What Would Churchill Do?

One of the more memorable lines from the interview with BP CEO Anthony Bryan "Tony" Hayward on May 14^th in the Guardian was, “There is a lot of speculation, red herrings and hearsay.“ Nor will any of us forget his now famous words, “The Gulf of Mexico is a very big ocean.”

Tony Hayward, now reduced to a less public role in BP, will never win any major awards for his leadership or oratory skills. But there is one British leader who did – Sir Winston Churchill, who was awarded the Nobel Prize in Literature partly for “brilliant oratory in defending exalted human values.”

What few may know is that aside from winning the Nobel Prize and saving Britain and the free world, Churchill early in his career saved BP with this internal document entitled, “BP Early History, 1909-1924, From Struggle to Success."

As a good Brit with a not-so-stiff-upper-lip, early in the Gulf disaster Tony Hayward made references to Churchill’s leadership at the outset of Second World War. He remarked on the seaborne evacuation at Dunkirk in which an armada of small boats saved some 300,000 British soldiers. It was a rescue effort so bravely and successfully conducted that it boosted British morale and created one hell of a collective ethic,“Yes, Adolf we bloody can!” that lasted through the war.

Yet as Churchill led his countrymen through their finest hour, Tony got stuck between red herrings and hearsay. Neither has BP Chairman Carl Henrik Svanberg impressed anyone with his leadership skills when he finally got the opportunity to put things right. Instead he referred to a new ethnic group of “the small people” in front of one billion TV viewers.

Though the differences are vast, there might be something to be learned from Churchill’s example. Back in 1940, the Nazi regime was the biggest threat to mankind. Perhaps it is not too farfetched to argue that the attack on the environment is the largest threat to our planet. Nowhere is that as apparent as in the Gulf of Mexico right now. Churchill did not the win the war for the Brits and allies only by his speaking abilities. He was a war time leader that sought unconventional solutions to combat the largest threat of his era. You could not be a wimp to deal with Hitler, and no shrimp, I mean wimp was he.

At the beginning of the War, Churchill was the only leader in the free world standing up to Germany. Europe had fallen; Japan had begun its conquest of the Pacific. The U.S. was still hesitant to get involved. Britain was completely isolated, but Churchill rose to the occasion. He assembled a wartime government with members from all parties. He quickly reached out to his allies, even the not-to-be-trusted Soviets. He profoundly refused to negotiate with Hitler, boosted aircraft production, and sunk the French Navy rather then letting it slip into the hands of the Germans. He kept public spirits up even when things looked dark through remarkable speeches. His Operation Dynamo that saved the British Army at Dunkirk was an amazing display of leadership through imagination, courage and accountability.

Protecting Our Environment

This leads us to the question: Who is standing up for the environment today? Who is leading the defense against commercial exploitation that threatens the future of this planet? Who will lead us through our finest hour?

To have an oil company act as defender of the environment, or even lead the development towards sustainability, seems odd. Yet isn’t that exactly how BP has portrayed themselves through past years with their re-branding campaign of British Petroleum to Beyond Petroleum and building their entire corporate identity on a "green" message?

Perhaps I’m more naïve then most, because I really believed it. I thought they were on to something real. Sad as it might sound, they gave me hope that sustainability was taken seriously. If BP could do it, anyone could.

As things have unfolded, we have realized that there is little green about BP. They are behaving exactly as a "traditional" oil company is expected to do by withholding information, avoiding responsibility, putting revenues before environment and embodying the motto: drill baby drill.  And what is all this fuss that Tony isn't good at PR?  Isn't that the least of BP's problems? I seriously would not want him running my family’s scooter factory with the lack of risk assessment tools in his toolbox.

This leads us to the government, our elected politicians. Just by reading the last two words of this sentence, we know instinctively this group hasn’t much of a chance. While corporations are governed by their duties to shareholders, politicians are governed by duties to stay in office. I guess that could be perceived as unfair. I do believe that Obama has done much good for this country. Yet if he wants to live up to his Nobel Peace Prize, now that things are really at stake, he has a lot to do in the Gulf.

