One of the problems we who teach business ethics have to deal with is the idea that there is a separation between business ethics and personal ethics. I’m sure everyone in the field has dealt with students (and business people) who believe that they should leave their ethics at the door when they go to work. That this belief is common is most unfortunate and produces a great deal of evil. The idea of two kinds of ethics is the worst kind of hypocrisy. And this is because what is basically being said here is that “I am a good person just so long as I am not at work.” I can’t find much comfort or consistency in having two codes of morality.
And what does this say about business in this nation? That this is a common belief does not speak well of the ethics of American business. The idea of a separate set of ethics strongly indicates diminished concern for ethics and a predilection for what is called in the law, sharp practice, taking advantage instead of fair dealing. Yet, how often have you heard the phrase, “It’s just business.” And that always means the same thing, “I wouldn’t normally make this decision but we are in the world of business and that’s what is done here.”
The Ethics Sage
The Ethics Sage strongly believes that we should live by a common ethical code, a code we practice both in and outside the workplace. So do I.
The quote below is an excerpt from The Ethics Sage’s latest work. It can found here. As always I recommend that you read the full article and subscribe. His work is well worth reading.
Are there two standards of behavior — one for the workplace and one in personal life?
…
We all should live life under a set of values that guide our actions, whether at home or on the job. Ethically, you can’t justify lying in the workplace for the “greater good” while never doing that at home. Ethics is not like a spigot we can turn on and turn off. We are what we do in life and ethical people always strive to do the right thing without compromising one’s values or beliefs. It’s not an easy standard to live up to all the time.
Ethics is prescriptive and not descriptive. It is an ideal that we all should strive to achieve — to be better people and contribute to the betterment of society. It is not about how we do behave but is about how we should behave. No one is perfect all of the time. Ethical people make mistakes. In such cases, whether in business or in one’s personal life, the best way to handle the situation is to admit your mistake right away — don’t cover it up — promise never to do it again. And then follow through by acting ethically in the future.
Business executives and business owners need to realize that there can be no compromises when it comes to ethics, and there are no easy shortcuts to success. Ethics need to be cultivated throughout the organization. Top management needs to set an ethical tone at the top. Actions must match words. Managers who believe this to be the case and act accordingly set the stage for the ethical leadership that is so important in organizations today.
One of the subjects dealt with in my blogging is free market fundamentalism, a subject intertwined with Neo-Liberalism. What does this have to do with business ethics? These philosophies have real impacts on policy across the glove. They are often used to determine economic decisions for entire nations and corporations. If we as business ethics teachers stay away from the big questions because it is less controversial and easier to deal with the small, what kind of people are we?
Micro Business Ethics
It seems to me obvious that these philosophies are embedded in business interests across the globe. They are spread and encouraged by well financed think tanks, lobbyists and political contributions. This belief system practices wage discipline, privatization, the destruction of public services and the replacement of democratic institutions by business “experts.” Considering these facts, business philosophy should and must be an area of concern for business ethics. When a school board is superseded to allow an appointed body to defund public schools and create a parallel charter school system, democracy has been thwarted. When once well paid workers are reduced to food stamps and penury, we should discuss whether the power of business is being used for good or evil.
Much of the writing of traditional business ethics concerns the individual confronted with intellectual dilemma. I call this Micro Business Ethics. I’ve read textbooks where the focus was heavily aimed at this part of the field. For instance, each chapter opened up with an ethical question for an employee in business or corporation. More commonly, textbooks have sections dealing with individual ethics, organizational ethics and business philosophy, although I have one almost totally devoted to larger business philosophy and questions of ethics both national and international.
And all of these textbooks are labeled “Business Ethics.”
Why don’t we borrow from the field of economics? According to Wikipedia microeconomics “studies the behavior of individuals and small impacting organizations in making decisions.” That sounds like a good definition of Micro Business Ethics. How about adding a macro for the larger problems?
I would define macro-economics as dealing with organizations larger than “close” corporations or sole proprietorships such as national and multi-national corporations up to international organization like the International Monetary Fund and including nation states like Greece. But instead of dividing the field of business ethics into two parts, I can’t help be feel that doctrine and philosophy need their own area of concentration which I would call simple business philosophy.
