Saturday, March 5, 2011

Diversity Efficiencies and Synergies in Your Accounting Firm

I just submitted this as my monthly (March) column in AICPA Career Insider

Diversity Efficiencies and Synergies in Your Accounting Firm
Mitchell Langbert, Ph.D.
Associate Professor, Brooklyn College
Prejudice, stereotyping and intolerance are patterns out of place in today's commercial society.  In prehistory tribal suspicion of outsiders may have been necessary.  One of the messages of the prisoner's dilemma, a foundation of game theory, is that where information cannot be shared there will be a tendency for players to minimize maximum losses.  During the Ice Age, access to food supply may have been a zero sum game: one tribe's killing and capturing the woolly mammoth meant that other tribes went without supper.  The strategy of minimizing maximum losses may have led to inter-tribal violence and conquest.   The primitive, zero sum mentality carried forward through antiquity and the Middle Ages, when aristocrats' wealth depended on conquest and serfdom.  In assuming that profit is possible only through exploitation of workers, Marxism makes related assumptions.   

In the 18th century the world changed with the Enlightenment's development of science and of a commercial society that depended not on tribe or on ethnicity but on contract.  The win-win, profit maximizing society began to replace the tribal, zero sum society.   One result is the reduction of discrimination over time.  Gary Becker's Economics of Discrimination[i] shows why.  Discrimination inhibits the allocation of human resources to their best uses and so reduces profit.  Justice and rationality coincide, and firms that discriminate pay an economic penalty.

Given the long term progress toward greater rationality we see increasing diversity in the workplace.  The gains have taken two centuries to materialize because of tribalism's atavistic remnants: nationalism, racism, slavery, Imperialism and National Socialism.  But rationality and justice seem to be winning with respect to diversity.  A 2010 Society for Human Resource Management Survey (SHRM) found that 68% of survey respondents have diversity practices.  This was down from 76% in 2005 when the economy was more robust.

The SHRM survey also found that 71% of respondents provide diversity training but only 36% measure its impact.  HR has lagged other business disciplines in adopting metrics and performance measures.  Donald L. Kirkpatrick has argued that any training program should be measured in four ways: participant reaction, behavioral change, on-the-job performance and results. [ii] Any diversity intervention, including training, ought to be evaluated following those steps.   Too often they are not, especially in the most important way: long term results.

Moreover, the diversity training in most firms may fail to penetrate the most sensitive issues.  Only 32% of the respondents to the SHRM survey feel that their organization is diverse at all levels and just 29% say that senior management is committed to workplace diversity.  But a sound diversity program does not require hoopla or even enthusiasm.  The extent of a firm's commitment to diversity ought to depend on the extent to which diversity contributes to efficiency and justice.
In particular, it is possible that an intentional increase in diversity beyond mere non-discrimination with respect to hiring for the firm's specific jobs yields better profitability than a nondiscriminatory but homogenous firm would experience.  If this is true, then reverse discrimination may be justified with respect to specific hiring decisions. 

This claim is grounded in findings about group dynamics.  Solomon Asch, a Swarthmore College psychologist, found that when individual test subjects were placed among a group of seven of Asch's confederates and the group was shown cards with three lines, one of which was shorter than the others, if the seven confederates said that one of the longer lines was the shorter one, then 32% of the test subjects agreed that the longer line was shorter. [iii]  Arguably, diversity can counteract organizational conformity and groupthink.  Diverse backgrounds potentially contribute to one of the chief advantages of group decision making: they broaden the available information pool.  Diversity may have benefits above and beyond the absence of discrimination. These can be called diversity synergies.  Whether diversity synergies exist is an empirical question, a matter of fact.

If there are no diversity synergies, or if firms have already exploited diversity synergies, and if firms have not systematically discriminated, then we would not expect to find consistent results showing that diversity increases productivity or profit.  The reason is that if firms match the best candidates to the best jobs then they are efficient whether or not they are diverse.  If firms have discriminated, then less diversity would be correlated with lower profitability whether or not diversity synergies exist.  If firms have not discriminated then finding that there are returns to diversity would suggest diversity synergies.
In the December 2003 issue of Journal of Management Susan E. Jackson, Aparna Joshi and Niclas L. Erhardt reviewed research on team and organizational diversity.[iv]  They write:

                Our examination of these studies yielded few discernible patterns in the results. For most
                diversity dimensions, the findings across studies were mixed… studies of sex diversity have found its
                effects on performance are sometimes positive… sometimes negative… and sometimes not significant…  
                Findings regarding age diversity were also mixed... the evidence that supports the often-made claim that
              racio-ethnic diversity improves performance is limited.

