on. It is pointless for us to deceive ourselves by saying, as this author does, that we dislike Amazon, but then renew our subscription to Prime. If we truly value what Amazon has to offer (and, clearly, we do as a society), then we either have to embrace that or, if we really want something different, then sacrifice some of the value Amazon offers and, instead, support a different company. One of the many problems with the majority of the CSR debate is that it does not account for the hypocrisy that drives much human behavior. For example, I could stand out on the corner of the street and ask everyone who passes whether they approve of sweatshops. My guess is that I would get a large majority who say they do not, but that most of those people are happy to benefit from the fast fashion industry, which is able to deliver clothes to them at ridiculously cheap prices because of the sweatshops that are an integral part of the global supply chain. But, it is not only consumers. For example, it is no good for the government to pass a law and then fail to enforce it; it is no good for the media to fail to investigate corporate wrongdoing, and so on. If we are going to make a more sustainable economy/society, we first need to acknowledge how the 'system' works in reality. Then, if we want to, we can start doing something about it. The worst situation is to misunderstand the causes of the problems we worry about. If we kid ourselves as to the causes, we have no chance of building something better.

 

Have a good weekend

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

© Sage Publications, 2017

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

 

 

Why we don't vote with our wallets

By Richard Conniff

October 22, 2017

The New York Times

Late Edition – Final

SR4

https://www.nytimes.com/2017/10/20/opinion/sunday/amazon-boycott.html

 

Strategic CSR - Airlines

The article in the url below discusses the extent to which executive compensation tied to shareholder interests distorts decision making in the airline industry. What is interesting, though, is not that this happens (it has been a feature of western capitalism for a while now), but how the degree of influence has shifted so dramatically in this particular industry in a relatively short period of time:

 

"Five years ago, American Airlines factored in on-time arrivals, lost baggage and consumer complaints to help calculate annual incentive payments for top management. Today, these bonuses are based exclusively on the company's pretax income and cost savings. … 'Fifteen years ago, airlines competed with each other over who could buy the most planes or have the most routes,' said Jamie Baker, a top airline industry analyst at JPMorgan Chase. 'Executives are just as competitive today, but it's about who can achieve an investment-grade rating first, who can be a component in the S. & P. 500, and who has better returns for investors.'"

 

The article argues that this heightened pressure results from the relatively low levels of economic growth in recent years. When growth is low, increased returns for shareholders come at the expense of the interests of other stakeholders:

 

"Mature industries — where double-digit annual profit growth is a reach in the best of times — are especially vulnerable to activist investors' demands for board seats, bigger stock repurchases and other short-term financial rewards. The pressure is especially brutal in the airline industry because the key expense, fuel, is for the most part beyond management control. Yet airline executives have largely convinced Wall Street that the bad old days of bankruptcies and fare wars are over, replaced by the kind of predictable annual profits more common among industrial companies. That's among the reasons fees have popped up in recent years for everything from checking bags to securing an assigned seat before boarding. Known on Wall Street as ancillary revenue, this stream of income is especially favored by investors because it doesn't swing sharply the way fares do."

 

What is equally interesting, however, is why the airline firms' other stakeholders allow this disproportionate transfer of capital to shareholders to continue:

 

"And so far, despite occasional bouts of air rage and frequent consumer complaints, Wall Street has been getting what it wants. United's stock has surged to more than $80 per share from $25 per share five years ago, with profit margins rising to 13.6 percent from 3.7 percent over the same period. Overall industry margins hit 16.3 percent, up from 5.2 percent in 2012."

 

The lack of resistance is placing a significant amount of pressure on the legacy carriers to follow suit or be left behind:

 

"The pressure on United, American and other giants is only going to increase with the rise of so-called ultra-low-cost carriers like Spirit, Frontier and Allegiant. In fact, American and United are rolling out a stripped-down new class called Basic Economy. Here, in exchange for the cheapest tickets, fliers can't choose their seats before checking in and are more likely to be stuck in the middle of the row. They board last and are less likely to be able to sit with companions. No carry-on luggage is permitted, forcing anyone without elite frequent-flier status to check anything larger than a backpack — for a fee."

 

Again, we have no-one to blame but ourselves for the standard of customer service we now have to endure every time we fly:

 

"'The response isn't to Wall Street. It's to customer behavior,' said Alex Dichter, a senior partner at McKinsey who works with major airlines. 'About 35 percent of customers are choosing on price, and price alone, and another 35 percent choose mostly on price.' Mr. Dichter noted that when American added two to four inches of legroom in coach in the early 2000s, 'as far as I know, the airline didn't see one bit of improvement in market share or pricing.' 'The great irony is that most C.E.O.s would love to compete on product and experience,' he added. 'It's much more fun. The problem is that customers aren't paying attention to that.'"

