Rachel Maddow looks at the unconstitutional nature of the Defund ACORN Act and speculates which other corporations risk being defunded on the same basis as ACORN.

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It is certainly an ambitious exercise, looking at estimated carbon emissions, company environmental policies and reputation perceptions.

Newsweek defends its methodology on the customary point of criticism: how can you compare a utility, say, with a bank? They point out that over 50% of the score relates to the strength of green policies (which anyone can implement) and reputation, all of which evens out the score somewhat.

I would add that there is no problem comparing high emitting industries with low emitting industries and finding that there is a cluster of high emitters near the bottom of the ranking. That is how it should be. Dirty industries should appear as they are. This table is not a ranking of overall social utility but of environmental credentials. If a cluster of oil extraction companies appeared in the top 100 it would be more than suspect; it would be incredible.

A particular concern I had was whether indirect impacts were adequately taken into account. Financial services have small direct footprints, but are the ultimate dirty industry in that they choose to finance all the others. The analysis of green policies brings this factor into the equation but a lack of transparency about the carbon impact of their loan and investment portfolios reduces the quality of analysis. For me this is a more worrying weak spot than the ranking's validity in comparing companies across different sectors.

One last observation: it is great to see that Newsweek used the extensive experience of two firms whose founders I have had the pleasure to meet: Peter Kinder's KLD Analytics and Paul Scott's CorporateRegister.com. Great to see such high caliber teams involved in producing the detail of something this high profile. Well done both.

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Having spent a few years as a compliance professional in the financial sector, I was intrigued to read about the detail of the Pfizer settlement.

The drug company Pfizer, you'll recall, has just settled with the US Department of Justice for a total financial penalty of $2.3 billion - the largest ever. The allegations against Pfizer concerned illegal marketing of painkiller Bextra and several other drugs.

What did not come through in the original reports was that in one part of the settlement, the inspector general  of the US Department of Health and Human Services  (HHS) required Pfizer to change the reporting line of the company's compliance department from the General Counsel to the Chief Executive. 

In-house compliance professionals are often in a bit of a bind. They are supposed to advise the business on how it needs to conduct itself if it is to remain within the letter of the regulations. Their reporting line, however, is often to someone with a strong personal interest in the short-term financial success of the business development to which the advice relates. Although compliance departments inevitably attract the label of "business prevention", their reporting lines (and remuneration and retention prospects) in fact incentivise them to bend over backward to accommodate the concerns of their superior. So much for independence.

In Pfizer's case compliance reported to the general counsel. As Lewis Morris, general counsel for the inspector-general's office put it:

"The lawyers tell you whether you can do something, and compliance tells you whether you should ... We think upper management should hear both arguments."

If that is what the lawyers are there to do, then they will be rewarded on the basis of their overall contribution to business development. Compliance reporting into that setup risk ending up singing the same tune, or leaving.

I predict regulators will become more prescriptive about the precise reporting lines of compliance professionals. I am not sure, though, that instituting a reporting line to the chief executive is the most effective course though. Although the CEO has a group-wide interest and won't want the actions of a particular division to threaten the overall reputation of the group, the CEO is still guided by short-term financial incentives. A better solution might be a reporting line into the audit committee of the board, which should be majority comprised of independent non-executives.

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The headline in the Washington Post piece says "Lobbyists Feel the Pinch As Downturn Hits K Street".

If you read the article there is certainly evidence of a tail-off in the amount corporations spend trying to directly lobby congressional representatives.

But as the article points out, it may not be so much a reduction in spending as a redirection of spending to activities that are less public, less accountable and often frankly less honest:

Lobbying insiders say factors other than the economy are driving down the numbers. Trade groups and private corporations, for example, increasingly are pouring resources into television ads, grass-roots organizing and other advocacy efforts not counted under the narrow definition of lobbying required for House and Senate disclosure forms.

Whereas the article points to the defense industry as an example of one that is spending less because of the downturn, an unrelated New York Times article seems to suggest a different reason:

Despite a recession that knocked down global arms sales last year, the United States expanded its role as the world’s leading weapons supplier, increasing its share to more than two-thirds of all foreign armaments deals, according to a new Congressional study.