This finding suggests either that firms have not discriminated or that there are no diversity synergies beyond any that firms already have exploited.  As a result, if chief executives are not focused on diversity issues the reason may be that they have already addressed the problem.

At the same time, firms must emphasize diversity.  In their textbook on human resources, Managing Human Resources 10th Edition, Susan E.Jackson, Randall S. Schuler and Steve Werner argue that there are three kinds of justice, distributive, procedural and interactional, and all three are relevant to diversity. [v] Employees who feel mistreated are likely to retaliate or become demotivated.  Therefore, even if equity is a matter of perception a sound diversity program is essential to human resource management.  
Despite the considerable gains that have been made, individuals still often stereotype and prejudge others. We can all stand to eliminate biases and prejudices.  In establishing organizational values, top management's commitment to just dealing is essential. This includes explicit, senior level commitments to diversity and inclusion. 

Two good approaches are mentoring and training. Mentoring programs can facilitate the promotion of employees who belong to groups that have been excluded from higher level jobs.   As well, diversity can be viewed as a broadening learning experience.  For example, encouraging support for employees who celebrate different holidays and learning about others' cultures and religions can be enjoyable learning experiences that build bonds among employees.

In short, progress with respect to diversity has been made.  The issue will not disappear, but rational strategic thinking, economic analysis and program evaluation should take precedence over slogans and clichés. 

[i] Gary S. Becker. The Economics of Discrimination. Chicago: University of Chicago Press, 1957.
[ii] Donald L. Kirkpatrick. Evaluating Training Programs Fourth Edition. San Francisco: Berrett-Koehler Publishers,, 2006.
[iii]Solomon E. Asch, S. E. Studies of independence and conformity: A minority of one against a unanimous majority. Psychological Monographs, 70 (416), 1956.
[iv] Susan E. Jackson, Aparna Joshi and NIclas L. Erhardt. "Recent Research on Team and Organizational Diversity: SWOT Analysis and Implications."  Journal of Management 2003:29: 801-830.
[v]Susan E. Jackson, Randall S. Schuler, Steve Werner. Managing Human Resources. Mason, Ohio: South-Western Cengage Learning, 2009.

Friday, March 4, 2011

Public Mix

Scott Rasmussen finds that sixty seven percent of Americans disapprove of the Wisconsin Democrats' bolting the state.  He also finds that the American and Wisconsin publics slightly back Governor Scott Walker over the Wisconsin unions, 47% to 42%. Republicans tend to back the governor while Democrats tend to back the unions.  At the same time, 50% of the American public supports public sector unions on principle.

An interesting puzzle is why a large percentage of Americans, at least 38% of the American public, supports public sector unionism while they are not union members.  Do the 38% or more wish they were in unions?  There may be something in these numbers. 

Albany Tax Men Bleed Ulster County's Economy

I just submitted the following article to the Lincoln Eagle. It's based on an earlier blog I had done on the Barker residency case.

Albany Tax Men Bleed Ulster County's Economy 

Mitchell Langbert, Ph.D.*

Where is Assemblyman Kevin Cahill now that we really need him?  A recent ruling by the New York State division of tax appeals in Troy[i] directly threatens Ulster County's moribund economy.   But Assemblyman Cahill, Ulster County's state assembly representative, has taken no steps to propose legislation to overturn the ruling.

Administrative Law Judge Joseph W. Pinto held in November that John and Laura Giarraputo Barker of New Canaan, Connecticut are residents of New York State even though they visit their vacation home in Napeague in the Hamptons only four or five weekends a year.  In 2002 they were there for Memorial Day, July 4th, July 19-21, August 7-10 and Labor Day weekends.  Most of the time Mrs. Barker's parents, the Giarraputos, live there because her father runs a fishing boat charter business.

John Barker is an investment manager for Neuberger Berman in Manhattan.  He commutes from Connecticut to Manhattan each day.  As a result, he spends more than 183 days in the state each year even though he was seldom at the 1100 square foot weekend cottage in Napeague.  The house is insured for $228,000 with flood insurance of $250,000.  Mr. Barker earns more than one million dollars per year.  The house is flimsily constructed. For instance, there is no interior wall insulation.  Even though the tax law says that cottages and camps are not permanent places of abode, the tax appeals court held that the Barkers' home is a permanent residence (even though the Giarraputos lived there most of the time).  As a result, the Barkers are responsible for back taxes and penalties from 2002 to 2004 of $904,489.00 

New York Tax Law holds that someone who is not domiciled in the state but maintains a permanent place of abode and spends more than 183 days of the taxable year in the state is a resident.  That is, Mr. Barker worked in Manhattan more than 183 days per year and owned the cottage on Long Island. The court held that the cottage is a permanent dwelling.  Therefore, Judge Pinto held, he must pay the $904, 489 in taxes and penalties. 