If the Olympics are so wonderful, why does there need to be a taxpayer guarantee?
Benjamin Franklin Would Have Said No
Boston is considering bidding on a future Olympics specifically 2024. What could be a better idea? Think of the wonderful benefits the city could get from all those new facilities, the publicity and the tourism! There can’t be a downside to that, can there?
I try to think critically and intelligently about difficult issues. This is definitely a business ethics issue. For is it not common knowledge that while businesses may want to see new grand facilities and while they may appreciate good public relations and even love foreign tourists, corporations and businesses have expressed a strong aversion to bearing the costs for any of these things? It always seems to be somebody else’s money (read “taxpayer”) that we are discussing when we talk about these international sporting events. You’d think listening to the corporate spin that the giant multi-national corporations and local businesses were the equivalent of Oliver Twist being slapped in the chops for wanting just a little bit more.
Now Boston was the home of Benjamin Franklin and he may have been the original civic booster. His autobiography is literally one story after another of a proud man acting to make his city a better place.
What would he say?
When he considered the opening a print shop and a newspaper he carefully scoped out the current businesses, talking to everyone and literally walking the community. I believe we can draw from this form of planning that his first question would be “What evidence is there that an Olympics will turn a profit?”
But he wouldn’t stop there. Remember, he wasn’t just a printer, he was a legislator as well and he insisted on public accountability for taxpayer funds, and further, as a proud citizen of the City of Boston, he would want the taxpayers left holding the bag. So, his second question, closely related to the first, would be: “Can the Olympics be profitable for both businesses and the citizens of Boston?”
Where would he start to find the answers to these questions? Obviously, in the library. After all, the lending library was virtually the creation of Franklin. And we know which books he would go to. He loved history, science, any how to book and, above all, philosophy. Of the four, he would got to history for the answer to the question of Olympic profitability.
The first fact that would leap out at him would be that the Winter Olympics of 1984 at Sarajevo was the first Olympics during the modern era to turn a profit. The second thing he would see was that there wasn’t much profit. Sarajevo made the equivalent of ten million American dollars after spending an initial budget of 110.9 million dollars and operating expenses of 55.4 million dollars.
The next four Olympics, three Summer, 1984, 1988, 1992, and one Winter, 1988, all were profitable. In fact, the Seoul Olympics made about 300 million dollars on a 4 billion dollar outlay.
However, the 1992 Winter Olympics lost 67 million. The 1994 Lillehammer games indicate neither profit nor loss and the Atlanta Summer games of 1996 show a profit of 10 million dollars against an initial outlay of 1.8 billion dollars.
I have to quote an article for the numbers on the Nagano Winter Olympics of 1998. You’ll see why when you read it:
The officials who organized Nagano’s bid for the 1998 Winter Olympics were zealous about keeping track of expenses. As they directed a massive lobbying drive to win the Games for their town, they maintained careful records of it all–90 volumes to be exact, enough to fill 10 large cardboard boxes. Inside was a window on what it takes to woo members of the International Olympic Committee–luxury hotspring resorts, first-class air tickets and geisha, to name just a few entries. But it seems Nagano’s bidding committee was better at compiling records than preserving them. In 1992, after a citizen’s group demanded disclosure of the Olympic spending, the 90 volumes mysteriously disappeared. Their fate remained a mystery until the controversy over Salt Lake City’s bid for the 2002 Games erupted in December, prompting a bid committee member to come clean: I ordered them burned, said Sumikazu Yamaguchi, former vice secretary-general of the Nagano Olympic Bid Committee.
We may safely conclude that they lost a great deal of money.
Now, we arrive at Sydney Summer games of 2000 and a loss of 2.1 billion dollars.
Followed by the Salt Lake City Winter Games of 2002 which made a 101 million dollars profit.
The 2004 Athens Summer Olympics are a milestone in sports history. Let me quote:
The Torino Winter games of 2006 lost 3.2 million dollars resulting in the creation of a lottery by the Italian government to cover the costs.
