Category Archives: Business ethics

To give everyone an idea how backward healthcare administration is in this country, read the following report touting the bold innovation instituted by CIGNA, making Quicken software available to some its members.

Only now, under the treat of regulation, does one the nation’s largest carriers make a step to help members organize their own healthcare records by offering access to a software program widely available to the public for decades. We’ve got a long way to go to fix this mess.

Story:

http://www.healthcarefinancenews.com/news/cigna-makes-quicken-software-available-health-plans

Great article below uncovering a root of our current financial disaster.  The euphoria of prosperity clouded reason.  Despite the hysteria, a few were wise enough to see the inherent dangers and voice their dissent.

We must never forget that the past is a guide to our future.

http://www.nytimes.com/1999/11/05/business/congress-passes-wide-ranging-bill-easing-bank-laws.html

Numbers without Meaning

I’ve been avoiding the furor over bailout spending and executive payouts for 2 reasons, previous coverage and exhaustion.  After dedicating much of this space to TARP earlier in the year, I was pleased to see the media push the issue into the spotlight.  The story is now ubiquitous, cavernous, incessant, and, despite my contempt for corruption, I’ve grown weary.  But the story below has blown my mind and made the wound fresh again.

Apparently Goldman Sachs is planning to return its TARP funds by mid-April.  The move is not the result of any newfound stability within the operation.  Instead, it is a means to avoid public scorn for being a corrupt, inept, and disorganized institution completely out of step with reality.  Rather than acknowledge nationwide frustration with a company that saw its net-worth plummet into oblivion while at the same time setting a record for executive compensation, Goldman Sachs hopes to obscure itself from its role in sinking the country by giving back the $10 billion in TARP funds that were absolutely essential for their survival just a few months ago.  By giving the money back, the bank hopes to escape from the public relations disaster.  And they are not alone, JP Morgan Chase, who plan to spend $138 million on two new corporate jets and a luxury airport hangar, also plan to return their TARP funds to the government.  Once they do, they’ll go ahead and finish their air travel upgrade, free of any public dissention.  After all, Jaime Dimon, JP Morgan’s CEO was quoted just two weeks ago saying, “When I hear the constant vilification of corporate America I personally don’t understand it.” Clearly.

Of course you don’t, Jaime, neither do any of your colleagues.  What is more troubling is that none of you are willing to understand it.  The bailout was intended to keep the foundations of our economy intact by keeping your businesses alive. Now, more than ever, it is clear you should have been allowed to fail (that would have been better for you, as then your bonuses never would have been under the threat of congressional rescission).  You refuse to learn from your mistakes and develop better, more efficient business models.  You are intent on running everything straight into the ground so long as you can continue to line your overstuffed pockets.  You claim that bonuses are essential to retain your top talent. Your companies have all devalued and eroded the global economy, you don’t have any talent.  You did not require government funding, you just got in line for free money that the government never should have offered.  But you took it, saying it was necessary.  Now, under pressure for inept practices, you are eager to return it, despite no considerable gains in your performance. You have no credibility, no integrity, and deserve no respect.  Oblivious to the frustration of millions, whose lives are stalled and even destroyed by your greed; continue on in your opulent, wayward, stupor.  You are worthless.

Goldman Sachs to Return TARP Funds by Mid-April:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aW2jw0bHcg3s&refer=home

JP Morgan Chase Spending Millions on New Jets and Luxury Private Airport Hangar

http://abcnews.go.com/Blotter/WallStreet/story?id=7146474&page=1

Chase Will Repay TARP Funds Before Making Jet Purchase:

http://dealbook.blogs.nytimes.com/2009/03/23/jpmorgan-to-proceed-with-new-jets-and-hangar/?hp

It turns out the Rose Art Museum at Brandeis University will not be closed after all.  After heated public outcry, and impassioned letters by Brandeis faculty and Rose Museum staff, University President Jehuda Reinharz is pulling back on the decision to close the museum.  Clarifying his position, Reinharz offers contrition for the expedition and miscommunication caused by the board decision to sell of the Rose’s art collection, and is now stating that the museum will remain open.  Though certain pieces may still be put up for sale, the “crisis of confidence” caused by the board’s actions has led to a new path.
President Reinharz’s letter is available below:

http://www.boston.com/ae/theater_arts/exhibitionist/2009/02/brandeis_presid.html?p1=Well_MostPop_Emailed3

How depressing is this?  An article on joblessness imposing hibernation on singles, who cannot afford to date.