Why doesn’t the federal government take over the Gulf situation is a question raised by many after the failed top kill solution a month ago. The official version was given by Adm. Thad Allen, “To push BP out of the way, it would raise the question, to replace them with what?" But is that response good enough? This means that the government could be in charge of the disaster effort, use every recourse available and eventually let BP pay for the bill. It is all in the Oil Pollution Act of 1990.

The simple answer is: our politicians are afraid. While it is easy to start a criminal investigation, speculate on whose ass to kick on national TV and grill CEOs in Congress, it is much harder to take responsibility and act with accountability. If the government took over, the responsibility would lie with them. Since no proven solution exists besides the four month drilling process for the two relief wells, the government does not dare go in. They would have too much to lose – the next election. So, they choose to kick BP's ass through out these long painful months of summer until August when the wells are due to be finished.

Tony Hayward and BP's continuing inadequate leadership is a wet dream for the administration. They have a perfect villain. He does not wear a black helmet and breathe like he has Stage 5 throat cancer. Instead, he has pink checks and a posh accent. Seriously, how can you not take over for Mr. Bean?

We, the world watching, don't want anyone at BP, not Tony Hayward, Carl Svangberg or Robert Dudley (Hayward's possible replacement) to be in charge of the Gulf of Mexico's ecosystem. This requires real leadership. So far, the president is not the environmental champion we hoped for. He is not our green captain.

What would Churchill do?

 What then would Churchill do? I bet he would take over the disaster effort, reach out to all stakeholders touched by the disaster by uniting political camps, industry champions and inspiring the public in the real belief that tomorrow is a greener day. He would not be satisfied with renaming the Minerals Management Service - the Bureau of Ocean Energy.

He would attack the real enemy and replace the oddly named “Department of Homeland Security” with its passive-aggressive slightly imperial name to…drumroll…Department of Sustainability - an official department devoted to sustainability where lawmakers work with industry and set aside capital for green investment.

Green innovation is the real solution to America’s oil dependency. The U.S. could take back the initiative to be a leading "Force for Good" in the world that somehow got lost after the fall of the Berlin Wall and fight to save the planet.

Yep, I think somewhere along those lines lies the solution that Churchill would have found. And perhaps he would have sunk the French Navy again just for the fun of it.

Staffan Engström is a media executive living in New York City. He has a Master's Degree in Business Administration and a background in philosophy and information technology. Staffan is a socially conscious freelance writer that scrutinizes the world with critical eye and a sharp witty tongue. 

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Cell Phones: Proceed at your Own Risk

Reported by Staffan Engström

Interphone, the long awaited study by the World Health Organization investigating the relationship between cell phone usage and increased risk for brain tumors, was finally released last month.

The $25 million dollar study was financed by the United Nations, the European Union and the mobile phone industry making it the largest study ever conducted on this topic. Five thousand (5,000) individuals diagnosed with Meningioma and Glioma brain tumors were interviewed on their mobile usage over a ten year period.

The study results were delayed by four years as the fifty research scientists could not agree on the interpretation of data. However, despite that real problem the official conclusion was that “no increase in risk of glioma or meningioma was observed with use of mobile phones.” The data revealed that “an increased risk of glioma at the highest exposure levels,” was possible. However, “biases and error prevent a causal interpretation.”

The final suggestion after ten years, $25 million dollars and thirteen participating country’s top scientists was that the “effects of long-term heavy use of mobile phones require further investigation.”

Rather then just starting of with new research, maybe there is a point in reading their results a little closer. According to the study, ninety percent of respondents used their mobile phone 2.5 hours per month—an uncommonly low amount for cell phone users. Ten percent of study participants were termed “heavy users” referring to those participants who used their cell phones thirty minutes per day over ten years. The evidence showed a 40% increase in the brain tumor Glioma among these users. This is a rather serious finding as most of us use our mobile phones at least 30 minutes a day.

