Strategic CSR - Compliance Officers

The article in the url below is interesting in the consequences it potentially has for a firm's Compliance Officer (CO):

 

"A U.S. District Court in Minnesota ruled that compliance officers and other individuals can be held responsible for anti-money laundering control failures under the Banking Secrecy Act, dealing a setback to a former chief compliance officer [MoneyGram Chief Compliance Officer Thomas Haider] who was hit with a $1 million fine by the Financial Crimes Enforcement Network [FinCEN]."

 

In other words, as a result of this ruling, not only is it the CO's responsibility to put in place the rules and culture to try and prevent corruption from occurring (either within the firm or in relation to the firm's dealings with external stakeholders), but the individual him/herself is potentially liable for any failure to do so:

 

"In the case against Mr. Haider, … defense lawyers challenged the ability of FinCEN to levy an individual penalty under the provisions it cited in the Banking Secrecy Act. … In his denial of a motion to dismiss, U.S. District Court Judge David Doty ruled that the provision of the act that requires institutions establish money laundering programs is governed by the act's broader civil penalty provision, which allows penalties against a 'partner, director, officer, or employee.' 'The plain language of the statute provides that a civil penalty may be imposed on corporate officers and employees like Haider, who was responsible for designing and overseeing MoneyGram's AML program,' Mr. Doty wrote."

 

This ruling is in-line with a September 2015 announcement by the Department of Justice that, in future, it plans to begin holding individuals to account for white-collar corporate wrongdoings, rather than relying on deferred prosecution agreements (where a firm is fined without admitting fault). The DoJ's memo to prosecutors announcing this shift can be downloaded at: http://www.justice.gov/dag/file/769036/download

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

 

 

Court Rules Anti-Money Laundering Law Applies to Compliance Officers

By Stephen Dockery

January 13, 2016

The Wall Street Journal

http://blogs.wsj.com/riskandcompliance/2016/01/13/court-rules-anti-money-laundering-law-applies-to-compliance-officers/

 

Strategic CSR - Bribery

The article in the url below marks an important step forward in the campaign to minimize instances of bribery by corporations abroad:

 

"U.K. oil, gas, mining and logging companies will, as of Jan. 1, 2015, have to disclose … payments to foreign governments of more than 86,000 pounds (about $135,000) for taxes, royalties, permits, bonuses and the like, and they'll have to do it on both a country-by-country and project-by-project basis."

 

In other words, rather than merely punishing firms that get caught, this legislation requires the reporting of all payments (legitimate or otherwise) over the minimum amount by energy companies. This is useful because, in the past, firms have cloaked bribes in legitimate-sounding payments, such as consulting fees. Now, all payments will have to be reported, allowing regulators the opportunity to identify suspicious patterns:

 

"The U.K. is the first European Union country to implement an EU directive passed in June 2013 requiring member states to pass laws requiring the disclosures. The first company payment reports will be published in the U.K. in 2016."

 

The hope is that this action in the UK will encourage the SEC to move forward with a similar proposal in the U.S. that has run into strong industry resistance and is currently stalled.

 

Have a good weekend.

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

 

 

U.K. Implements Extractive Transparency Rule

By Samuel Rubenfeld

December 1, 2014

The Wall Street Journal

http://blogs.wsj.com/riskandcompliance/2014/12/01/u-k-implements-extractive-transparency-rule-as-sec-delays-standard-further/

 

Strategic CSR - Hippocratic Oath

Building on the idea of an oath for graduating MBA students (http://mbaoath.org/) and a general oath for executives (see: Strategic CSR – Executive oath), the article in the url below proposes a Hippocratic oath for the financial sector. The stated need for such an oath is that:

 

"… despite five years of reform the public retains its distrust for bankers and the services provided fail to meet the diverse financial needs of society."

 

The reason, it is argued, is that the focus of reform was misplaced—falling more heavily on the symptoms of the problem, rather than the cause:

 

"A focus on financial stability alone fails to address the root cause of the crisis, which we believe lies in the inherent lack of virtue among our banking institutions and subsequent ethos. This led to a self-serving culture that influenced the behaviour of bankers."

 

It therefore follows, the authors argue, that a more effective response targets the underlying culture of the finance/investor industry. Rather than trying to impose a "rigid moral regime" to all, however, the authors instead apply what they refer to as the "theory of virtue":

 

"Applying this theory to banking reform means that our banks should, to the best of their abilities, attempt to meet people's diverse financial needs, and should not simply focus on self-enrichment or basic transactional services."

