Wednesday, March 23, 2011

The Superorganic World of Transfer Pricing

Business anthropology is an emerging sub-discipline in anthropology. As an academic discipline, business anthropologists study business practices and organizations from a cultural and cross cultural perspective. As an applied discipline, the Business anthropologist works with business owners and corporations to solve cultural and cross cultural problems that arise in the course of international business and/or working with a socially and culturally diverse workforce, market place and business environment.

One problem unique to the international business corporation is the impact of "transfer pricing" on the corporation's organizational structure and operational processes. This is a concept that the business anthropologist should become familiar with when working with international\global corporation.

Transfer Pricing is an accounting tool used in international business to account for sales between a parent company and its subsidiaries located in a different tax jurisdiction. Transfer pricing deals with the problem companies face when they have operations in several different taxing jurisdictions and engage in intra-company sales of goods and services. It can also be a tool that can be used to maximize corporate income taxes savings.

A recent NPR interview on Fresh Air with reporter Jesse Drucker, from Bloomberg News, describes how this tool is being used by such global corporations as Google,Forest Laboratories and other companies to save billions of dollars of taxes.

Monday, March 14, 2011

What every applied anthropologist should learn about money!

In a recent question posed in the Systems Thinking World interest group on LinkedIn, I was struck by what I consider to be an area missing in the standard training of an applied anthropologist. This training gap applies specifically to a problem such quoted below.

On the surface this might be taken to a simple cross-cultural problem in a business context.The question is:
What should you do if you meet this situation when you are in a foreign-owned enterprise: A foreign home company set up a new brand company in China five years ago! However, till now, the Chinese brand company size was still same as before. Compared with the other similar company, this Chinese brand company never grew up. The profit that they earned has to submmit to the foreign home company by a kind of form call technical support cost.

My first questions to the reader are:
How would you attempt to address this question?
Is this a matter of cross cultural mis-communication?
Is it an example of foreign exploitation or even racism?
and, What theory or tools would you be using to assess the problem?

As I first read it. I thought about these questions and how I might have attempted to address one or the other. Maybe both. But then I paused and remembered my MBA training, especially accounting. In the world of business, accounting is the lingua franc. If you go to the site you can read my answer. Here is where the answer lay - it is a linguistic problem.

In this particular case, we have a common situation found in international business where a profit can be quickly transformed into an expense and even a loss for tax purposes. The situation is called, "transfer pricing" and is a little magical trick of removing a profit on the balance sheet and transferring it to a liability on the Income statement.

What I want to stress here is that every applied anthropologist should take a basic course in financial accounting, not to become an accountant, but to learn the language of money. Especially, the grammar of money and when to bring in an interpreter.

I am not attempting to justify exploitation such as described in the original question. What I am criticizing is that so much of the ideological criticism by anthropologists directed toward corporations and international businesses, attacking capitalism vs labor, etc. is based on the critic's linguistic ignorance of the language spoken by those they criticize. Traditional ethnography would require that the ethnographer have a basic understanding of the native language before attempting to interpret the alien culture.

What I am proposing is that any applied anthropologist who expects to influence a client who works in the real world should be familiar enough with the language of money to know when it is time to call in an accountant.

Friday, March 4, 2011

Is Applied Anthropology a Profession?

My question is based on my dissertation and subsequent career path as well as monitoring of the anthropological profession for the past 30 years. My dissertation began as a study of voluntary associations as particular type of socio-cultural adaptation to the pressure for change in a complex society - sort of a "superorganic" adaptation. The final product entitled, Anthropology and the Social Engineer: A Case Study of the Professionalization and Elaboration of the Social Scientist's Role, drew upon the research done by sociologist and anthropologists who studied modern professions such as medicine, accounting, engineering for a theoretical framework. They define a profession as a subset of an occupation. My own field work in the areas of social program design and evaluation and research into the organizational development of American anthropology confirmed the idea that a professional organization is a special case of the voluntary association form of social organization.

One of the major findings of this research is that a professional tends to express the very sense of "calling" and "commitment" to the ideology of the discipline they pursue that people report in their religious experience. These professions call upon members to subordination of their individual bias to a set of the collective standards established by discipline (faith) and to maintain a special relationship to the lay public being served. This is similar to what one finds in the clergy.

Just as the Church's greatest weapon against the apostate is "excommunication," so too the greatest weapon against a professional is the threat of ostracism, e.g. a lawyer being disbarred or a doctor having his/her medical license pulled. This is usually caused by an extreme breach of professional ethics or standards.

My question is to ascertain how others think and feel about the following situation.

If the AAA, SfAA, or NAPA have codes of ethics but no authority to enforce them and no formal requirements for membership other than paying dues, then are they a profession or simply a voluntary association?

My observation over the past 30 years is that the profession seems to rest solely and exclusively in the academy. Specifically it rests in the university department which can "license" practitioners with tenure and expel members by rescinding tenure. But where else is there a similar professional control over the practice of anthropology?

A truly professional "applied anthropology" or "practicing anthropology" would model itself after the other service professions such as medical, law,social work,engineering, etc. These professions are organized to insure a form of self government to protect members from government interference in their practice, and protect the public they serve from quacks and unethical practitioners by controlling membership.