The Beijing Summer Olympics are interesting subject. Here’s a quote:
On March 6, 2009, the Beijing Organizing Committee for the Olympic Games reported that total spending on the games was “generally as much as that of the Athens 2004 Olympic Games”, which was equivalent to about US$15 billion. They went on to claim that surplus revenues from the Games would exceed the original target of $16 million.[10] Other reports, however, estimated the total costs from $40 billion to $44 billion, which would make the Games “far and away the most expensive ever”.[11][12][13]
So, it depends on whose numbers you want to believe. If we assume their original plan of spending about 15 billion and making 16 million in profits, we are back at very limited returns on large investments. If we believe the estimates of 40 to 44 billion, we are talking losses far greater than the catastrophe of Athens. But the Chinese government claims they made about 146 million dollars.
The Vancouver Winter Olympics made 925 million dollars (Canadian) on an outlay of about 6.4 billion dollars for the initial budget.
The London Summer Olympics made 52.8 million pounds with an initial budget of 14.6 billion dollars.
And then we come to the last Olympics thus far, Sochi. I’ve seen estimates of cost up to 66 billion dollars. However, let’s just go with the more usual 50 billion dollar estimate that still makes this the most expensive Olympics in history. The organizing committee says it made 261 million dollars in profit.
Franklin would conclude that there were many people both in and outside of Boston willing to invest but that the bulk of the investment and virtually all the risk lay on the taxpayers, the citizens of Boston. The citizens of his city were being asked to insure that there would be no losses in a highly speculative venture which had historically on most occasions made no money, that when it did make money, the profits were very limited and that when it lost money, the losses could be catastrophic.
Benjamin Franklin would never have agreed to this type of scheme.
James Pilant
The Corporate Consultant Working For Free To Kill The Boston Olympics
The effort that would become No Boston Olympics began in November 2013, when Chris Dempsey and Liam Kerr, friends since they met while campaigning for Gov. Deval Patrick, were sitting on Kerr’s living room couch in Boston’s Beacon Hill neighborhood. For months they had listened to organizers from Boston 2024 tout benefits the Olympics could bring the city, such as new transportation investments and a shot of economic stimulus.
Dempsey and Kerr, though, saw nothing but risk. Their primary problem was Boston 2024’s request for a taxpayer guarantee, the government backing the International Olympic Committee requires should private financing fall short. Looking at previous Olympics, they saw that such a guarantee often turned out poorly for host cities and their residents.
“Our goal,” Dempsey said, “has been to tell the other side of the story.”
Democracy and Neo-Liberalism = Mongoose and Cobra? Right now, the Greeks are gearing up for an election that will decide how much the people of that nation will concede in the negotiations with the Euro-Zone. If you have followed the talks, you might be troubled at the how the Euro-Zone Bureaucrats are interfering with the internal affairs of Greece. Greece wanted to raise taxes on the wealthy and impose a one-time tax on businesses. They were told no. Greece wanted to increase spending on tax enforcement. They were told no.
But it wasn’t just about saying no. The Greeks were told to increase “value added taxes,” a kind of sales tax. These fall most heavily on the lower classes. And they were told they should cut the number of pension holders and the amount they get (roughly 800 a month measured in American dollars). Needless to say these bureaucrats (technocrats?) are unelected and their preferences strongly tend to the economic prescriptions of the International Monetary Fund. These prescriptions while being applied to Greece at the moment are familiar to any American who follows economic policy discussions. They are privatization, a lessening of regulations, means-testing for government aid, a dramatic reduction in social services to force salary discipline, and lowered taxes on businesses and the wealthy. These in the neo-liberal mind will eventually produce an economic utopia although success has eluded them thus far. .
People given the power of the vote are an obstacle in the path of these kinds of changes. Democratic peoples tend to lean toward the ideas that privatization of commonly held public goods like parks are opportunities for businesses to charge them for things that were once free. That regulations no matter how often they are called drags on the economy are for the public’s protection. And they feel that they have a right to a decent retirement and other government aids in the face of an increasingly unsure economic environment. Many people also believe that businesses and the wealthy are not carrying their fair share of the tax burden.
