By William Fisher
The misconduct of the financial industry no longer surprises most Americans. Only about one in five has much trust in banks, according to Gallup polls, about half the level in 2007. And it’s not just banks that are frowned upon. Trust in big business overall is declining. Sixty-two percent of Americans believe corruption is widespread across corporate America. According to Transparency International, an anticorruption watchdog, nearly three in four Americans believe that corruption has increased over the last three years. (New York Times, July 12, 2012)
A good friend of mine is trying to teach corporate social responsibility on the heels of Libor and so many, many other shameful deceptions – or worse . That must be like flying into the eye of the hurricane on a mosquito. The perfect storm caused not only by banking and financial interests, but also by manufacturers, service companies, just about everyone whose mission is the turn a profit.
What in the world could you be teaching them? Maybe your focus is on what they could do to become socially responsible that they clearly are not doing now?
In all honesty, I would be hard put to name a single company I felt was and had been acting in a socially responsible manner. In fact, I’d do much better with the inverse proposition. No shortage of villains out there!
Back in the 70s and 80s I used to lecture and write a lot about CSR. Back in the those days, we were able to point to at least a few companies that we thought were acting responsibly – Cummins Engine, Caterpillar, General Electric, and a few others.
Huge companies couldn’t slow down to catch their breath and implement real programs; it was liberal lipservice. Smaller companies just struggled to stay afloat. And most of them didn’t.
I daresay we are now experiencing a repeat of that situation – with the added disadvantage that the people know. Thanks to the web, 24-hour news cycles, etc. companies acting irresponsibility have no place to hide.
The usual sponsorships of social services, educational, athletic, and artistic programs looked to be tinier than usual in relation to what needed to be done. Most of these are good programs, well thought-out. But they are implemented largely in isolation, with little coordination among donors and sponsors.
And as one after another after another of those donors is exposed as corner-cutting, smarmy-talking prevaricators caught with both hands in the cookie jar, so the American public loses what little faith it may once have had in the indestructible pillars of American capitalism.
What to do? Nothing? Not acceptable!
So I found myself thinking the most simplistic, eighth-grade solution. And knowing that my economist friends would be all over me in a nano-second.
So, being a rabid risk-taker, I posited the following:
Ten of millions of people are out of work.
Big multinational companies and financial institutions are stuffed with cash they borrowed at zero interest from the Fed.
They are not lending that money; they are sitting on it until demand rises for their products and services.
The longer they sit on it, the more the banks love them.
But suppose President Obama did something really off the wall?
Suppose he sat down with the shareholders of the Fortune 500 and tried to persuade them each, for a period of time, to take a 50% haircut on the profits they’re now making on the stocks and bonds of these dinosaurs. Corporations and banks would put their cash to work by hiring unemployed people – starting with those fired or furloughed when the economy tanked. The government would subsidize any losses these investors would incur.
And here comes the big IF. The government would need to be trusted as the rescuer of last resort.
If, by some miracle of alchemy, charisma, and pragmatism, the FatCats agreed, a lot of folks would have jobs again – not makework, not entry-level no-income internships, but real jobs to put real meals on the table and be able to afford to pay real mortgages, and jobs that opened up the possibility of the industrial and financial innovation that seems to have gotten lost in the past decade.
Now, dear readers, tell me the many reasons this won’t work!
First to weigh in was Chip Pitts, who happens to be the friend who’s lecturing on CSR at Oxford this summer. Here’s his take:
“I think that something like this could be part of the solution, a la the New Deal, but you’re right that the economists would object, and likely on grounds that those jobs are (“the market has spoken”) no longer needed, by definition, since they’re not there and (from the companies’ standpoint and the economy’s standpoint the economy is still working pretty well for the elites). Thus, there is a legitimate concern that this could result in ‘makework’.”
He continued: “Some of that would be OK, but it would be better if we found work for people in new jobs that could stand on their own in this increasingly competitive global environment. It would thus seem to me to be more a priority to think about how to rejigger and restart the economy using methods calculated to create new technologies and jobs that are definitely needed for the sectors likely to be most in demand in the future which also have social and environmental purpose.”
