Category: Capitalism

Bad Times

On By southwerkIn Capitalism

Bad Times

It seems that both major political parties are unable to cope with any form of reality. Both cannot solve the nation’s problems or in fact make any kind of intelligent decisions. These are bad times. People are short of jobs, money and hope. I share this malaise. I’ve thought about this and I have come to a decision. For thousands of years, people have lived through terrible times, many have died but the rest persevered and through luck or work or intelligence, we go on. Whatever is going on in the larger society, I still have my duty to my students and my duty to myself and my country.

James Pilant

Shareholders Out of the Loop?

On By southwerkIn Capitalism

The SEC says that Bank of America didn’t properly inform shareholders that Merrill planned to rush out $3.6 billion in bonuses to its employees – information that shareholders needed to make an informed decision about the merger.

In the fourth quarter, Merrill lost 14 billion dollars.

What do you get bonuses for? I was under the mistaken impression that these were rewards for performance. Apparently they have other uses.

However, there is a counter argument, Thomas F. Cooley, writing in an opinion piece for Forbes magazine writes that bonuses and other benefits are closely tied to shareholder interests and demonstrates this by using graphs. He graphs shareholder interests against executive benefits. I quote:
The observations cover the years 1992 to 2006. Our sample consists of information on 31,587 executives, employed by 2,872 companies, for a total of 33,896 company-executive matches and 167,822 executive-year observations.

His graphs indicate correlation between stockholder interests and compensation. I am not convincedin this instance. I am not opposed to high executive compensation provided it is approved by the shareholders and rewarded for successful performance. I am very opposed to executive compensation paid for out of public funds for a disastrous performance.

My problem with Mr. Cooley’s graph isn’t in its accuracy but in my perception that it does not analyze the problem at hand – the correlation between investment banks success and their executive bonuses with an appropriate analysis of how government funds played out in that success.

High executive compensation might work well in dozens of industries. Does it work well in these? And if it does not, what should we be doing instead?

Is it ethical to consider a business successsful if it can get government rescue money totalling billions of dollars to put it in the black? If so, is it then ethical to pay bonuses based on a success purchased with public money?

James Pilant

FIFA and Less Regulation

On By southwerkIn Capitalism

FIFA and Less Regulation

Foul Play: FIFA shows what less regulation offers to business (via Paul Kiser’s Blog)

(This originally appeared on 6/29/10. It was improperly tagged and search engines couldn’t see it. So, I’m reposting it so the post can be seen by search engines like Google.)

Kiser compares the current crisis in the rules governing calls in soccer with the rules of good business.

He writes: “This is a good lesson for those who preach that less regulation is good for business. We have seen what happens when government is stripped back to allow business to do as they will to their customers and the market. Too little regulation leads to foul play. It always has, always does, and always will.”

I recommend this to your attention.

James Pilant

by Paul Kiser USA PDT  [Twitter: ] [Facebook] [LinkedIn] [Skype:kiserrotary or 775.624.5679] Up until today the Fédération Internationale de Football Association (better known as FIFA) believed in fate, not fair play. In FIFA soccer (better known as football) four referees are charged with monitoring non-stop activity on a ‘pitch’ that is a larger field th … Read More

via Paul Kiser’s Blog

China targeting 8% growth in 2010 ?

On By southwerkIn Capitalism

That’s the BBC headline. My question is how accurate is it? We aren’t talking about a Western Democracy. This is almost the last of its kind, a communist state. It is easy to find numerous web sites discussing the lack of accuracy and inflated claims made by the Soviet Government during its time. Eastern European Communits countries have a similar dismal record of accuracy. When China’s Great Leap Forward had already become a disaster (1956) government statistics showed it to be a great success. Now that foreign investment, exports and international agreements are on the line, is the temptation less? It was explained to me over and over again by many news articles and “analysis” (sometimes even by my Chinese students) that China would be the big winner during the world economic crisis, that it was immune to economic downturn. If that is so, why did the Chinese Government create a 586 billion (U.S.) dollar stimulus package for its economy?