The United States signed weapons agreements valued at $37.8 billion in 2008, or 68.4 percent of all business in the global arms bazaar, up significantly from American sales of $25.4 billion the year before.

Not so much a downturn in lobbying expenditure, then, as a redirection to politically friendlier places elsewhere?

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Steven Davidoff at the New York Times reckons the focus on bonuses paid to Merrill staff is not the issue.

Steve is less willing than some to blame the lawyers in the BoA merger.

The elephant in the room, he argues, is the possible non-disclosure of the extent of Merrill Lynch's losses - $15.3 billion at last count.

If these were not disclosed then the bonus disclosure would become altogether more substantial. Steve thinks the SEC is avoiding dealing with that possibility because of the question of whether the Bush administration directed Bank of America to keep Merrill's losses quiet.

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While bankers and politicians seem anxious to get back to business as usual, the current difficulty being faced by Bank of America suggests that “normality” is not going to return any time soon, if indeed it is permitted to do so at all.

The Securities and Exchange Commission is trying to conclude an investigation into Bank of America’s payment of $3.6 billion in bonuses to executives of the sinking ship that was Merrill Lynch upon the former’s purchase of the latter. The SEC and Bank of America have agreed a $33 million settlement – an amount that some might call (and have called) derisory.

The SEC replies that it is unfair to penalize shareholders overmuch for the actions of executives. But hang on, I thought shareholders were supposed to be owners holding risk equity? That is what is supposed to provide shareholders with the incentive to keep an eye on how executives run their business, rather than simply smile while the money comes in. If shareholders don’t end up picking up the tab for reckless risk-taking then you create a moral hazard; shareholders will be better off turning a blind eye than supervising.

Enter Judge Jed S. Rakoff, a United States District Court judge in Manhattan. Whereas most such settlements are simply waved through, he has the temerity to question whether this settlement is really in anyone’s interest. Apparently he would like to take this opportunity to exert what little influence he has to deter further behaviour of this kind.

No doubt he has his own reasons for thinking the time has come to take a stand. Judge Rakoff presided over the SEC’s case against WorldCom – as in “corporate fraud on the scale of Enron and WorldCom” – and took the step of appointing a former SEC commissioner as a Corporate Monitor to oversee the reform of WorldCom’s corporate governance. He will recall that there was much talk after Enron and WorldCom of the importance of not letting big business return to its former ways, particularly the financial and professional advisers who enabled those corporations.

They did, however, and on his watch. And he knows that his courtroom is practically the only venue where pure greed can be stopped in its tracks.
 

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Paranoia strikes deep in the heartland
But I think it's all overdone
Exaggerating this and exaggerating that
They don't have no fun

Paul Simon, "Have a good time"

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This is seriously worrying. The US Supreme Court is to create an opportunity to revisit curbs on corporate spending on political advertising.

You might think the army of former insiders hired by the healthcare industry to lobby for private interests in healthcare reform at a cost of $1.4 million per day was already sufficiently invasive of democracy.

The current US Supreme Court, however, is using a narrow case arising from the previous presidential election to raise the possibility of rolling back controls on corporate financing of election advertising, essentially threatening to hand deep-pocketed corporations a blackmailing tool against any elected official who is reluctant to pursue their particular legislative agenda.

If these constraints are rolled back you can kiss goodbye the last vestiges of "By the people" US democracy.

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The Obama administration is to lend $5.9 billion to Ford Motor Co and $2.1 billion to Nissan and Tesla to develop fuel efficient vehicles.

The loans are the first to be made from a new $25 billion fund set up to spur green innovation in the auto industry.

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It is just one more step in the process of getting the Waxman-Markey climate-energy bill passed, but it is an important step.

You might think that getting a sufficient number of liberals to agree on legislation to brig into being a price for carbon emissions would not be hard, but the behind the scenes effort to get enough votes has been tough.

Sticking points have been Democrats that have recently taken seats from Republicans in more conservative parts of the US, and Democrats representing farming constituencies who stand to have their environmental impacts brought into the carbon count fully for the first time.

Nancy Pelosi is credited with having organized the strong arming.

If the agreement sticks, a vote on Friday should see the bill pass in the House of Representatives.

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