 

In essence, an ethical responsibility that is larger than the individual – a professional responsibility. More specifically:

 

"One way this can be achieved is by requiring all members of the banking profession to affirm a Hippocratic-style oath, where employees publicly voice their commitment to behave in a manner that prioritises customers and recognises that the abuse of their position can have dramatic consequences for society."

 

It is argued that such an oath would reform the culture of the profession, as a whole, as a result of focusing more on the social value banking adds, rather than a personal route to financial success. It would also reposition the image of bankers in the eyes of the wider public:

 

"Lawyers, doctors and architects all hold a professional motive to not only do the best for their client but also adhere to the well established principles of that profession. In medicine, the Hippocratic oath provides a centre-piece for personal responsibility in the profession and their overarching principles. Banking is no different and in the post-crash era, should strive towards professionalism."

 

Take care
David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

 

 

Bankers should take a Hippocratic oath to restore virtue to the financial sector

By David Fagleman

July 28, 2014

The Guardian

http://www.theguardian.com/sustainable-business/banking-reform-bankers-hippocratic-oath-report

 

Strategic CSR - Financial Crisis

The accusation that the U.S. government has been reluctant to punish the instigators of the Financial Crisis is not as convincing as it once was. There is some evidence that they have been willing to attribute blame, as the article in the url below suggests. In particular, the article contains a graphic that lists the 10 largest settlements by banks with U.S. authorities. Notably, all ten settlements have been announced since February, 2012 and all but two of them are directly related to the Financial Crisis:

 

1. JPMorgan Chase:        $13 bn.

2. Bank of America:         $11.8 bn.

3. Bank of America:         $11.6 bn.

4. Bank of America:         $9.3 bn.

5. BNP Paribus:               $8.9 bn.

6. Wells Fargo:                $5.3 bn.

7. JPMorgan Chase:        $5.3 bn.

8. JPMorgan Chase:        $5.1 bn.

9. Bank of America:         $2.9 bn.

10. Credit Suisse:             $2.6 bn.

 

Now, whether the fines are big enough and whether individual executives should also have been punished, are separate questions that remain.

 

Have a good weekend.
David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


Capital Punishment

July 5, 2014

The Economist

58

http://www.economist.com/news/finance-and-economics/21606321-frances-largest-bank-gets-fined-evading-american-sanctions-capital-punishment

 

Strategic CSR - HFTs

The article in the url below from The Atlantic is a great riff on cheating that, in the process, puts high-frequency traders (HFTs) in their place (sorry, I meant in the correct context):

 

"It's Wall Street at its most socially useless. HFT funds aren't allocating capital to where they think it'll be most productive. HFT funds are allocating capital to where they think other people will put it 50 milliseconds from now. It's a tax on everybody else. And it's a tax that has basically no benefit. Sure, HFT funds defend themselves by saying they're increasing liquidity, but increasing liquidity is the last refuge of bullshitters. … Economist Paul Samuelson had it right all the way back in 1957: knowing (or trading) something one second before everyone else is personally profitable and socially pointless."

As everyone now knows, thanks to Michael Lewis' book, Flash Boys, the way HFTs make money is by front-running the market:

 

"The Wall Street Journal reports that HFT funds buy early access to data from third-party distributors—everything from corporate earnings to the Philadelphia Fed's manufacturing survey. They're getting the numbers just fractions of a second early, but that's more than enough in the world of high-frequency trading. … The private sector isn't paying for the creation of a public good when it buys a sneak peek at them. The private sector is just profiting off existing public goods. If a company sold hedge funds an early look at their earnings, it'd be insider trading. But when a third-party like Business Wire sells hedge funds an early, albeit split-second, look at corporate earnings, it's perfectly legal. It's nuts."

 

Of course, the important questions is: Who are the bigger idiots—the HFTs for doing what they are doing, or us for letting them get away with it?

 

Have a good weekend.
David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


High-Speed Trading Isn't About Efficiency—It's About Cheating

By Matthew O'Brien

February 8, 2014

The Atlantic

http://www.theatlantic.com/business/archive/2014/02/high-speed-trading-isnt-about-efficiency-its-about-cheating/283677/

Strategic CSR - BP

Here are some excerpts from a full-page ad that BP ran in The New York Times recently:

 

“Immediately following the Deepwater Horizon accident, BP committed to restore the environment and help people affected by the spill recover as soon as possible. We waived the statutory liability cap, mounted an unprecedented cleanup, and began paying claims within days.”