(Story, Can’t Buy Me Love http://www.boston.com/lifestyle/relationships/articles/2009/01/24/cant_buy_me_love/)

Yes, dating is expensive.  And I will not make light of someone who watches each and every dollar and chooses to refrain from going out.  But I do not like the psychology within the article that suggests an unemployed person is unworthy.  That is a distorted and unnecessary view.  Certainly I can understand the frustration of unemployment, I have been there and, who knows, perhaps soon I will be there again.  But we are supposed to know who we are.  Our job is not our identity.  Very few people in this world love their jobs, those who do are blessed and in the minority.  A loss of income and occupation can certainly institute a lack of purpose, but we need to rise above that and be who we are beyond our occupations.  If you exercise, perhaps you go to a gym or attend fitness classes, you can meet people there.  If you are a reader you may go to a library, you can meet people there.  If you drink coffee you may go to a coffee shop, you can meet people there.  If you want to meet someone and don’t have money, get involved with a cause and volunteer.  We need to be open to meeting people at any time. It is difficult, daunting, and overwhelming, but we need to try to rise above that.  We cannot be consumed by worthlessness, and being without a job does not make you less of person.  Certainly it may feel that way, and some may treat you that way, but those who do are worthless themselves.  Be true to yourself and understand that your job does not define you.  A lack of income may limit your lifestyle, but does not limit your value.  Open your mind and embrace the world, there is no cost for imagination.

Money is not an indicator of value.  Yes, we all want more money, I do too. But look at the greed that is taking our country down into a death spiral.  People like John Thain, Jeffrey Skilling, Dennis Kozlowski, Bernie Madoff, who have choked the incomes of millions by pursuing their own relentless avarice.  For each one of those deplorable men, there are hundreds arround them, approving their salaries and bonuses, or working for them and straining to reach their level.  That is why our industries are drying up, because they infected with a staggering gluttony of greed that has permeated all levels of our society.  This corruption has become our corruptor.  We need to set ourselves free.

And just for measure, some personal experience.  I have had the pleasure of being dumped by my girlfriend of three years while unemployed.  At a time when I needed support, she walked out the door never to return.  I was heartbroken and devastated.  It took me a significant amount of time to rise out of that depression, but I did rise out of it; before I had another job or another girlfriend.  As the saying goes, what doesn’t kill you makes you stronger.  In that experience, I learned more about my own value and my ex-paramour’s lack thereof.  The love I had believed in was largely an illusion.  Certainly not at the beginning but, on her end, well before my job disappeared.  Illusion, delusion.  That is something we need to learn through each and every relationship, as well as the time between.

Ultimately we need to know who we, ourselves, are.  That is the true path to happiness.  Togetherness can be an illusion.  You can be with someone without really sharing anything true.  And some may choose that over being alone, but that is more of an avoidance of self discovery and understanding.  Just as we should not define ourselves by our jobs, we should not define ourselves by being in a couple versus being single.  There are a great number of unhappy couples out there, which is easy to forget when you are not with someone.  But do not nurse your wishes, because simply finding “someone” does not create happiness.  It is finding the right one. And that cannot happen until you know who you are, which can take a lifetime.  It has for me.


Ousted

 

After solidifying Merrill Lynch’s depth charge acquisition by Bank of America, former Merrill CEO and unabashed bonus seeker John Thain is rightfully out of work.  After pulling in over $54 in 2007 from Goldman Sachs, Thain accepted a $15 million signing bonus to become CEO of Merrill Lynch.  In his short time there, he dutifully spent $1.2 million redecorating his office to ensure a comfortable perch to watch as the near century old Merrill steadily moved toward the brink of collapse.  In September, Thain and Kenneth Lewis negotiated the merger of Merrill Lynch with Bank of America; a move that has been nothing but an albatross to B of A.  Despite the precipitous decline of Bank of America based on the poor financial markets and toxic assets of Merrill Lynch, Thain still had the voracious audacity to request a $10 million bonus from the board for his efforts.

