Category: business ethics

And They Don’t Pay Their Share Of Taxes Either

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure

I wrote in the previous post about how the fifty companies that laid off the most workers paid their CEO’s a total of 598 million dollars. But if you read the study itself, you discover that they also shirk their duties as good corporate citizens.

This is from the study –

Under current law, U.S. corporations face a 35
percent statutory tax rate on corporate profits. Of the 50
layoff leaders, only two reported paying this statutory
rate in 2009 and most paid substantially less, according
to an IPS analysis of domestic earnings and federal tax
payments in company 10-K reports.20 Hewlett-Packard,
under Hurd, remitted $47 million in federal corporate
income tax, a mere 2 percent of the company’s reported
$2.6 billion in pretax domestic net income.


Citizens for Tax Justice has used forensic accounting
methods to demonstrate that corporations
often pay an even lower tax rate than they report to
the SEC. Overall, as a result of various tax avoidance
schemes, U.S. corporate income taxes have plummeted
from almost a third of all non-Social Security federal
tax revenues in the 1960s to only a sixth of total taxes
today.22

In some extreme cases, major U.S. corporations
are actually paying less in taxes to Uncle Sam than
they pay, in compensation, to their CEOs. At Occidental
Petroleum, for instance, CEO Ray Irani made $31.4
million last year. That represented almost twice as much
as the $16 million the international oil firm paid in federal
corporate income tax for all the services the federal
government provides.

It is almost too obvious to mention that when corporations avoid their taxes, the burden falls on the middle class.

What is meant by CSR, corporate social responsibility? Are they just code words, that mean, “Get off my back and stop complaining,” or “Can’t you crazed citizens and nosy government officials recognize our good works and let the magnificent engine of capitalism grind on?”

I wonder if it is just a public relations thing. I bet you do too.

James Pilant

Job Cutting CEO’s Average 12 Million In Salary (not counting other benefits)

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure

The fifty largest job cutting companies in the United States paid their chief executive officers a total of 598 million dollars.

Read some more –

The nation’s biggest job-cutting companies paid their top executives an average of $12 million last year, according to a report released today.

The 50 U.S. chief executives who laid off the most employees between November 2008 and April 2010 eliminated a total of 531,363 jobs, according to the Institute for Policy Studies, a research group that works for social justice and against wealth concentration.

In “CEO Pay and the Great Recession,” the institute said the $598 million in combined pay for the 50 executives would have paid one month’s worth of average-sized unemployment benefits for each of the laid-off workers.

The top 50 layoff firms reported a 44 percent average profit increase for 2009, the report said.

“These numbers all reflect a broader trend in Great Recession-era Corporate America: the relentless squeezing of worker jobs, pay and benefits to boost corporate earnings and maintain corporate executive paychecks at their recent bloated levels,” the authors wrote.

The complete article is here.

The complete study is found here.

Job killing has been profitable for many years now but the scale of the rewards are almost unimaginable. Reflect that 12 million dollars yearly is a million a month. In a thirty day month, that’s about 33,000 dollars a day or 4,166 dollars and hour or 69.44 a minute.

James Pilant

Gary Bender Adds His Thoughts On This Post: Business ‘Ethics’ Wrong Focus – Really?

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure

Gary Bender is a friend of mine and more than that, he is well read and thinks. So I enjoyed his comment and share it with you.

Gary Bender writes –

Mr. DiLorenzo writes “Dishonest business people will be punished financially as customers cater to their competitors while suppliers refuse to do business with them. In cases of negligence, such as the BP oil spill, chief executives often lose their jobs, the company is sued, and the firm’s stock price plummets, as was in fact the case with BP. Such market feedback mechanisms do not guarantee ethical behavior, but they do reward it with customer loyalty – and profits. No such feedback mechanism exists in government, which is where much larger ethical problems exist.”

This is the usual nonsense we hear from the teabaggers and other blame-the-Democrats-I-mean-government right-wingers.

No, customers are not watchdogs. They buy for complex reasons that have little to do with the ethics of merchants. Likewise, suppliers sell to anyone.

As far as malfeasance, BP will continue to make huge profits long after the gulf spill is forgotten. Sure, a few people will lose their jobs, probably fewer than lost their lives in the explosion, and stock prices will rebound. Those who are intelligent enough to invest for the longterm will barely notice the stock dip.

It is in government where the people do have a feedback mechanism – their votes. Unfortunately, in the American two-party system, greedy capitalist are able to have more influence on government than the voters. Mr. DiLorenzo is one of those who would like to see more corporate influence on government. I believe that Benito Mussolini called the marriage of government and corporations fascism.