 

“Nearly four years later, we’ve spent more than $26 billion. $12 billion of that has gone to paying hundreds of thousands of claims. Over the last two years, most claims have been paid through a settlement agreement designed to compensate the remaining people and businesses with financial losses due to the spill. Unfortunately, that agreement has been implemented in a way that encourages people to exploit it.”

 

BP has been running a long campaign to try and correct the fraud it sees being committed (at its expense) in relation to the payoffs from the fund:

 

“Over the last several months, we’ve shared with you a few of the most outrageous cases of exploitation and other abuse. Exaggerated, even fictitious claims. Fraud within the Settlement Program. And the firing or resignation of senior Settlement Program officials due to misconduct.”

 

In this ad, they attempt to broaden the implications beyond their own resources and question how this miscarriage might affect the way that companies in the future react to PR crises:

 

“What choice will other companies make when faced with the next industrial accident, product defect, or data security breach?”

 

“Will they accept responsibility and do the right thing?”

 

“Or will the lesson be that it’s better to deny, delay, and litigate – with victims potentially waiting decades for compensation?”

 

Here is the title of the ad:

 

“We’ve tried to do the right thing. Will other companies be discouraged from doing the same?”

 

The ad can be viewed at: https://www.thestateofthegulf.com/media/65958/Bp-Ad-3-18-14.pdf

 

Have a good weekend

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

 

Strategic CSR - Crime pays

Some quotes from a fascinating article from The Economist in the url below about how criminal gangs seek out illicit trade for massive profits with little associated risk:

 

"Commodities such as rhino horn and caviar offer criminals two benefits rarely found together: high prices and low risk. Rhino horn can fetch up to $50,000 per kilogram, more than gold or the American street value of cocaine. Get caught bringing a kilogram of cocaine into America and you could face 40 years in prison and a $5m fine. On January 10th, by contrast, a New York court sentenced a rhino-horn trafficker to just 14 months."

 

"… though traditional trafficking in drugs, guns and people is still lucrative, gangs are increasingly moving into lower-risk, higher-reward areas—not just wildlife, but fraud and illegal waste-disposal. The [UN Office on Drugs and Crime] says the value of cross-border trade in counterfeit goods could be as much as $250 billion a year."

 

"Gangs in Britain make around £9 billion ($14.8 billion) a year from tax, benefit, excise-duty and other fraud—not much less than the £11 billion they earn from drugs. In America cigarette-trafficking deprives state, local and federal governments of $5 billion in tax revenues annually. The European Union estimates that losses within its borders from cigarette smuggling, tax fraud and false claims on its funds by organised groups total €34 billion ($46.5 billion) a year. But member states bring fewer than ten cases each a year for defrauding the EU, and sentences tend to be light."

 

What I found most interesting about the article, however, is what is driving the criminal activity—the twin forces of consumer demand and government regulation. In other words, the more governments try and regulate a product that is in demand, the more valuable the illicit trade of that item becomes:

 

"The appeal of such trade is increased, however unwittingly, by governments trying harder to protect what is precious and rare. 'When we finally get it together to agree that we'll only take ten tuna out of the water this year because that's all we can afford to take, that 11th tuna will be worth a lot of money,' says Theodore Leggett of the UN Office on Drugs and Crime (UNODC). As with tuna, so with ebony, ivory and rhino horn—all being regulated more tightly, and all still desirable."

 

And, where we are creating distorted incentives, the motivation to clear things up is also lacking:

 

"If a network of Nigerian scammers based in Amsterdam defrauds French, Australian and American credit-card holders, where does the crime occur? And who has the motivation, not to mention the jurisdiction, to prosecute?"

 

Although governments are increasingly trying to work together, essentially, policing efforts amount to little more than a tax on what is otherwise an incredibly lucrative business:

 

"One [U.S. Fish and Wildlife Service] inspector estimates that for all the peering, prodding and chirping, for all the rewards promised and rhino-horn traffickers caught, the agency picks up perhaps 5% of wildlife brought illicitly into America. For criminals, that is merely a light tax on the profits from the rest."

