Strategic CSR - Earnings guidance

Well, this isn't exactly the rationale I was hoping for, but the article in the url below notes that more companies are refusing to issue quarterly earnings guidance -- a blow to the short-term thinking (and misguided focus on shareholder value) that dominates our economic system: 

"Et tu, Walmart. Analysts covering the world's largest retailer will have to sharpen their pencils now that it has joined several other companies in scrapping quarterly earnings guidance (it kept it for the full year)."

It seems that the uncertainty injected into the economy, in recent months, is the 'excuse' CEOs are drawing on to avoid the glare of quarterly expectations:

"'Uncertainty' is practically a dirty word on Wall Street. After competitors scrapped their public forecasts, United Airlines instead took the unusual step last month of publishing two scenarios—one for a recession and another for an expansion."

As the author notes, however, the better approach might have been to scrap earnings guidance (i.e., not earnings reports) altogether:

"Unfortunately, that is a luxury mainly available to elite CEOs who are extremely secure in their jobs: Apple's Tim Cook, JPMorgan Chase's Jamie Dimon and, of course, Warren Buffett, who recently announced his impending retirement after six decades running Berkshire Hathaway."

Such a narrow focus on shareholder value, of course, is a relatively recent phenomenon, driven by neoliberal economic theory in the twentieth century (which resulted in most CEOs today being paid using stock options). But there is a strong argument to say that, not only is shareholder value a theory (rather than a legal fact), but that a singular (or even primary) focus on delivering it can be counterproductive to the long-term interests of the organization:

"Henry Singleton might be the greatest example of an executive who delivered with minimum regard for what Wall Street thought. Teledyne, the conglomerate he founded and ran for almost three decades, was a hot stock in the 1960s. … He was 'the smartest businessman I ever knew,' said the late Charlie Munger, who was vice chairman of Berkshire Hathaway."

 

Broad stakeholder support for not issuing guidance, particularly from the board and other key stakeholders, is what is required for CEOs to have the confidence to make decisions for the medium to long term, which is how the optimal level of value is created. While somewhat regular earnings reports are essential to allow for adequate oversight and governance mechanisms, quarterly earnings guidance is an unnecessary legacy of a disproportionate focus on shareholder value, which can be unhealthy, as noted in the article in the second url below:

 

"What would not be painful: a voluntary reduction in 'quarterly guidance,' or forecasts, by executives about how they expect their companies to fare. Warren Buffett of Berkshire Hathaway and Jamie Dimon of JPMorgan Chase recommended this change in a Wall Street Journal essay in 2018. Companies routinely use these forecasts to manipulate the expectations of financial analysts so that when earnings reports ultimately arrive, they constitute 'positive surprises' that set off rallies in the companies' shares."

 

While the article in the third url below suggests this development is gaining momentum and possibly being extended to earnings reports:

"The Securities and Exchange Commission is preparing a proposal to eliminate the requirement to report earnings quarterly and instead give companies the option to share results twice a year, according to people familiar with the matter. The regulator could publish the proposal as soon as next month."

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e  

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

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

 

Elite CEOs Don't Need Earnings Guidance

By Spencer Jakab

May 16, 2025

The Wall Street Journal

Late Edition – Final

B12

https://www.wsj.com/business/elite-ceos-dont-need-earnings-guidance-a0e5de93

 

Is The the Time to End Quarterly Earnings Reports?

By Jeff Sommer

October 5, 2025

The New York Times

Late Edition – Final

BU4

https://www.nytimes.com/2025/10/02/business/trump-earnings-reports-investing-stocks.html

 

SEC Prepares Proposal to Eliminate Quarterly Reporting Requirement

By Corrie Driebusch

March 16, 2025

The Wall Street Journal

https://www.wsj.com/finance/regulation/sec-prepares-proposal-to-eliminate-quarterly-reporting-requirement-1d700bbb

Strategic CSR - Bank of America

The article in the url below contains a headline that I don't see very often:

"Bank of America Pledged to Stop Financing Coal. Now It's Backtracking."

What strikes me about it that is different is not that companies are not taking climate change seriously or that they are saying one thing and then doing the opposite (both of which have always been true), but that they feel comfortable saying so, so directly. In other words, backtracking like this is exposed by the media, all the time, but it is rare to see the company announce its own backtrack:

"Two years ago, Bank of America won kudos from climate activists for saying it would no longer finance new coal mines, coal-burning power plants or Arctic drilling projects because of the toll they take on the environment. The bank's latest environment and social-risk policy reneged on those commitments. The policy, updated in December, says that such projects will instead be subject to 'enhanced due diligence.'"