What about the issue of corruption? The only real information about the critical nature of corruption is anecdotal. Try these two stories. About 80% of the foreign money sent to help survivors of the earthquake in 2009 wound up in the hands of the government. Researchers estimate that 73 billion dollars a year are spent on government banquets.

How about this quote from the Carnegie International Endowment for Peace:

Failure to contain endemic corruption among Chinese officials poses one of the most serious threats to the nation’s future economic and political stability, says a new report from the Carnegie Endowment. Minxin Pei, an expert on economic reform and governance in China, argues that corruption not only fuels social unrest and contributes to the rise in socioeconomic inequality, but holds major implications beyond its borders for foreign investment, international law, and environmental protection.

Are Chinese economic statistics accurate? I have my doubts. What about the greater question? Is China going to be the next world superpower? My prediction is no. There are too many geographic, foreign policy, economic  and cultural difficulties for the country to maintain its stability for even the next decade.

James Pilant

Too Many Business Ethical Failures

On By southwerkIn Capitalism

!!@@#dddddd444hmlbr35Too Many Business Ethical Failures

When I was eighteen I remember watching an interview with Art Buchwald, the great political humorist. He was asked if he had difficulty finding material to write about each week. He laughed and said that during the Watergate scandal his columns wrote themselves. He said writing under the Ford administration was much tougher. There wasn’t a scandal a day.

When I want to write about a business failing what I believe are its duties, it takes about a minute of internet searching. A particularly juicy one takes about five minutes. There is far more than I can write about. This ought to please me in some small way but it doesnt. This is a tidal wave of misconduct.

I teach Business Ethics. Have I got a chance against a tidal wave of misconduct? When confronted by a stubborn business culture that refuses to follow the dictates of conscience, religion or the public interest, do I just drown? What’s my answer?

You fight. What’s right is right and that you may very well not prevail is not the first consideration. The first consideration is whether or not you are doing what is right in the eyes of God and man. So, I fight.

James Pilant

Islam’s Business Teachings

On By southwerkIn Capitalism1 Comment

hmlbr09Islam’s Business Teachings

There are many negative stereotypes about Islam in the United States. Many foolishly belief that Islam is the same everywhere. Like Christianity, Islam has many branches.

I want to call your attention, gentle reader, to the ethical teachings of Islam in regard to business practices. Islam has particular teachings about the ethics of business. It provides guidance to its members in the business community.

Quoting from a Washington Post article:

But Islam has its own detailed system of business ethics, including a ban on interest-bearing loans and stocks and aversions to debt, hording and overvaluing. And it is becoming more of an issue as Muslims’ affluence and interest in business grows — something visible in classes such as the Fairfax Institute’s and in the appearance of Islam-friendly mutual funds and establishment of Islamic finance programs at universities such as Rice in Houston and James Madison in Harrisonburg, Va.

http://www.washingtonpost.com/wp-dyn/content/article/2006/05/06/AR2006050600747.html

Tom Petters – 3.5 billion not small change

On By southwerkIn Capitalism

109-1Tom Petters – 3.5 billion not small change

Generally speaking few people begin a life of crime suddenly and without warning. Usually there are many small crimes and a certain “casualness” toward the accepted standards of society.

Tom Petters’ trial in Minnesota on hedge fund fraud (Ponzi scheme) begins this week.

Let me quote from the Wall Street Journal article:

In high school in Minnesota, he started a business selling stereo equipment to students at a local university, but his parents shut him down after learning he was skipping school. He later dropped out of college to work for an electronic retailer, but he was so broke in 1988 that he had to move in with his brother, Jon.

Add in a divorce, a stint in cocaine rehab, and involvement in multiple breach-of-contract lawsuits with business partners, both as a defendant and plaintiff.

There were plenty of warnings if someone was willing to look. Am I saying that people cannot turn their lives around? Certainly not. But I don’t believe in living with your eyes closed either. 

James Pilant

http://industry.bnet.com/financial-services/10004501/tom-petters-goes-to-trial-in-historys-second-largest-hedge-fund-ponzi-scheme/

http://blogs.wsj.com/law/2009/04/22/tom-petters-and-the-alleged-dvd-fraud/