But democracy is not always an effective obstacle. International organizations like the IMF, the World Bank, and Euro-Zone among many others work to limit the effects of democracy using loans, a legion of technocrats, and literally tons of learned documents explaining that what people believe to be in their best interest is not.
Democracy limited by international treaty to allow corporations to sue in supra-national judicial systems does not have the historical or traditional power of a nation state. This is currently the most significant move by international business to curb human rights and democratic authority. It is epitomized by the Trans-Pacific Partnership, a secret agreement reaching into every part of business law and strengthening the power and influence of corporations, other business interests and the wealthy.
Democratic values and patriotism are not obsolete because it is in the interest of international business to make them so.
Nations and the societies therein are successful because of the wisdom of the learned, the courage of the brave and the obedience of the citizen. Wisdom, courage and obedience are all irrelevant in a world where monetary interest is the sole measure of success.
James Pilant
Congress Weighs in on Holding IMF Accountable for Damage Caused by Failed Policies in Greece | Mark Weisbrot
It is not surprising that the very idea of a referendum would provoke the ire of the eurozone authorities. Unlike the European Union, which has a different history, the eurozone project has become a fundamentally anti-democratic project. It has to be; the people currently running it want to reverse, as much as possible, decades of social progress on issues that are vital to Europeans. But you don’t have to take my word for it: there is a paper trail of thousands of pages that spell out their political agenda. The IMF conducts regular consultations with member governments under Article IV of its charter, and these result in papers which contain policy recommendations. There were 67 such consultations for EU countries during the four years of 2008 to 2011, and the pattern was striking: budget tightening was recommended in all 27 countries, with spending cuts generally favored over tax increases. Cutting health care and pension spending, reducing eligibility for disability and unemployment compensation, raising retirement ages and increasing labor supply were also overwhelmingly common recommendations.
The European authorities took advantage of the crisis and post-crisis years to impose parts of this agenda on the weaker eurozone economies: Spain, Italy, Portugal, Ireland and most brutally of all, Greece. More than 20 governments fell as a result, until finally, in Greece on January 25, a government was elected that said no. The goal of the European authorities, therefore, is to topple this government. This has been apparent since the ECB cut off its main line of credit to Greece on February 4.
Research by the Center for Responsible Lending is showing that it isn’t just one type of loan doing the damage but a combination of loans. For instance, a predatory mortgage can lead a family to payday loans, etc. That results in a perfect financial story as debt cascades from different kinds of loans.
Predatory Financial Services
It is obvious that there are two tiers of financial services. One, where people can go and get car loans, home loans, etc. at reasonable rates and with opportunities for adjustment in the event of financial difficulty. These tend to be provided by local banks. The other is, to be blunt, predators profiting from many individuals inability to access regular financial services like banks.
Business ethics does not have proper language to deal with these different kinds of financial services. The same words are used for predator and community benefactor. It should be obvious to all that providing a car loan at a reasonable rate is a benefit to the community. It means that a human has access to a vehicle and can pursue economic ends like having a job and buying groceries. A car in this case is a production good. It creates value. But a predatory lender siphons money out of the financially disadvantaged, those that cannot for one reason or another access regular financial services. It siphons money and instead of a valuable production good, we have limited production good always riding a narrow dividing line between benefit and deficit.
The report (discussed below) shows how different kinds of predatory lending combine to produce financial disaster. One bad loan leads to another.
In this country, we have a long history of limiting the power of lenders with anti-usury laws limiting the interest rates that can be charged. It is time to revive that tradition and begin once again the work of building a fair system of financial services devoted to building the American economy and not systematically draining the resources of the poorest among us.
James Pilant
Immediate Costs of Predatory Financial Practices Are Steep, But They Are Just the Tip of the Iceberg | Michael Calhoun
Since 2012, the Center for Responsible Lending (CRL) has been measuring the effect of different predatory lending practices in our State of Lending research series. We have shown that predatory mortgage terms result in higher rates of foreclosure; that certain auto lending practices result in racial discrimination; and that trapping people in debt is the payday lending business model. Our final chapter, The State of Lending in America and Its Impact on U.S. Households: Cumulative Costs of Predatory Practices shows lending abuses are inter-related and that they set off chain reactions that have long-term consequences, derailing economic opportunity for millions of Americans and weakening the U.S. economy.