I know there has been a backlash against the label "ESG" (correct impulse, but orchestrated for all the wrong reasons; see Strategic CSR – ESG and Strategic CSR – Green-hushing), but that is different from backtracking on a commitment not to fund fossil fuel projects. The reasoning, according to the article, is the same as the pushback against ESG, in general – I just would have thought Bank of America could have made a meaningful distinction among its stakeholders (and those it perceives to be most important):

"Bank of America's change follows intensifying backlash from Republican lawmakers against corporations that consider environmental and social factors in their operations. Wall Street in particular has come under fire for what some Republicans have called 'woke capitalism,' a campaign that has pulled banks into the wider culture wars."

While the backlash against ESG and related initiatives is a general phenomenon (at least, here in the U.S.), it seems particularly virulent in the finance industry, whether targeted against investment funds or the banks that finance large infrastructure projects:

"States including Texas and West Virginia have passed financial regulations designed to ward off efforts to deny fossil-fuel companies access to banking services. In New Hampshire, state lawmakers have sought to criminalize the business principle known as E.S.G., shorthand for environmental, social and governance."

The shift by Bank of America, in particular, is quite dramatic:

"Bank of America said in a statement that clients or transactions 'that carry heightened risks will continue to go through an enhanced due diligence process involving senior level risk review.' In late 2021, the bank's policy stated that it 'will not directly finance new thermal coal mines or the expansion of existing mines' or 'petroleum exploration or production activities in the Arctic.' It also would not 'directly finance the construction or expansion of new coal-fired power plants, including refinancing recently constructed plants' unless those facilities employed carbon capture or similar technology. That language is gone from its updated policy."

But, there are other signs that a similar shift is occurring industry-wide:

"There have been other contentious changes. In November, JPMorgan Chase said in its annual climate report that it was overhauling the oil and gas emissions-reduction target that had guided its energy investing and was adopting a new 'energy mix' target that took into account financing for clean energy projects. … In a statement, JPMorgan said at the time that its modified target recognized that 'a singular focus on fossil fuels will not successfully achieve the necessary transition of the global energy system.'"

For examples of more banks reneging on their climate commitments, see the article in the second url, below:

"Many of the world's biggest financial firms spent the past several years burnishing their environmental images by pledging to use their financial muscle to fight climate change. Now, Wall Street has flip-flopped. In recent days, giants of the financial world including JPMorgan, State Street and Pimco all pulled out of a group called Climate Action 100+, an international coalition of money managers that was pushing big companies to address climate issues."

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e 

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

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

Bank of America Reverses Pledge Against Fossil Fuels

By Hiroko Tabuchi

February 4, 2024

The New York Times

Late Edition – Final

p19

https://www.nytimes.com/2024/02/03/climate/bank-of-america-esg.html

More Wall Street Firms Flip-Flop on Climate Pledges

By David Gelles

February 20, 2024

The New York Times

Late Edition – Final

B2

https://www.nytimes.com/2024/02/19/business/climate-blackrock-state-street-jpmorgan-pimco.html

 

Strategic CSR - BRT

The article in the first url below reviews progress by signatory companies to last year's statement on stakeholder capitalism by the Business Roundtable, BRT (see Strategic CSR – Business Roundtable and Strategic CSR – Business Roundtable (II) and Strategic CSR – Business Roundtable (III)). In the original statement, "the CEOs of more than 180 major companies" pledged to broaden their purpose to focus on all stakeholders, rather than merely shareholders. The media responded very positively to this and influential voices in academia have heralded the statement as an important turning point in the evolution of the stakeholder perspective (e.g., see here). The article below, in contrast, sets out to collect data to see whether this optimism has necessarily turned out to be warranted:

"Although the Roundtable described the statement as a radical departure from shareholder primacy, observers have been debating whether it signaled a significant shift in how business operates or was a mere public-relations move."

This attempt to quantify whether each company was genuine in its intent focuses on the extent to which the decision was treated as important, internally:

"Major decisions are typically made by boards of directors. If the commitment expressed in the statement was supposed to produce major changes in how companies treat stakeholders, the boards of the companies should have been expected to approve or at least ratify it."