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

 

 

Earning with the fishes

January 18, 2014

The Economist

59-60

http://www.economist.com/news/international/21594349-globalised-gangs-profit-new-regulations-and-markets-governments-are-struggling

 

Strategic CSR - Free markets

For the few of us left who still have faith that we live in a free market, capitalist society, last Sunday’s 60 Minutes presented a story that should give serious pause for thought. It is an interview with Michael Lewis about his forthcoming book, Flash Boys. The title of the interview is ‘Is the U.S. stock market rigged?’ The compelling answer that Lewis lays out is: most definitely, yes. The reason is due to high frequency trading (HFT), which now accounts for half of all stock market activity:

 

http://www.cbsnews.com/news/is-the-us-stock-market-rigged/

 

To get a more balanced view of the positive impact that supporters say HFT has had on the market, see this article in Bloomberg Businessweek and this article in The Wall Street Journal. While both articles seek to undermine Lewis’ argument and emphasize the positive aspects of HFT, neither does a good job, I think, of refuting the central claims of the 60 Minutes piece—that high frequency traders are essentially front-running the market. In support of the idea that something is amiss, the article in the url below reports that the FBI is investigating:

 

“… whether high-speed trading firms are engaging in insider trading by taking advantage of fast-moving market information unavailable to other investors. … Among the activities being probed is whether high-speed firms are trading ahead of other investors based on information that other market participants can't see. Among the types of trading under scrutiny is the practice of placing a group of trades and then canceling them to create the false appearance of market activity. Such activity could be considered potential market manipulation by encouraging others to trade based on false orders. Another form of activity under scrutiny involves using high-speed trading to place orders to conceal that the transactions are based on an illegal tip.”

 

Have a good weekend

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

FBI Investigates High-Speed Trading
By Scott Patterson and Michael Rothfeld

March 31, 2014

The Wall Street Journal

http://online.wsj.com/news/articles/SB10001424052702304886904579473874181722310

 

Strategic CSR - Financial Crisis

Some quotes from a recent article in The New York Times by Gordon Brown, who was Prime Minster of the UK during the most recent Financial Crisis:

 

“Already, we have forgotten the basic lesson of the crash: Global problems need global solutions. And because we failed to learn from the last crisis, the world’s bankers are carrying us toward the next one.”

 

“… most of the problems that caused the 2008 crisis — excessive borrowing, shadow banking and reckless lending — have not gone away. Too-big-to-fail banks have not shrunk; they’ve grown bigger. Huge bonuses that encourage reckless risk-taking by bankers remain the norm. Meanwhile, shadow banking … has expanded in value to $71 trillion, from $59 trillion in 2008.”

 

“In the patterns of borrowing today, we can already detect parallels with the pre-crisis credit boom.”

 

“China’s total domestic credit has more than doubled to $23 trillion, from $9 trillion in 2008 — as big an increase as if it had added the entire United States commercial banking sector. … And China’s banking system may not be Asia’s most vulnerable.”

 

Ultimately, Brown’s criticism is not focused on different laws and regulations put in place by individual country legislatures, but with the failure to act on a global scale. Because big banks have become bigger (more multinational), the need for consistency across borders is paramount:

 

“The Volcker Rule, now approved by American regulators, illustrates the initial boldness and ultimate weakness of our post-2008 response. This element of the Dodd-Frank financial reform law of 2010 forbids deposit-taking banks in the United States from engaging in short-term, proprietary trading. But these practices are still allowed in Europe. Controls are even weaker in Latin America and Asia. International rules are needed for international banks.”

 

“In short, precisely what world leaders sought to avoid — a global financial free-for-all, enabled by ad hoc, unilateral actions — is what has happened. Political expediency, a failure to think and act globally, and a lack of courage to take on vested interests are pushing us inexorably toward the next crash.”

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


Heading Toward Another Crash

By Gordon Brown

December 20, 2013

The New York Times

Late Edition – Final

A27

http://www.nytimes.com/2013/12/19/opinion/gordon-brown-stumbling-toward-the-next-crash.html

 

Strategic CSR - Financial crisis

The article in the url below presents a pretty compelling argument in favor of CSR:

 

“The six biggest U.S. banks, led by JPMorgan Chase & Co. (JPM) and Bank of America Corp., have piled up $103 billion in legal costs since the financial crisis, more than all dividends paid to shareholders in the past five years. That’s the amount allotted to lawyers and litigation, as well as for settling claims about shoddy mortgages and foreclosures, according to data compiled by Bloomberg. The sum, equivalent to spending $51 million a day, is enough to erase everything the banks earned for 2012.”

