Episode #360: Interview with Kimberlee Josephson

kimberlee josephson

In an email, Dr. Kimberlee Josephson wrote to Ron and Ed saying, "I just began listening to your podcast and I’m glad to have stumbled upon it! I wanted to reach out about your Woke Capitalism/ESG segment since this is an area I am trying to voice concern over." It was a great conversation and we have included the full show notes and additional resources below.

But first, a bit more about Kimberlee Josephson…

Dr. Kimberlee Josephson is an Associate Professor of Business, Associate Dean for the Breen Center for Graduate Success at Lebanon Valley College in Annville, Pennsylvania, and Adjunct Research Fellow with the Consumer Choice Center. Her academic background is in international studies and strategic management and she teaches courses covering topics on global sustainability, international marketing, and workplace diversity. Prior to serving in academia, her professional career spanned from working in sales in Manhattan, as a producer for a web marketing firm, freelancing for on-air promotions at QVC, and as a research assistant for an international NGO. Her op-eds have appeared at University Business, Quartz at Work, and PA Capital Star. She holds a doctorate in Global Studies and Commerce from La Trobe University in Australia, a master’s degree in Political Science from Temple University in Philadelphia, another master’s degree in International Policy from La Trobe University, and a bachelor’s degree in Business Administration with a minor in Political Science from Bloomsburg University.

Ed’s Questions: Segment One

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. I'm Ed Kless, with my friend and cohost, Ron Baker. And folks, on today's show we have our interview with Kimberly Josephson. Hey, Ron, how's it going?

Ron

Very good. How are you?

Ed

I'm doing great, great week. It will be fun to interview Kimberly, I’ve been looking forward to this all week. And without further ado, let me get the bio read and get her get her back on the program here. Dr. Kimberly Josephson is an Associate Professor of Business, Associate Dean for the Breen Center for Graduate Success at Lebanon Valley College in Annville, Pennsylvania, and Adjunct Research Fellow with the Consumer Choice Center. Her academic background is in international studies and strategic management where she teaches courses covering topics on global sustainability, international marketing, and workplace diversity. Prior to serving in academia, her professional career spanned from working in sales in Manhattan, as a producer for a web marketing firm, freelancing for on-air promotions at QVC, and as a research assistant for an international NGO. Her op-eds have appeared at University Business, Quartz at Work, and PA Capital Star. Welcome to The Soul of Enterprise, Kimberly Josephson.

How does someone who goes from an on-air promotion analyst at QVC to teaching economics at Lebanon Valley College in Annville, Pennsylvania?

You sent us an email, having listened to one of our shows, and we have actually been paying attention to your work, Ron and I do a bonus episode after this on our Patreon channel, and FEE is one of our go-to sources. So we are we were somewhat familiar with your work already, so we're happy to have you on. And you've been writing a lot about corporate social responsibility, woke capitalism. So let's start, it’s attributed to Socrates, but he didn't really say it, that all wisdom begins with the definition of terms. Let's try to define some of these things, shall we? Let's define corporate social responsibility, if it can be, maybe It can't be.

This is great, it's great background to talk a little bit about this. In fact, you anticipated some of my additional questions about stakeholder capitalism and woke capitalism, or as I like to call it, marketing.

As you were talking, I was reminded, didn't we settle this with David Ricardo and the division of labor, why don't we focus on the things that we're really good at and not try to produce cheese, and wine, and do corporate social responsibility? Because all that really is is just another division of labor? I think, if I'm not mistaken here, the not-for-profit sector is the third largest sector in the US economy. If we just as employees were able to keep more of our own money, well, then how about we'll donate because that's what Americans do anyway.

Ron and I talked about this last week, that there's a standard now in Europe to try to get everybody to use USB-C ports instead of Apple’s, so Apple would have to shift, and of course then you're locked in and there can be no new better creation of a plug-in, so very confusing. Well, we're up against our first break.

Ron’s Questions: Segment Two

Welcome back, everybody. We're here with our interview with Kimberly Josephson, and Kimberly, great discussion with Ed. I'm going to pull back and go to a macro question. I think you cited a Richard Branson paper, or quote, or speech that he gave at the World Economic Forum. And they claim that our economic model is broken. And you point out, how can you say that when in the last 20 years we've dropped poverty into single digits, bone crushing, dollar-a-day poverty. So we've created all this wealth and brought all these people out of poverty. You were talking about Bono and his Red movement. Somebody asked him at a TED talk, “Can you name one country that's developed because of foreign aid or NGO aid? Name one, there's not one out there. It's just amazing, and I love how you point this out—we’ve done this all without ESG!

We've had Professor Deirdre McCloskey on the show twice [Episode #6 and Episode #293], and her trilogy on bourgeois virtues and equality. Her whole premise is the Great Enrichment started because we gave entrepreneurs and innovators dignity. It was a cultural, language, and rhetoric change. It wasn't about oil, or scientific invention, or any of these materialist explanations. It was because people can now have a go and make other people's lives better. And I just find that so compelling, even though it's very hard to prove.

I just listened to something that was talking about an article about accountants are going to save the environment, because they're going to be able to attest to these new ESG standards that are coming out, and the Sustainability Accounting Standards Board, which I think is BlackRock’s or someone’s. And I'm thinking, geez, we've got the Big Four now offering this as an attest service. I worry that this is a wet blanket on innovation and dynamism because creativity is supposed to take us by surprise, otherwise it could be planned. And you can't, like you say, have standards on something new. And that's one of my biggest concerns about ESG. It's just a wet blanket on dynamism.

And it's entrenching big businesses. Bloomberg estimates ESG funds could hit $53 trillion by 2025. And like you say, they're controlling the standard setters and the jargon, and they're the ones that are doing the assessment or teaching companies how to make the grade, or whatever. I'm just going to ask this, is this a Trojan horse? Is this a way for unskilled people without any merit, or skills in business, or wealth creation, to get into the boardroom?

