Papa Johns, only the latest corporate whore to reveal themselves

Definition of WHORE (n)

1: a woman who engages in sexual acts for money :prostitutealso : a promiscuous or immoral woman
2: a male who engages in sexual acts for money
3: a venal or unscrupulous person

Definition of WHORE (v)

1: to have unlawful sexual intercourse as or with a prostitute
2: to pursue a faithless, unworthy, or idolatrous desire

The Case of Papa John’s

In a recent statement Papa John’s CEO, John Schnatter, announced that instead of raising the price of pizza by the 12-14 cents it would cost to fund health care for his full-time employees to comply with the new American health care legislation he would, instead, cut employee hours because President Obama was re-elected. Keep in mind, this is at a time when the company’s 3rd quarter 2012 profits have increased and the company’s international economic performance is higher than that of many of its competitors like Domino’s. So, at a time when shareholders could afford to lose a little from each share, split the cost with consumers, or consumers could pay an extra 14 cents per pizza and still be within a tolerable market threshold, Schnatter decides to do the most ridiculous thing of all — hurt his employees to make a political point.

So what is Schnatter’s price?

Apparently his price to sell out his employees is, at most 14 cents per pizza. Now, in a world driven by bottom-line only this doesn’t necessarily even make sense because in any given American market there are already pizza places that are less expensive than Papa John’s, so this seems unlikely to be the threshold significantly driving sales down. No, this isn’t a rational business decision that Schnatter’s made, this is an irrational decision based in political dogma. Perhaps he doesn’t understand the influence that image, evaluation of corporate social responsibility, and trust are the cornerstones of doing business. In fact, most people look for opportunities to minimize their exposure to companies they don’t trust or like. Now, in the case of a company like Wal-Mart that gets a lot of bad press a lot of the time, it’s not going to hurt them as much because the competition for Wal-Mart is pretty thin. However, in the case of a company like Papa John’s — a market that is saturated with competitors — if people look at this as a political move with few benefits and hurts a working segment that’s already at risk, Papa John’s risks much more than losing 14 cents a pizza profit. And, by the way, they should lose out because this is a snarky response to not getting what he wanted in the election. I’m sure a man who lives in a castle can arm himself against economic ups and downs, but his employees are unlikely to be able to manage the changes.

Apparently, Schnatter’s humanity can be bought…

but clearly his long-game strategy needs some work. If he wanted to make the case that Obamacare was hurting his business, then the smarter strategy would have been to wait it out — see if profit margin went down significantly, face some pressure from major shareholders, create the illusion that you were trying to keep it going for the employees, but then either make the decision to increase pizza prices by the requisite amount OR cut wages with the evidence laid out for you. That would have been the smart strategy in the long game. But that would have risked having to admit that it might not significantly affect profit margins or that it was good for his company’s employees. See, that’s why we can be pretty confident that this was about political dogma and not good business strategy.

The problem?

Papa John’s isn’t the only company nor even in a small group of companies whose actions defy both long-term sound strategy and social responsible actions, they are the norm. In the United States, we have a business culture that is ‘a-moral’. It’s not that it’s immoral, but it is without consideration of morals. In fact, if anyone sits through business, law, or MBA courses in the US they are taught that a company’s core purpose is to maximize shareholder value. Sitting through these classes, banal conversations about the importance of ‘companies doing the right thing’ come in conflict with short-term decisions that shareholders might not like, are rife with a lack of sensitivity to the communities and socio-economic realities of the world that the companies live in. Despite cases like Merck Pharmaceuticals demonstrating that a corporate leadership pursuing cures for diseases — even when some of those cures (like that for Malaria) weren’t profitable — is more likely to lead a company into positions of industry strength than when MBA ‘business’ types lead the company with a firm hand on profit and shareholder responsibility as their core values, the message never sinks in. That’s why we see Wall Street corruption, companies taking short cuts to maximize short-term profit, and a fundamental tension between doing what’s in the community’s good and what’s in the shareholders good emerge in modern corporate decision-making.

Mistaking Incompatibility Between Capitalism and Socialism

People mistakenly believe that there’s a necessary incompatibility between capitalism — a market driven economy — and socialism — a belief that those things that are used by everyone should be owned by everyone (e.g., health care).  In fact, the two are necessary to work together and keep corporate interests from becoming a ‘whore’s affair’. Getting past the sexual implications of being a whore, the root of it is someone/ something that will do anything for money. That is our modern conceptualization of business because in a world of multinational corporations where the corporate suits are so far removed from the people doing the ‘work’ of the company and where the corporation itself is removed from the communities that it affects it’s easy for the corporation to pursue the unworthy goal of putting profit at a higher premium than humanity. Yet, greed is seems to be a natural instinct for humans in modern society. That is where socialism comes into play — for education, police, fire, health, infrastructure, etc. (i.e., all of the things that we need in order for society to function) — it ensures that we live in a more secure community, one that tempers the interests of the few to retain all of their wealth and the many who make their wealth possible.
Not only does a dose of socialism temper the negative impact of greed, but it actually fuels capitalism. Think about today’s reality where IF someone’s lucky enough to have a good paying job that provides health care and they can live a relatively comfortable life, they are essentially bound to that job because without it, in the United States there are few safety nets. It’s not hard to imagine that many people have good ideas for businesses and probably the money to get started on their business; however, the real risk to themselves and their families is losing the benefits — especially health care. This is likely to create the biggest disincentive for people to take a financial risk to start a small business because they simply cannot gamble with their family’s health. In a world where health care was guaranteed, that’s at least one risk mitigated. Yet, a couple of years ago I was having a conversation with a lovely lady — a Columbia University PhD in economics who had never considered that socialism enabled capitalism’s true opportunities and once she had thought about it admitted that would change the risk scenario for most innovators.
But this is exactly the problem in modern America — we fail to consider that we live in society together. So, instead we get poor, dogmatic, and insensitive decision-making by corporate heads like John Schnatter. Well, we’re not powerless in this conversation, we can be better consumers. Someday, I hope that happens.
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