But not to panic! The researchers claim that we are saved by “biases and errors”—meaning they are not sure of the validity of the respondents claims.

Sketchy Memories

The study concluded that, “A brain tumor, particularly in the frontal or temporal lobes, may adversely affect cognition and memory.”

The researchers claim that people with brain tumors have weak memories and, therefore, are not reliable witnesses for their own cell phone usage. Yet the testimony of these 5,000 impaired memory individuals is precisely the evidence the study is based on.

Dr.Maria Feychting, a Swedish researcher from the Karolinska Institute, claimed that it is not easy to remember phone habits from fifteen years ago, “especially not if one has a brain tumor.” Another member of the research team, Dr Daniel Kewski of the Center for Population Health Risk Assessment at the University of Ottawa in Canada, added that “the group was unable to prove that heavy mobile phone use increased the risk of cancer because the findings were based on the sketchy memories of some participants.”

It seems more than a coincidence that Canadian Wireless Telecommunications Association (CWTA), a lobbyist group for the mobile phone industry, gave one million dollars to fund the Interphone study and also pays the salary of Dr. Daniel Krewski who happens to be the head scientist of the report.

Upon closer scrutiny, the “sketchy memory” theory appears to be based on responses from participants who claimed to use their mobile phones more than 12 hours per day. When reached by telephone in Sweden, Dr. Feychting confirmed that out of the 210 reported “heavy users,” the total number of the 12 hour per day users was (12) twelve. Researchers based their $25million dollar theory that foggy memories prevent reliable conclusions on the connection between brain tumors and heavy cell phone usage on 12 people!

Motivated to Recall

The study blew further smoke on participant testimony with the statement that, “cases may be more motivated to recall and report a publicized potential risk factor for their disease.” Researchers claimed that people who learned they had a brain tumor were inclined to falsely report heavier usage of their mobile phones.

Dr Elisabeth Cardis at the Centre for Research in Environment Epidemiology (CREAL) suggested at a press conference that respondents with brain tumors were angry and motivated to falsely blame mobile phones for their health issues. Therefore, they may claim higher cell phone usage than what actually took place.

Interphone’s own validation study from 2006 stated there were “a substantial proportion of subjects who markedly over or under-estimated their mobile phone use.” Yet “under-estimating” cell phone usage is not included in the analysis.

Two Opposing Views

Over the four year debate, two theories emerged in the research community. One concluded there was no link between cell phone usage and brain cancer. The other concluded that there was a great deal of evidence to support this connection.

Dr Feychting claimed in Computer World that mobile phone usage resulting in “increased risk” of brain cancer from heavy cell phone usage “isn't biologically believable.” In my brief discussion with Dr. Feychting, she explained that all the research done today on this topic in all interrelated fields suggested the same thing. No relationship exists between cell phone radiation and brain cancer.

Her colleague, Dr. Olle Johansson, does not share her view. “At the Karolinska Institute, we have for many years observed very serious biological changes from exposure to microwave radiation and extremely low-frequency magnetic fields of the kind emitted by cell phones.” One of the studies he was referring to showed a 3.9 times increase in acoustic neuroma, a type of cancer in the ear.

Dr. Lennart Hardell, a professor in oncology and cancer epidemiology at the University Hospital in Orebro, Sweden, has conducted research on young people’s usage of mobile phones. His conclusion is that, “People who started mobile phones before the age of 20 had a more than five-fold increase in glioma.”

 Conflicting Interests

The Interphone researchers, Dr Feychting and her colleagues at the Institute dismiss Dr. Hardell’s research, however, Dr. Hardell has written a paper entitled "Secret Ties to Industry and Conflicting Interests in Cancer Research” which suggests close connections between the Karolinska Institute, the SSI, the Swedish Radiation Protection Agency, Dr. Feychting and the mobile phone industry.

