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By Andrew Newton on 07 Oct, 2009 - 02:48 UTC

Stephen Green, Chairman of HSBC and author of a new book "Good Value", has said in a BBC interview that he feels banks owe the public an apology.


This makes quite a change from the tales of "back to business as usual" emanating from Wall Street and London's Canary Wharf, and much more appropriate to the author of a book with the subtitle "Reflections on Money, Morality and an Uncertain World". I wonder though whether an apology is enough. Here's a reminder from my earlier post about what we can now view as:


the worst financial crisis since the Great Depression: an increase in the number of people around the world in chronic hunger and poverty by over 100 million, to 1.02 billion; between 200,000 and 400,000 more babies could die each year between now and 2015 if the crisis persists; an increase in global unemployment by between 29 million and 59 million people; one in eight US mortgage borrowers is behind on mortgage payments or facing foreclosure at the end of the second quarter 2009; pensioners relying on developed country stock market returns for their retirement incomes have seen their savings fall by 45%.


The Financial Crisis Inquiry Commission in the US holds out the promise of going beyond apologies and the inevitable return to customary way of doing business. It offers a public space in which public but impotent anger can be channeled into better understanding and a focussed demand for real change, generating and sustaining in its turn the political will for the necessary reforms.


London could do with a comparable public inquiry of its own.


 

The test, developed by a UK psychologist, aims to help employers screen candidates for racism, homophobia or prejudice against disabled people.

 

Based on associative theory, the test attempts to measure our unconscious biases.

 

While discrimination needs a solution, there are concerns that the test will penalize those who have prejudicial beliefs or feelings, but who nevertheless manage to surmount these and act within the law.

 

 

The test could have value as a way of raising the topic of prejudice in the personnel development context - ie highlighting a concern of which the individual might well not be aware and equipping them with strategies for self-management. Identifying prejudice also opens the way to bridging the knowledge gap that underpins it through, for example, empathic experiences.

 

But as a recruitment tool? Sounds Orwellian to me, but then I'm a white male.

 

At the end of this year bailout recipient Goldman Sachs may award its highest level of bonuses ever.

 

This seems more than a touch surreal.

 

Goldmans' revenues are experiencing a surge benefiting from business driven by the crisis the firm helped bring about.

 

Firstly, the crisis wiped out some of their main competitors, so they can charge much more for their services.

 

Second, the crisis created a need for governments and corporations to raise substantial amounts of new money (eg, in the government's case, to bail out banks like Goldman Sachs). Goldman Sachs is a prime broker of government debt and one of the principal market intermediaries in all asset classes and is therefore benefiting from a cut on these transactions.

 

So, bonuses are back. Goldman's points out that now bonuses are held back for one year before payment, but the risky behavior they reward generally take a few years longer to translate into problems.

 

Better sit tight, or tackle your legislator to support effective regulation.

 

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The BBC conducted an interview with five of the City of London's leading lights about the future of the financial sector post crisis.

 

It appears to confirm that insiders view the crisis as business as usual, and are heading back to, well, business as usual.

 

In the aftermath of weak regulatory reforms in the US, the prospect of a healthier, more sustainable financial sector underpinning (not ruling) the global economy future appears to be getting less likely with everything new I read. It is a major lost opportunity.

Sigh.  According to Reuters, the bonus culture at many financial firms--those left standing--is so entrenched that top bonuses may increase by 20 or 30% this year.  For those at the very, very top, at any rate.  Everyone else will likely see smaller, or no, bonuses. 

 

So, it looks as if the richest may just keep retrenching, making the palace walls higher, the moat deeper, all the while defenestrating more and more of the new peasantry. 

 

Maybe, when they hit the billionaire mark, some of them will do a Bill Gates because it will make them happier.

 

Or maybe camels will fly through the eyes of needles first.

CEO rage works even when it doesn't
By Keren Clark on 07 Jun, 2009 - 21:25 UTC

CEOs may get short-term reinforcement for angry outbursts due to immediate appeasement, but the long-term impacts are largely negative. Psychologists who have studied CEO personalities and behavior have noted that the longer term effects on team-building, morale and staff perception of the CEO himself tend to be negative and harmful.