Specifically, they operationalized this in terms of who was the highest authority who signed-off on the decision:

"We contacted the companies whose CEOs signed the Business Roundtable statement. … Of the 48 companies that responded, only one said the decision was approved by the board of directors. The other 47 indicated that the decision to sign the statement, supposedly adopting a major change in corporate purpose, was not approved by the board of directors."

The researchers then reflect on the possible interpretation of these findings:

"What can explain a CEO's decision to join the Business Roundtable statement without board approval? Even 'imperial' CEOs tend to push major decisions through the board rather than disregard it. … The most plausible explanation for the lack of board approval is that CEOs didn't regard the statement as a commitment to make a major change in how their companies treat stakeholders. That may be because they believe their companies are already meeting the standard for taking care of stakeholders. But it still implies that they believed signing the statement wasn't a major step for their businesses."

To reinforce the idea that any major change in focus by the statement's signatories should have been approved by the Board, the researchers checked the governance documents for each company. They found these documents are essentially unchanged and "mostly reflect a clear 'shareholder primacy' approach":

"Take the corporate governance guidelines of JPMorgan Chase, whose CEO, Jamie Dimon, chaired the Business Roundtable at the time the statement was issued. These guidelines state that 'the Board as a whole is responsible for the oversight of management on behalf of the Firm's shareholders.'"

Johnson & Johnson is another example cited:

"The corporate governance guidelines of Johnson & Johnson —whose CEO, Alex Gorsky, served as chairman of the Business Roundtable Corporate Governance Committee—indicate in clear terms that 'the business judgment of the Board must be exercised . . . in the long-term interests of our shareholders.'"

The article concludes:

"The evidence is clear: Notwithstanding statements to the contrary, corporate leaders are generally still focused on shareholder value."

While I am not sure these data are quite as definitive as the authors suggest, they are certainly not an indication that things have changed. It is still early, but these studies are beginning to emerge and I have not seen one that paints the BRT signatories in a positive light. For another, more recent example, see the article in the second url below:

"The coronavirus, its attendant economic devastation and the ongoing movement against racial injustice have collectively posed the first test of the lofty words proclaiming a kinder form of capitalism. The results have fallen short of the promise, according to a study released Tuesday and obtained in advance by The New York Times. The Business Roundtable's statement of a purpose of a corporation, released last year, was touted by prominent executives as a landmark in the evolution of corporate governance. But its signatories have done no better than other companies in protecting jobs, labor rights and workplace safety during the pandemic, while failing to distinguish themselves in pursuit of racial and gender equality, according to the study."

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

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

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

'Stakeholder' Capitalism Seems Mostly for Show

By Lucian Bebchuk and Roberto Tallarita

August 7, 2020

The Wall Street Journal

Late Edition – Final

A15

https://www.wsj.com/articles/stakeholder-capitalism-seems-mostly-for-show-11596755220

Stakeholder Capitalism Falters in Study

By Peter S. Goodman

September 22, 2020

The New York Times

Late Edition – Final

B1, B4

https://www.nytimes.com/2020/09/22/business/business-roudtable-stakeholder-capitalism.html

Strategic CSR - Guns

At first glance, the article in the url below contains an interesting proposal – that the credit card companies prohibit the purchase of guns using their products:

 

"Here's an idea. What if the finance industry — credit card companies like Visa, Mastercard and American Express; credit card processors like First Data; and banks like JPMorgan Chase and Wells Fargo — were to effectively set new rules for the sales of guns in America? Collectively, they have more leverage over the gun industry than any lawmaker. And it wouldn't be hard for them to take a stand."

 

The idea is that, by prohibiting gun sales using Visa and MC, the stores would be faced with either accepting credit cards or selling guns, but could not do both. The effect, the author believes, would be to remove guns from most stores across the country:

 

"For example, Visa, which published a 71-page paper in 2016 espousing its 'corporate responsibility,' could easily change its terms of service to say that it won't do business with retailers that sell assault weapons, high-capacity magazines and bump stocks, which make semiautomatic rifles fire faster. … If Mastercard were to do the same, assault weapons would be eliminated from virtually every firearms store in America because otherwise the sellers would be cut off from the credit card system."