Abusive loans do not exist in a vacuum and borrowers who fall victim to one abusive loan are more likely to fall victim to another. Our report finds that 54.5 percent of those who have had a car-title loan have also had a payday loan, and 62.8 percent of consumers who recently used a payday loan also have a credit card. The costs of abusive loans compound over time because loans with harmful features lead more often to defaults, bankruptcies or the loss of a critical asset such as a car or home.
Goldman Sachs has discovered the milk of human kindness and has decided to restrict interns to no more than 17 hours a day.
Allowing for travel time, this would appear to allow for as much as 4 and 1/2 hours of sleep at most a day.
I’m confused. I’m having trouble understanding what they are trying to get from these interns. I’m sure to some it seems like the company is trying to get every possible waking moment of labor they can squeeze out of them while evading the bad publicity of a death. But you would think they have plenty of money to hire interns and even treat them well. Is there an element that I am just not getting here? Is it a kind of fraternity initiation? Does this indicate a kind of hazing for admittance into the upper echelons of finance? There has been evidence suggesting that fraternity members dominate the great investment houses. Could it be that frat boys are always frat boys? Maybe they have so many applicants, working them to the breaking point is just one way of winnowing them out.
Give us almost all of your time!
Certainly, if I were managing a company, the idea of people doing work for me with less than five hours of sleep for days on end would worry and appall me. And I would consider myself both a fool and a villain if I made them do it.
As a business ethics issue, the answer is clear. Working people 17 hours a day is wrong.
But what doesn’t make any sense here is that not only is there no need for this, it is counterproductive. At least in theory, high finance requires good judgment and high cognitive skills – reasoned judgment. How do you get that out of the sleep deprived?
I assume someone is asking, “How does this blogger know that 4 and 1/2 hours of sleep is too little, didn’t Margaret Thatcher brag about only sleeping four hours a night?”
My first response would be, “She’s probably a strong case for that being too little sleep but let’s do science instead of swapping anecdotes.”
Studies of people with four and six hours of sleep a night compared with a control group of eight hour sleepers showed significant cognitive losses among the short timers. You can read about that here.
Sleeping less than five hours a night has been connected to false memories as well as reduced reaction time. You can read about that here.
Getting too little sleep for several nights in a row disrupts hundreds of genes that are essential for good health, including those linked to stress and fighting disease.
Tests on people who slept less than six hours a night for a week revealed substantial changes in the activity of genes that govern the immune system, metabolism, sleep and wake cycles, and the body’s response to stress, suggesting that poor sleep could have a broad impact on long-term wellbeing.
The changes, which affected more than 700 genes, may shed light on the biological mechanisms that raise the risk of a host of ailments, including heart disease, diabetes, obesity, stress and depression, in people who get too little sleep.
I believe I have established beyond a reasonable doubt that forcing employees to work so many hours that they are sleep deprived impairs their performance significantly. And since we can reasonably assume that the executives at Goldman Sachs have the same internet access that I do, what gives?
I have a theory and it runs like this. I was watching an expert on firearms talk about the Japanese weapons of the Second World War. He was asked why the Japanese developed the sub-machine gun at the very last stage of the war when the Americans and Europeans had adopted it in the 1930’s. He said the old timers in the service had never had them, didn’t see why anyone would want the new-fangled weapons anyway and since they hadn’t had them and had got along fine, they weren’t necessary. So, my guess is that the current leadership of the company was treated badly, hazed and worked countless hours and if it was good enough for them, it’s good enough for the new guys. After all, didn’t it make them the successful men and the successful company they are today?
Now any careful examination of the facts indicates that doing this to employees is counterproductive but we are up against the male mythology of toughness and traditional manhood against which reason is unavailing. And what is truly sad is that this is finance, one of the most cerebral fields of endeavor open to humankind. They’re not branding cattle, fighting in the ring, or playing football. They are crunching numbers on a main-frame and negotiating.
Getting across the idea to new hires that sheer dogged persistence in the face of pain and declining performance is the key to success is not the lesson you want to convey to successive generations of investment bankers, but that is just what the company has decided to do and is going to do.
