Tuesday March 31 | The Ethics of Business

March 30, 2009 at 11:28 am | Posted in Coming Up | 11 Comments

We’ll discuss some of the questionable business practices that led to the current economic crisis. Many critics, including the President and much of the public, have also cried foul at the notion of bonuses for executives at corporations receiving government bailout funds. We’ll also look at lending practices in the mortgage industry and how they may have promoted cheating among mortgage professionals.
Dr. Edward Kane – Professor of Finance, Boston College
Dr. Robert Kolb – Prof. of Finance & Chair of Applied Ethics, Loyola University Chicago

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  1. I may be in Hickory tomorrow organizing a citizens’ bailout march and rally for this region. (see “thewayforward.org” or William Greider piece at Bill Moyers Journal) People fearful of Charlotte downtown or police reaction are welcome to join in. (April 11, tentative)

    Mortgages, and even consumer credit, are not at the core of this meltdown. Deregulation, lax enforcement, and corrupt corporate business practice are to blame. High interest, bad mortgage contracts, off-shoring of profits and fire-walling of losses would not have been easy without these failures. Former NYTimes columnist Chris Hedges sums up our “moral failure” very well at Truth Digg, where he writes regularly.

    I write this Monday night. If professors Kane and Kolb dwell on mortgages and consumerism Tuesday morning, and Mike Collins allows such obscurantism, this show will be no more than a propaganda piece blaming American taxpayers for their own soaking. To whom much is given; much is required. People of influence and power delayed reform, concealed the truth and manipulated economic conditions for the gain of themselves and their socioeconomic peers. There is no way to conceal that basic truth. Credit default swaps and derivatives are the reason our bailout funds have been disappearing down a black hole of debt. If there were transparency we could put a greater priority on economic functioning and human need. The hidden casino wagering among large speculators has not yet been terminated. Reinflating another speculative bubble with a fatal leak will not help us in the long run. The Obama adminidstration continues to present financial workings as a magician’s trick: too many veils, switches, trap doors and mirrors.

  2. Sorry, the correct email address for the Saturday April 11th protest information is anewwayforward.org. Please register and come to Hickory if you can.

  3. I didn’t hear the entire show this morning but I did hear one guest state his opinion that most businesses are ethical. I agree. It’s refreshing to hear that point of view. The fostered resentment fomented by the left on big corporations (and the wealthy) benefits no one. NPR, Greenpeace, wind farms and TOFU manufactures are big businesses. People hate big oil and big pharmaceutical companies but where would we be without them?

    On the banking fiasco Mike asked if banks lent money to people they knew couldn’t pay it back. I inferred that he was blaming the banks for people not knowing their own budgets. Personal responsibility has to play a role, doesn’t it? I will not buy a new Jaguar because I can’t afford it. If a bank will lend me the money then I still won’t buy because I still can’t afford. It seems like common sense to me.

    The guest talked about incentives for the banks to loan money. I would have liked to heard about the punishments for banks that didn’t lend money based on “affirmative action policies” (Andrew Cuomo’s words) and the 13 times the Republicans tried to reign it in. The Committees were run by Barney Frank and Chris Dodd, I think it’s also relevant that Obama received so much money from Freddie and Fannie. Only Dodd got more.

  4. Wow! What a terrific program. Heard things we aren’t hearing in the general media.

  5. It seems big business wants everyone to be held accountable except big business! Let me tell you a story. About a year ago, Discover suddenly doubled, then nearly tripled, my interest rate because they said I was a “delinquent” customer. I cut them loose immediately. To this day, I get at least two invitations to open an account with Discover because of my high credit score. If I’m delinquent, then why do they want my business? With my sky high credit score, why did they call me delinquent? A fine upstanding business would never lure someone into a business obligation knowing that someone could meet that obligation…or would it? Ethical behavior varies inversely with the size of the business.

    Here’s another example. GM has for years turned out low quality cars, with low fuel efficiencies. They have openly refused attempts to raise fuel efficiencies because it would cut into profits. Now you and I are paying out the nose to keep them from going bankrupt and they really expect to keep doing things as usual? Ethical? You’re kidding, right?

    And do you really want me to bring up the AIG bonuses? Contractually obligated to pay the bonuses? Hysterical! I work for the state of NC and my salary is spelled out in my annual contract, but guess what? My salary was cut 10% last month with no regard for what’s in my contract. Do you expect me, and other Americans, to believe that AIG has never broken a contract? Just how gullible do you think we are?

    There are just too many other examples to list here. I’m all for business and making a profit, but do it fairly and without taking advantage of people. Oh, and spare me the faux cries of “socialism” too. If you want to see socialism, look at what Chavez is doing to Venezuela. Finally, I’m still guffawing at calling NPR a “big business.” Surely you know that NPR is a not-for-profit organization, hardly in the same league as a bank or GM or AIG. Sheesh.

