The largest mortgage settlement in U.S. history was pitched by its creators as a deal that would offer quick aid to 1 million people in danger of losing their homes to foreclosure. But according to a report released Thursday by the court-appointed monitor of the settlement, in the first nine months after the $25 billion deal was struck, fewer than 50,000 people received the most coveted form of relief: reduction of principal owed on a first mortgage.
Meanwhile, more than three times as many borrowers — 169,000 — agreed to a short sale, which requires they leave the property, according to the report.
Banks still have time to meet their obligations under the settlement, which requires that 30 percent of total relief come in the form of first mortgage principal reduction. But housing advocates say the limited progress so far — just 14 percent of aid has gone to write down loan balances — suggests that banks are avoiding, or at least delaying, their obligation to provide meaningful relief as they promised under the deal.
What did the federal government think would happen when their vaunted, over-hyped 25 billion dollar settlement wound up in the hands of the banks themselves? A child could have made an accurate prediction. You reward criminality by avoiding any real penalties. You chock it up as an enormous victory for the government while the banks and people like me hold you in contempt for your incompetence and servile stance to corporate crime. The banks have to pay back some money to the people they stole from. Great. Except that they decide who gets the money and they have decided that most of the money will go to short sales. Isn’t that special. They’re maximizing their profit. Who would’ve thought?
Banks thrive, while homeowners still suffer | The Great Debate
A year ago the federal government and 49 states completed a $25 billion agreement with the nation’s largest mortgage servicers to settle claims of “robo-signing” and unlawful foreclosure practices. President Barack Obama announced the creation of the federal-state mortgage securities working group in his 2012 State of the Union address. The nation seemed on the verge of transforming the way banks treat struggling homeowners ‑ particularly those with “underwater” mortgages, in which a homeowner owes more than the house is worth.
These promises, however, have yet to be fulfilled. The latest interim report on the national mortgage settlement is due out this week, and banks will likely again declare that it offers proof that they are fulfilling their obligations. But the communities hit hardest by the foreclosure crisis have yet to see any meaningful relief.
Time is running out to ensure that these communities receive their fair share under the settlement. But it is not too late to provide meaningful assistance. The settlement monitors need to demand greater transparency from banks, and they need to see that banks comply with the fair-lending requirements set out in the agreement. They also need to aggressively police the servicing reforms to ensure that all homeowners get a fair opportunity to save their homes.
Unfortunately, there is little transparency about how the banks are using this money. They have not provided any loan-level data to show which borrowers are receiving assistance.
Moreover, mortgage servicers have complete discretion over who receives help. Advocates fear the banks have been cherry-picking expensive loans that are deeply underwater to meet their settlement obligations quickly. This provides an important service for the borrowers in that category but little systematic relief for low- and moderate-income communities suffering the most from the foreclosure crisis.
Simply immune to prosecution?
The mortgage holders committed fraud for years making billions of dollars taking homes they had little or no claim to. They used the HAMP program as a weapon against homeowners, telling them to skip three payments so as to be able to qualify, then rejecting their applications or not bothering to even process them (not that we’ll ever know in most cases, the HAMP program kept no records for the first two years) and then quickly foreclosing on their homes. I’ve had students in my classes who were victims of that scam.
Instead of holding the perpetrators of these crimes accountable they were “sort of” fined 25 billion dollars through a program they administer and report on without effective oversight. Let me repeat that – they, the banks, administer the program to give back some of the money and homes they stole. Oh, forgive me, they are not giving the homes back just some money should they feel in some way that they want to because if they don’t want to, they don’t have to.
That is what passes for justice in the current administration and the 49 states that the bankers negotiated this sweetheart deal with. Crime pays in the United States if you are a banker dealing mortgages.
They stole billions of dollars worth of homes. They in an epic display of arrogance created a parallel system of recording deeds without any legal justification purely to expedite trading of mortgages and to evade filing fees. They lied to judges all over the United States in countless jurisdictions filing tens of thousands of false affidavits saying that their paperwork, their proof of ownership was in order.
These are crimes, not mistakes, crimes.
If I stole through fraud the least home in the land, I would and should do prison time. No one has been sentenced for these crimes. Without prison time, fines, that are a fraction of the money made, are the only deterrent. Is that enough? Does that make sense?
Two systems of justice – one for the bankers and one for regular citizens, the “common” folk, the ones without political friends; the ones that don’t have the right memberships, the right bank accounts, the right lives lived in the adoration of business television and magazines.
We discussed in my class on business law and business ethics what it takes to build a good society. One of the thoughts was to reward virtue and penalize wrong doing. What kind of society does this build?