Working relationships between industry and research are of course common, but there are few countries in the world in which industry and research institutions collaborate as closely and as successfully as in Sweden, and especially on the very edge of advanced technology and research. The relationship between government, industry and research institutions put Sweden at the top ranking of The Global Information Technology Report 2009-2010 determining the worlds countries competitive edge in terms of information technology. This report was released in March by the World Economic Forum with the motivation “The success of these countries (Sweden, Singapore and Denmark) underlines the importance of a joint ICT (information and communication technology) vision, an implementation by all the different stakeholders in a society for a country to take full advantage of ICT advances in its daily life and overall competitiveness strategy.”

Yet the monetary interests of the mobile phone industry lobbyists and executives and the close industry ties to the Interphone researchers throw a cloud of uncertainty over the reliability of their findings. Additionally, the unscientific theories of false blame and sketchy memories make this study’s conclusions harder to accept.

A leading scientist of the Interphone project, Dr Elisabeth Cardis of Spain, stated at a May 17, 2010 press conference that they had “not been able to demonstrate that there is an increased risk” between cell phone usage and brain tumors. However in an interview with Microwave News Dr. Cardis admitted, “To me, there's certainly smoke there.” "Overall, my opinion is that the results show a real effect," she continued.

Dr. Cardis will continue her investigation with a research project focusing on mobile phone usage and its relation to brain tumors in young people dubbed “Mobi-kids.”  This study will take 5 years, excluding time for interpretation of the data, through surveys of young adults with brain tumors as well as “exposure assessments” provided by France Telecom SA. Representing Canada will be a Dr Daniel Kewski, who very well could conclude that people with brain tumors have sketchy memories and therefore cannot be reliable.

It is possible that “bias” was present among brain tumor patients who reported 12 hours of mobile phone usage every day over 10 years. Yet it is also possible that industry relationships make researchers biased judging by their emphasis on 12 respondents (out of 5,000) who overstated their usage. 

Is there a coincidence that the Swedish researcher Dr. Maria Feychting and her Canadian colleague Dr. Daniel Kewski who both refer to the “poor memory thesis” as grounds for disqualification of this study and the fact that their countries’ economies are dependent on the success of industry telecom giants Ericsson and Nortel?

Staffan Engström is a media executive living in New York City. He has a Master's Degree in Business Administration and a background in philosophy and information technology. Staffan is a socially conscious freelance writer that scrutinizes the world with critical eye and a sharp witty tongue.

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Beyond Capitalism: Spirit Talk                         

An inspirational magazine emanating from socially innovative, Berkeley, California, Tikkun, derives its name from the Hebrew, “tikkun olam –meaning social justice and the repair of the world.” Tikkun is edited by Rabbi Lerner who “has been described by thinkers like Cornel West and Jim Wallis as a contemporary prophet.” The journal is “dedicated to healing and transforming the world” and attracts “a network of spiritual progressives” from many faiths.  Their Nov/Dec 2009 issue featured an article “Roadmap to a New Economics: Beyond Capitalism and Socialism.” by the wonderful thought leader, Riane Eisler.  A social scientist, author, and Professor of Sociology at the California Institute of Integral Studies, Riane and her parents miraculously escaped the Nazis from her native Austria and came to the U.S. Her extended family was not so lucky and many relatives died in concentration camps. Despite her tragic history, Eisler is a perpetual optimist. Her treatise of New Economics as detailed in her The Real Wealth of Nations outlines the strategy for creating a global system of “caring economics.” Echoing the goals of GoodB, we happily excerpt her recent Tikkun blog below.

(If you to be happen to be in San Francisco on Monday February 15, 2010, Riane will be speaking at a CSR conference sponsored by Tikkun. If you are not in town, you can listen on the web. For details, contact conference site.)

Is there room for Spirit in our families?

By Riane Eisler

“Our challenge is to create the social conditions that support the realization of our enormous human capacity for consciousness, creativity, empathy, and caring. This is the core of a progressive spiritual political agenda.