 

Amazingly:

 

“JPMorgan and Bank of America bore about 75 percent of the total costs, according to the figures compiled from company reports. JPMorgan devoted $21.3 billion to legal fees and litigation since the start of 2008, more than any other lender, and added $8.1 billion to reserves for mortgage buybacks, filings show.”

 

Numbers like that represent either a lot of wrongdoing or overpaid lawyers (or both). Either way, it does not suggest well-run organizations that are structured around meeting the needs of their stakeholders, broadly defined. Don’t you just hate it when the statute of limitations will not come round fast enough?

 

“The legal process could be extended if the U.S. attorney general brings more cases and unearths information that can be used in new lawsuits. While some cases have a five-year statute of limitations, those involving bank frauds have a deadline that’s twice as long. The Financial Institutions Reform, Recovery and Enforcement Act, known as FIRREA, has a 10-year limit, and the U.S. used the law against JPMorgan and Bank of America.”

 

Have a good weekend.

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

 

 

U.S. Bank Legal Bills Exceed $100 Billion

By Donal Griffin & Dakin Campbell

August 28, 2013

Bloomberg

http://www.bloomberg.com/news/2013-08-28/u-s-bank-legal-bills-exceed-100-billion.html

 

Strategic CSR - Carrots and sticks

An ever-present challenge for those looking to hold firms to account for their actions is what mix of carrots and sticks to use. While providing incentives for firms (i.e., executives) to make the right decisions can be productive; how can we, as a society, wield sufficient sticks? How can we punish firms which, by definition, cannot go to jail? The article in the url below highlights the extent of this problem by focusing on the fines paid by firms that are found to have committed serious transgressions:

 

“The numbers seem eye-popping. So many billions here for supposed mortgage abuses, so many billions there for questionable foreclosures. But there’s more than meets the eye to the big legal settlements you’ve been reading about involving some of the nation’s biggest banks. Actually, there’s less than meets the eye. The dollar signs are big, but they aren’t as big as they look, at least for the banks. That’s because some or all of these payments will probably be tax-deductible. The banks can claim them as business expenses. Taxpayers, therefore, will likely lighten the banks’ loads.”

 

What does this look like in practice? Well, for example:

 

“After the Gulf of Mexico oil spill, for example, BP received a $10 billion tax windfall by writing off $37.2 billion in cleanup expenses.”

 

The law in the U.S. appears to be that, in general, settlements or penalties paid by firms to correct either civil or criminal transgressions are not tax deductible. That is, unless the payments are being made into funds that will ultimately aid others. Of course, that is a loophole that any half-decent corporate lawyer can wade through with their eyes closed. As a result, the issue of tax deductibility (of any settlement) is usually part of the negotiation between the firm and the government, with enforcement being left up to the IRS (which may or may not have been informed by the relevant government agency about what parts of the settlement are deductible). The outcome, in most cases, appears to be a fine that is largely tax-deductible. The only exception is the SEC:

 

“Since 2003, it has barred companies from deducting settlement costs as a business expense.”

 

In reality, however:

 

“… a 2005 report from the Government Accountability Office suggests that tax benefits in settlements are prevalent. Examining more than $1 billion in settlements made by 34 companies, the G.A.O. found that 20 had deducted some or all of the money from their tax bills.”

 

So, one possibility in terms of punishing firms is to fine them. But, as the article demonstrates, who is really being punished in such cases? The default to firms in financial settlements appears to be to treat it as a tax deductible expense. And, even when additional costs are levied, the firm is free to pass those costs onto customers in the form of higher prices. Surely, the only way to hold firms to account is to punish individuals. But, as the government demonstrates every time it tries, white-collar crime is notoriously difficult to prosecute.

 

So, where does that leave us? The whole discussion around HSBC and its money laundering activities earlier this year was that the firm was “too big to fail”—that, if the government had indicted the firm for a criminal act, it would have essentially put the firm out of business, which would seriously damage the economy, which is not in our collective best interests, etc., etc. As such, I am increasingly left with the sense that, in practice, societies are highly limited in being able to hold firms to account. In the worst cases, the organization dissolves and the individuals (the smartest ones among them, anyway) simply move onto the next job. What recourse do we have?