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

© Sage Publications, 2017

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

 

 

Route to Air Travel Discomfort Starts on Wall Street

By Nelson D. Schwartz

May 28, 2017

The New York Times

Late Edition – Final

A1

https://www.nytimes.com/2017/05/28/business/corporate-profit-margins-airlines.html

 

Strategic CSR - United (follow-up)

As a follow-up to the Newsletter I sent last semester about United's treatment of its passengers (Strategic CSR – United), the article in the first url below reinforces the idea that all the airline is doing is providing the level of service for which we are willing to pay:

 

"On Tuesday, the carrier released its first financial statement that included the period after security officers forcibly removed a 69-year-old passenger, Dr. David Dao, from a plane. The incident left him bloodied and disheveled and left United facing widespread calls for a boycott. Nearly three months later, it appears that all the public anger has not hurt the company's bottom line."

 

In case you needed reminding, the online version of the article has the video of the forced removal embedded in the story. Not only did the video (and subsequent #boycottUnited campaign) fail to hurt the airline, however, it thrived in its aftermath:

 

"United reported a profit of $818 million in the most recent quarter, ending in June, up 39 percent compared with last year. Sales rose, too, as more customers booked flights with the carrier, amid rising demand for air service over all. In a separate report this month, United said that it had more than 71 million passengers during the first half of the year, up 4.2 percent compared with last year."

 

While I understand that there are complex issues involving the failure of anti-trust law to provide a competitive industry for domestic U.S. flights and that the price of airline fuel drives profits to some degree, the stunning results (39% growth, year-over-year) suggest we are also gluttons for punishment:

 

"The results point to an underlying principle about the airline business: Passengers, by and large, look for the most convenient and cheapest fares, not which airlines claim to offer the best service."

 

Or, as a longer discussion about seat space in the article in the second url below puts it:

 

"Faced with a choice between discomfort and higher fares, most travelers choose discomfort."

Given such results, what is the United CEO to takeaway from the experience? Should he risk his airline by providing a higher quality product and charging accordingly, or should he give passengers what they say they do not want, but what seems to be the only thing for which they are willing to pay?

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

© Sage Publications, 2017

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

 

 

United Airlines Profit Rises Despite Boycott Threats Over Passenger Treatment

By Micah Maidenberg

July 18, 2017

The New York Times

https://www.nytimes.com/2017/07/18/business/united-airlines-profit-earnings.html

The Incredible Shrinking Airline Seat

By Justin Bachman

August 17, 2017

Bloomberg Businessweek

https://www.bloomberg.com/news/features/2017-08-17/what-s-stopping-airlines-from-making-your-seat-more-miserable

 

Strategic CSR - United

A key to understanding the full implications of Strategic CSR is the idea that corporations reflect our values; they do not shape those values. In other words, corporations reflect the aggregated values of their collective set of stakeholders (internal and external). To put this succinctly – it is not Walmart that puts Mom & Pop stores out of business; customers do that by choosing to shop at Walmart, employees do it by choosing to work for Walmart, governments do it by providing tax breaks for Walmart, and so on. If you have a problem with Walmart, then you have a problem with American society because it is clear that American society wants Walmart. 90% of U.S. households shop at Walmart at least once a year – I don't know of any other company that consistently receives that level of societal endorsement.

 

An extension of this idea is that corporations are not the problem; they are the solution. The for-profit firm is simply a tool that we have devised to solve a specific problem – how to allocate scarce and valuable resources. There is a finite set of resources available to us. How to allocate these resources in a way that produces 'optimal' value for the majority is a problem that has challenged humanity throughout our existence. The best solution we have found to date is for-profit firms operating within a market-based, democratic form of capitalism. Once you understand firms are merely a tool, you understand that they will do what we ask of them. If we ask them to pollute the planet (as we are, at present), they will efficiently do that. Equally, if we ask them to preserve the planet, they will find the most efficient means of achieving that goal. They will do what we want them to do – they reflect our collective set of values.

 

I was thinking about this again in light of United's recent challenges. To what extent is United shaping the airline industry and to what extent is it merely giving us what we, collectively, want – cheap tickets and bare-bones service? The most recent crisis to hit United is made all the more apparent in contrast to last week's news about the airline industry's most recent performance ratings. The one headline that caught my attention there – the low budget carrier, Spirit Airlines, is currently the most profitable U.S. airline; it also has the highest rate of customer complaints. I fail to understand how that can be. If people want the absolute cheapest tickets, why would they then complain if they receive poor service, or their bags get lost, or whatever caused them to complain? If we want good service, we have to understand that there is a cost associated with that. And, if we are willing to pay for good service, we should believe that there are many entrepreneurs out there who would be more than willing to provide it to us. Clearly, when it comes to airlines, however, most of us do not want to pay for that service.

 

This brings me back to United. I don't necessarily agree with the overall tone of the article in the url below, but it is the most unique perspective I have seen in the acres of coverage on this issue. More importantly, I think it captures effectively the idea that United is merely a reflection of a broader system that we have shaped through our day-to-day decisions. In other words, while it feels satisfying to shoot the messenger, we should always remember that it is we (the firm's collective set of stakeholders) who are sending the message. In the same way that we get the politicians we deserve, we also get the companies we deserve:

 

"It is commendable and necessary to direct your outrage at this particular corporation, on this particular day, but keep the larger truth in mind: You are not mad at United Airlines; you are mad at America."

