Un-ethical companies and their future 11

[ST111]

So I'm sure we are all aware of big projects and issues that have risen over the years, highlighting certain companies as unethical.
Classic examples such as Bechtel, Shell, Exxon-Mobil (just off the top off my head, not aiming at O&G companies specifically), however they all consistently state their ethical groundings as world class etc.

Is this going to change? Have these companies learned from their mistakes and genuinely working towards ethical work?

Also is it ethical or un-ethical to work for one of these companies? I would be interested in peoples opinions.

 

[ScottyUK]

Was Ken Lay's death ever proven? I didn't recall any evidence of his death, just an announcement that he had conveniently died to escape justice. As an ex-Enron employee and shareholder I'd cheerfully have watched the lying bastard swing from a rope. I firmly believe that he's alive and had a new identity arranged by his friend Bush. I don't generally entertain consipracy theories!

 

[IRstuff]

Depends on whether you think there's a conspiracy; he supposedly was autopsied:

http://www.autopsyfiles.org/reports/Other/lay, kenneth_report.pdf

Lots of stuff can be faked

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[MartinLe]

Agree with moltenmetal, strict compliance rules can point to problems in the past and more importantly may not work at all. If you can't get your job done without breaking all or many rules (wether safety or anti-corruption or whatever), they won't work.

A few years back I read an interesting article on corruption and measures against corruption in water supply in India. One highlight: Someone upstairs within a municipality thought (probably correctly) that contractors often overcharged in exchange for kickbacks. So they made a list of what certain parts or services may cost, as an upper ceiling. Problem was that this list was soon divorced from reality, the only way to successfully tender any work was for the contractor to sit down with the engineer doing the tender and puch costs around until the contractor could make his cut and the prescribed max. costs where kept. This is the situation you actuall want to prevent with a tender, that contractor and tendere sit alone and talk about prices. Turned out that in these situation, the discussion would often come to kickbacks ...

 

[urgross]

A situation regarding engineering ethics I have frequently encountered is A-E firms getting a percentage kick-back for rep'ing specific products, and specifying those products in order to pick up a small percentage, while being less than the optimal selection in terms of price, fit and functionality for the customer. There is enough dirt in engineering back yards to clean up before picking out other industries.

One ethics matter that I find hilarious is the annual mandatory federal ethics class. The software had to be updated because people could "unethically" just skip through the whole thing in two minutes. I'm guessing the ethics course was a sweetheart deal between a congressman and his mistress to steer a few million dollars. If you don't have a moral compass by the time you are managing contracts, odds are very good a one hour computer course is not going to help. Just like in the private sector, some whitewash and eye candy is needed.

 

[cranky108]

Still there is the problem of perception in the area of environmental ethics. If your business is digging something out of the ground, then you have little choice but be digging it out of the ground.
Yes you can change things over time by finding a better way to use your product, or exit those operations, but that is not what I am talking about.

So the question is, what is ethical? Who decides what is ethical?

Some say GE is unethical because they paid no income taxes. Is it unethical to follow the law to reduce the amount of tax paid?

Breaking the law could be unethical, but if we look at the laws of different countries, or even states, the laws can be confusing and in conflict. So what laws are a company to follow?

 

[KENAT]

Zdas, I keep coming back to your issue about fining corporations being unfair to the small investors or folks with money in 401k's etc.

The principle of fining the 'owner' of a company is presumably so that the 'owner' sets up and operates the company in a way to avoid malfeasance.

This should work pretty well when you have a single owner, or even a small group of owners.

However, when you have thousands of share holders - many of them several steps removed via 401k's etc. with minimal ability to directly impact how the company is run then yeah it falls down.

I mean, look at various efforts by share holder groups to look at executive pay being blocked one way or another as to how hard it is for small share holders to impact operations of the company.

If the company board is nominally representing them then perhaps as you say the buck should fall on them and they should personally be fined/criminally prosecuted as well as the explicit 'wrong doers' where applicable.

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[1gibson]

Step 1: Fine the owners personally to the tune of 100% of their bonus the previous year.

Step 2: This page intentionally left blank

 

[KENAT]

Step 1: How on earth does that apply to publicly traded companies with hundreds or even thousands of share holders?