Vacation home construction drives much of Ulster County's economy.  The reason is that the county's Democratic Party-dominated representatives, led by Congressman Maurice Hinchey and Assemblyman Kevin Cahill, have voted for regulation and taxation that have driven businesses away.  Population in Ulster County, New York has grown at one third the national rate as children have fled to Republican-run states like Colorado and Texas.  Not satisfied with the scope and extent of the economic devastation that they have caused so far, tax-and-spend Democrats are rejoicing now that the Barker ruling will reduce vacation home building here.
Threatening prospective vacation home buyers who do not really live in the state with punitive income taxation is a sure way to reduce demand for vacation homes, reduce employment, and reduce property values throughout Ulster County.  Can we expect Assemblyman Cahill to take action on this assault on the county's economy, or will he continue to sing the Cahill Street blues?  

Numerous New Yorkers own vacation homes in the Town of Woodstock, whose median income is the county's highest.  But many weekenders come from other states, especially New Jersey.  The effect will be downward pressure on property values as they sell here and buy at the Jersey shore. 

There is also the question of people who live full time in Ulster County but own second homes in New York City.  Will they have to pay New York City income tax even though they do not live there?   In an article on February 23, 2011 The New York Times reports that people who own apartments in New York have to be able to positively prove that they were not present in the city 183 days or more to avoid income tax liability. The article cites examples like Thomas Puccio of Weston, Connecticut, who presented affidavits from Weston stores to prove that he was in New York City only 111 days but was nevertheless held to owe $271,382 in income taxes to the city and the state. The burden of proof is placed on the taxpayer, and the tax courts know who their bosses are: the state's tax-and-spend politicians and unions. 

Taxation interferes with property rights.  Since economic progress, which makes the middle class wealthier, depends on property ownership, more aggressive tax systems such as are evolving in New York will be accompanied by fewer rights concentrated at higher levels.  The middle class will not be able to afford the legal fees necessary to cope with aggressive and confiscatory tax policies.  New York's Democratic Party and Rockefeller Republican socialists imagine themselves to be egalitarian, but they are friends of plutocracy.  As aggressive taxes hamstring middle income Americans, the super-rich, who can afford to pay multiple income taxes (people like Barker and Puccio, who was Klaus von Bulow's lawyer), are able to purchase property at lower values.  George Soros reaps significant benefits from his contributions to the Democratic Party as the rest of the country becomes poorer and income inequality is increased.

*Associate Professor, Brooklyn College. Dr. Langbert blogs at

Thursday, March 3, 2011

Wisconsin's Demonstrators Much More Violent than Tea Parties'

 In Wisconsin, public sector workers' demonstrations include surrounding GOP State Senator Glenn Grothman in a threatening manner (h/t Dennis Sevakis).  The public sector workers are much more violent than any major Tea Party demonstration.  The left has repeatedly accused the Tea Party of violence while the demonstrators whom they support in Wisconsin surround and verbally assault elected officials.  Compare the violent, abusive anger in Wisconsin and the person screaming, "don't touch him!" (conscious of the legal implications of battery but ignoring that assault is a wrong even if it does not involve battery) with Tea Party demonstrators in Broward County, Florida and Danville, California.  My friends at the Kingston Rhinebeck Tea Party tell me that the Washington police have repeatedly told them that Tea Party demonstrations never involve problems of the kind that the public sector employees in Wisconsin illustrate.


Broward and Danville:

Wednesday, March 2, 2011

Gary Cooper

Gary Cooper won three Academy Awards : one for Sergeant York; one for High Noon; and an honorary lifetime achievement award.  According to Wikipedia, the real-life Sergeant York, who single handedly killed 28 German soldiers and captured 132 in one incident  in World War I's Meuse-Argonne offensive, refused to allow the film to be made unless Cooper portrayed him. Cooper also won Academy Award nominations for For Whom the Bell Tolls; Pride of the Yankees; and Mr. Deeds Goes to Town. His IMDB filmography includes 115 titles.

When discusing Cooper's starring role in Ayn Rand's The Fountainhead I was somewhat surprised that none of my students had heard of him.  Perhaps this is symptomatic of a general lack of historical knowledge, but some of Cooper's films are still watched.  Students have little cultural awareness in any area, including film.

Recently, I have been watching Cooper's films, starting with Howard Hawks's Sergeant York and William A. Wellman's Beau Geste.  Both are excellent and neither could be made today.  Sergeant York is about a man who finds religious faith and then reconciles a conflict between his belief in the Bible, which leads him to want to become a conscientious objector, and his loyalty to the United States.  His rural upbringing gives him competencies, including shooting, that urban Americans had lost.  