 

John Thain was formerly known as a Mr. Fixit, now he should be rightly seen as nothing more than an avaricious parasite seeking to gain from the world’s losses.  A man completely out of touch with his position, oblivious to the responsibility he held for his own workers as well as the general public.  Of course he has already made more money than can be spent in a lifetime, but he should not be allowed to disappear into affluent anonymity. He should rightly become a punchline.  The man is a disgrace who encapsulates the endemic greed that has poisoned and sunk our economy.   No, he is not alone, but his defiant gluttony has brought unwanted fame that business schools and mentors should never allow to fade.  Here is an example of what not to do, of who to guard against, in every business arena.  Think of the jobs that were lost under his distorted and myopic tenure.  Think of how many jobs could have been saved by remunerating just his 2008 signing bonus.  These are the kind of lessons we need to learn from this trying time.  Yes, greed is inherent in humanity and will never be rooted out.  But we can see the poison of greed in our corporate system as we pay its ever increasing cost.  Each day brings more headache and greater struggle to millions; people like John Thain are at the root of the evil.  Do not forget the trustees who granted these salaries, and all the other executives straining for their own share of the pelf.  This whole culture has to change, and that requires public outrage and vigilance.  We have not seen the worst of it yet, but each day someone like Thain is ousted is a step in the right direction.  Good riddance.

 

John Thain Agrees to Leave Bank of America

http://www.bloomberg.com/apps/news?pid=20601087&sid=apwXZlxMaUm4&refer=home

 

A Different Tune

 

Chrysler is demonstrating a willingness to change through their proposed merger with Fiat.  The two companies produce vehicles at opposite ends of the spectrum, Chrysler producing large, gas-guzzling trucks and SUVs, and Fiat producing small, fuel-efficient economy cars.  The move is one of necessity, as Chrysler is fighting for survival.  But this represents an open-mindedness to find a new path in order to sustain its business. 

 

This is exactly what companies need to do at all times.  However, American auto-makers have been particularly stubborn and resistant to change.  Their obstinance has led them to the point of collapse.  Forced to plead Congress for bailout funding, the government rightly imposed upon the automakers a quick deadline for a revised business model.  In order not to forfeit the $4 billion they received, Chrysler has until March 31 to implement plans for a new business model offering innovation, reduced debt and reduced labor costs.  Again, that is the general goal of any business worth their salt, but clout and power corrupt.  And we are witnessing the price that must be paid.  While the auto-makers appealed to the government for assistance, they were unprepared on their first attempt to face reality.  Looking like a bunch of spoiled brats expecting a blank check, trying to be certain they still had a chair once the music stopped, they had no refined vision, no plan to lift their companies out of the morass they had presided over. The government wisely learned from the mistakes made by the vagaries of the financial bailout, and sent the automakers home to do some reflecting and number crunching.  Their return plea was accepted, their funds granted, but with clear accountability. 

 

Chrysler is responding to the challenge.  Fiat offers them wider distribution, and more efficient vehicles.  Sales should increase, allowing debt to decrease.  The impending collaboration should help Chrysler catch up with the times, and not rely solely on hulking trucks and SUVs.  The world is getting smaller, and is no longer the United States’ oyster.  Cars are getting smaller too.  The demand for broad, powerful trucks will always be there.  But is not the vehicle of choice for the masses.  By expanding its offerings and opening itself to more foreign markets, Chrysler is making a move that is right for the times.  What is more encouraging is that the government bailout seems to have made a positive impression on the corporation.  Let’s hope that’s contagious for all businesses receiving federal funds. 

 

Fiat to Claim 35% Stake in Chrysler:

http://www.boston.com/business/articles/2009/01/21/fiat_to_give_chrysler_technology_markets/

 

TARP Case Study

 

Below are articles outlining the use of TARP funds by Bank of America, which is taking on water thanks to their acquisition of Merrill Lynch.  As bad as the news is, the details provide a productive use of bailout funds, but it certainly is alarming to see that, not only the toxicity of Merrill Lynch, but also the awful (and high priced) recommendation of outside consultants J.C. Flowers and Fox-Pitt.  Since announcing the merger, Bank of America stock has lost over 75% of its value.  In order to stabilize, the company is now preparing to lay off 35,000 workers.  This begs a reiteration of the question, what on earth did John Thain (CEO of Merrill Lynch) expect a $10 million bonus for? 