Kamala Harris is right: we need a Homeowners Bill of Rights, and the banks, like it or not and they don’t, need good, strong regulations to control them. These two items are bare minimums. As for giving the money to individual homeowners, if it does happen, the amounts will be small because the numbers involved are so large. Better to allocate some money to homeowners’ advocacy and education groups.
The five mortgage companies who are part of the settlement are Bank of America, Wells Fargo, Chase, GMAC/Ally Financial, and Citibank. While HUD estimates that 2 million homeowners could see their mortgage balances reduced, it will be up to the five banks to determine which homeowners will be included in the program. In addition, payments of between $1500 and $2000 will be paid to people who lost a home to foreclosure between 2008 and 2011, so long as certain criteria are met. The factsheet does not explain the criteria necessary for those people to qualify.
A major impediment to mortgage modifications is the bank practice of “dual tracking” mortgages. When a mortgage is dual tracked the bank pursues foreclosure while at the same time allowing the home owner to pursue a modification. The problem with this is that in spite of an eminent, or completed modification the bank will still sell a home at sale leaving the owner homeless.
I listened to this video and enjoyed it, particularly the discussion of Adam Smith and Milton Friedman early in the lecture.
Dean Guthrie’s background in Chinese studies is particularly interesting to me, since I also have a great interest in the nation’s culture. I am less sanguine about that nation’s prospects than he is. China’s long term geographical and political ambitions are not compatible with continued economic cooperation with the United States.
There’s no way to appreciate fully the contributions of Nobel Prize-winning economist Milton Friedman (1912-2006), who would have turned 99 years old this weekend, to the growth of libertarian ideas and a free society.
This is the man, after all, who introduced the concept of school vouchers, documented the role of government monopolies on money in creating inflation, provided the intellectual arguments that ended the military draft in America, co-founded the Mont Pelerin Society, and so much more. In popular books such as Capitalism and Freedom and Free to Choose, written with his wife and longtime collaborator Rose, he masterfully drew a through-line between economic freedom and political and cultural freedom.
The federal government appears to be under the impression Wall Street CEO’s are better at managing the United States Treasury than trained economists.[26][27][28] America has over two centuries of proof that bankers and legislators cannot be trusted with the people’s money,[29] yet, despite forewarnings from Adam Smith to Milton Friedman, Washington ignores the experts and continues helping itself to the Treasury.
America has gained and lost many times,[30] learning repeated lessons the central government continues committing: monetary stupidity. In truth it is useless to wonder why Washington continues creating and wreaking economic havoc when it is obvious that human nature has proven those with power will continue doing harm[31] as long as mankind exists. It is for this reason economics was invented, is practiced and taught: too often, lack of common sense has been in charge of money and the need for fiscally wise minds analyzing trade and industry is cost effective to society overall. That being said, financiers tend not to listen to the money-wise discussed here: men who forewarned disaster if certain fiscal policies were not implemented, and devised solutions to resolve and repair monetary failure.
To all fellow men and women out there who may have deep fondness for the liberal capitalist model of economic adaptation, I hope that you can make some adjustments in your cognitive banks. Capitalism is not a permanent facet of human life, but merely one among various epochs that will come to pass. Only impermanence is sacrosanct in the cosmos, so please refrain from singing hallelujah to a world system that is on its death knell as I articulated in a previous article.
And please refrain from swallowing hook-line-&-sinker the contentious propaganda of Francis Fukuyama about the ‘end of history’, that accordingly history had concluded with the galvanization of liberal capitalism, that history makes no more sense. Fukuyama’s theory is a slapstick narrative of hyper-valuation of the ‘mad economics’ of late capitalism and hypo-statization of reality that has no relation at all to the real in the world out there. Fukuyama had taken as ‘real’ what is actually ‘virtual’, and froze time much like unto a fairy tale of timelessness, of history-less Nietzschean moment that is fit more for infants than for adult humans.
Foreclosure Review In New Settlement Leaves Homeowners In Banks’ Hands
For more than a year, housing advocates and their allies worried that a review of foreclosed loans managed by banking regulators was vulnerable to mortgage industry interference.
On Monday, the Office of the Comptroller of the Currency and the Federal Reserve Board — the two regulatory bodies that had taken the lead in making the nation’s largest banks accountable for rampant foreclosure fraud — announced that homeowners no longer need worry about the independence of the reviews. The regulators, essentially admitting that the reviews were too difficult to conduct, and that assigning appropriate compensation to those most harmed by the banks was no longer a priority, said the mortgage companies themselves will determine how to distribute $3.3 billion to more than 4 million homeowners forced into foreclosure in 2009 or 2010.
