Should Virtue Be Rewarded?

On By southwerkIn business ethics1 Comment

Should Virtue Be Rewarded?

This is another one of those stories. I am always reading them. Another company discarded ethics, fired those who would practice it and promoted those who “aggressively sought profit.”

According to McClatchy, Moody’s Investor Services, fired employees who warned the company of problems with their ratings of mortgage based investments and actively promoted those who helped create the second largest economic crisis in American history after the great depression.

When the company went public in 2000 it granted its middle managers stock options. This had a corrosive effect on the integrity of the rating process. To quote from the article:

“It didn’t force you into a corrupt decision, but none of us thought we were going to make money working there, and suddenly you look at a statement online and it’s (worth) hundreds and hundreds of thousands (of dollars). And it’s beyond your wildest dreams working there that you could make that kind of money,” said one former mid-level manager, who requested anonymity to protect his current Wall Street job.

Now, what do you say? As a teacher of business ethics, this is one of those real life examples, it might be best your students never heard about. After all, when the hero in the white hat is unceremoniously dumped and those who have damaged the economic fabric of modern civilization are promoted and enriched(from what I can tell, apparently very enriched). Given the example, you have to wonder why anyone would take business ethics seriously.

The article indicates that if you were willing to give investments whatever their actual value a good rating, in many cases a triple A rating, you were promoted and given more money. Thousand of people relied on these ratings to determine what to invest in. Those unfortunate enough to rely on these credit rating agencies lost large sums of money. We are talking about minimally billions of dollars. These are inconsequential investors like retirements funds, endowments for educational institutions, and charitable organizations.

Can you doubt for a moment that our civilization is damaged by this kind of behavior. Can you doubt that those who did these things and profited should be punished so that others might be deterred? I see an investigation in progress by the Securities and Exchange Commission but aren’t they the ones who didn’t see a problem in the first place?

Unless these people are punished, do jail time, have their profits taken from them and be socially stigmatized, there is no reason for my students and the rest of the public to say the right things to me and other do-gooders; and then take the money. After all, isn’t that what the “real world” says to do?

This is the link to the McClatchy story: http://www.mcclatchydc.com/economy/story/77244.html?storylink=MI_emailed

This is the link to the book, A Colossal Failure of Common Sense, by Lawrence McDonald.

http://www.amazon.com/Colossal-Failure-Common-Sense-Collapse/dp/0307588335

I recommend you visit Lawrence McDonald’s web site at:

http://www.lawrencegmcdonald.com/

Can Ethical Decisions Be Life or Death Choices?

On By southwerkIn business ethics

Can Ethical Decisions Be Life or Death Choices?

ABC news reports that Consumer Reports, the magazine, has released a new study that reports the following:

The bad news from a new study is that two thirds of store-bought chicken was found to be contaminated with potentially harmful bacteria.

This is a clear situation where ethics and morality have a role to play. Okay, now, ask yourself, can you ethically sell chickens contaminated with bacteria? Let’s be clear about the consquences. We are talking about food poisoning. Let me quote from wikipedia:

However, foodborne illness can result in permanent health problems or even death, especially for people at high risk, including babies, young children, pregnant women (and their fetuses), elderly people, sick people and others with weak immune systems.

So, we are talking about dead people and serious illness for thousands of others and since food poisoning can mimic other diseases like the flu, the numbers reported are too low.

Now, back to our moral dilemma. The bacteria from your chicken will kill some people often the elderly or the very young. On the other hand, you are participating in busines worth billion of dollars a year. (Tyson sold 26 billion dollars worth of food in 2005.) If your competitors do not act to fix the problem, they can sell chicken for less than you. You will lose market share and thousands of people might lose their jobs.

Now, you might say, “James, you have to draw the line here, we are talking about people’s lives.” I agree that lives are at stake, but I can’t help but point out that it doesn’t look like anybody is drawing a line.

Should we wait for industry to act? A study two years ago showed 80 percent of all chicken contaminated with bacteria. We’ve gone from 80 percent to 2/3 of all chicken sold. Isn’t that movement in the right direction? Don’t you know that incremental change is the responsible way to accomplish these kinds of goals? If you were to impose radical changes on the industry, everyone in American would have to pay a lot more for chicken. Don’t you want even the poorest in this country to have access to meat and the nutritional benefits it brings?

So, we come down to the usual questions. What are you willing to do as an employee of such a company? Where do you draw the line? What’s worth losing your job for? What’s the “right” thing to do?