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[IRstuff]

One issue I have with the notion that "mom & pop" investors shouldn't shoulder the burden of malfeasance. So, Enron's stock is a high flyer, and people "invest" in (make a bet with) their stock. They then sit back happily enjoying paper gains and/or dividends and not even bother to pay attention to any rumblings of price fixing or market manipulation. So they're OK reaping the rewards of the malfeasant (?) corporate behavior, but plead innocence when things start crashing? While their roles are relatively passive, let's not forget that their very act of piling-on a high flying stock is what drives the price up and what provides the incentive for executives and managers to try and continue to pump up the price to get their bonuses. So, it's indeed rather cruel to learn this lesson, but mavens of the market have repeatedly warned people about all eggs in one basket, etc., and so, again greed is at the core of those mom&pop investors who lost their entire life savings because they bet it all on Enron. Likewise, the employees did the same with their 401K investments and lost them all when Enron crashed. For employees, there's at least some measure of peer pressure and appeals to "loyalty" that might have swayed an otherwise rational person into investing their future in Enron stock. To that end, I feel more sympathy to the Enron employees that got shafted, as I too, have had situations where you were "required" to invest in company stock.

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[KENAT]

IRstuff, that's kind of the issue that was bugging me but I probably poorly explained my point.

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[zdas04]

IRStuff,
You've missed my point completely. If I buy a stock I am betting that value will increase and I could lose that bet.

Laws were broken in the name of Enron. No question about that. The people who broke the laws should be punished to the full extent of the law. No question about that. Where I have a problem is levying a fine against Enron (since it doesn't have a physical manifestation to send to jail). Those fines only punish the billions of individual owners of Enron stock who had every reason to believe that the stock was flying high because of stellar [legal] performance. I follow this industry very closely and I had no idea what they were doing or that it was illegal. A technical trader just looks at ratios to make his decision and has no reason to look to see what it is they make or how good they are at it (I consider technical trading to be a tiny step from a Ouija board). The fines lowered the eventual liquidation value of the assets in favor of putting that money in the general fund. I don't feel that those fines were actually in the country's interest.

David Simpson, PE
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist

 

[IRstuff]

zdas, I understand that point, but technical trading is amoral, and must accept the consequences. Technical trading would allow you to invest in blood diamonds because that's ostensibly a very profitable business. Or any number of illicit or immoral activities.

When something like Enron happens, there has to be a penalty. The magnitude of Enron's duplicity was such that there were LOTS of people in on it, and only a few were actually punished. The fine simply represents some acknowledgement that the value of the company was based on illegal activities, i.e., a form of blood money. The executives could have avoided all of that by declaring bankruptcy 7 yrs earlier. Thus, the increased valuation that the investors lost didn't really exist. Presumably, someone who read the annual reports in detail might have noticed that liabilities were magically disappearing, but since the company was doing so well, no one bothered to do their due diligence.

In some respects, this isn't much different than Bernie Madoff's Ponzi scheme. People were willing to suspend disbelief because the profits were so beguiling, but they were beguiling precisely because they were lies.

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[moltenmetal]

David: people shouldn't profit from crime, whether they committed the crime or others committed it on their behalf.

Yes, governments should and MUST fine corporations when they do wrong- taking ill-gotten gains back from the shareholders. Doesn't matter if those shareholders are retirees, mom-and-pops or Warren Buffett.

If we fail to do that, we fail to enter meaningfully into the corporate algorithm to define meaningful limits on what can and cannot be done in the name of making money.

Throwing a few people in jail in the worst cases sounds wonderful, but how's that working in practice? How many people went to jail after the sub-prime mortgage/mortage backed securities debacle in the US? And on a side note, any idea how much Canadian government money went into Canadian banks to prop them up after this debacle nearly wiped out the US financial system? Zeto dollars. I believe we were the only G7 country that can make that claim. Why? Because we still regulate our banking system in the public interest. Everyone still hates the banks, and they still screw people mercilessly when they can- and most of us hold bank shares in our RRSPs to at least get back earnings to replace the fees they charge us shamelessly for everything- but we do still set regulatory limits on their operations which greatly reduce the risk of them becoming insolvent. We've forgotten nearly all of the lessons that 1929 taught us, but not every single one.