  6. Joe,

    I assume you are addressing me because of the end of your post. I’ve had similar experiences with credit cards. In my opinion you are describing bad business not unethical behavior. Not only was the solution simple, it was totally within your power to fix. You cut up the card. Problem solved.

    I disagree with your statement: “GM has for years turned out low quality cars, with low fuel efficiencies. They have openly refused attempts to raise fuel efficiencies because it would cut into profits.” You seem to be equating “low fuel efficiency” with “low quality”. The last time the government raised CAFE standards they exempted trucks. The auto companies put 5 seats on a truck chassis and the SUV was born. People love SUV’s. BTW any smart business would not do anything to purposely “cut into profits”. Why should they? I share your outrage at the bailout. With Obama as GM’s defacto CEO they will be forced to make cars that no one wants to buy. If people wanted tiny electric cars the they would be produced. Let the market decide. Look for Ford, who didn’t take the bailout, to prosper because they aren’t as restricted.
    On the AIG bonuses, this is what happens when the government goes down the bailout road. What did people expect?
    I didn’t say that NPR was comparable to GM. I just pointed out that NPR is a big business. Do you deny that? My point is that criticizing corporations is too easy. It’s like criticizing lobbyist. I’m sure NPR has them too.
    Maybe “socialism” isn’t the right word. The President of the United States of America has fired the CEO of a private company and is telling them what product they can and can’t make. He’s guaranteeing warranties! He campaigned on giving tax cuts to 95% of Americans. 40% don’t pay taxes. How is that possible? It’s redistribution of wealth, plain and simple. If you don’t like “socialism” what word would you use?

  7. If I’m a socialist Gregg you’re a macoute (Haitian creole-not a musical term). Your atomic analysis does not work because there are thresholds of qualitative change within quantitative change. Neither have you accounted for the advantages of concentrated economic power. It is difficult not to use a credit card to buy groceries when your children are hungry. Derivatives and credit default swaps (A $200 trillion black hole) are being honored now at the peril of our nation: And that is why normal loans are not forthcoming.

    In the 1990s I had a successful business where I hired only adults who were citizens.(At first we had group health coverage before it went up.) I called them employees and paid their federal and state deductions. My competitors hired illegal aliens at much lower wages and called them “contractors.” They called their citizen employees contractors too and left them to pay taxes on sub-standard wages. If American business is so ethical then why did I have to close down. Runaway capitalism produced a race to the bottom after Fuhrer Ronnie, and we are almost there. An alcoholic will see the floor coming up at him and go to a meeting, but not a capitalist oligarch.

  8. Huh?

  9. Sorry Jack, I couldn’t help myself. It’s hard to take you seriously.
    You’re all over the map. Of course there are “advantages of concentrated economic power” that does not mean automatic corruption. This concentrated economic power is also capable of much good. Bill Gates for example has affected positively the lives of millions. Nice try on the “hungry children” tear-jerker. Don’t have kids if you can’t afford to feed them. There’s plenty of help WIC, food stamps, churches, family, communities, charities etc. What’s your point on that anyway? If you need a credit card, get one. Make sure to read the fine print, I do. I’m with you on the “black hole”. It sounds to me like your business was a victim of lax immigration laws, corrupt government and the failure of law enforcement. I never called anyone a Socialist but I bet I can make the case that Obama is one better than you can make the case that I’m a Haitian whatever. Capitalism works because it’s makes much better business sense to be ethical. It’s a no-brainer. If one’s sole motivation is money then that works better than altruism. My grocer doesn’t care a bit if I go hungry. He wants my money. It works for me. There, think I’ve addressed all of your points. How about looking for the question marks in my last post and answering them.

  10. Is “huh?” a tone or a chord, and in what key or scale. I think this could develop into a movement if not a symphony. So you believe in regulation to save businesses like my contracting shop in Montgomery County, Maryland? The pitiful part is that the government officials we served preferred the lower price and poorer work of the corner cutting competition who obeyed neither codes nor labor regulations. People assume naughty lawbreaking has its rewards. I had two jobs then, thank goodness. My crew of “drug addicts and deadbeats” (what the private sector advocates termed my union siblings) at the City of Baltimore turned out much better work than the exploited refugees remodeling in Takoma Park and Kensington, and about as quickly. To tell a coherent story sometimes, the teller must travel all over the map. It’s the nature of anecdotal evidence.

  11. So we agree, “your business was a victim of lax immigration laws, corrupt government and the failure of law enforcement”.

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