 

Although interesting, the logic on which this idea is based is flawed. The author uses Bitcoin as an example of the credit card companies' ability to enact the changes he is proposing:

 

"There is precedent for credit card issuers to ban the purchase of completely legal products. Just this month, JPMorgan Chase, Citigroup and Bank of America banned the use of their cards to buy Bitcoin and other cryptocurrencies. To be clear: Those three banks won't let you use your credit card to buy Bitcoin, but they will happily let you use it to buy an AR-15-style semiautomatic rifle — the same kind of gun used in mass shootings in Parkland; Newtown, Conn.; San Bernardino, Calif.; Las Vegas; and Sutherland Springs, Tex."

 

But, the primary reason Visa and MC ban Bitcoin purchases is risk mitigation. Bitcoins are a very risky investment. If I use my credit card to buy Bitcoin that then crashes in value, how am I going to repay my debt to the credit card companies? The comparison to purchasing a legal product for regular consumption is not valid (it would only be valid if the credit card companies could be sued if their cards were used to buy guns that later were used in a mass shooting, which is an interesting idea, but another story). If the credit card companies were to take the author's advice and start selecting which legal products to block, their task would never end. Tobacco kills ten times as many people in the U.S. as guns every year, should they prevent those products being bought? Alcohol is another big killer. What about cars, which kill tens of thousands of people every year in the U.S.? Or fast food, candy, or sodas, which all contribute significantly to a variety of health-related issues and premature deaths? The list is potentially endless. Blame is being misapplied here. More specifically, the burden of trying to find a solution is being conveniently shifted. This is not the credit card companies' problem to solve. It is our problem, together, as a society. If anything is to change regarding gun laws in the U.S., it is legislators that will need to take the lead, but that lead will need to come from us. If we say we support such action, then we need to vote for politicians who actually might do something about it. As Thomas Friedman puts it in the article in the second url below:

 

"… ultimately, nothing will change unless young and old who oppose the N.R.A. run for office, vote, help someone vote, register someone to vote or help fund someone's campaign — so we can threaten the same electoral pain as the National Rifle Association. … This is not about persuading people with better ideas. We tried that. It's about generating raw electoral power and pain."

 

In short, we need to follow the inspiring leadership of the Parkland, FL high school students most affected by this most recent tragedy and shame politicians into acting. They are a great example of what I would call engaged stakeholders!

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

© Sage Publications, 2017

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

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

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


Congress Fails to Curb Guns. Could Banks?

By Andrew Ross Sorkin

February 20, 2018

The New York Times

Late Edition – Final

B1

https://www.nytimes.com/2018/02/19/business/banks-gun-sales.html

Stop Tweeting, and Get in the NRA's Face

By Thomas L. Friedman

February 21, 2018

The New York Times

Late Edition – Final

A23

https://www.nytimes.com/2018/02/20/opinion/get-out-of-facebook-and-into-the-nras-face.html

 

Strategic CSR - Airlines

The article in the url below discusses the extent to which executive compensation tied to shareholder interests distorts decision making in the airline industry. What is interesting, though, is not that this happens (it has been a feature of western capitalism for a while now), but how the degree of influence has shifted so dramatically in this particular industry in a relatively short period of time:

 

"Five years ago, American Airlines factored in on-time arrivals, lost baggage and consumer complaints to help calculate annual incentive payments for top management. Today, these bonuses are based exclusively on the company's pretax income and cost savings. … 'Fifteen years ago, airlines competed with each other over who could buy the most planes or have the most routes,' said Jamie Baker, a top airline industry analyst at JPMorgan Chase. 'Executives are just as competitive today, but it's about who can achieve an investment-grade rating first, who can be a component in the S. & P. 500, and who has better returns for investors.'"

 

The article argues that this heightened pressure results from the relatively low levels of economic growth in recent years. When growth is low, increased returns for shareholders come at the expense of the interests of other stakeholders:

 

"Mature industries — where double-digit annual profit growth is a reach in the best of times — are especially vulnerable to activist investors' demands for board seats, bigger stock repurchases and other short-term financial rewards. The pressure is especially brutal in the airline industry because the key expense, fuel, is for the most part beyond management control. Yet airline executives have largely convinced Wall Street that the bad old days of bankruptcies and fare wars are over, replaced by the kind of predictable annual profits more common among industrial companies. That's among the reasons fees have popped up in recent years for everything from checking bags to securing an assigned seat before boarding. Known on Wall Street as ancillary revenue, this stream of income is especially favored by investors because it doesn't swing sharply the way fares do."