 

[EmmanuelTop]

There are countries out there, also badly affected by the robbery committed by the banking system in 2008, but countries that have bailed out the citizens and not the banks. So the bankers ended up in jail, instead of receiving enormous bonuses. But we won't see that on any television, in spite of "highest democracy" standards we apparently enjoy in our countries.

The point I am trying to make is that government(s) can be a part of the same money-making crew that instigates corruption and robbery of its own citizens, let alone corruption and exploitation of people in other countries and continents. The question then becomes, who is going to control corporations, banks, or any other company/institution set out to break the rules in order to make more profit?


Dejan IVANOVIC
Process Engineer, MSChE

 

[rotw]

quote
zdas, I understand that point, but technical trading is amoral, and must accept the consequences. Technical trading would allow you to invest in blood diamonds because that's ostensibly a very profitable business. Or any number of illicit or immoral activities.
quote
I agree with this IRStuff mostly because of the speculative risk (and that is for personal/moral/ethical reasons against gambling) however concerning the risk of illegal activities I tend to agree but keeping in mind that we should assume that we live in a "world" which is ruled by the power of the law. If the illegal activities are discovered / disclosed it is the responsibility of the regulator and his failure. They are not to punish the investors who have the right to assume the system abides with the law. But this brings the issue of the reasonable doubt that people may have when they make their own judgment and that's even a philosophical problem. I guess that's why we have rulings which are to ensure the rules of the game are adhered to, so competition happens in a fair environment. I guess this is essence of the capitalism: to measure performance against enforced standard and rules so the one who is outperforming others is at the top for real reasons and also the whole thing improves. When the regulator punishes the shareholders the regulator is sending a totally wrong signal. Like if we live in a mafia world where the regulator would say "you should not have assumed anything" ; are people paying taxes to get this ? but lesson learned that discloses a little bit of the world we are living in: it is not ideal but must be improved, still we should have our fact straights or not ?

 

[moltenmetal]

The shareholders individually might all find an illegal act to be immoral and reprehensible. Nevertheless, when illegal actions are taking place, the shareholders collectively encourage the management to look the other way by their actions in the market. Neither the management nor the directors nor the shareholders nor any employee should profit from crime, period. And again, you're thinking about this totally the wrong way: you're thinking that this primarily has to do with the good or evil intentions of individuals, when in fact it's an algorithm at work.

Governments need to fine corporations for profit-motivated malfeasance, and they must do so to a degree sufficient to enter into the calculation of profit and loss to demonstrate that the risk of doing the wrong thing vastly outweighs the potential benefit. Otherwise, even illegal actions are not outside the realm of what a corporation will do to maximize its profits and shareholder value.

What should that fine money be spent on? That's a political decision. Money coming in from fines is money that shouldn't need to be collected from honest people in taxes. Dishonest people aren't paying them anyway.

 

[cranky108]

So what of arms of the federal government that enforce rules on other arms of government? Some of the fines do not involve crimes but involve record keeping practice. Is a fine on a non-profit government agency really a crime?

What about fining non-profit corporations that live on donations?

My point is where is the line between not following the rules and illegal, and reprehensiable?

The other issue is what is immoral? Who sets these standards?

In general most of us know something big is immoral, illegal, and reprehensiable (IIR). But where is that line between bad form and something slightly IIR.

Is APPLE in that gray area? Is customer privicy, more important than the demands of law enforcement?

 

[urgross]

An ethical question, which is from an event I had to work through about 20 years ago.

By the European Federal Acquisition Regulation (EUFAR), all Host Nation laws had to be observed in negotiations. One specific nation I was trying to get contracts signed had a mandatory federal gratuities law. US law forbids the paying of gratuities to a foreign government official. I was directed to meet with the national general staff and get five contracts signed immediately, and don't come home until it is done. I got all five contracts signed in one day without violating US or Host Nation law.

Would that still be unethical if no laws were broken?

 

[nickelkid]

When something is legal it is ethical? That does not set well with me, legal and ethical are not synonymous.

 

[KENAT]

Ethics is situational morality.

The law on the other hand, is an ass.

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