Corporate Ethics- An Oxymoron?
Two front page articles in the New York Times earlier this week reminded me of just how pervasive the lack of ethics has become in the corporate world, where making money is the only thing that counts. Perhaps the same level of corruption has always been there but is reaching public awareness more frequently now.
One of the articles was about the way Walmart’s business in Mexico had been able to expand rapidly by bribing officials to expedite the necessary permits. When an internal investigation by Walmart uncovered this corrupt behavior in 2005, it was suppressed by corporate executives and those involved were allowed to go unpunished. In fact, the major figure responsible was subsequently promoted to vice-Chairman of the company.
Another report examined the actions of insurance companies in changing to a new payment method for out-of-network care. This change increased patients’ costs while it saved the insurance companies money. However, this new method contravened a previous settlement the companies had made with New York State over manipulation of data that was supposed to improve payments to providers and protect policyholders from additional costs.
Also this week, 60 Minutes on CBS examined the fraud and deception by Lehman Brothers officers prior to its bankruptcy in 2008. To date, none of the executives of Lehman Brothers, including the Chairman Richard Fuld, have been charged with criminal activity by the government. They have been able to walk away with tens to hundreds of millions of dollars obtained at the expense of shareholders.
Similarly, none of the executives of any of the other financial firms that precipitated the recession, and necessitated the bailout by American taxpayers, have ever been brought before the criminal bar of justice. Angelo Mozillo, Kerry Killinger, Stanley O’Neal, Charles Prince are but a few of the names that live in infamy. Reports have confirmed that these executives and others provided false information about their companies to stockholders, investors and regulators or condoned activity by employees to make it seem as if their firms were healthy when they were actually in dire straits. They also vetted investment vehicles, like CDOs, they knew were of poor quality to unsuspecting buyers. There were real estate loans as well, approved for applicants by mortgage brokers even though it was known the applicants could not afford them. Unsurprisingly, these loans subsequently went bust and contributed to the economic meltdown. But the more loans handed out, the greater the bonuses received by the mortgage brokers and banking executives.
There are also instances of short cuts taken by corporate executives to save money that increased risks and flouted safety regulations, resulting in deaths or environmental damage. BP fits into this category with its Alaska pipeline spill and Deepwater Horizon blowout in the Gulf. The mine explosion in West Virginia in the Upper Big Branch mine owned by Massey Energy that killed twenty-nine miners is another example.
At random, other instances of corporate malfeasance that come to mind include the Enron debacle, the TYCO scandal and the Savings and Loan scandal. But in addition to these illustrations of corruption that are well known to the public, there are almost daily instances of illegal and unethical behavior by corporations and their executives to enhance corporate bottom lines along with executive salaries and bonuses.
Capitalism provides people with the opportunities to make money. Human nature drives some of them to illegal or unethical behavior to increase their remuneration. It is up to the government to provide a strong regulatory structure and prosecution of lawbreakers to minimize corrupt behavior. This also helps the economy by maintaining a level playing field so that honest businessmen and women have a fighting chance in the marketplace.
A VietNam vet and a Columbia history major who became a medical doctor, Bob Levine has watched the evolution of American politics over the past 40 years with increasing alarm. He knows he’s not alone. Partisan grid-lock, massive cash contributions and even more massive expenditures on lobbyists have undermined real democracy, and there is more than just a whiff of corruption emanating from Washington. If the nation is to overcome lockstep partisanship, restore growth to the economy and bring its debt under control, Levine argues that it will require a strong centrist third party to bring about the necessary reforms. Levine’s previous book, Shock Therapy For the American Health Care System took a realist approach to health care from a physician’s informed point of view; Resurrecting Democracy takes a similar pragmatic approach, putting aside ideology and taking a hard look at facts on the ground. In his latest book, Levine shines a light that cuts through the miasma of party propaganda and reactionary thinking, and reveals a new path for American politics. This post is cross posted from his blog.