 

What is equally interesting, however, is why the airline firms' other stakeholders allow this disproportionate transfer of capital to shareholders to continue:

 

"And so far, despite occasional bouts of air rage and frequent consumer complaints, Wall Street has been getting what it wants. United's stock has surged to more than $80 per share from $25 per share five years ago, with profit margins rising to 13.6 percent from 3.7 percent over the same period. Overall industry margins hit 16.3 percent, up from 5.2 percent in 2012."

 

The lack of resistance is placing a significant amount of pressure on the legacy carriers to follow suit or be left behind:

 

"The pressure on United, American and other giants is only going to increase with the rise of so-called ultra-low-cost carriers like Spirit, Frontier and Allegiant. In fact, American and United are rolling out a stripped-down new class called Basic Economy. Here, in exchange for the cheapest tickets, fliers can't choose their seats before checking in and are more likely to be stuck in the middle of the row. They board last and are less likely to be able to sit with companions. No carry-on luggage is permitted, forcing anyone without elite frequent-flier status to check anything larger than a backpack — for a fee."

 

Again, we have no-one to blame but ourselves for the standard of customer service we now have to endure every time we fly:

 

"'The response isn't to Wall Street. It's to customer behavior,' said Alex Dichter, a senior partner at McKinsey who works with major airlines. 'About 35 percent of customers are choosing on price, and price alone, and another 35 percent choose mostly on price.' Mr. Dichter noted that when American added two to four inches of legroom in coach in the early 2000s, 'as far as I know, the airline didn't see one bit of improvement in market share or pricing.' 'The great irony is that most C.E.O.s would love to compete on product and experience,' he added. 'It's much more fun. The problem is that customers aren't paying attention to that.'"

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

© Sage Publications, 2017

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

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

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

 

 

Route to Air Travel Discomfort Starts on Wall Street

By Nelson D. Schwartz

May 28, 2017

The New York Times

Late Edition – Final

A1

https://www.nytimes.com/2017/05/28/business/corporate-profit-margins-airlines.html

 

Strategic CSR - Finance

The article in the url below reports the latest success for environmental activists campaigning against banks that finance companies involved in strip coal mining:

 

"Last week, with little fanfare, PNC Financial, the nation's seventh-largest bank, disclosed a significant strategic shift. The bank said it would no longer finance coal-mining companies that pursue mountaintop removal of coal in Appalachia, an environmentally devastating practice that has long drawn opposition."

 

It seems that PNC was one of the few remaining banks willing to finance this industry:

 

"PNC had been a holdout; Bank of America, Citigroup, Morgan Stanley, JPMorgan Chase, Wells Fargo, Credit Suisse and others had already distanced themselves from coal companies involved in mountaintop removal."

 

As such, future options for the industry are running out:

 

"GE Capital and UBS appear to be the only large financial institutions in the country still willing to lend money to companies involved in this mountaintop mining, and even they are scrutinizing such activities."

 

The article suggests that this strategy of trying to cut-off supplies of finance is more effective for campaigners instead of trying to force investors to divest from carbon energy stocks:

 

"It's one thing for large investors like the Rockefeller family or Stanford University's endowment to pull out of fossil fuel companies. The result, maybe, is a marginally lower stock price for the big oil players. But it's quite another when the nation's banks decide, independently or collectively, to effectively shut off the financing for projects that require considerable capital. It has the effect of killing the business."

 

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/

 

 

A New Tack in the War on Mining Mountains

By Andrew Ross Sorkin

March 10, 2015

The New York Times

Late Edition – Final

B1

http://www.nytimes.com/2015/03/10/business/dealbook/pnc-joins-banks-not-financing-mountaintop-coal-removal.html

 

Strategic CSR - Employees

The article in the url below raises an interesting question – Can companies insure one of their most valuable assets, their employees?

 

"Employees at The Orange County Register received an unsettling email from corporate headquarters this year. The owner of the newspaper, Freedom Communications, was writing to request workers' consent to take out life insurance policies on them."

 

The twist is that, essentially, the company planned to take out individual life insurance policies on each of its employees, which means it would be paid in the event of the employee's death. In short:

 

"… the beneficiary of each policy would not be the survivors or estate of the insured employee, but the Freedom Communications pension plan. Reporters and editors resisted, uncomfortable with the notion that the company might profit from their deaths."

 

This is a question that is facing increasing numbers of firms:

 

"Because so-called company-owned life insurance offers employers generous tax breaks, the market is enormous; hundreds of corporations have taken out policies on thousands of employees. … Aon Hewitt estimates that … about one-third of the 1,000 largest companies in the country have such policies. Industry analysts estimate that as much as 20 percent of all new life insurance is taken out by companies on their employees."