Housing advocates, while acknowledging that the foreclosure reviews were flawed, said they don’t understand how turning the process over to mortgage companies improves a system already insufficiently independent.
“The regulators have decided to replace the fox in the henhouse with the wolf,” said John Taylor, president of the National Community Reinvestment Coalition, a Washington-based housing nonprofit. “It is just incomprehensible to me that they could not find a third party that has the wherewithal and independence to fairly determine what the damage is to homeowners.”
Is this good business ethics? Well, let’s look at it from the mortgage companies’ point of view. They made an enormous profit by misleading courts and mortgage holders as to who actually owned the property. In many cases, they told clients that they should skip payments, usually three payments, explaining to them that they would then qualify for government programs like HAMP. Once the home owner had skipped the payments, the bank immediately foreclosed. It terms of money, it was an incredible success.
Let’s analyze based on the Social Responsibility. Social responsibility rests on four pillars: economic, legal, philanthropic, ethical, and philanthropic.
Did the mortgage companies profit? Yes, but it depends on which stakeholders you look at. The shareholders did well. The employees did very well. The customers, at least as far as mortgage holders, were crushed. They are unlikely to ever be customers again. It is very difficult for families to buy a home in the first place. A second bite after foreclosure is not likely. The community was hurt badly by the thousands of empty homes, the collapse of the housing industry and the larger economic bust.
But let us have a special look at our last major shareholder, the regulatory agencies. They came, they saw, they said it was too difficult and gave it all back to the banks after extracting a promise that the banks will be good and give back 3.3 billion of the money they stole in the first place. It would appear the regulators are doing okay. They have shed their responsibilities to the public, which is always much easier than doing your job.
Was it legal? No. The banks violated the law thousands of times, perhaps hundreds of thousands. They lied routinely in official documents requiring affidavits and, for all intents and purposes, were in the business of stealing homes. They have, however, walked away unscathed.
Was it ethical? You have lying on a cosmic scale and theft of the property in the many billions of dollars. I don’t feel further analysis is required here.
And finally, was it philanthropic? Did they give back to the community? This is a pure case of negative philanthropy. The banks often had no concept of what to with the homes they took. They often didn’t care for them. Sometimes, they found it cheaper just to bulldoze them. They took value out of the community and replaced it with negative costs.
This is another sorry episode, which I will wonder if it is wise to mention to my business students? Should I tell them that stealing people’s homes will make you enormously rich while you with virtually no penalties? I am honest. I will. But I would rather not have negative business ethics taught so well by the mortgage companies. It makes what I do look foolish.
Major banks have once again agreed to a settlement, this time worth $8.5 billion, to compensate homeowners whose homes were fraudulently foreclosed upon in 2009 and 2010 through practices such as “robo-signing.” JP Morgan Chase, Bank of America, and and Wells Fargo will pay $3.3 billion to homeowners, and the remaining $5.3 billion will reduce mortgage bills and forgive principals on homes that were sold for less than what the owners owed on their mortgages. 3.8 million homeowners will be eligible to receive compensation ranging from a few hundred dollars to a maximum of $125,000.
In another settlement, Bank of America has agreed to pay the federal housing finance agency, Fannie Mae, $11 billion for selling the agency bad mortgages that defaulted, causing Fannie Mae to assume all the losses. $3.6 billion will be used to compensate for the bad mortgages, and $6.75 billion will be used to buy back mortgages.
Both of these agreements are part of a process to mitigate the impacts of the housing crisis and to hold the banks accountable for their role in both creating the housing bubble and in using questionable, if not fraudulent, methods in servicing their loans and processing foreclosures. Having faced significant losses, Bank of America continues to move out of the mortgage market, and in the deal with Fannie Mae, it agreed to sell the servicing and collection rights for 2 million loans, totaling $306 billion. Some economists and analysts are concerned that as the major banks shift away from mortgage lending, the industry is being consolidated into the hands of a few banks. However, though the housing market is recovering slowly, banks, such as Bank of America, might not be in a position to compete, given the losses they’ve already incurred and the problems they’ve had in servicing loans.
Housing advocates, while acknowledging that the foreclosure reviews were flawed, said they don’t understand how turning the process over to mortgage companies improves a system already insufficiently independent.
“The regulators have decided to replace the fox in the henhouse with the wolf,” said John Taylor, president of the National Community Reinvestment Coalition, a Washington-based housing nonprofit. “It is just incomprehensible to me that they could not find a third party that has the wherewithal and independence to fairly determine what the damage is to homeowners.”