Beau Geste is about English brothers who enlist in the French Foreign Legion (note that Hollywood hasn't made Foreign Legion movies since the Vietnam War) and about one's noble gesture. Today's Hollywood, with its ridiculous political correctness and left wing ideology is incapable of making movies at these two films' moral level.

I find Cooper's performances in the 1939 Beau Geste and 1941 Sergeant York  to be stronger than his later performances.  Like De Niro, whose best work was in his earliest movies like Taxi Driver, Cooper's testosterone was stronger when he was slightly younger.  I think audiences continued to remember the younger Cooper into the 1950s. To appreciate him you need to watch his films made from the late 1920s through early 1940s.

2009 Revisited: Fed Auditors Know Nothing About Fed Operations

Sharad Karkhanis sent me this link to a May 6, 2009 video on Daily and the Daily Paul site.  Representative Alan Grayson (D-Fl) is questioning Inspector General Elizabeth A. Coleman,  the inspector general of the Federal Reserve Bank's board of governors.  Coleman says that she does not have authority to investigate or audit an alleged $9 trillion off balance sheet transactions ($30,000 for every single American) or any Fed activities and that she has no idea of who received the money, or the losses the Fed had inccurred on a $2 trillion loan portfolio.

Tuesday, March 1, 2011

The PSC Fiddles While Your Seniority Burns

Sharad Karkhanis sent my piece "The PSC Fiddles While Your Seniority Burns" as a Patriot Returns issue to 13,000 CUNY faculty and staff.  The PSC is the union that represents the CUNY faculty. Its leadership is fringe left.


   Vol. 54, No.3                                                          February 28, 2011
PSC Fiddles While Your Seniority Burns
Mitchell Langbert, Ph.D.
Associate Professor, Brooklyn College
In 1960 Sumner Slichter et al. claimed that by rationalizing the workplace unions had improved management. Whereas bribery and caprice characterized the foreman-dominated shape-up system of an earlier age, unions encouraged rules that made personnel decisions predictable and efficient.* Among these were seniority systems and bumping rights. Soon after The Impact of Collective Bargaining on Management's publication, unionism's role in education grew. By 1981, Douglas Mitchell et al. observed that collective bargaining had been one of the three most important developments in education in the preceding 30 years.**
But Slichter and Mitchell never observed President Barbara Bowen and her Merry Prankster-like New Caucus. Had they, they would have given up on unions. Not since the days of the Industrial Workers of the World has there been a leadership so out of touch with the realities of the workplace and American politics. Worse, now that the bureaucratic model of unionism that Slichter et al. recorded is under assault, the PSC is distributing e-mails about proprietary schools, the Egyptian crisis and Puerto Rico.
A Union Leadership Losing Touch
This is what the PSC has accomplished in the past few weeks. First, President Bowen distributed an email protesting charter elementary schools. Then, she distributed one urging the PSC's membership to take action about fraud in proprietary colleges. On February 15 Anthony Gronowicz distributed an email to the PSC-DA email list concerning human rights in Puerto Rico under Governor Luis Fortu. Angel Gonzalez adds that the struggle against Puerto Rican privatization ought to be at the forefront of the PSC's concerns. Then, taking a breather to focus on something related to a faculty union, on February 21 the PSC put forward a resolution condemning the limitations on collective bargaining and the elimination of faculty bargaining in Wisconsin. Quickly, Nancy Romer and Bill Friedheim added a crucial point: that a resolution concerning Egypt should be read at "all our Wisconsin support events."
While the PSC is busy equating the Muslim Brotherhood and the Wisconsin State Senate there has been a simultaneous New York conflagration concerning bumping rights and seniority rules in public schools. This local, and, to the New Caucus, apparently uninteresting debate may eventually affect your own bumping rights and how you are treated during an economic downturn. The New York Post observes that a New York group called Education Reform Now is running advertisements attacking traditional bumping rules in lower education. At the same time, President Obama's education czar, Secretary Arne Duncan, argues against traditional LIFO bumping rights. Mayor Bloomberg openly speaks of repealing the traditional rules.
Speculatively, this could be a harbinger of an assault on not just bumping rights but also tenure in higher education. Yet, President Bowen becomes cross when disturbed from her meditations on Cesar Chavez, Sami al Arian and fraud in proprietary schools.
There are arguments for and against seniority and tenure as management techniques in industry. That is, while those arguing for merit-based employment systems claim that they will reduce costs, their arguments can be refuted. In the private sector the Japanese use less merit pay and place more emphasis on seniority than American firms do, but Japanese firms are more efficient. The Japanese made their greatest gains when they relied on seniority and did not use merit pay. The last time I looked Toyota did not have to be bailed out, but unlike GM its engineers are not subject to employment at will.
Although the Japanese commitment to lifetime employment has waned, their firms are less likely to lay off workers than are failed American firms on Wall Street and in Detroit. At the same time, neither the managements of Japanese firms nor the leaders of the enterprise unions, the company unions that have assisted Japanese firms by representing employees, waste their time debating the Iraqi War and the Unabomber's free speech rights.
CUNY's faculty ought to consider what personnel policies would be best for CUNY and best for the faculty itself. As well, a lobbying strategy aimed to educate the legislature about faculty practice and ways to improve higher education ought to be established. If tenure policy is eventually associated with seniority, wise input from reasonable faculty leaders will become important.
Moreover, in order to achieve a vision of what higher education ought to be, a university-wide dialogue is required. But there has been none. The absence of coherent discussion reflects the New Caucus's inability to coherently frame personnel issues in contemporary terms. Instead, anyone who disagrees with the New Caucus's foreign policy is silenced. Rather than discuss seniority rights, the New Caucus complains of Puerto Rican privatization and complex events in Egypt whose implications specialists do not fully comprehend.
Do Barbara Bowen and the New Caucus offer CUNY's best face? Are you confident that when discussion about CUNY's personnel policies is forced into the public arena the New Caucus will effectively represent you?
* Sumner H. Slichter, James J. Healy, and E. Robert Livernash, The Impact of Collective Bargaining on Management ( Washington , D.C. : The Brookings Institution, 1960
** Douglas E. Mitchell, Charles T. Kerchner, Wayne Erck and Gabrielle Pryor, "The Impact of Collective Bargaining on School Management and Policy." American Journal of Education 89:2 pp. 147-88, 1981.