Most of us share the vision of a world where peace will no longer be an interval between wars. We are seeking a world of peace. A world where every child will be wanted and truly cared for. A world where abject poverty and hunger will be memories of a brutal past. A world where our natural life-support system, our mother Earth, will truly be honored. A world where governments will invest in really caring for people – in health, in education, in welfare – rather than in weapons and armaments. In short, a world where generations to come will be able not only to survive, but to thrive.”

Read More

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Upping the Ante

The U.S. government is dropping “shame” as a strategy for compliance by TARP-taking banks in foreclosure prevention. This week, they are bringing out the big guns and adding fines, penalties, sanctions, on-site management, and public notice to the arsenal.

The Treasury Department ordered Bank of America, Citigroup, Wells Fargo, and big and small lenders to Washington D.C. this week to inject a little gratitude into their blood money veins. Of the 71 participating lenders, few have accomplished significant mortgage modifications for troubled homeowners. To insure a patriotic zeal from “take the money and run” lenders, the Treasury is installing “three person SWAT teams to monitor the eight largest companies' work and requesting twice-daily reports on their progress.”

Bloomberg reports, “The program requires banks that took federal aid to help homeowners at ‘imminent risk’ of default by lengthening repayment terms, lowering interest rates and making other changes to mortgages to avert foreclosure.”

So what has been the biggest problem?

Banks say it is homeowners who don’t complete the paperwork. Some lenders claim that over 20% of desperate borrowers with claims have “missing” paperwork.

Frustrated borrowers claim that banks are dragging their feet by “losing” paperwork.  Common complaints among applicants are the banks put them on hold, claim they never received documents, and complain of limited staffing for loan modifications.

It is a he said-she said game of the highest order and banks until now have had the upper hand.

Let’s see…if I as a borrower don’t submit my paperwork, I stand to lose my family home and have nowhere to live. If I do submit the paperwork, my family home, children, and spouse will at least have shelter from the storm.

If I as bank fail to “find” the paperwork, I stand to foreclose on a property and make big bucks on auction. If I do find the paperwork, I must reduce the interest, the principle, and the length of time to repay.

Now who are you going to believe? Despite the banks proven “integrity (not),” the govies are suspicious that something not quite kosher is going on in the Home Affordable Modification Program on the part of banks.

To put some firepower behind the threats, the Treasury Department is finally enforcing real legal and economic consequences for TARP-taking banks that gave out shoddy loans who somehow can’t find the paperwork.

For a list of the 71 participating servicers in HAMP program and their contact information who participate in the HAMP program, read more.

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No Apeing of America

Japan's new Financial Services Minister, Shizuka Kamei took office this past month and vowed that, “There would be no apeing of America.” Kamei declared the official Japanese business model would embrace “social meaning.” Mr. Kamei called for Japanese corporations to turn away from the American model of “self-interest” and return to the old spirit of “unity and cooperation” that once made Japan’s economy great. "Japan became No 1 in the world and it is an objective and historical fact that Japan achieved that because of a typically Japanese style of corporate management...I insist that we should return to the traditional Japanese style of management."

The typical style of management Mr. Kamei refers to includes a system “whereby employees were offered jobs for life and profits were distributed between business partners, subcontractors, sub-subcontractors and employees.” The value of the service the corporation or institution made to Japanese society was as valued as the bottom line profits.  Japan takes pride in its socially responsible culture and the new finance minister’s call for a return to these basic values in business rings true for many citizens.

Kamei asserts that "Japanese companies no longer treated their employees as human beings." His call for a return to corporate commitment to the labor force might be a welcome call for reform in unemployed labor circles. Critics are worried that Kamei’s call for social meaning might reduce Japan’s competitive edge in the global markets. Finance Minister Kamei, however, believes that business and society form a partnership. The bottom line of profits is not the only measure of success for Kamei, the human bottom line should also be counted in the economic equation.  