 

Everything I ever needed to know about bargaining/leverage was taught to me by my Chinese step mother in the street markets of Hong Kong. Unless you are willing to walk away, you will not come out on top. I can translate that action directly to CSR—what I am terming ‘corporate stakeholder responsibility.’ If self-interest is an insufficient motivation for firms to engage in strategic CSR, corporate stakeholder responsibility seems to me to be the only option that can form the basis for a sustainable economy. In short, stakeholder vigilance has to lead to the withdrawal of business/custom. That is the only message firms seem to understand, and history shows that they are very good at reacting to it. As stakeholders, we have to be willing to walk away, even at the risk of forgoing a product we demand, if we ever hope to change anti-social behavior into pro-social behavior.

 

Take care

David

 

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

 

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

 

 

Paying the Price, but Often Deducting It

By Gretchen Morgenson

January 12, 2013

The New York Times

Late Edition – Final

http://www.nytimes.com/2013/01/13/business/paying-the-price-in-settlements-but-often-deducting-it.html

 

Strategic CSR - Employees

Long term subscribers to this Newsletter will know that, on the whole, I do not put much stock in public opinion surveys, particularly when they are used to collect subjective, qualitative data, such as ethical consumption habits. That doesn’t mean they do not occasionally throw up some interesting facts, however:

 

“According to the study, 51 percent of human-resource managers reported that their organization has hired someone with a criminal record. The study included 2,298 U.S. hiring managers and human-resource professionals and was conducted between May 14 and June 4, 2012.”

 

The article in the url below discusses the barriers faced by job applicants with criminal records when searching for a job. In terms of tips of how to overcome those barriers; in addition to more obvious suggestions, such as be honest and transparent about your background (68% of respondents), the article also has other helpful hints, such as staying positive (46% of respondents), don’t apply for jobs where having a criminal record is a problem (31% of respondents), and, when all else fails:

 

“Consider joining the military -- 18 percent”

 

Have a good weekend

David

 

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

 

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

 

 

Half of employers surveyed have hired someone with a criminal record

By Debra Auerbach, CareerBuilder Writer

October 1, 2012

CareeBuilder.com

http://msn.careerbuilder.com/Article/MSN-3152-Job-Search-Half-of-employers-have-hired-someone-with-a-criminal-record/

 

Strategic CSR - Dodd-Frank

When whole industries overstep the bounds of socially-determined acceptable behavior, the government steps into legislate. This intervention produced Sarbanes-Oxley in 2002, in response to the corporate scandals that occurred in the early years of this century (in particular, the collapse of Enron); as a result of the more recent Financial Crisis, it generated the Dodd-Frank Act in 2010:

“Wall Street has found a common enemy: the Dodd-Frank Act. After the industry’s aggressive risk-taking nearly toppled the financial system and the broader economy, Congress ushered in Dodd-Frank, the most significant regulatory overhaul since the Great Depression.”

This process is the basis of the Rational Argument for CSR (Chapter 1, p16). From this perspective, firms have an incentive to adopt a CSR perspective proactively because the alternative (i.e., government intervention) is usually not an efficient solution to whatever problem is being tackled:

“CSR is a rational argument for businesses seeking to maximize their performance by minimizing restrictions on operations. In today’s globalizing world, where individuals and activist organizations feel empowered to enact change, CSR represents a means of anticipating and reflecting societal concerns to minimize operational and financial constraints on business.”

Although they have no-one to blame but themselves, rather than self-reflection and altered behavior, the general response from many firms within the finance industry is resistance:

“Since the law was passed in 2010, banks and other financial institutions have sought to tone down the most onerous aspects of the law, fearful of the threat to their businesses and their bottom line.”

The potential for amendments is presented by the extensive nature of the law—it is large and, at the time of passing, undefined:

“The law takes up some 2,300 pages and touches nearly every corner of the banking industry. … As regulators have devised the myriad rules, Wall Street has embarked on an all-out lobbying blitz. The industry has doled out hundreds of millions of dollars, held regular meetings with regulators and bombarded federal agencies with public letters.”

As a result, and due to the excessive influence of money in modern politics, the industry’s efforts are beginning to bear fruit:

“The industry’s efforts have proved effective. Despite facing tight deadlines, regulators have completed only a third of the regulations mandated under Dodd-Frank. Another third of the rules are in the proposal phase, and the rest are in limbo.”