You just put your finger on it with the term tradeoffs. Thomas Sowell [Episode #25] says there's no such thing as solutions, there's only tradeoffs. The thing that scares me, Kimberly, as a recovering CPA from a Big Eight, is we have a knowledge problem here. How can the Big Four come in and attest to something they know nothing about?

Well, this is flying by, as we knew it would.

Ed’s Questions: Segment Three

We are back with Dr. Kimberly Josephson. I want to ask you about something I came across last week. Jonah Goldberg, in his newsletters, talked about the James Beard awards. I'm not sure if you're familiar with this, but these are basically the Oscars of the food world. The organization itself uses that as its unofficial motto. But they have just recently announced that their prestigious annual awards are going to be retooled based on the decisions that candidates have shown and demonstrated a commitment to racial and gender equality, community and environmental sustainability, and a culture where all of that can thrive. Not on who makes the best hamburger. I'm all for all of those things, those are all wonderful things that we all should strive for. But does it really matter when it comes to making a chicken Kiev?

It's really, I think, also partially responsible for some of the things that we're seeing with regard to the vaccine and COVID because we've just politicized everything. Gone are the days when LeBron James can say Republicans buy sneakers as well. Now we have to have red sneakers and blue sneakers, I guess. This actually happened in the software industry before the election last year. There was a company that came flat out saying we are against Donald Trump. Are we really going to have red apps and blue apps? I mean, is this what we're going to do?

I think this this goes back to a misunderstanding that John Mackey, from Whole Foods, in his book, Conscious Capitalism, makes this great point, he says: look, the purpose of business is not to make a profit—profit is the result. And that is the big problem. Everybody thinks you go into business to make a profit. No, that's the result. You go into business to do something for someone else. It's actually other- directed, it's altruistic. And people don't get that part of it, that it's about serving the customer.

Kimberlee Josephson  51:49

for I mean, Adam Smith saying, right, the butcher and the baker right, they don't do it for themselves, like they have a talent they have a skill and they're leveraging that skill and they should get a return for that and if people are willing to pay a good amount for it and it's all voluntary, everybody wins you have that specialization and people pursue what it is within their means and and what it is that they desire so that's really important my I mean with with the stakeholder model, the concern is with money that's objective right? That's just that we can use that as the tool of measurement right? If my profit margins are good, if people are purchasing if my price if the elasticity of demand right if it that changes if I lower my price or raise my that signals to me the perception of value and what people are willing to pay it's very useful. So focusing on profits not a bad thing because that that tells you if you're doing something wrong or right so that's smart to focus on it I don't want students to lose sight of that profit is not evil. It's a functional faith and you need it to scale and to reinvest and you know, grow the business or whatever you want to do with it. But with the stakeholder model, a lot of that's subjective right? I actually to help my students remember the stakeholders we focused on the core stakeholders I call it the spice model because we think in terms of society partners partners in the industry, investors, customers and employees but you have so many other secret the government media right we could go on forever there are so many stakeholders and sometimes I do a little exercise with them like okay now prioritize them and they can't right some people owe you the employees employees are the most important because if you don't have employees, you know, how are you going to provide Okay, well if you don't have customers, there's no point of the business okay? If you don't have the investors, right, that's how are you even going to get the business but so it's just it's so contestable. And and it varies and how you prioritize to is going to vary according to the industry, what the needs are, what the expectations are,

And sometimes they just outright conflict with one another.

I’ve got about one minute left in my segment here and I don't want to finish on a downer. So I'm going to take you back to an article that you wrote in January of this year, entitled “Four Netflix Hits That Agenda-Driven Corporate America Could Take a Cue From in 2021.” And I'm just going to pick one of them, feel free if you want to go to a different one, but I want to know what can we learn from Beth Harmon in Queens Gambit on Netflix?

Well this is this is great, it is flying by, and Kimberlee I'm going to pass it over to Ron, he's going to take you the rest of the way home, but from me thanks for being on the show today.

Ron’s Questions: Segment Four

Welcome back, everybody. We're here with Dr. Kimberlee Josephson, and Kimberlee, I wanted to ask you about the 2019 Business Roundtable statement that basically threw out shareholder maximization theory [and replaced it with stakeholder theory]. It did move the Overton window, it seems pretty rapidly. You probably read this, The Wall Street Journal wrote a two year anniversary in 2021 of this statement. And they looked at these 181 members who signed the statement and said, You know what, nothing has changed with any of you. You haven't really done anything with this. Is this just virtue- signaling?

The stakeholder theory sounds so beautiful, because we have to watch out for our customers, and we have to watch out for the community, and pay our taxes, and all of that. But all of these things have conflicts. And for the C-suite, or the employees of the corporation, if they're accountable to more than the shareholders—in other words—now they're accountable to everyone, then they're accountable to no one. And a slave with two masters is a free man. And I worry about that, because how do they deal with these tradeoffs: As a customer, I want a lower price, as an employee I want a higher wage, as the government, we want more taxes. The price system deals with this beautifully without any conflict whatsoever, but now you lay over the ESG and the stakeholder theory, and it brings up all these conflicts that are unresolvable without a price system.

We made everything a Veblen good, all the way down. No luxury, just everything now is a Veblen good. Kimberly, this is great. I’ve got 15 seconds with you, but are you optimistic that we can push back on all this?

I'm glad to hear that. Well, Kimberly, this has been an honor. Thank you so much for appearing on The Soul of Enterprise. Ed, what do we have next week?

Ed

Next week, Ron, we are interviewing Marco Bertini, the author of The Ends Game.

Ron

I'm looking forward to it. I'll see you in 167 hours.
 

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