Regulators said the review process, which sought to determine if specific loans were unfairly foreclosed upon, was too costly and time-consuming. Under the new deal, 10 mortgage companies, including Bank of America, Wells Fargo and JPMorgan Chase, will pay $8.5 billion. Of that, $3.3 billion is earmarked for direct payments to “eligible borrowers” whose foreclosures were handled improperly. The remaining $5.2 billion will help struggling borrowers with programs such as loan modifications.
And finally, from the web site, 4Closure Fraud (reprinted from ProPublica):
The Independent Foreclosure Review was supposed to be a full and fair investigation of the big banks’ foreclosure abuses, and it was trumpeted as the government’s largest effort to compensate victimized homeowners. Federal regulators, who designed the review, forced banks to spend billions to carry it out. Millions of homeowners were eligible and hundreds of thousands submitted claims. But Monday morning, the very regulators who launched the program 18 months ago announced that it had all been a massive mistake and shut it down.
Instead, 10 banks have agreed to pay a total of $3.3 billion in cash to the 3.8 million borrowers who had been eligible for the review. That’s an average of around $870 per borrower. But typical of a process that’s been characterized by confusion, delays and secrecy, regulators said the details of how the money will be doled out were not yet available.
The headline number for the settlement is $8.5 billion, but that includes $5.2 billion in “credits” the banks will receive for actions they take to avoid foreclosures, such as providing loan modifications. That’s very similar to the separate $25 billion settlement reached last year between five banks, 49 states and the federal government. That settlement has been criticized for awarding credit to banks for things they were already doing.
Insight: How Colombian drug traffickers used HSBC to launder money | Reuters
In a typical transaction, a middleman in a drug cartel would offer to deliver consumer goods, such as computers or washing machines, to Colombian businesses on favorable terms. Another person in the United States would buy the goods from firms using funds from drug trafficking, and fulfill those orders.
Money launderers exploited the laxness of HSBC in policing shadowy money flows, the Department of Justice said earlier this month. Failures included not conducting due diligence on customers, not adequately monitoring wire transfers or cash shipments and not having enough employees to run anti-money laundering systems. U.S. Assistant Attorney General Lanny Breuer called the lapses “stunning failures of oversight.”
The situation was so bad, according to the Department of Justice, that in 2008, the head of HSBC’s Mexican operations was told by Mexican regulators that a local drug lord described the bank as “the place to launder money.”
The Chaparro probe, led by ICE and the Justice Department, converged over the past two years with two other investigations – led by federal prosecutors and investigators in West Virginia and by the Manhattan district attorney – resulting in this month’s settlement with HSBC.
HSBC and its employees avoided criminal indictments, as the bank agreed instead to a deferred-prosecution deal that forces it to strengthen controls and accept a compliance monitor.
Where to start? This bank has committed crimes on a scale almost beyond comprehension.
Our first question; is this good business ethics? Under Friedman analysis that a corporation’s sole purpose is to serve the shareholders, the HSBC’s actions were a marvelous success. The bank paid a fraction of its profits on its wrongdoing. Further it evaded any prosecution and the resulting loss in prestige and publicity damage that would have resulting from actual criminal punishments. But even more important when looking at the profit side of the ledger, a precedent has been set that if a bank has reached a certain size, it is beyond prosecution. This insures that banks of this size can in the future launder money with confidence that it will both be profitable and free from criminal charges.
Is this bad business ethics? The bank laundered about nine billion dollars in drug money from the Mexican cartels. These financed the drug trade smoothing the shipment of drugs into the United States and other countries. It paid for assassinations and kidnappings, bribery of public officials, and the creation of large heavily armed criminal mafias capable of exerting control over large geographical areas. The was at the very least a subversion of the government and economy of Mexico. Similar but smaller effects were felt in the United States.
However, this is not the whole story, the banks also laundered money for Saudi and Bangladeshi clients who were highly likely involved in terrorists activities and in some cases known have links to terrorists. I don’t think I need remind you that the United States has embarked and continues a “war” against terrorism. The bank actively subverted that war. In addition, the money helped finance rogue regimes like Iran in defiance of American sanctions, strengthening the nation’s enemies, and making those regimes more able to resist reform and democracy.
There can be no doubt that the religions of Christianity, Islam, and Judaism and a giant list of smaller religions would find these acts in violation of their rules of ethical conduct.
Philosophically, unless you consider Friedmanism, a legitimate source of wisdom, almost all philosophical schools with the probable exception of Nietzsche, would condemn the bank’s actions.