Sharad Karkhanis, Ph.D.
Professor Emeritus


Issues of The Patriot may be accessed at
Archived editions are available at

Sunday, February 27, 2011

Physicians, Guns and Lawyers

I just received this e-mail from  Robroy4355:

A)  The number of physicians in the  U.S.  is


(B)  Accidental deaths caused by Physicians

per year are



(C)  Accidental deaths per physician



Statistics courtesy of  U.S.  Dept. of
Health  and  Human Services.


Now think about this:


(A)  The number of gun owners in the  U.S.



(Yes, that's 80 million)

(B)  The number of accidental gun deaths

per year, all age groups,



(C)  The number of accidental deaths

per gun owner



Statistics courtesy of


  statistically, doctors are approximately

9,000 times more dangerous than gun owners.


Remember, 'Guns don't kill people, doctors do.'




Almost everyone has at least one doctor.
This means you are over 9,000 times more likely to be killed by a doctor as by a gun owner!!!


Please alert your friends


alarming threat.

We must ban doctors

before this gets completely out of hand!!!!!


Out of concern for the public at large,

We withheld the statistics on


for fear the shock would cause

people to panic and seek medical attention!

Benjamin Franklin Quotes

We're covering Benjamin Franklin in my senior seminar tomorrow. I pulled a few quotes from his booklet  "The Way to Wealth" and other sources:

The Way to Wealth:

A word to the wise is enough

Early to bed and early to rise makes a man healthy, wealthy and wise

God helps them that help themselves

Never leave till tomorrow which you can do today

There are no gains without pains

Rather go to bed supperless than in debt

Fools make feasts and wise men eat them

What would maintain one vice would bring up two children

Lying rides on debt's back

Creditors are a superstitious sect, great observers of day and times

Additional Sources:

Never leave that till tomorrow which you can do today.

Time is money.

A place for everything, everything in its place.

In this world nothing can be said to be certain, except death and taxes.

If you know how to spend less than you get, you have the philosopher's stone.

Many people die at twenty five and aren't buried until they are seventy five.

There are three things extremely hard: steel, a diamond, and to know one's self.

Honesty is the best policy.

Anyone who trades liberty for security deserves neither liberty nor security

Where liberty is, there is my country.

We are all born ignorant, but one must work hard to remain stupid.

An investment in knowledge pays the best interest.

Any fool can criticize, condemn and complain and most fools do.

Being ignorant is not so much a shame, as being unwilling to learn.

A good conscience is a continual Christmas.

A man wrapped up in himself makes a very small bundle.

Having been poor is no shame, but being ashamed of it, is.

He that is good for making excuses is seldom good for anything else.

I wake up every morning at nine and grab for the morning paper. Then I look at the obituary page. If my name is not on it, I get up