An editorial appeared recently in USA Today concerning corporate conduct and it was most interesting. In my opinion, the writer was squarely on target concerning wrongdoing in Corporate America. What was written does not paint a pretty picture for the companies and their decision-makers in a number of industries. I have always thought that a few of the corporate bosses needed a crash-course in “honesty” and “integrity.” Let’s see what the editorial had to say on the subject.
How to make corporate sinners get religion
July 8, 2014
Business is not feeling a lot of love these days. Wall Street greed, bank bailouts and anger driven by wealth concentration are driving populist anger from both the left and right. Three of the business lobby’s top policy goals – overhauling immigration, funding highways and renewing the Export-Import Bank – are stalled on Capitol Hill.
Corporate leaders are right to bemoan the nation’s dysfunctional politics. But they also need to look in the mirror. Much of their poor standing is the result of their own misbehavior.
To review the past decade is to see a remarkable string of fraud, self-dealing, market manipulation, negligent manufacturing, money laundering, price fixing, price gouging and tax evasion – much, but not all, of it focused on the financial sector.
Topping the list, of course, are the wildly irresponsible subprime and “no-docs” loans – and the many lies that went into selling them in bulk to investors – that nearly brought down the U.S. economy in 2008.
But headlines of the past two months show even that near-death experience, and subsequent reforms, haven’t exactly halted the cavalcade of corporate wrongdoing.
In May, banking giant Credit Suisse agreed to pay $2.6 billion in penalties for helping wealthy American clients evade U.S. taxes.
In June, BNP Paribas agreed to pay nearly $9 billion and plead guilty to criminal charges for violating U.S. financial sanctions by processing billions of dollars in financial transactions for rogue nations such as Iran and Sudan.
Beyond the banks, General Motors admitted dragging its feet for a decade in recalling vehicles with a potentially deadly ignition switch problem, and T-Mobile was accused of overbilling its customers to the tune of hundreds of millions of dollars.
Most of these cases, including the one against BNP Paribas, have been settled without criminal charges against individual corporate officials, inevitably inviting both further abuse and public speculation that the corporations control the government rather than the other way around.
The Justice Department has reinforced that impression by repeatedly promising to hold individuals accountable, then largely failing to do so.
“I think people need to just be a little patient,” Attorney General Eric Holder said earlier this year. But six years after the financial collapse, they’ve been more than patient. As Lanny Breuer, the former head of the Justice Department’s criminal division, once put it, “The strongest deterrent against corporate crime is the prospect of prison time for individual employees.” That deterrent is sorely missing. As for the aggrieved business community, it needs a hard look at its ethics. Actions don’t have to be criminal to be wrong – a principle that seems to have been lost not just on Wall Street but also at GM and a host of other companies that have been caught abusing their customers. If business groups want to repair some of their reputational loss, they need to look first to themselves.
While all corporate officers aren’t involved in activities like those mentioned above, there are a good number who clearly have been. I am convinced that weak regulatory agencies that are under-funded and under-staffed are a large part of the problem. We have seen less than adequate regulation of corporate America and that has allowed the companies to do things without any real fear of being caught. And, if they are caught, a fine is paid, and nothing really changes. It’s time for shareholders in Corporate America to start getting involved in brining about change in the board room of their companies.
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