Capitalism is in a crisis. This is not an isolated example of few individuals’ greed. This is a giant financial institution deliberately acting against the interests of its host countries and financing murder and mayhem around the world. But further, have we not seen banking incompetence and law breaking on a massive scale on a regular basis since the 2008 financial crisis. This hardly seems to be passing phase.
This particular bank makes more money than most of the nations on earth. Its power to cause harm is enormous and it deliberately, over a long period of time, with direct knowledge of its leadership, caused that kind of harm.
This is a moral and ethical bankruptcy that is not just wrong but endangers the long term welfare of citizens in the United States and the rest of the world.
It’s hard to think of any phrase more sad when have knowledge of these crimes than, HSBC Avoids Criminal Charges.
James Pilant
From Matt Taibbi, Rolling Stone
Though this was not stated explicitly, the government’s rationale in not pursuing criminal prosecutions against the bank was apparently rooted in concerns that putting executives from a “systemically important institution” in jail for drug laundering would threaten the stability of the financial system. The New York Times put it this way:
Federal and state authorities have chosen not to indict HSBC, the London-based bank, on charges of vast and prolonged money laundering, for fear that criminal prosecution would topple the bank and, in the process, endanger the financial system.
It doesn’t take a genius to see that the reasoning here is beyond flawed. When you decide not to prosecute bankers for billion-dollar crimes connected to drug-dealing and terrorism (some of HSBC’s Saudi and Bangladeshi clients had terrorist ties, according to a Senate investigation), it doesn’t protect the banking system, it does exactly the opposite. It terrifies investors and depositors everywhere, leaving them with the clear impression that even the most “reputable” banks may in fact be captured institutions whose senior executives are in the employ of (this can’t be repeated often enough) murderers and terrorists. Even more shocking, the Justice Department’s response to learning about all of this was to do exactly the same thing that the HSBC executives did in the first place to get themselves in trouble – they took money to look the other way.
From further down in the article:
On the other hand, if you are an important person, and you work for a big international bank, you won’t be prosecuted even if you launder nine billion dollars. Even if you actively collude with the people at the very top of the international narcotics trade, your punishment will be far smaller than that of the person at the very bottom of the world drug pyramid. You will be treated with more deference and sympathy than a junkie passing out on a subway car in Manhattan (using two seats of a subway car is a common prosecutable offense in this city). An international drug trafficker is a criminal and usually a murderer; the drug addict walking the street is one of his victims. But thanks to Breuer, we’re now in the business, officially, of jailing the victims and enabling the criminals.
This is the disgrace to end all disgraces. It doesn’t even make any sense. There is no reason why the Justice Department couldn’t have snatched up everybody at HSBC involved with the trafficking, prosecuted them criminally, and worked with banking regulators to make sure that the bank survived the transition to new management. As it is, HSBC has had to replace virtually all of its senior management. The guilty parties were apparently not so important to the stability of the world economy that they all had to be left at their desks.
The following are findings from the Senate report:
HSBC Bank USA, N.A., known as HBUS [pronounced H-Bus] functions as the U.S. nexus for HSBC’s worldwide network. HSBC has 7,200 offices in more than 80 countries and 2011 profits of $22 billion; HBUS has 470 branches across the United States with 4 million customers. HBUS provides accounts to 1,200 other banks including more than 80 HSBC affiliates.
In 2010, HSBC was cited by its federal regulator, the Office of the Comptroller of the Currency (OCC), for multiple severe anti-money laundering deficiencies, including a failure to monitor $60 trillion in wire transfer and account activity; a backlog of 17,000 unreviewed account alerts regarding potentially suspicious activity.
HBUS offered correspondent banking services to HSBC Bank Mexico, and treated it as a low risk client, despite its location in a country facing money laundering and drug trafficking challenges. The Mexican affiliate transported $7 billion in physical U.S. dollars to HBUS from 2007 to 2008, outstripping other Mexican banks, even one twice its size, raising red flags that the volume of dollars included proceeds from illegal drug sales in the United States.
Foreign HSBC banks actively circumvented U.S. safeguards at HUBS designed to block transactions involving terrorists, drug lords, and rogue regimes. In one case examined by the Subcommittee, two HSBC affiliates sent nearly 25,000 transactions involving $19.4 billion through their HBUS accounts over seven years without disclosing the transactions’ links to Iran.
HBUS provided U.S. dollars and banking services to some banks in Saudi Arabia and Bangladesh despite links to terrorist financing.
