Category: ethics

Credit Rating Overused

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

Credit ratings are one way to measure the risk a borrower poses. It is ironic that during the housing bubble that a low credit rating often got one a mortgage while today it takes it a high one to get a similar or lessor mortgage.

An article in the New York Times discusses this problem.

It seems that lenders are overusing credit ratings because of their simplicity and a misunderstanding of their limitations. The score is an algorithm based on a collection of data by one of three major rating agencies: Transunion, Equifax and Experian. But there are no rules on how information is gathered. Lending companies and other debt organizations have a great deal of freedom in choosing what to disclose and where to disclose it.

This is a quote from the article:

You would think, given the critical importance of an accurate score, that there would be rules about the information that is submitted to them. There aren’t. Lenders can submit information about your credit history to one of the bureaus, all of them or none of them. Some of them turn over information right away; some take months; some don’t do it at all. Some are sticklers for accuracy; others are sloppy. The point is that the credit score is derived after an information-gathering process that is anything but rigorous.

The author went on to point out many errors in his report. These companies are unregulated and make up their own rules. But their decisions can be disastrous for individuals. Whether or not you can buy a house or a car is a critical decision for most people. Not to mention, the interest rate to be paid and whether or not you can get adjustments in rates are also factors determined in whole or part by credit ratings.

There need to be rules. These credit agencies have more power than most parts of the federal government, certainly more than the states. Isn’t it objectionable to you that there is a private company determining without oversight some of the most important elements of your life? Shouldn’t we do something about it?

How about just a small thing? Let’s make them correct errors not when they want to but whenever there is an error. Why don’t we standardize the rules about to whom and about what lending companies must report? How about criminal or civil penalties when reports are deliberately falsified? We can fix the problems that bedevil capitalism. There should always be ground rules. It is unfortunate that we cannot rely on the morals and honesty of individuals but that is not the case.

These companies have virtually unfettered power. Is that good for anyone or any organization at any time? Let’s change the rules. As citizens in a democracy we are entitled to fairness.

James Pilant

Textbooks Are Ridiculously Expensive

On By southwerkIn business ethics, Capitalism, ethics

No kidding! The Star Telegram reports that there will some changes in the law regarding textbooks. The Higher Education Opportunity Act of 2008 requires that publishers provide professors with detailed information about pricing and any alternatives in formats. Students will no longer have to buy CD’s and other materials formerly bundled with textbooks so you would have to buy them. Now they will all be separate items.

The changes are good but they don’t go far enough. Textbooks can run on average $800 to $1200 per student per semester. Are the almost mathematical predictable (two to three years and 12% on the average more expensive) upgrades to textbooks necessary? What are the profit margins? Are there any cozy deals between professors and book companies?

There is a lot more that can be done. We should as a nation be more supportive of education and those willing to take the time and effort to improve themselves rather than offering them up as casual sacrifices to publisher profits.

See this video on overpriced textbooks –

Stephanie Lewis commented on your post:

“James, I firmly believe in rental programs at schools.  My undergrad college had one such program.  My books were $12 a book with an option to buy.  To get your grades, you had to turn your books in or be charged full price.  They were on 1 year rotations for subjects in which the information changes frequently.   Others were on two-year rotations and the bulk were on 3 year rotations.  At the end of every semester, there would be a book sale to get rid of retired inventory ($1 a book).  Of course, that meant the school had to run its own bookstore and not outsource it to another company and have the storage and staff for its inventory and maintenance, but it was a bargain for me and saved me a boat load in student loan money.  Trust me, next to medical books, art history books are some of the most expensive.  California is currently transitioning all of its state schools to rental programs and has been for a few years.  I firmly believe in rental programs.  BTW, I went to my undergrad college from 1990-1994 and that rental price didn’t change.  Currently, they still only charge $17.50 a book.”

Goldman Sachs’ Value Drop – July 20th, 2010

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

This a news analysis of the July 20th, drop in Goldman Sachs’ shares. Forgive the commercial that opens it. I can’t get around it.