Futher, as a society, what social costs are we willing to incur for low levels of bacteria in chicken: loss of jobs, increases in foreign competition and a greater price at the supermarket? What’s the social value of cheap chicken?

My conclusion is the following.

Selling chicken which you know to be contaminated with bacteria when you have the technology to eliminate some or all the bacteria is murder. I’m sorry about all the jobs. I’m sorry about the lost profits and danger of competition from foreigners but I just get upset about dead people, a personal weakness of mine, perhaps.

Since, it does not appear any chicken selling company is willing to make the first move to eliminate bacteria and endanger its bottom line, the government will have to mandate new standards.

Now, I realize that given time the free market will solve this problem. After all companies that sell chicken that kill will undoubtedly lose market share. Or will they? Reported levels of 80% didn’t stop people from continuing to buy chicken. On the other hand, this information does not appear to be common knowledge. It appears that the free market doesn’t function well when the consumers do not all have the same information. If death from chicken were certain instead of sporadic it would be easier for the public to make a good decision but food poisoning takes as long as a week to manifest itself. It’s hard to figure out what you ate over a seven day period and of course you might think it’s the flu. What do you think? Could this be an example of the free market yielding illogical or tragic results? Does the free market unfettered by government interference solve all problems?

James Pilant

Selling Public Property to Balance The Budget?

On By southwerkIn Privatization1 Comment

Selling Public Property to Balance The Budget?

Robbie Wills poses the question above on his web site.  Below is the full article. Beneath it is my response.
Kimberly Leonard writes for Stateline.org that some states struggling to balance their budgets are moving to sell or lease public property such as state office buildings, prisons and major tollways, a strategy attacked by some as a short-term fix.  Arizona and California lawmakers, for example, have pursued “sale-leasebacks” of state buildings. Connecticut is planning to sell unused office buildings, vacant land, cars and equipment.

Should Arkansas state entities such as the Arkansas Department of Environmental Quality or the Arkansas Teachers Retirement System, both of whom own their own buildings, follow a similar path?  Should we be unloading surplus vehicles and other equipment?

Here’s the link and here’s an excerpt:

The deals afford the states quick cash, while guaranteeing investors a profit after recouping the cost of the building through the long-term lease payments from the state. Arizona officials said they have received about 100 inquiries from interested buyers, including real estate investors, financial investors, the private sector and nonprofits.

My response is below.

Dear Sir:

I believe that selling state property is a badly conceived idea. This property belongs to the citizens of the state in perpetuity. It is difficult to conceive the costs to future generations based on current evaluations. For instance, there were large areas of poor scrub land in Oklahoma that yielded oil. Who knows what treasures lay beneath the soil of Arkansas? As some of the studies I have included links to indicate, it’s extremely difficult to calculate value for even short periods of time.  

You might argue that many of these shifts of public property could be done as leases. But the leases I have seen in the press are for periods of time like 75 years. For all intents and purposes that is forever as far as this generation is concerned. We have an ongoing responsibility to the citizens both future and current that should not be abdicated by putting it off.

Politically there are powerful interests determined to promote this kind of privatization. Are the people of Arkansas well served by a new and determined group of lobbyists whose successful efforts could result in millions and eventually billions of dollars of profit diverted from public possession and public needs? Citizen activism is a brief phenomenon. Lobbyists and business interests are eternal.

Would these be fair deals? Arkansas budget shortfalls are likely to be regular in the future with important needs unfunded in the short term. How hard are the Arkansas negotiators likely to be when the budget must be completed on a fixed schedule and vital public needs are at stake? The City of Chicago negotiated in the middle of a budget crunch and signed on to a very poor deal.

The Texas Legislature researched and debated the subject quite heatedly. They killed the deal amid concerns that they simply could not figure out the proper value and what kind of safeguards the public deserved.

South American began the privatization process almost twenty years ago by privatizing highways. What happened? It was a disaster. The promised benefits failed to materialize. The report concludes that private public partnerships on roads are always suboptimal. (page 5)

In conclusion, privatization is a short term solution for long term budge problems, a band aid when surgery is necessary. The benefits are unproven, disputable or simple not there. These kinds of decisions that transfer public property to the private sector are worthy of the greatest possible scrutiny and they seldom receive it.