 

Of course, on the flip side, the fact that so many passengers felt outraged at the events and spread the word so quickly suggests a willingness to induce change, …. perhaps. We'll have to see if there are any lasting consequences for United. Past performance suggests we will quickly forget and move on. But, it is worth keeping in mind the next time you purchase an airline ticket. Will you demand better service and pay for it, or are we all heading towards a future filled with versions of Spirit Airlines or Ryan Air (or your lowest-cost carrier of choice)?

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

© Sage Publications, 2017

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

 

 

You're Not Mad at United Airlines; You're Mad at America

By Shane Ryan

April 10, 2017

Paste Magazine

https://www.pastemagazine.com/articles/2017/04/youre-not-mad-at-united-airlines-youre-mad-at-amer.html

 

Strategic CSR - Airlines

The article in the url below is interesting because it takes a concept we take for granted (comparing fuel efficiency among different makes and models of cars) and applies it to an area of transportation we think less carefully about (fuel efficiency among different airlines).

In the case of cars, we measure miles per gallon. For airlines, the article argues the comparable measure is “how far one seat (occupied or not) can travel on one gallon of jet fuel”:

“And U.S. major airlines average about 64 mpg, according to calculations using Department of Transportation data for 2009. For each gallon of jet fuel, airlines could, on average, fly one seat 64 miles. That's better than your SUV or hybrid car, unless you pack lots of people into the car.”

This graphic from the article is enlightening:

http://si.wsj.net/public/resources/images/PJ-AW431_midsea_G_20100811210020.jpg

Perhaps it is not surprising that:

“The three worst major U.S. carriers for fuel efficiency happen to be the three biggest: Delta, American and United airlines. They fly the biggest planes, which aren't always more fuel efficient, and they have the oldest fleets.”

While, on the more positive side:

“Best in fuel economy: Alaska Airlines, jetBlue Airways and Continental Airlines, which all have fleets that average nine years of age or younger.”

The article also breaks down different mileages by plane make (i.e., Boeing or Airbus) and model, with the new Airbus A380 super-jumbo averaging “about 65 miles per gallon per seat.”

Take care

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

The Middle Seat: A Prius With Wings vs. a Guzzler in the Clouds

By Scott McCartney

1221 words

12 August 2010

The Wall Street Journal

D1

http://online.wsj.com/article/SB10001424052748704901104575423261677748380.html

Strategic CSR - United Airlines

You may have heard about or seen the YouTube video over the summer by the musician whose guitar was broken on a United Airlines flight in March, 2008:

http://www.youtube.com/watch?v=5YGc4zOqozo

The article in the first url below outlines the background to the event:

“Canadian singer Dave Carroll is now on the map, courtesy of United Airlines (UAUA). In March 2008 he was changing planes in Chicago on the way to a gig when he saw baggage handlers tossing instruments. Finding his $3,500 Taylor acoustic guitar damaged, Carroll tried for more than a year to get United to pay for the $1,200 repair.”

When United continued to deny any responsibility (largely based on a technicality—the firm claimed he had failed to file a complaint within 24 hours; a claim Carroll denies in his video), Carroll responded by writing the song and posting it on YouTube, where, as the article in the second url below reports, it quickly became a hit:

“According to the Times of London, "...within four days of the song going online, the gathering thunderclouds of bad PR caused United Airlines' stock price to suffer a mid-flight stall, and it plunged by 10%, costing shareholders $180 million. Which, incidentally, would have bought Carroll more than 51,000 replacement guitars."”

At present, this video has had over 5,250,000 views on YouTube and there are multiple postings:

“Can United's 180 million dollar loss be chalked up entirely to a song on YouTube? Probably not. Did the song have a very real and very negative effect on United's brand equity? Absolutely.”

A strategic approach to CSR involves firms putting systems in place to meet the needs of as broad a number of stakeholders as possible. The goal is to avoid the backlash often associated with a short term focus on minimizing costs, which, as United demonstrates, can turn out to be more expensive in the long run.

To see the benefits of doing things differently, see this response video posted by a musician who has been flying Southwest for many years and, as he says, “Southwest Never Broke My Guitar.” The song is not as good, but I think the value of having a loyal consumer base, rather than one that is suspicious, quickly becomes apparent:

http://www.youtube.com/watch?v=u1SMcaVekVE

Have a good weekend.
David

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther/


Broken-Guitar Hero

Christopher Palmeri
Businessweek
August 3, 2009, p17.
http://www.businessweek.com/magazine/content/09_31/c4141btw643725.htm

Broken Guitar Has United Playing the Blues to the Tune of $180 Million

July 30, 2009
By: Ravi Sawhney
Fast Company Magazine
http://www.fastcompany.com/blog/ravi-sawhney/design-reach/youtube-serves-180-million-heartbreak