This is a PBS two part series on how Goldman Sachs’ profit. If you want to understand our economy’s problems and what is likely to continue to go wrong, this is a good place to start.

This is the second part.

Ethics Blog Roundup – 07/24/10

On By southwerkIn business ethics, Capitalism, ethics

David Gebler writing on the blog, Business Ethics, discusses safety violations, codes of silence and what not to do when advancing safety practices.

Shel Horowitz begins his latest blog post (Principled Profit) with these words: As my Boomer generation ages, and as our parents move well into the elder category, I reflect often on something I learned as a young organizer with the Gray Panthers (1979-80): the idea that society had best learn how to incorporate people with disabilities into active daily life, because most of us were going to grow into that category sooner or later.

Horowitz writes that today, his entry is part of an event, Worldwide BloggersUnite, Empowering People with Disabilities. I’d give it a read and take a look at the idea behind the event.

I would like to call attention to two Chris MacDonald postings. A few days ago, Professor MacDonald posted an interview with the author of the “The Authenticity Hoax.” Since then the posting has had some comments (skip past mine) and they have been interesting. Chris gets pretty tough there in that last one. So, I recommend a read of the comments section.

The second MacDonald posting concerns British Petroleum’s faked photographs. MacDonald implies that he has been willing to give BP the benefit of the doubt in the past (I firmly believe this is true. I thought he was too fair) but he is increasingly doubtful of their motives and honesty.

A new business ethics blog has appeared. I give it a warm welcome and a hope of many postings!

Wall Street Overpays!

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

“Stop me before I overpay again,”might be scratched on the wall of Goldman Sachs’, if the firm had any insight or shame. But they don’t. Reuters News Agency reports that Goldman Sachs, J.P. Morgan and Citibank are among the firms who will be cited by the Obama administration pay czar Kenneth Feinberg for having made “ill-advised” payments. (For ill-advised read unearned) The payments in the 17 institutions cited total over one billion dollars. This was in 2008 when the firms were awash with taxpayer money from the bailout.

You see it doesn’t matter what scrutiny they are under, whether or not the public is angry, whether an action is right or wrong as long as the money flows. Money, Money, Money, the arbiter of all decision making on Wall Street, the great green god that supplants the real God and any of sense of responsibility. They know that the only important thing in the world is money. It buys happiness, sex, influence and immunity from the duties that the rest of us take for granted as part of our lives. They live in separate communities with separate education systems and when our children serve in the military, become teachers, policeman or firemen, they snicker at our stupidity.

Or they decide we are unworthy, take a look at this excerpt from Ben Stein’s article in the American Spectator:

The people who have been laid off and cannot find work are generally people with poor work habits and poor personalities. I say “generally” because there are exceptions. But in general, as I survey the ranks of those who are unemployed, I see people who have overbearing and unpleasant personalities and/or who do not know how to do a day’s work.

That’s right, the millions of unemployed their lives in tatters because of casino capitalism, aren’t there because of a savage recession (depression). No, they’re just lazy.

By the way, the article just oozes with Ben Stein’s concern for his poor friends who made bad investments. I can’t help but be curious where he would meet the unemployed. Maybe he’s just confused. Maybe he’s really thinking about his upper crust friends who don’t know how to do an honest day’s work or exercise a workable personality.

I shouldn’t be so angry. Right? Why should the fact that there is one job for every five applicants bother me? Why should an economic elite that moves every job humanly possible to some distant shore where they can ignore those annoying work place laws like child labor, wage and hour, and most annoyingly of all, worker safety, bother me? Why should I be upset? After all, there are a lot of workers, a lot of surplus population that needs culling.

I want justice. I want hard working American to reap the benefits of their hard work, their devotion to this country and their willingness to go the extra mile to do what’s right.

James Pilant

British Petroleum Discards Justice And Patriotism.