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India Takes the Lead in Curbing Executive Pay

Heading the government’s call for self-restraint, the world’s seventh wealthiest businessman, India’s Mukesh Ambani reduced his annual compensation by two-thirds. Ambani is the top executive at Indian petrochemical company, Reliance Industries. According the Financial Times, “Salman Khursheed, the minister of corporate affairs, suggested the government might seek to curb the compensation of top business executives.”

Taking the lead himself, Ambani wasn’t waiting for government intervention to do the “right thing.” He took it upon himself to limit his salary and compensation to $3.2m for 2009. An astronomical sum perhaps for a dirt-poor population, yet this represents a 66% reduction from his historical compensation. Reliance Industries has not relied on the Indian government for a bailout of any kind. Could it be a social conscience that prompted the practical and symbolic act? From the self-serving “gimme more” American and European executive view, this might be hard to comprehend.

Yet the world’s second wealthiest businessman, Warren Buffett, has long criticized outsized executive compensation. Buffet historically earns a fraction of his American colleagues as Chief Executive of Berkshire Hathaway at $350,000 per annum. To date his banking counterpart, Lloyd Blankfein of Goldman Sachs, last reported salary and bonus in the fateful year of 2007 that brought on the global financial crisis earned $70m.

Buffet and Berkshire Hathaway have not asked for, nor received, a government handout of any kind. Goldman Sachs, dangerously perched on the edge of abyss after the fall of Lehman Brothers, received $10bn in direct government aid in October 2008, $15bn in “back-door” government aid from AIG, unlimited access to zero percent interest government loans, and ironically $5bn in SOS money from the frugal and self-restrained Buffett.

It seems Goldman’s financial crunch was further intensified after paying out 70% of its “phantom subprime profits” to its top execs. It was left with little cash to save itself and was forced to ask Daddy Warrenbucks, Daddy Hank (Paulson), and Daddy Ben (Bernanke) for an allowance. Goldman Sachs trimmed its workforce some 30% this past year and is set to pay its remaining executives record-breaking compensation.

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Germany Lays Down the Banking Law

It’s official. The German government reins in the risky American-style banking practices that brought the global economy down.

According to an August 17, 2009, Wall Street Journal report:

“Germany announced new rules on Friday to tighten banks' risk-management standards, increase the powers of supervisory boards over managers and outlaw risky and short-term-focused compensation plans. The new rules from banking regulator BaFin are the latest in a series of initiatives by European regulators and governments trying to put into practice the lessons learned from two years of turmoil in global financial markets that have resulted in bailouts across the continent costing hundreds of billions of dollars.”

(American post-crisis banking regulations are still “under discussion” as U.S. banks continue pre-crisis business as usual.)

“In the future, German banks will have to include "all substantial risks of the group" in their risk management,” according to BaFin, the official German government banking regulator.

(U.S. derivatives markets continue to include the same dangerously risky and unregulated products, such as "credit default swaps" that crushed AIG. Self-interested Lobbyists have successfully held off efforts to create transparency with a U.S. Derivatives Exchange.)

“The provisions appear inspired to a large degree by the near-collapse of Hypo Real Estate Holding AG, which was crippled when its Depfa subsidiary, registered in Ireland, found itself unable to refinance its liabilities in international money markets. The government has had to inject fresh capital and offer loan guarantees of more than €100 billion ($142 billion) to keep Hypo RE afloat, acquiring a stake of more than 90% in the bank in the process.”

(The outrageous actions of American Investor and Private Equity Manager, J.C. Flowers who owned controlling shares of Hypo Real Estate Holding AG spurred the German government to safeguard the banking system from outside manipulation.)

BaFin enacts “clawback” measures for executive banker pay. "Aggressive compensation systems -- amongst many other factors -- contributed to the financial crisis by creating false incentives," BaFin said. In the future, "short-term profitability must play no further role in the variable components of the compensation of managers and employees who can establish high-risk positions."