 

It is also a problem that sounds much worse, depending on how you frame it. For example, I am not sure it is fair to claim that "the company might profit from their [employees'] deaths." It seems just as accurate to say they will be compensated for the loss of an important asset, but will still need to invest and retrain in order to replace that asset. I do not think these policies are set-up to incentivize firms to go around trying to encourage the death of their employees. Nevertheless, any attempt to put a value on a human life (something actuaries at insurance companies do every day) is liable to sensationalization in today's media:

 

"But critics say it is immoral for companies to profit from the death of employees, while employees themselves do not directly benefit. And despite a law enacted in 2006 that sought to curb the practice — companies now are restricted to insuring only the highest-paid 35 percent of employees, who must give their consent — it remains a growing, opaque and legal source of corporate profit."

 

What is more enticing (from the media's perspective) is that "Banks are especially fond of the practice":

 

"JPMorgan Chase and Wells Fargo hold billions of dollars of life insurance on their books, and count it as a measure of their ability to withstand financial shocks. … Bank of America's policies have a cash surrender value of at least $17.6 billion. If Wells Fargo had to redeem its policies tomorrow, it would reap at least $12.7 billion. JPMorgan Chase would collect at least $5 billion, according to filings with the Federal Financial Institutions Examination Council."

 

Where the issues become a little more ethically complex is that the payments firms receive are tax-free and are being relied upon to fund employee pension plans:

 

"Companies and banks say earnings from the insurance policies are used to cover long-term health care, deferred compensation and pension obligations. … And because such life insurance policies receive generous tax breaks — investment returns on the policies are tax-free, as are the death benefits eventually received — they are ideal investment vehicles for companies looking to set aside money to pay for pension plans. Companies argue that if they had to finance such obligations with investments taxed at a normal rate, they would incur losses and would not be able to offer the benefits to employees."

 

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/


An Employee Dies, and the Company Collects the Insurance

By David Gelles

June 23, 2014

The New York Times

Late Edition – Final

B1

http://dealbook.nytimes.com/2014/06/22/an-employee-dies-and-the-company-collects-the-insurance/

 

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 - Financial Crisis

Some quotes from the article in the url below that should be of concern to anyone hoping that we had learned from the Financial Crisis:

 

“Five years after the system was held at gunpoint by a massively interconnected and over-risked Wall Street, the country’s six biggest banks—JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley—are now 37 percent larger than they were in the depths of the financial crisis. These institutions make more than four out of every 10 loans and tote two-thirds of the banking system’s $14.4 trillion in assets.”

 

“The total roster of U.S. banks is at all-time record low. In 1985, there were more than 18,000, compared with 6,891 now. … ‘The federal government has been keeping track of the number of banks since 1934 and this year is the very first time that the number has fallen below 7,000.’ [writes economics author and blogger Michael Snyder].”

 

“JPMorgan Chase is about the size of the entire British economy and holds 12 percent of all cash in the U.S.”

 

“Four U.S. banks now lug total derivatives exposure well north of $40 trillion, or more than the combined value of U.S. gross domestic product and the national debt.”

 

Too big to fail is not only alive and well, it is the global financial system! The graphic that accompanies the article demonstrates clearly how the banking industry has consolidated over the last two decades:

 

http://images.bwbx.io/cms/2013-12-09/1209-bank-popup-6301.jpg

 

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/

 

 

Is Wall Street Now Too Big to Care?

By Roben Farzad

December 10, 2013

Bloomberg Businessweek

http://www.businessweek.com/articles/2013-12-10/is-todays-wall-street-now-too-big-to-care

 

Strategic CSR - Financial Crisis

The article in the url below provides an update on the cost of the recent Financial Crisis:

 

“Wall Street could pay nearly $50 billion to buy peace from federal authorities who are taking aim at the banks over their role in the mortgage crisis, according to interviews and a confidential analysis of the industry’s potential legal exposure. … The $50 billion figure does not include JPMorgan’s $13 billion payout, which means the ultimate industry tab could exceed $60 billion, according to the analysis.”