On By southwerkIn ethics, Government Failure

The Lockerbie bombing was a traumatic event in Western history. A plane called the Clipper Maid of the Sea was destroyed by a bomb. The deaths included 243 passengers, 16 crew and 11 on the ground for a total of 270. One man was convicted for the bombing. His name is Abdelbaset Ali Mohmed Al Megrahi. He was sentenced to life in prison with a recommendation that he serve at least twenty years. He was released by the Scottish government after serving less than ten years on the grounds that he had terminal prostate cancer with less than three months to live. Only the one unnamed doctor supported this diagnosis. It is alleged that there were four specialists on cancer who did not agree and whose advice was ignored. Nevertheless, he was released on compassionate ground to “die” in homeland of Libya.

Let me quote wikipedia concerning his triumphal return to Libya: Megrahi landed in Libya to national celebrations and acclaim.[71] As he left the plane, a crowd of several hundred young people were gathered at Tripoli Airport to welcome him, some waving Libyan or Scottish flags, others throwing flower petals. Many had been ushered away by Libyan officials in an attempt to play down the arrival in accordance with British and US wishes.[72] Megrahi was accompanied by Saif al-Islam al-Gaddafi, son of Libyan leader Muammar al-Gaddafi, who was dressed in a traditional white robe and golden embroidered vest. It was he who had pledged in 2008 to bring al-Megrahi home, and so he raised his arm in victorious salute to the crowd.[73] Megrahi was then joined on the aircraft steps by Al-Amin Khalifa Fhimah, dressed smartly in a white boubou with a tan waistcoat and waving a small Libyan flag at the gathered crowd. This was the first time the pair had met since they had stood side by side during their eight-month trial at Camp Zeist, in the Netherlands 8½ years earlier.[74]

Thus, one of the greatest mass murderers of history was returned to his country. Of course, he did not die. Reports indicate that he could live another ten years.

Why was this man released? There is an allegation that British Petroleum wished a lucrative deal with Libya and the imprisonment of their “national hero,” was a roadblock in the negotiation. The negotiations occurred at the same time and were concluded at roughly the same time. The Libyan government has denied any connection between the two sets of negotiations.

Let us assume for the sake of argument that the allegations are true. The convicted killer of 270 people is released so that British Petroleum and the British government can reap enormous profits.

Let’s do an ethical analysis. We are not confronted here with an iffy, unclear, difficult analysis. Releasing convicted murderers on compassionate grounds when the evidence appears to have been flimsy at best is not ethical. Releasing him for money is not ethical to put it kindly.

What conclusions can we draw from this? First, both BP and the British government’s concept of justice is that it is a matter of convenience. Second, money outweighs all other interests.

I call into question the patriotism of British Petroleum in that providing release of a convicted international criminal who performed essentially an act of war is not the action of a group devoted to the interests of any country or any civilized society but motivated only by a concern for profit.

Now, the big question, can we count on international corporations in a time of war? If the United States were to go to war with a large and powerful enemy with considerable economic resources, would international corporations (even nominally based in the United States) offered enormous profits to remain neutral side with this country and decline to sell trade, patent and other secrets to our enemies? Would these corporations refuse to support the United States if such support cost profits particularly in the areas of trade disruption or mineral rights?

Does the regularly delivered evidence of corporate malfeasance indicate a willingness to abandon national interests in time of war if such would cost profits? Could an enemy of the United States purchase military secrets held by corporations if they name the right price?

I believe that currently with the enormous financial resources of the United States that we can outbid other countries for the continued favor of international corporations. Since this country is squandering its manufacturing base and descending into an ear of corporate ethical darkness, it is doubtful that such a financial advantage can long continue.

James Pilant

What I didn’t learn at B-School (via Tadka Maar Ke Daily)

On By southwerkIn business ethics, Capitalism, ethics

This quote is going to delight me for days. Ladies and Gentlemen, a business student talks about business school in his own words honestly (the world may end!).

“Finally, there’s the small matter of the treatment of ethics and CSR in MBA courses. The prominent role played by some former Ivy League geniuses in perpetrating the greatest financial meltdown of the past million years or so has painted the lot of management practitioners as a bunch of soulless, blood-thirsty and greedy Shylocks constantly devising new and exotic ways of separating honest folk from their hard-earned money. And in the light of what has transpired over the past decade or so, I must admit a manager’s standing is somewhere between that of a vulture and a sewer rat.”