(U.S. "Compensation Czar" is currently investigating the ethical and legal issues around Citibank, Bank of America, Goldman Sachs and Financial Industry year-end bonuses and executive compensation. Some banks already have a post-crisis "clawback" clause in place.)

"In establishing provisions for clawing back money from individuals if the deals they do turn sour, Ms. Lautenschlaeger of BaFin acknowledges that she had overridden concerns from the banks that such provisions are unworkable. "Variable components of compensation must also take into account negative future developments," she said. "With this, 'risk takers' are to share not just in the profits but also in the possible losses." The rules go into effect immediately. Banks have until the end of the year to comply with the new regulations. "

(U.S. regulators do not have any "rules" established yet for bailed-out bankers compensation. Congress was not able to establish guidelines and handed over sole authority for Wall Street bonus rules to a new "Compensation Czar." How is one person, a "Czar" with independent and ultimate power, even legal in a democratic society?)

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Measuring Sustainability: A Step Forward

Sustainability has become a serious issue for most companies, but measuring sustainability performance has been anything but easy.  The True Sustainability Index, a new model recently released by the non-profit Center for Sustainable Innovation, includes several indicators that measure greenhouse gas emissions, water use, impacts on ecosystem habitats, biodiversity, and others. However, the True Sustainability Index is unique in that it has 15 context-based metrics, “meaning that they express organizational performance relative to actual social and environmental conditions in the world.” Quantifying sustainability this way provides companies with “clear and universally accepted guidelines and standards.”

Read more

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IBM, once the 20^th century poster child for “corporate indifference”, has had an epiphany.

21^st century IBM wants American business to step up to the plate and do more for Corporate Social Responsibility and Environmental Sustainability. IBM says that while most companies have corporate responsibility goals, many companies cannot achieve them.  Incomplete goals are not due to lack of willpower, instead IBM blames the inability to achieve CR goals on corporate inefficiencies.

Ways to improve efficiency include:

•  Collecting accurate data on the home front, as well as from suppliers, as to the effects of business practices on community and environment.

•  Understanding public concerns about corporate responsibility.

Why does IBM think CR and sustainability are so important?

•  Corporate Social Responsibility and Sustainability are important to consumers. 

•  Widespread internet information can uphold or destroy a company’s reputation.

•  Companies that are implementing and executing CSR and sustainability initiatives help  increase shareholder value.

All in all, IBM believes CSR is just good for business.

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ENFORCING ETHICAL LABOR LAWS

Who knew that corporate America not only skirted around hard-won worker protections like worker’s comp, unemployment insurance, social security and payroll taxes by shipping jobs overseas, but it also got a tax break for doing so???? Amazing!

Well, the tide has finally turned thanks to Prez Barack and his hopes for encouraging companies to keep American jobs at home. Outsourcing companies and big American corporations are sufficiently arrogant about slippery outsourcing ethics. Low labor costs are the deciding factor, not “tax disincentives” says KPMG tax man, India’s insourcing king.

Perhaps enforcing the 1938 Fair Labor Standards Act that established minimum wages, maximum hours, and fair labor practices like unemployment, disability and worker’s comp would do the trick. Imagine if U.S. companies could no longer avoid their legal obligation to the American workforce by simply bypassing worker’s rights and shipping jobs overseas.

What if companies were forced to abide by American working values and set aside unemployment, disability, and worker’s compensation insurance for any worker whether in Mexico or India or wherever?

It seems high time that American companies did not have a double standard—one that embodies the values held in reverence by our nation and another that exploits both American and outsourced workers while thumbing its nose at the United States legal system.

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Intel to the Rescue

Intel Corp., the hugely successful Silicon Valley tech company, announced in January 2009 it would close “older” factories and lay off 5,000 workers worldwide. In a remarkable turnaround, CEO and President Paul Otellini announced a new initiative aimed at preserving 7,000 high-paying factory jobs in the U.S.