To suggest that capitalism and government are disjoint in America is disingenuous. To suggest that greed in capitalism is of no concern is downright evil.

Citizens United v. Federal Election Commission

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure2 Comments

I have been giving this Supreme Court decision some thought. Those of you with a legal bent will recall that this case ruled that corporations can give unlimited sums of money to political organizations seeking to influence elections. The court essentially recognizes corporations as persons under the law.

Is that a different animal than the previous creature? I mean if a corporation is more like a person than a contract, does it have citizen like responsibilities? Does it have a character, an ethos? … beyond earning money?

If a corporation is not a mutual agreement, a contract, between a number of individuals but an entity with rights, what does that imply?

It would seem to suggest that corporations are business and political organizations. What I mean to say is, this decision ratifies the idea of a corporation as essentially a small political party. Now, that may appear on its face to be no big deal. But let’s look more closely. Let’s say that a large corporation has 30,000 members counting stockholders and employees. There are many, many corporations with far larger numbers. Nevertheless, let’s use this as our example. The company has yearly profits of a little more than one billion dollars, again not particularly large considering the number and profitability of modern companies.

Thirty thousand members is not a large group compared to Democrats or Republicans or even Libertarians. However the Republicans and Democrats and other interest groups managed to spend about three and one-half billion dollars in the last election cycle’s presidential race. Our hypothetical company can play a major role in the presidential election with only a relatively small contribution of effort. If the company devoted 200 million dollars to the election they could have a major effect on the outcome. But what about the primaries? Well, let’s consider the Iowa primaries, a single state but often a make or break state for presidential candidates earlier on. What if our hypothetical company throws in a mere 20 million dollars to dispose of one candidate in a horse race of seven? How likely is that to be successful, particularly when the numbers are close in the first place?

Citizens United took corporations from a very significant though limited role in American politics and essentially created hundreds of small political parties unified under central leaderships with powerful legislative needs and freed them to use virtually unlimited funds to gain those ends.

I argue that some corporations will take on dual role, not just to make money but to forward pro business ideologies as well as traditional business needs and desires. Would shareholders be willing to tolerate a loss in profit during one quarter of a year every two years? And what if the company was able to prove that by its political advocacy it had made a return on the money of 50 or 100 percent?

Could you form an oil company or a manufacturing company whose sole purpose is to turn money into political power? Would there be people interested in doing this?

They would be investing in a political movement. Look at their advantages. Their money in the form of public shares would always be available. They could get it back provided the company was profitable. Yet, the continued investment in political action could get a far higher return than regular campaign contributions especially considering the unified leadership of a CEO and the other corporate officers who we may assume will have considerable political experience.

We might very well have a de facto multiparty state with all that that implies.

James Pilant

Student Privacy Disappearing!

On By southwerkIn business ethics, Government Failure6 Comments

The increasing use of student surveillance and intrusion of school districts into students’ extra-curricular conduct should alarm us all. Whether it is a district surveilling students in their bedrooms via webcam, conducting random drug or locker searches, strip-searching students, lowering the standard for searching students to “reasonable suspicion” from “probable cause,” disciplining students for conduct outside of school hours, searching their cellphones and text messages, or allegedly forcing them to undergo pregnancy testing, student privacy is under increasing threat.

In this quote from the web site, Pogo Was Right, it’s laid out for us. The schools’ use of surveillance technology is on the rise and students will be conditioned to having it.

Wow, this generation has a rendezvous with destiny. And apparently that destiny is the destruction of their privacy throughout their lives. Gives you a patriotic feeling, doesn’t, … You know. Land of the free and all that.

James Pilant

Iraq Not Rebuilt – $Billions Wasted

On By southwerkIn business ethics, Capitalism, ethics, Government Failure, Privatization

Just wonderful! Of course, it’s not much of surprise, there were already news stories and photographs of disastrous building projects and corporate contractual malfeasance. But here we are, billions in the hole, no doubt costing American lives as the Iraqis looked around and waited for us to fulfill promises our private contractors had little intention of doing in the first place. As long as the money rolled who cared about results. Here’s the lead in from the AP report –

A $40 million prison sits in the desert north of Baghdad, empty. A $165 million children’s hospital goes unused in the south. A $100 million waste water treatment system in Fallujah has cost three times more than projected, yet sewage still runs through the streets

As the U.S. draws down in Iraq, it is leaving behind hundreds of abandoned or incomplete projects. More than $5 billion in American taxpayer funds has been wasted — more than 10 percent of the some $50 billion the U.S. has spent on reconstruction in Iraq, according to audits from a U.S. watchdog agency.