The HSBC deal includes a deferred prosecution agreement with the Manhattan district attorney’s office and the Justice Department. The deferred prosecution agreement, a notch below a criminal indictment, requires the bank to forfeit more than $1.2 billion and pay about $700 million in fines, according to the officials briefed on the matter. The case, officials say, will claim violations of the Bank Secrecy Act and Trading with the Enemy Act.
Prosecutors found that HSBC had facilitated money laundering by Mexican drug cartels and had moved tainted money for Saudi banks tied to terrorist groups.
On November 11 HSBC said it had “reached agreement with United States authorities in relation to investigations regarding inadequate compliance with anti-money laundering and sanctions laws.” The bank is also expected to reach a settlement over the matter with Britain’s Financial Services Authority, according to a person with direct knowledge of the matter.
November 10, federal and state authorities also won a $327 million settlement from Standard Chartered, a British bank. The bank, which in September agreed to a larger settlement with New York’s top banking regulator, admitted processing thousands of transactions for Iranian and Sudanese clients through its American subsidiaries. To avoid having Iranian transactions detected by Treasury Department computer filters, Standard Chartered deliberately removed names and other identifying information, according to the authorities.
But HSBC is not being indicted and nobody will be criminally prosecuted because of the perceived or projected threat to the financial system if such a large bank and its officers were penalized criminally for commission of crimes that everyone agrees did take place. Why? Because HSBC is too big to indict.
The obvious answer here is to dismantle the mega banks that are so big that their every move produces swings in the financial markets. Instead DOJ and other law enforcement agencies have given a green light to anyone who can build a bank that big. They can now commit crimes with impunity, which is to say that we are guaranteed to see repeat behavior. Now when a smaller bank engages in the same illicit schemes, it too can point to the fact that law enforcement decriminalized what is clearly a crime under all applicable statutes.
And if Harvard MBAs get it, and corporate titans understand it, we certainly ought to focus our attention on the issue of business ethics as one of the most relevant concerns of anyone interested in tikkun olam – perfecting the world.
When we talk about the importance of business ethics as a barometer of spirituality, we need to remind ourselves of the remarkable passage in the Talmud that tells us that after we leave this earth to face our divine judgment, there are many things we will be queried about as the heavenly court reviews our lives. Yet the very first question posed will be: “Were your business dealings conducted honestly?”
And no one will be able to justify his misdeeds by claiming “It was only business!”
I want to put more in the blog about religious ethics. I strongly believe that it is neglected and often discarded in discussions of business ethics. But religion has much to say about business conduct from the Old Testament’s demand for just weights to Islam’s ban on interest payments.
If the company never seriously thought about whether it is ethical and corporate social responsibility issues, these six can provide guidance to start the process. Although it is important to behave ethically, it is equally important to get the message to the public if a company wants to take advantage of “doing well”. 1. Define what your company stands for and what values it places on the market. Public awareness of these values? Do they have a positive reaction to them? 2. Check the internal and external relations of the company. Do not they make sense and reflect the values of society? Public and the media frequently proclaim the guilt of the association. To search for new relationships with companies that meet ethical standards. 3. Understanding what the public expect from a company today. Are you ready to meet those expectations? 4. Check the location of assets, liabilities, and promises of brands, products, public sector and community initiatives. 5. Compare your public profile, in which private actions. Are in conflict? 6. Do not be shy about spreading the word through the media, employees and community.
Ethics involves the notion of morals however they’re different but interrelated concepts (Ethics and morality, n.d.; Tallman 2009). Morals are the individual establishment between right and wrong whereas ethics occurs in the context of groups of individuals who build shared values and standards creating a culture in which decisions influencing the causal relationship of right and wrong exist (Clawson 2006 ; Hrebiniak 2005 ; Klebe Treviño, Pincus Hartman & Brown 2000 ; Northouse 2009 ; Schein 2004). There’s a philosophical question of whether businesses have ethics due to the notion that business is apart from society (Longstaff 1991). However, individual people who constitute the business are part of multiple collectives defining the wider societal and cultural values environment in which ethics resides and the business operates (Huntsman 2008 ; Longstaff 1991).
Have you ever saw the definition of business? If you have then you know what I am talking about. In defining a business, ethics don’t play in to the picture at all. Sole purpose of a business is to increase the value for its stakeholders. Thus, can you blame those businesses, who are taking advantage ofthe lower tax policies in Ireland to increase their net income? It might be morally wrong forthose businesses to show all of their profit in Ireland, while they get their 50-70% profitfrom United States, but you can’t do anything about that. As more and more countries loosen their tax policies to attract foreign businesses, there would always be somecompanies who want to move there to increase their net profit by paying lower taxes there.