Let me point out one additional matter. If privatization is always better than public management, why are you employed?  If you and your colleagues are unable to find viable revenue for the state’s future and incapable of creating highway authorities and other governmental bodies capable of good performance, why shouldn’t you be privatized? (Forgive me, I would never suggest actual privatization nor do I wish to infer you are not working hard or performing a valuable service to Arkansas. I am merely taking the argument for privatization to its logical conclusion.)

If democracy is the best form of government, what does yielding up large portions of the public’s possessions to private industry say about our ability to govern ourselves? The citizens of the United States have faced war and a succession of economic crises. We don’t have to yield to these challenges by quick fixes. We are the people who will show the world how a democracy even in the most serious of economic difficulties can survive and prosper.

Sources

Dennis Enright’s testimony before the United States Senate (2008)

http://finance.senate.gov/hearings/testimony/2008test/072408detest.pdf

Dennis Enright’s testimony before the Texas State Senate Committee On Transportation and Homeland Security (August 12, 2008)

http://www.senate.state.tx.us/75r/senate/commit/c820/handouts08/081208/Dennis_Enright.pdf

Report of the Legislative Study Committee on Private Participation in Toll Projects

ftp://ftp.dot.state.tx.us/pub/txdot-info/library/pubs/bus/tta/sb_792_report.pdf

This was hardly a recommendation and on July 8, 2009, the Texas Legislature denied the Texas Department of Transportation the authority to build privatized toll roads in cooperation with private developers.

 http://enr.ecnext.com/coms2/article_intr090708LoneStarStat

This is U.S. PIRG’s report on toll roads and protecting the public interest.

http://www.uspirg.org/home/reports/report-archives/transportation/transportation2/public-roads-private-costs-the-facts-about-toll-road-privatization-and-how-to-protect-the-public-texas

The City of Chicago decided to lease out their 36,000 parking meters. The Office of the Inspector General released a devastating report that the city has rushed through the deal and had not properly analyzed the costs.  

http://www.chicagoinspectorgeneral.org/pdf/IGO-CMPS-20090602.pdf

 

Ethics Continuously Created by Everyday Activities

On By southwerkIn ethics4 Comments

Ethics Continuously Created by Everyday Activities

Anna Peterson when asked what the most important message is contained within her new book: Everyday Ethics and Social Change: The Education of Desire

That ethics is not disconnected from ordinary activities. This means a couple of things. First, almost nothing we do is “value neutral.” We can’t separate out the times we are acting “morally,” and the rest of our lives. Second, it means that ethics are not something constructed or articulated in the abstract and then applied, in a top-down fashion, to concrete circumstances. Rather, ethics are created in and through ordinary practices. This means we ought to think more carefully, perhaps, about the ethics we enact (or don’t) on a daily basis. In the end, I think, movements for social change seek to transform everyday life so it becomes safer, less oppressive, and more joyful for more people (and other creatures). So it makes sense that the roots of a radical ethic for social change can be found in the best parts of our everyday lives.

I have strongly professed such beliefs in my teachings on ethics. I strongly believe that the moral stance we have in place is the main factor in what we decided when the ethical dilemma arrives. It is obvious to me, that we create our ethics continuously, and the destruction of our ethical framework takes place in small daily increments. This is why traditional business ethics teaching has little effect. What the more foolish call the “real world” eats it up. The real world is the kind of person you are as opposed to the crawling maggot the world would prefer you become.

James Pilant

Who Is Responsible For Our Financial Crisis?

On By southwerkIn business ethics

002-1Who Is Responsible For Our Financial Crisis?

Dylan Rattigan nails it (from the November 25, 2009 program, Morning Meeting):

Exactly and more importantly making sure that we identify who burned the house (the house being the American economy) down, who made themselves rich burning the house down, getting the money back from those who made themselves rich burning the house down, punishing those who burned the house down and then building a new house that doesn’t allow people who like to burn houses down to build them. And they’re acting like the house fire was an accident and I think that’s where you run into a lot of problems.

There has been a continuous failure of the Obama Administration to place blame or establish penalties for the long term financial wrong doing that created the greatest economic crisis since the Great Depression. Without accountability what reason do those who have profited so much from hurting so many to stop their actions?

James Pilant

Does The Bottom Line Always Trump Ethics?

On By southwerkIn business ethics

From Reuters, a comment from China Labor Watch:

“The case of Wal-Mart, the world’s largest retailer, shows that corporate codes of conduct and factory auditing are not enough by themselves to strengthen workers’ rights if corporations are unwilling to pay the real price it costs to produce a product according to the standards in their codes.”

Acting ethically costs real money. It limits the return on investment. It complicates dealings with suppliers, competitors and often the government.