 

As a behavior therapist myself, I see a dilemma. Positive reinforcement is what effects behavior. The results a CEO may get in the wake of an angry outburst will be very reinforcing of this behavior simply because of the immediacy of the reaction. In other words, the CEO gets what she wants right away, thus insuring the continuation of angry outbursts as a way of getting things done. Even the best intentions of a CEO to change may be thwarted by this simple fact of human behavior.

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In a comment article yesterday in Director Magazine, Jack Welch tried to help by clarifying where CSR should be prioritized during a downturn.

 

It makes depressing reading because here we have a business leader emeritus completely failing to understand what corporate social responsibility is.

 

CSR, according to Mr Welch, essentially comes down to "giving back" (what we used to simply call philanthropy) and to products that meet the demand for sustainable alternatives.

 

Such CSR, he continues, has to be toned down when the going gets tough.

 

My problem with his argument is twofold:

 

1/ CSR is first and foremost a management framework for enabling ethical decision making to take place within a short-term profit obsessed corporate culture. Mr Welch does not mention ethics once, nor does he indicate explicitly whether our ethics should take a back seat in tough times.

 

2/ Mr Welch's argument betrays the fundamental problem with the way that the bulk of the CSR industry chooses to present the case for doing the right thing (i.e. behaving ethically): that good companies reap financial rewards.  The flaw in relying on the profit motive as the driver for ensuring that your product range and manufacturing processes limit negative social and environmental impacts is clearly laid out by Mr Welch:

 

"When gas costs $4 per gallon, a hybrid Toyota Prius is an attractive value proposition. When gas is $2 per gallon, that's no longer the case. When most consumers have good jobs and feel secure in them, it makes sense to expect them to pay more for a product that's environmentally friendly. When bank accounts have been drained, that more expensive product is a very tough sell."

 

If corporate social responsibility has been robbed of any useful meaning, perhaps we should start encouraging business leaders like Mr Welch to give an opinion on their prioritization in times of crisis of, say, "ethics management" - a broad enough term to encompass the firm's approach to managing social and environmental impacts.

 

Mixing up CSR with good old philanthropy, public relations or product innovation and ignoring the ethical conduct of business is just shell gaming.

Bankers pay: seeding the next bubble
By Andrew Newton on 28 Apr, 2009 - 11:19 UTC

If a picture tells a thousand words, try these graphs prepared by the New York Times.

 

There are plenty of assumptions built into these figures, so examine them carefully. But the year-on-year first quarter figures are very telling. The only way I can think of that they might provide a misleadling impression of likely banker pay for the year is this: banks are moving towards lowering bonus components in exchange for awarding higher (twice or three times higher perhaps, but not bonus-level higher) basic salary. Depending on whether the banks had already implemented this policy at the time the first quarter figures were reported, the NYTimes estimates may over or underestimate the 2009 total pay level.

 

Its good indignance candy though.

A Q&A in the Washington Post discusses the ethics of different staffing options available to a firm that absolutely has to reduce staff costs.

 

Interesting for its opening premises, as much as its conclusions.

Communications Workers of America is waging an online "picketing" of the 2009 Masters Tournament this weekend by encouraging workers to tweet their concerns.  A sample of tweets from theweekend: RT AT&T execs: watching golf and cutting retiree health benefits; AT&T at the top of the leader board for corporate greed; From a blog on AT&T CEO: One day before he announced he would not be taking a bonus, he was gifted some 300,000 shares of stock.#Masters.

A new report from the Equality and Human Rights Commission finds that women earn less than men in the British financial sector across all levels of seniority.  In other words, the issue isn't simply that women, by and large, occupy lower-level positions than men; it's also that they're paid less for doing the exact same job.  On the lower rungs of the financial ladder, women earn 16% less than men in equivalent positions; at the top, they earn an average of 45% less. 

 

The Guardian calls this report "shocking" but I'm not sure many professional women, in any field, would be shocked by these numbers.

 

 

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