Netflix now has the right to share your viewing habits – Salon.com
After nearly two years of intense lobbying, Netflix has won the reform it needs to integrate its services with Facebook. Ars Technica first reported that the Senate quietly passed a reform to the Video Privacy Protection Act (VPPA) last week, giving video streaming companies the right to share your data for up to two years after asking for your permission once. (Mother Jones notes that “The Senate didn’t even hold a recorded vote: The bill was approved by unanimous consent”).
This is a government subsidy to a business, in this case, a particular business. The act gives away a right to privacy with no return to the consumer.
Is this good business ethics? One of the first tests of ethics is the question, “Is it legal?” The “reform” makes what was previously illegal into a legal act. It’s also intensely profitable. This passes the sole test of Friedman’s code, “Does it enhance shareholder value?” Yes, it makes more money for the company. I would expect the company’s value to be enhanced.
But this is slicing good business ethics pretty thin. It’s legal and profitable. But so are a great many things that we can be ashamed of.
Is it bad business ethics? It takes a public good, privacy, and converts it to private profit. What did consumers gain from allowing Netflix to sell their information to other companies? That easy, they won the right to be specifically targeted in advertising. Their viewing habits can be used to get a handle on their political beliefs, whether they have children, etc.
It might be argued that the consumer has to give permission to access his records. A blanket right has been abolished and replaced with a private opt out clause. One of the things I have learned is that few of my students even though they are computer literate have any concept of how their data can be used against them. Considering that observation and the mass of e-mails we are bombarded with, I find it unlikely an informed decision is going to be made in many cases.
A company has been profited at a cost to the public interest. It is a government subsidy with all that implies. The company could have done better.
James Pilant
From around the Web –
From the web site, 33 Bits of Entropy: (This article highlights another important issue in online privacy. jp)
New lines will need to be drawn defining what is acceptable data-release policy, and in a way that takes into account the actual re-identification risk instead of relying on syntactic crutches such as removing “personally identifiable” information. Perhaps there will need to be a constant process of evaluating and responding to continuing improvements in re-identification algorithms.
Perhaps the ability of third parties to discover information about an individual’s movie rankings is not too disturbing, as movie rankings are not generally considered to be sensitive information. But because these same techniques can lead to the re-identification of data, far greater privacy concerns are implicated.
Today, Netflix presented at the F8 conference to talk about their planned integration with Facebook. You can see what you friends are watching and they can see what you are watching on Facebook. Not only on a granular level, but Facebook will present what it finds to be interesting trends among your friends’ viewing habits. Mark Zukerberg’s example showed that four of his friends just watched movies staring Johnny Depp. Netflix will be integrating with both Facebook’s newly announced Timeline as well as their OpenGraph platform. Facebook will have similar integration with Hulu.
An archaic 1988 law, the Video Privacy Protection Act, currently prevents the sharing of your video watch lists, such as with services like Netflix or Hulu, on social media outlets such as Facebook or Google+. Earlier this month, the US Senate put through an upgrade to the bill to address this issue, to little notice. It was a minor correction to an old set of laws. But when the US House got ahold of it, they put forth some edits, which is where the problem begins.
These changes, as reported by the ACLU, divorces the bill from a larger set of laws, called the Electronic Communications Privacy Act. In so doing they eliminated protections which were in place to require a warrant for accessing of cloud-based private electronic communications and other content, such as email, private social network posts, any information stored on cloud based servers. Instead, a subpoena is all that is required, a legal process but one which does not require the due diligence of a warrant, not even requiring an active investigation to acquire.
Why aren’t gunmakers making safer guns? Because guns are exempt from most of the consumer safety laws that improved the rest of American life. The Consumer Product Safety Commission, which was established in 1972, is charged with looking over thousands of different kinds of products. If you search its database for “guns,” you’ll find lots of recalls of defective air pistols and lead-covered toy guns but nothing about real firearms. That’s because the CPSC is explicitly prohibited from regulating firearms. If you’re injured by a gun, you can’t even go to court. In 2005, Congress passed and President George W. Bush signed the Protection of Lawful Commerce in Arms Act, which immunizes gun makers against lawsuits resulting from “misuse” of the products. If they can’t be sued and can’t be regulated, gunmakers have no incentive to make smarter guns. It’s the Pinto story in reverse.
This is certainly a business ethics question. Whatever a person believes about having firearms, there is a separate question of whether or not the manufacturers should be held to the standards we hold other products to. Millions of guns are purchased each year and are an inherently dangerous product. So, why don’t we regulate guns as intensively as toys? What is it about this industry that makes it worthy to be immune to lawsuits while other products are not similarly placed?