He added, “CSR and rights-based businesses can spur some of that by creating new products, services, and business models, like GE’s Ecomagination and Healthmagination, Unilever’s Shakti program, Grameen Danone’s joint venture, etc. But we also need lots of other old and new ideas, including continuing education, job training, starting entirely new social enterprises and small business – all which might be better, more sustainable and resilient investments and approaches.”
I’m sorry to be such a sourpuss, but I can’t resist pointing out that all these proposed initiatives are spoken in the future tense. Maybe they’re going to happen someday, but they haven’t happened yet. Yet now is when they are most needed. What have we been doing since 2008 and well before?
Well, it took a bone fide economist to shake me from my torpor. He came in the person of Dr. Jack N. Behrman, Associate Dean Emeritus at the University of North Carolina Business School. In his usual characteristic plain-speaking language, this non-academic academic delivered this IED:
“Now, who is going to do what about it -- what with the big financiers corrupting Congress and the Supreme Court? They are interested in only one thing -- jimmying the election and then the U.S. economy so they control it for their own selfish reasons. No sense of ‘noblesse oblige’--nor social responsibility, and B-school faculty have come to their senses too late, having mushed the brains of their students with ‘profit-maximization’ goals.”
A somewhat more hopeful note was struck by another old friend reader, Ludwig Rudel, who ran a successful property business after serving as one of the first American development specialists ever deployed to South Asia.
“Who possibly can be against enhancing corporate social responsibility? It is asking others to behave better! No cost to me! Next you will try to reform or eliminate prostitution. Good Luck.”
“Me ... I prefer incentives. It is generally thought that the unemployment problem will not go away until the housing sector is stabilized. I have been waiting four years for our President to do something ‘off the wall to solve that.”
“How about this? FNMA will buy any and all of a bank's mortgages, either performing or non-performing, for homes still occupied by mortgagees for 80% of the outstanding principal, excluding penalties and fees, (no appraisal required) if the bank can prove they actually own the mortgage. FNMA can then offer to rewrite the house owner's mortgage paper at that (80%) value, for the first 5 years at an APR of 2%, the second 5 years at 4% and the last 20 years at 6% (since FNMA can obtain short term funds at virtually 0%). Then, for those mortgagees that such terms still can't be made to work, FNMA will handle foreclosure at its own cost.
“Such mortgages would be very affordable and attractive to owners. The banks would get out from under. It costs them more than 20% to foreclose. The cost to the taxpayer would be minimal.”
“Maybe it would be possible to persuade the banks that they will get brownie points on their social responsibility ledger for doing this.”
OK, but at this rate accumulating enough Brownie points is going to take a while. Maybe we should try Girl Scout Cookies?
Then comes the coup de grace. Artist Tony Benn, my favorite Marxist didact, blind-sides me with this:
“Without wanting to sound totally defeatist but most likely post-Marxist. Capital has and will always be amoral. Teaching it morality will always be sinking water into the desert of morality. The point of the State whichever one we can elect coherently and cohesively is to ameliorate the worst excesses of Capital. Until we all wake up to that awful but sobering realization then expecting a CEO to change the mindset of two centuries that started with the French revolution we are just dealing with the chimera and the spectacular nature of Capital.”
He adds: “And yes, this is the post-Marxist bit, until the contradictions of Capital are revealed or better still betrayed to itself not much is likely to happen. When the generals stop obeying orders of the ruling classes then the image cracks. Vis, the revolutions such as they are in the North Africa crescent. The Syrian general class jumping ship...pip pip!
If the ancient Greek philosopher Diogenes were to go out with his lantern in search of an honest many today, a survey of Wall Street executives on workplace conduct suggests he might have to look elsewhere.
A quarter of Wall Street executives see wrongdoing as a key to success, according to a survey by whistleblower law firm Labaton Sucharow released on Tuesday.
In a survey of 500 senior executives in the United States and the UK, 26 percent of respondents said they had observed or had firsthand knowledge of wrongdoing in the workplace, while 24 percent said they believed financial services professionals may need to engage in unethical or illegal conduct to be successful.
Sixteen percent of respondents said they would commit insider trading if they could get away with it, according to Labaton Sucharow. And 30 percent said their compensation plans created pressure to compromise ethical standards or violate the law.