Judgment is based on reason and facts not the memories of how awful you were treated when you were young and how it made you the man you are today. That’s a fantasy, a fantasy continually used to justify treating people badly. It’s wrong and it is poor business ethics.
James Pilant
Goldman Sachs restricts intern workday to 17 hours in wake of burnout death | Business | The Guardian
Go home before midnight, and don’t come back before 7am. Goldman Sachs – one of Wall Street’s toughest firms – has told interns they have got to work hard, but not too hard.
The new rules, introduced for this summer’s crop of investment banking interns, have been introduced “to improve the overall work experience of our interns”, a Goldman Sachs spokesman said. All of its summer interns across the world were informed of the new working hours rule on their first day in the office earlier this month.
Wall Street’s shift to caring capitalism comes in the wake of the death of a 21-year-old Bank of America Merrill Lynch intern who had regularly pulled all-nighters in a desperate bid to impress his bosses.
Jamie Dimon has publicly asked whether or not Senator Elizabeth Warren understands the global banking system. This is, of course, nonsense, but this kind of attack is often used on anyone the financial world considers the naive. And by naive, they mean anyone who doesn’t sympathize with their wants, desires and their ways of making money. As you can see from the quote below from “Think Progress,” Warren taught corporate law at Harvard University and published nine books among other significant qualifications. I agree with her that what upsets the financial world epitomized by the likes of Jamie Dimon isn’t that she doesn’t understand what they do but that she understands all too well what they do.
Of course, Dimon has experience foreign and unique that Warren will probably never have. His firm has agreed to billions of dollars of fines for illegal activities while he was in charge. Leading an institution that has repeatedly broken the law provides a man with a unique take on financial transactions, I’m sure.
Is it naive to question the money making techniques of the giant, “too big to fail” financial institutions? Undoubtedly the denizens of these firms view themselves as job and wealth creators doing God’s work. And who are we that would question that? Let me respond with a question of my own – who are you that your “work” is guaranteed with taxpayer dollars, literally trillions of taxpayers’ dollars? – Who are you that when you make mistakes doing “God’s work,” that the public loans you billions of dollars to save your firms from your own incompetence? Who are you who deliberately and with full awareness of the law break that law, not once but over and over again? And why is it that when you do tens of billions of dollars of damage to this nation and other nations, the worst thing that happens to you is a fine?
That God’s work analogy is in a way correct for these financial institutions do seem to have some kind of divine intervention saving them from failure and jail.
And when investment bankers get this kind of treatment, this loving application of government protection and a gentle massage of warm taxpayer dollars, it shouldn’t surprise anyone that we get statements like “I don’t know if she fully understands the global banking system.”
Those of us who don’t get this loving treatment, who lack armies of lobbyists, millions in campaign contributions and never get to play golf with the President, must seem foolish in comparison.
James Pilant
A Bank CEO Said Elizabeth Warren Doesn’t Understand Wall Street. Her Response Was Perfect. | ThinkProgress
On Wednesday, JP Morgan CEO Jamie Dimon said of Massachusetts Senator Elizabeth Warren (D), “I don’t know if she fully understands the global banking system.”
By Thursday, Warren already had a response. Speaking on the Huffington Post’s “So, That Happened” podcast, she said, “The problem is not that I don’t understand the global banking system. The problem for these guys is that I fully understand the system and I understand how they make their money. And that’s what they don’t like about me.”
Warren’s résumé comes with nearly 20 years of experience teaching corporate law at Harvard University, publishing nine books, chairing the Congressional Oversight Panel that oversaw the bank bailouts in 2008 (of which JP Morgan was a beneficiary), and coming up with the idea for and helping to create the Consumer Financial Protection Bureau, which has already helped consumers avoid numerous predatory lending schemes and recouped more than $4.8 billion through its enforcement actions.