 

Details of the Additional $20 Billion for Bank of America to Stave Off Crisis Caused by Merrill Lynch Acquisition:

http://money.cnn.com/2009/01/16/news/companies/bofa_new_bailout/?postversion=2009011609

 

Colin Barr’s Editorial on Bank of America’s Toxic Acquisition of Merrill Lynch: 

http://money.cnn.com/2009/01/15/news/bofa.unfair.fortune/index.htm?postversion=2009011515

The Call For Transparency

The public demand for transparency concerning bailout funds is mounting.  On Monday, Fox News filed suit against the Fed for its refusal to declare details regarding the Troubled Asset Relief Program, citing a violation of the Freedom of Information Act.  This is a bold and exemplary move.  The impetus for the case comes from a November request of the FED by Fox Business News for full disclosure on the source, recipients, and use of TARP funding.  The FED denied the request, and now Fox News is taking them to court on behalf of our public right to know how our money is being spent.  (Read story, http://uk.reuters.com/article/marketsNewsUS/idUKN1235009220090112)

Further insistence is brought today by The Huffington Post, where Thomas B. Edsall highlights the duplicity of statements that were made at the time TARP funding was awarded and the actions we have witnessed.  (Read story, (http://www.huffingtonpost.com/2009/01/08/the-end-of-bailout-transp_n_156472.html)  As Edsall states in his piece, this story is not taking center stage on our media outlets.  Certainly, in consideration of the multiple entries in this space on the same topic, I agree. 

Again, without a public demand for accountability, our country will only sink further into the oblivion caused by corporate duplicity and hubris.  The fact that two seemingly disparate media outlets, Fox and Huffington, are rallying for the same cause is a triumph.  This is not a partisan issue, it is a national issue.  Beyond that, it is not limited to the bailout, it is an example of the ethical chaos that has caused our financial devastation. This is our money, we are entitled to accountability.  The architects of the bill said so themselves.   

We Need More

 

The era of the bailout thickens.  FED Chief Benjamin Bernanke made public comments stressing the urgency of releasing the remaining $350 billion of TARP funding to banks.  The move is expected to put pressure on the House to release the funds in concert with the request of President-elect Barack Obama.  However, as I have highlighted a few times in this space, we still have no clear window into how these institutions are utilizing the funds they have already received.  The Associated Press targeted 16 institutions for disclosure and was summarily denied.  With his comments, Bernanke is acknowledging the severity of our economic predicament, which also outlines his own underestimation of the crisis just a few months ago.  The lack of transparency in the use of TARP funds is well documented.  Yesterday, the FDIC requested banks disclose their use of the funds.  Not surprisingly, this request was met defensively by the banking industry.  As the FDIC is trying to ensure that these funds are being used for lending to ease the credit crisis, and to make certain they are not being moved into bank reserves.  For some reason the banks are refusing full disclosure.  They were willing to concede some broad declaration.  This is ludicrous.  If any of us were to apply for a bank loan, we would have to supply the bank with our exact intention for the funds.   Now that the banks are on the receiving end of federal loans, the rules are different.  This is hypocrisy, plain and simple. 

 

Senator David Vitter (R-La) has introduced a measure to block the release of the remaining TARP funds.  The hopeful outcome of this action, from my standpoint, is that we can solidify a framework for the responsible use of this massive loan.  Without negating the need of federal assistance to solidify the financial industry, it is necessary to determine transparency.  If indeed further federal funding is necessary to stave off total economic calamity, we should be all the more determined to know the exact use of our tax dollars to determine what is working and what is not.  If these corporations are unwilling to disclose their business practices, it only adds to skepticism of their business practices.  Until proven otherwise, it is fair to presume these funds are being hoarded in their reserves, to pay egregious bonuses to high level executives, and further misuse that has resulted in their own demise.  Without clear parameters and disclosure, the government is throwing our money away on supercilious business leaders who will only bring our economy down even further in an effort to maintain their own stake. 

 

Capitalism is a system that ensures survival of the fittest, and that means yesterday’s giant may be today’s memory.  If that is the case, so be it.  The uncertainty of these times will provide opportunity for new names with better business practices and greater efficiency.  Some of the giants of today will fade and even fail due to their own mistakes.  The giants of tomorrow will incorporate those lessons to create a better environment.  That is how capitalism works.  Ultimately, bailout funds are for our greater national economic survival.  They are not life rafts for a sinking ship.  If more money is needed, we need to know why.

 

 

 

 

 

Bernanke urges release of TARP funds and need for additional Federal Funding

http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aic5mGSBvQ4E

 

FDIC asks receiving banks for disclosure on TARP funding

http://www.bloomberg.com/apps/news?pid=20601087&sid=atDyzLXtnMRU&refer=home

 

Senator Vitter introduces measure to block release of remaining TARP funds

http://www.reuters.com/article/politicsNews/idUSTRE50C4YQ20090113