Doing the right thing is never cheap. The wrong thing can make you enormous sums of money in a world where this kind of behavior has no down side.

jp

Pets to Benefit from Holiday Cheer

On By southwerkIn business ethics3 Comments

Generally speaking the occasional pet story doesn’t bother me. However this was the leading or top story on CBS News’ web site. The only other thing going on was the crisis in the treasury department and the Federal Reserve Board. And they have mentioned the largest economic crisis since the Great Depression. Now I freely admit that later in the business news they became more serious. But really, doesn’t this belong in the “popular” news or how about just moving it down a hair so it isn’t the number one story.

What Moral Stance?

On By southwerkIn business ethics

As I discuss the ethical implications of various business practices, I am troubled by the multiple possibilities of moral stances. Catholic Social Doctrine, Protestant Social Doctrine, the Southern Baptists’ total absence of any moral doctrine in regard to the business expressed as free market absolutism, Plato and Aristotles advocacy of the good life, the life examined and well lived, Kant’s categorical imperative, Friedman’s thinly veiled advocacy of Friedrich Nietzsche Superman, (the moral and ethical are weaklings who place limits on the “real” achievers because otherwise they couldn’t cut it); what do you advocate when examining the strange conduct of American business?

I will search for the best options, but it is not going to be easy. But doesn’t that fit with so much else?

The fight for justice, truth and honor is never won. The forces of evil rise again and again. There is no golden stake you can thrust into their heart to stop their depradations on the poor and helpless, their use of the levers of power to enrich themselves when they have contributed nothing and worst of all their continued recruitment of the young an a half wit philosophy of joining a group of “special” people, achievors, the real makers and shakers, an Ayn Rand doctrine that makes you special without any accomplishment or achievement save a twisted belief.

What is there but to fight, to struggle. Hear the words of Cyrano de Bergerac
in the last act of the play.

(He raises his sword):
What say you?  It is useless?  Ay, I know
But who fights ever hoping for success?
I fought for lost cause, and for fruitless quest!
You there, who are you!–You are thousands!
Ah!
I know you now, old enemies of mine!
Falsehood!
(He strikes in air with his sword):
Have at you!  Ha! and Compromise!
Prejudice, Treachery!. . .
(He strikes):
Surrender, I?
Parley?  No, never!  You too, Folly,–you?
I know that you will lay me low at last;
Let be!  Yet I fall fighting, fighting still!

Let us fall knowing that we acted with honor. Let us die with a curse on our lips for the sanctimonious, pompous evil doers among us. Let us die well.

United States Attacks Financial Fraud Two Years Late

On By southwerkIn Government Failure

Justice must be seen to be done. A society in which the wealthy or well connected get different justice than others is a society in real trouble.

When someone murders someone, you start looking immediately. When you have a theft you go and start asking questions. But if you are American financial institutions, you get a two year head start.

The Obama administration has decided to launch “a sustained, multilevel attack on financial fraud.”

Isn’t that just precious? They’re on the job!

I can’t help but wonder why people who stole billions of dollars, moved many Americans into poverty and missed totally destroying the world’s economic system by a hairs breath get two years to dispose of the evidence and develop new schemes of raping the public.

I have to ask if this government and this president are serious in any way at pursuing the financial malfeasance of those who have made large campaign contributions.

Morality and ethics demand that criminals be brought to justice. But not only that, simple logic dictates that they who have victimized millions should be priority targets for investigation.

Chamber of Commerce Stacks the Deck

On By southwerkIn business ethics2 Comments

Truth. We are taught to respect it. It might be said that truth is the basis of morality and ethics. Certainly the search for truth is the basis of modern science.

But the United States Chamber of Commerce already knows the truth. To paraphrase the movie, Treasure of Sierra Madre, “They don’t need no stinking research.”

In a series of memos, the Chamber explains that it has decided to pay $50,000 dollars to a “well-respected economist” to write a study explaining that the health care bill will cost jobs.

“The economist will then circulate a sign-on letter to hundreds of other economists saying that the bill will kill jobs and hurt the economy. We will then be able to use this open letter to produce advertisements, and as a powerful lobbying and grass-roots document.”

This the Chamber’s procedure. We decide on a result. We hire someone who “looks” respectable but has the morals of a syphilitic serial killer. He conducts a study predesigned to our conclusion. We get the research result we want and we can call it science.

Tell me, what does this say about the organization and its lobbying effort?