Explain to me how J.P Morgan after paying out billions in fines due to illegal activity still employs the same C.E.O? Jamie Dimon might very well be one of those non-violent psychopaths who doesn’t care about rules and regulations, only his own ambition and greed. I wish that we had more lawmakers who were as intelligent, principled and courageous as Senator Elizabeth Warren. I couldn’t take Jamie Dimon’s words seriously when he tried to insult Senator Warren, she is a Harvard Bankruptcy Professor, she set up the CFPB, her creation which is helping a lot of people, she is a double threat because she can decipher and translate finance speak so that the people understand, she has lifted the veil and Jamie Dimon hates it. …
“Let the buyer beware!” is thought by too many businessmen to be the rule of law. On the continent of Europe, they do lean toward that concept, be we, Americans, have a different system of laws in which there are duties. When selling real estates, there is a duty to disclose any material fact that might effect the value of the property.
And it comes with its own stalker!
Generally this is pretty mundane stuff. From the furnace is going out to a neighbor putting in a hog farm, a seller has to do disclosure. But this case is a little off the beaten track. We’re not dealing with a busted furnace. No. This home comes with its own stalker.
I won’t get into the lurid details or speculate about the likely movie deal. (I have a link below where you can read about it.) This is simple business ethics. First, it’s wrong under the common law not to disclose this kind of material fact. Second, it is absolutely wrong on ethical and moral grounds to deceive by non-disclosure.
That you have a problem and a terrible one cannot be solved by simply selling the property, not morally or, in the case of real estate, not legally either.
If the seller has a good lawyer, he’ll settle this thing by paying out some money. If he has a bad one or wants to cling to the idea that the buyer should have been more cautious, he is going to court and have to take back title after paying compensatory damages and almost certainly a very large punitive damage cost.
That’s justice.
James Pilant
Buyers of $1.4m US house sue seller over stalker obsessed with their new home | US news | The Guardian
A couple who says they were scared away from their new US$1.4 million home in New Jersey because of creepy letters from a stalker has sued the sellers for not telling them about a person with a “mentally disturbed fixation” on the house.
Derek and Maria Broaddus said the former owners of the home in Westfield, New Jersey, west of New York city, should have warned them of the person who signs the letters as “The Watcher”.
( An introductory note – I reread this the next day after I wrote it and I’m sure to many it comes as shrill and angry. Some years ago, I asked a fellow academic to add a link to my web site, he said he wouldn’t because he had read articles from my web site and they were were shrill. He suggested I moderate my views and seek comments to balance my writing. I never asked anyone to link again.
I wanted to ask him what his blogging had accomplished, who his moderate, restrained and academic language had influenced to do what was right and avoid what was wrong but I was sure he would find that shrill.
If you read the article below, you will get some of my anger, perhaps more than you consider appropriate. I am writing about the legal responsibility of personal financial advisers to tell the whole truth to their clients, – in most cases, retirees who have spent their lives accumulating resources so their final years might have some degree of comfort. Instead of a fiduciary duty which, for instance, attorneys, have to their clients, these “advisers” have a lower level of responsibility which they use to influence their clients to take actions in favor of the adviser and against their clients best interest.
In my simple naive world, devoid of the “buyer beware” of Friedman style economics, I find adhering to a lower standard of duty to misuse your customers dishonorable, a failure in the duty of a lady or a gentleman, a failure of the legal duty of fair dealing, a failure to adhere to the standards of religion be that faith: Christianity, Islam, etc., and a disregard of the tenets of virtually every Western philosophy up to Ayn Rand and our contemporary worship of greed.
I guess that’s shrill.)
Before I begin talking about the personal financial advising industry, I want you to know that if you write for a while, you begin to develop an admiration for the clever writer. When you are just a reader, it is easy to overlook a clever title or an eloquent lead in, but when you write – it’s different. And here is a lead in that flies right up to the angels:
(The selection above is from Helaine Olen writing for the online magazine Slate.)
The feds want to change the standards for advising customers in the personal financial advising industry. Olen explains it in more detail but the story is pretty straightforward. Most in the personal finance industry do not have to adhere to the fiduciary standard, that is, to act as your agent by fully informing you of your choices. They live by the suitability standard, a less stringent standard, which means they can advise you to do things that bring them extra profit while concealing from you information that might lead you to make a different decision.