I would suggest that gun control, is such a hot topic that rational conversation is difficult and rational action even more difficult. If this is the case, why not shift the discussion to a different plane, product safety?
What if our most recent mass killer had got up that morning,went to the weapon he intended to use (in this case, his mother’s) and found it wouldn’t work? That might have changed everything. And why wouldn’t it work? It would have had a feature on that recognized its owner and no other as being able to fire it, a smart gun. Smart gun technology would not eliminate mass shootings, but since a good number are committed with stolen or borrowed weapons, it would certainly curb them. The smart gun technology is just one of the things that could be done in a regulatory environment in which protecting consumers becomes the focus of the law instead of protecting gunmakers.
I was appalled to hear that some chapters of the cancer-fighting organizations bearing Gilda Radner’s name have elected to drop her identity from their organizations. This decision might be understandable if this were the early Twentieth Century but we live in the age of You Tube when evidence of Radner’s comic genius lives on. Surely the organizations can present clips, pictures and writings from this artist?
Is this an ethical issue? It’s borderline. The organizations have every right to name themselves as they wish. In a Friedmanesque world, to model themselves on businesses seeking the highest possible profits.
But there is also the fact that many of these charitable efforts would not exist except against the backdrop of Gilda Radner’s tragic death from cancer.
Personally, I hold to the romantic belief that we live on as long as others speak our name. It would trouble me that we forget Gilda so soon.
James Pilant
What do you mean, you don’t know who Gilda Radner is? – Salon.com
From the article:
On-screen, Gilda Radner was fearless. The force of talent that brought to life such characters as Roseanne Roseannadanna, Lisa Loopner, Emily Litella, Baba Wawa and Candy Slice was incandescent. It was the broadness and boldness of Gilda’s work that made her, immediately, a bigger star than the other two women in “SNL’s” original cast, Laraine Newman and Jane Curtin. Jane was more cerebral and restrained, and it wasn’t until later seasons that the show’s writers began to recognize and exploit the depth of her talent. Laraine consciously decided to make her mark as “the sexy one,” and in many sketches she was sexy indeed. What she didn’t have was Gilda’s effusive personality, and that kept her from establishing the bond with audiences that Gilda seemed so effortlessly to achieve. As longtime “SNL” writer Jim Downey put it, “Sex bombs are never going to compete with people who want to be loved.”
Lance Armstrong doping: How the cyclist is like Lehman Bros. – Slate Magazine
Many of us instinctively presume that cheating creates a level playing field. In fact, it does precisely the reverse. Widespread cheating rewards the few who have the best information, the most money, and the highest risk tolerance. In this world, Armstrong and his team ruled: Armstrong spent more than $1 million maintaining his exclusive relationship with Dr. Michele Ferrari, regarded as the sport’s best doping doctor. Armstrong used his private jet to transport drugs, and he cultivated a friendly working relationship with the sport’s governing body that, according to the USADA report, may have helped him evade sanction for a suspicious drug test in 2001. Armstrong also had an entrepreneurial attitude toward risk, hiring his gardener to follow the 1999 Tour de France on a motorcycle and deliver EPO.
While a few intrepid journalists were farsighted enough to cast doubt on the validity of Armstrong and Postal’s dominant performances, most were content to focus on the myth-like story they witnessed on the road each July. Only in 2010, when the federal government and USADA began their respective investigations, did the truth begin to emerge. Thanks to investigators and the riders who have stepped forward, cycling now faces its watershed moment: an opportunity to build a culture of meaningful regulation, accountability, and to ensure a clean sport for future generations.
The Armstrong era happened because doping worked so powerfully and lucratively that no one—not riders, not cycling’s governing body, not the media—was willing to stop it. It was a time of hollow magic. It helped create kings and heroes that were too big to fail.
The article goes on to point out the similarities between cycling corruption and that in the investment firms of the 2007-8.
I have been telling my class that many of the stories we find in the media are negative business ethics stories, success stories where individuals have made enormous sums of money by flouting the rules or subverting the purposes of the government to gain a competitive advantage. These are stories that make a mockery of following the rules, doing the right thing or simply obeying the law.
How do you teach business ethics when you compete with a “win at any cost” culture? In a society where the worship of the “long green” seems to have supplanted much of Christianity, it is hard to argue for the intrinsic benefits of living the virtuous life.
The good fight is worth fighting but the media ethos is a detriment to that fight and to a continuing fidelity to right and truth.
Pilant's Business Ethics Blog 
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