There are some good graphics that accompany the article and make aspects of the law a little more accessible:

http://www.nytimes.com/interactive/2012/12/11/business/Deconstructing-Dodd-Frank.html

Take care

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Deconstructing Dodd-Frank

By Ben Protess

December 12, 2012

The New York Times

Late Edition – Final

F12

http://dealbook.nytimes.com/2012/12/11/deconstructing-dodd-frank/

Strategic CSR - BP

I found the recent BP settlement with the U.S. government regarding the 2010 Deepwater Horizon oil spill in the Gulf of Mexico interesting because of the individual indictments they contained:

“Donald J. Vidrine and Robert Kaluza were the two BP supervisors on board the Deepwater Horizon rig who made the last critical decisions before it exploded. David Rainey was a celebrated BP deepwater explorer who testified to members of Congress about how many barrels of oil were spewing daily in the offshore disaster. Mr. Vidrine, 65, of Lafayette, La., and Mr. Kaluza, 62, of Henderson, Nev., were indicted on Thursday on manslaughter charges in the deaths of 11 fellow workers; Mr. Rainey, 58, of Houston, was accused of making false estimates and charged with obstruction of Congress.”

As the article in the url below indicates, this represents a shift in emphasis. While the prosecution of individuals for wrongdoing in business settings was common up until the 1970s, after Watergate (when companies were found to be using slush funds to bribe foreign government officials, as well as to donate secretly to Nixon’s re-election campaign), Congress began to hold companies responsible for actions committed by individuals on behalf of the organization:

“Legal scholars said that by charging individuals, the government was signaling a return to the practice of prosecuting officers and managers, and not just their companies, in industrial accidents, which was more common in the 1980s and 1990s.”

This focus on the organization was reflected in legislation, such as the Foreign Corrupt Practices Act (see: http://strategiccsr-sage.blogspot.com/search/label/FCPA), and standardized throughout the judicial system in the U.S. via the 1991 Federal Sentencing Guidelines. This has meant that individual culpability has been de-emphasized for the last few decades in favor of punishing the corporation:

“[Jane Barrett, a University of Maryland law professor and former federal prosecutor] noted that it was unusual for the Justice Department to prosecute individual corporate officers in recent years, including in the 2005 BP Texas City refinery explosion that killed 15 workers, where only the company was fined.”

This decision by the government to indict two BP Managers for manslaughter and hold another one in contempt of Congress, therefore, suggests a recognition that, since corporations cannot be thrown in jail, focusing on organizational liability and letting individual perpetrators off-the-hook is an insufficient disincentive to commit harm:

“They are the faces of a renewed effort by the Justice Department to hold executives accountable for their actions. While their lawyers said the men were scapegoats, Attorney General Eric H. Holder Jr. said at a news conference, “I hope that this sends a clear message to those who would engage in this kind of reckless and wanton conduct.””

Take care

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

In BP Indictments, U.S. Shifts to Hold Individuals Accountable

By Clifford Krauss

November 16, 2012

The New York Times

Late Edition – Final

B1

http://www.nytimes.com/2012/11/16/business/energy-environment/in-bp-indictments-us-shifts-to-hold-individuals-accountable.html

Strategic CSR - Chief Legal Officer

The article in the url below from The Economist contains an interesting profile of the Chief Legal Officer:

“ONCE upon a time, in-house corporate lawyers were dismissed as plodders. Partners at law firms make far more money. Only someone who couldn’t hack it as a legal brain-for-hire would seek the dull security of a salaried job, people assumed. But the power of in-house lawyers has grown hugely in the past ten years. The chief legal officer (CLO) is now one of the mightiest figures in the C-suite.”

Given the profile’s emphasis on compliance, particularly regarding ethical issues, the CLO’s responsibilities appear remarkably similar to those of the Chief Ethics and Compliance Officer or CECO (Case-study: Ethics and Compliance Officers, p336)!

“A CLO must be independent. But unlike outside lawyers, his financial future depends on just one client: his employer. He must protect the company’s reputation with customers, suppliers, journalists and non-governmental organisations. And he must do more than merely tell managers what they can get away with. As Susan Hackett, a former director of the Association of Corporate Counsel, says: “Most lawyers will look at legal rules and say: ‘Here are the ways you can do it.’ A good [general counsel] says: ‘Of course it’s legal, but it’s stupid.’” Diplomacy is as important as legal analysis in delivering this message.”

Put another way, how long before the CLO position is renamed the CECO?

Take care

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

A Guardian and a Guide

Chief Legal Officers have more power than ever before

By Schumpeter

The Economist

April 7, 2012

80

http://www.economist.com/node/21552170