That amount is likely an underestimate, based on an analysis of more than 300 reports by auditors with the special inspector general for Iraq reconstruction. And it does not take into account security costs, which have run almost 17 percent for some projects.

Business ‘Ethics’ Wrong Focus – Really?

On By southwerkIn business ethics2 Comments

Thomas DiLorenzo writes an article in which he explains that those teaching business ethics tend to emphasize a few bad apples which implies that all businessmen are corrupt. What’s wrong with greed, he says. We’ve always had it. The real problem is with government.

Okay, I get tired of this. I never teach that all businessmen are corrupt but I strongly suggest that those that are do incredible damage to this country and I can prove my point.

There are a lot of things like greed and pride and avarice and sloth, but that they’ve been around a while doesn’t mean they are acceptable.

I have to notice that the American economy (and the world economy) were nearly destroyed by Mr. DiLorenzo’s “greed.” I do not believe that the government is the source of all evil and I have more faith in an organization in which the American People have some kind of input (not as much as I want) than a giant financial company with a proven record of manipulation, overpayment and use of government influence to protect itself from the actual economic consequences of its misbehavior.

I am a business ethics teacher. That’s a lot more than a apologist for corporate malfeasance and a radical who has discovered the source of evil as American self government.

James Pilant

Business Ethics NEWS – Governor Rick Perry Has Accumulated A Cool Million During Twenty Years Of Government Service?!

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure

How do you do that? I guess you could be really clever. Or you could take some ethical shortcuts. I remember reading Milton Friedman, he says you are supposed to make the maximum profit for shareholders within the rules of the game. Now, I find ole Miltie utterly contemptible. However, that phrase “within the rules of the game” has always troubled me. What does that mean? Here is a situation in which the rules appear to be very flexible. What’s more – How vigorously can you fight or maintain the public interest with such “close” friends?

The Houston Chronicle suggests it might be like this –During two decades of full-time government service, Gov. Rick Perry has accumulated a net worth of about $1 million – perhaps through good investment timing.

However, almost everyone who steered Perry to his money-making deals has seen rewards from Texas government.

Six received key state government appointments or jobs. Two benefited from government actions that had the potential to enhance their real estate holdings. Another was poised to get a state grant for his business until the deal fell through.

The bottom line is, all of the real estate deals that made Perry money occurred because of an insider’s tip. The profits mostly go into a blind trust outside of public view or scrutiny.

“Every transaction I have been involved in has been at arms length, has been transparent and it has been reported on so many cotton-picking times that, if there was something there, it would have been reported on,” Perry said recently.

Southern Methodist University political scientist Cal Jillson said Perry’s real estate deals remind him of the story of Texas oilman Sid Richardson hiring future governor John Connally as a lawyer. Richardson told Connally his salary would not be big, but “I’ll put you in the way to make some money.”


A Brief Comic Strip Explaining CDO’s And How The Banks Use Them

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure

Go to this web site.

Banks Created Fake Demand To Keep Home Sales Going

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure

Back in 2006, when the housing market began to slow banks began to have difficulty moving their CDO’s (collateralized Debt Obligations). So, they created an artificial demand by selling them to each other.

Tens of billions of dollars in deals were exchanged between the banks. The CDO’s were becoming increasingly risky as solid mortgage investments disappeared. But the banks had strong influence over the managers who created the CDO’s and how couldn’t they? A billion dollar CDO made the manager a millionaire off that once transaction.

Without these deals keeping demand high and luring new investors into the game, the housing market would have slowed much earlier with much less damage.

Investment firms like Merrill Lynch cultivated the CDO managers –

As the head of Merrill’s CDO business, Ricciardi also wooed managers with golf outings and dinners. One Merrill executive summed up the overall arrangement: “I’m going to make you rich. You just have to be my bitch.”

The mortgage debts varied in risk, so the banks kept the top 80% and marketed the high risk bottom 20%. But bizarrely, the banks bought each others CDO’s. That’s right, the bottom 20%. But remember, a one billion dollar deal results in five to ten million in fees. That’s a lot of incentive to make bad deals. Bad for your bank but very, very good for you.

The banks were so successful in creating this artificial demand that in 2006, the amount being traded doubled in spite of the cooling real estate market reaching a value of 226 billion dollars.

These were the kind of toxic assets the banks were holding. The banking industry would have you believe that home buyers got in over their heads looking for easy loans. How does that figure when the banks are buying each others’ mortgage investments? How does that work when the banks are creating artificial demand?

And you know the end of the story, how the federal government used tax money to buy those toxic investments which the banks bought from each other knowing they were toxic investment. Do you feel good?

This is isn’t about overenthusiastic home buyers, this New Depression is the result of financial mismanagement and naked greed.

James Pilant