Financial Truth Telling
The critical issue here is rollovers. Your adviser desperately wants you to take you money and move it into something else (like an IRA) where he can collect fees and be rewarded by his friends in the financial industry. One of the things, the adviser isn’t telling you is how much he makes from advising you to make these kinds of decisions.
So, here is the fight in Congress in a nutshell. The personal financial advising industry says if they have to tell the truth this could cost many millions of dollars and some could go out of business. They want Congress to protect them from the crazies in the Labor Department and the Obama Administration who have this bizarre fetish for the “truth.” After all, “What is truth said jesting Pilate and did not stay for an answer.” On the other side of the issue are the great American people who are not aware that this particular industry’s profit model involves giving the kind of advice one would give to one’s enemies to them.
Financial Truth Saying
So, some in Congress are lining up with the financial industry to preserve the right of non-disclosure to the clients. Think of it like cigarettes. It must have pretty unfair in the minds of tobacco companies to have to tell people their product was dangerous. They must have been furious. And it is just the same in the personal finance. Can you feel the rage? -“Why should I have to tell some old couple that I’m advising them to make me money and them more financially insecure. I mean, hell, they’re adults right. We don’t need the government sticking its nose into our business and acting like truth telling is important. What are these people? Twelve? This isn’t grade school. We’re adults now. If I can convince them to give me money, I should get the money. The government should mind its own business.”
And there are those in Congress who feel the truth in those words and wonder why it is when things are going so well for the industry that the government has to come in and mess it up.
I teach business ethics and I am going to come down on the side of truth telling. It is my belief that if you can’t sell something without some serious non-disclosure, you should not be selling it. Of course, the industry has well financed ties to some members of Congress while the great mass of the American people have little or no contact with members of Congress. Thus I am not optimistic.
AT&T advertised unlimited data plans that weren’t. That sentence tells you everything you need to know in terms of business ethics. Telling someone you are going to provide a service and then not is wrong.
And it is not wrong in just one way. It’s fraudulent misrepresentation. AT&T lied to get customers to pay for a service that wasn’t going to be provided. That’s fraud. It’s a basic violation of contract law.
Usually this would be cured by a lawsuit but since the Supreme Court has made class actions suits very difficult to bring, that leaves as the only sheriff in town the FCC. The word is they are going to fine AT&T a hundred million dollars.
I don’t think that’s right. My first problem is that as far as I can tell no one knows how much money they gained by the illegal act. Punishment should as much as possible be proportionate to the crime. (Take the Charleston church shooting – in that case there is simply no proportionate punishment possible. But this is a business crime.) This is about money and money is quantifiable. Perhaps a multiple – five times or ten times what was taken?
And what’s more I am curious. Who in AT&T thought this was a good idea? I think when a business does something wrong, those making the wrong decisions should have their name in the official documents and thus in the newspapers, the television, the Internet, etc. Public shaming is a useful tool. More importantly, when a corporate executive is climbing the ladder, an internet search showing a few little bumps in the road might slow that process to a crawl – it’s called justice. And it might actually discourage people in these brackets from breaking the law. As long as the only calculation is whether or not you make money and can afford the fine, breaking the law is just another corporate strategy to be used whenever applicable. But putting people in a bad light because they do illegal things, that’s not part of the game and they’re not going to think it’s fair because after all, “It’s just money!” No, it’s not. Lawbreaking violates morality and there should be punishment for this, public punishment.
It is time to change the rules. Because it is obvious that corporate criminality is never going to be stopped by fines. There has to be more.
James Pilant
A&T Loses Big In First Net Neutrality Case | ThinkProgress
The Federal Communications Commission is expected to fine AT&T $100 million for misleading customers with unlimited data plans.
An FCC investigation found that AT&T violated the transparency requirement under the 2010 net neutrality rules by offering “unlimited” data plans and surreptitiously throttling, or slowing, customers’ mobile internet access without telling them. The case does not involve the FCC’s newly published net neutrality rules passed earlier this year.
“Consumers deserve to get what they pay for,” FCC Chairman Tom Wheeler said in a Wednesday news release. “Broadband providers must be upfront and transparent about the services they provide. The FCC will not stand idly by while consumers are deceived by misleading marketing materials and insufficient disclosure.”
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