 

The basis for these estimates is the $13 billion settlement announced at the end of last year between the government and JP Morgan. Based on the relative amounts of mortgages issued by each of the largest banks from 2005-2008 (see accompanying graphic) and comparing to the JP Morgan settlement, the article arrives at estimates for each of the banks, individually:

 

“The analysis, which lawyers prepared for one of the financial institutions and which was reviewed by The New York Times, indicates that Bank of America could ultimately settle for $11.7 billion in penalties, with an additional $5 billion in relief to homeowners. Morgan Stanley’s combined tally, the analysis shows, could be around $3 billion, with roughly a third going to consumer relief, while Goldman Sachs’s total could come to roughly $3.4 billion. For the Royal Bank of Scotland, the total price could be around $10 billion, which might prompt an outcry in Britain, where the government owns a majority stake in the bank. Citigroup could pay roughly $1 billion, the analysis shows. The potential penalties for other banks are under $1 billion, the analysis shows.”

 

It is encouraging to see the government act as a concerned stakeholder … at last. Of course, all pain is relative:

 

“A payment of $50 billion, made up of a string of separate deals, would amount to roughly half the total annual profit of large American banks in 2012.”

 

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/

 

 

Wall Street Predicts $50 Billion Bill to Settle U.S. Mortgage Suits

By Jessica Silver-Greenberg and Peter Eavis

January 10, 2014

The New York Times

Late Edition – Final

A1

http://dealbook.nytimes.com/2014/01/09/wall-street-predicts-50-billion-bill-to-settle-u-s-mortgage-suits/

 

Strategic CSR - Compliance Officers

According to the article in the first url below, Compliance Officers are “hot” on Wall Street!

 

“The kings of Wall Street used to be the traders and investment bankers who said yes to big deals and big trades, but today's power brokers increasingly are the compliance officers who quite often say no to risky proposals.”

 

I have seen a number of articles in the mainstream national business press in recent weeks, all with the same story line—there are insufficient qualified applicants for the number of compliance openings available. As noted in the article in the second url below, both JP Morgan and HSBC are reacting to increasing government oversight and enforcement (having suffered significant fines recently for past misdeeds):

 

“The Wall Street Journal previously reported that J.P. Morgan would spend $4 billion and commit 5,000 people to risk and compliance efforts and that HSBC added 1,600 compliance jobs in the first half of the year. But there is even more demand for compliance. The Institute of Internal Auditors shared with Risk & Compliance Journal some preliminary findings from its Pulse of the Profession survey, expected to be made public in November, which found 67% of internal auditors believe that audit committees see compliance as one of the top five risk areas, up from 59% at the same time last year.”

 

As the first article points out, although long in the making, the focus on compliance has gathered pace in recent years as the consequences of non-compliance become increasingly apparent:

 

“[Much of] Wall Street's focus on compliance … dates back to October 2003, when a provision of the Patriot Act that required financial institutions to verify the identities of certain customers went into effect. Banks were then forced to bolster so-called AML (anti-money laundering) compliance departments to monitor their customers and transactions. But it was only in recent years – after the 2008-2009 financial crisis – that regulators and prosecutors have intensified a crackdown on the flow of money tied to suspected terrorist activity, drug lords and tax evaders. Enforcement actions have stacked up across the industry, with anti-money laundering settlements, including some sanctions violations, spiking to total $3.5 billion in 2012, from $26.6 million in 2011, according to the Association of Certified Anti-Money Laundering Specialists. That jump includes last year's $1.9 billion blockbuster fine on HSBC for its failures to stop hundreds of millions of dollars of drug money routed through it from Mexico.”

 

Clearly, there is a market for business schools and organizations such as the Ethics & Compliance Officers Association (ECOA, http://www.theecoa.org/) that are training students with the necessary skills to conduct this work:

 

“There are no specialized degrees required for compliance officials, who were typically repurposed from other divisions of a bank. But as demand picked up, candidates with degrees from reputable law schools started moving into the field, recruiters say. At a bank or broker-dealer, a compliance employee with a couple years of experience might make between $65,000 and $85,000 plus a bonus; five to 10 years of experience generally commands a base salary of up to $150,000 per year; and top professionals can expect $1 million or more.”

 

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/


Wall Street’s Hot Trade: Compliance Officers

By Aruna Viswanatha

October 9, 2013

Reuters

http://www.reuters.com/article/2013/10/09/us-usa-banks-compliance-idUSBRE9980EE20131009

Help Wanted in Compliance, No Experience Needed

By Gregory J. Millman

October 22, 2013

The Wall Street Journal

http://blogs.wsj.com/riskandcompliance/2013/10/22/help-wanted-in-compliance-no-experience-necessary/
 

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