Go read the whole thing! This guy has things to say!

This is based on a blog by my friend, @pushkarx…I have added on my bit but the credit still goes to him. To Pushkar, if I ever own a firm with profits of a million, I'll pull you in to break even again…you are worth every cent of the million. In a perfect world every product/service would deliver exactly what we expected of it. The Sun would be shining, the birds singing and there would be beer flowing out of taps. Instead, we live in a world … Read More

via Tadka Maar Ke Daily

Saving Trees and Capitalism Too (via Canadians for Climate Change Action)

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

Michael Barker is not afraid of having his own opinion or afraid of writing in depth on a subject about which he feels passionately. The article is about corporate giving in the environmental movement and its corrosive effect. I do not always agree with the author. But it is inescapable that the article is well written and well researched. I wish Mr. Barker well.

James Pilant

Saving Trees and Capitalism Too By Michael Barker "Describing a group funded by the world's leading capitalist elites as grassroots demonstrates how desperately well-meaning environmentalists cling to the illusion that by working with capitalists (not the grassroots) they will be able to counter the destruction wrought on the planet by capitalists (evidently for the benefit of the grassroots)." Capitalism requires trees, but trees do not need cap … Read More

via Canadians for Climate Change Action

Are High Salaries Unethical?

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

I guess like most things it depends on the situation. Well, let’s take a look at an unusual situation. Let us wander around the state of California until we arrive at the small town of Bell. No, it is not small by the standards of some western states but a population of 36,000 does put it in the average category. And this place is tough. I mean almost impossible to run. Because they have such difficulties getting skilled politicians that they pay the mayor about $800,000. This is not quite twice as much as the President of the United States, but the mayor of Bell must have tougher problems. Obviously.

However, the mayor is not the only one who makes a good salary. Let me quote from the article:

Residents, however, have no problem expressing what they think about their city’s budget, which pays the police chief — who oversees a 46-person department — $457,000 a year. By contrast, Los Angeles’ police chief oversees 12,899 people and earns $307,000.

My favorite part is the city council. To be a city councilman required a person to work part time and it’s must be really tough part time work because these guys get a $100,000 for their efforts.

Chief Administrative Officer Robert Rizzo (I refer to him as the mayor.) is not upset or sorry. He says he can make the same in the private sector. Of course, some wiseacre might point that he isn’t in the private sector and that since the private sector seldom owns and operates small cities, it might be hard to get a comparative number.

Now as always when people with real ability are rewarded for their skills and effort, there will be people who squawk and complain. Let me quote from another article on the same subject:

Bell resident Douglas Waugh said he was infuriated when he learned that city officials in his small city had some of the highest salaries in the nation. “They think we’re stupid,” Waugh said standing outside of his home. “They get into power and talk to us like little kids and they think we’re ignorant, but we’re not.”

The top officials in Bell receive a 12% pay hike every July. The mayor has been working in that position since 1993. At that rate he will be earning $2,446,680 in the year 2020. Did you know that the city has been cutting back on services and laying off employees? But these guys have their priorities straight. Right?

James Pilant

Did Not Take Pilant’s Ethics Class Award 7/17/10

On By southwerkIn business ethics, ethics, Teaching

Parents Shocked By Swimming Instruction Techniques reads the article title. The technique involved tying a child’s shoes and throwing him into the pool. This was to teach him how to float even in “dangerous conditions.”

Ethically, just where do you start? If the purpose of swimming instruction techniques is to teach the child to swim, an overwhelming fear of the water caused by your own actions might be a detriment. Secondly, it does not appear from the article that parents were aware of this aspect of training.

As a parent I think I would like to be aware if the class had taken a turn toward training my child what to do if a comic book villain ties his shoes together and throws him into water.

I ran an internet search to see if this practice was common but had no luck. It’s possible it happens elsewhere. But search terms like “tie shoes together” and “swimming instruction” just don’t seem to get any hits.

James Pilant