The plan would invest seven billion dollars in manufacturing upgrades in its three US plants in Oregon, Arizona and New Mexico over the next two years. The initiative is also intended to create 4,000 jobs for contractors and construction firms who will partner with Intel on projects.

What is it all for? CEO Otellini states, “It was important for a company like Intel to stand up and say we have confidence” in the American economy. He asked for “other companies to join us” in a presentation at the Economic Club in Washington, D.C.

The chip maker plans to continue spending in the U.S. factories as it prepares for the introduction of a new product at the end of 2009.

Intel’s Otellini told the Economic Club audience that a downturn is the best time for savvy businesses to increase market share.  Yet clearly the firm’s intent was to boost the sagging American economy and set a trend to reverse course from the severe belt-tightening and cost cutting at other Silicon Valley companies.

Mr. Otellini believes that firms who follow suit can make a difference in America’s fragile economy. “Economic cycles are about confidence.”

“We believe in the company and in this country,” Mr. Otellini stated.

 It just takes a few American heroes to get the nation’s workforce back on its feet again.

(see Ressler on the Street)

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Lessons in Good Community Banking Practices

By Alain Bolea

Mortgage Banks received a helping hand from the Cook County Sherriff in Illinois on how to improve profitability and meet their community banking requirements.
 
Sherriff Dart was tired of sending his officers to evict people after foreclosures by banks only to find bewildered tenants, unaware of pending legal proceedings, facing eviction even after having dutifully paid their rents to a landlord who in turn did not pay the bank.  Evictions have increased dramatically. The police will now simply ask banks to prove that they have met the requirements to notify people subject to eviction within the legal timeframe.
 
This takes some courage from the part of Sheriff Dart and many will ask for his head, no doubt.  It seems that the American Banking Association is already beating that drum, accusing Dart of vigilantism and proposing he should be found in contempt of court.  Instead of dealing with the issue raised, the ABA is reacting in fear that other sheriffs might follow the example.

Whatever the legal aspects of who is supposed to do what, it seems that banks have an opportunity to help themselves and others at the same time.  Could they accept the tenants’ rent payments directly and use those to service the outstanding debt?  Or is it better to evict tenants and put yet another empty property for sale in a severely depressed market?  Not forgetting that the outcome is likely to be that the property will sit empty for months, and eventually be sold at a fraction of the loan value.

Let’s also not forget to take into consideration the burdens the latter scenario places on the community, from needing to accommodate “manufactured” homeless to the impact of vacant buildings on local economics and crime.  I will hardly mention the depressing effect on surrounding real estate.  (Think Detroit.) This is the time for banks to take their fair weather promises of community banking to a different level of social responsibility and take the initiative to find new solutions.

On the other hand, banks need help in thinking differently.  When they run into massive credit problems as they have now, they are under pressure from regulators and investors to clean up their act fast.  The plan is always the same unload the troubled assets they acquired through foreclosure as soon as possible.  Take the bad news in one gulp and move on.  The other reality is that banks have neither the staff nor the know-how to manage real assets, so the options are would require a new scenario.

Now in the case of real estate there is a further perversion.  In an orderly market, it is good to have rental cash flows to determine the borrowing capacity of the property.  But when the market is hot or depressed, having no tenants can be even better, because the new owners can do as they please with the building to maximize their returns, and it could mean buying a property for a song and keeping it shuttered for years.

The strangeness of ABA’s reaction is that they do not seem to believe one bit that a healthy community makes for a healthy business environment.

The courageous stance of Sherriff Dart is indeed a wake call to move away from the short-term compartmentalized thinking that has brought the world economy to the current collapse.

2008 © Alain Bolea

Alain Bolea is a former investment banker with Deutsche Bank. He is currently a financial consultant who advises companies and managers on how to bridge spirituality and economics.

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THE FREE MARKET isn't FREE

“Raw Capitalism is Dead.”  Hank Paulson

A United States Congressman grilling Treasury Secretary Paulson on the $700 billion dollar rescue plan during the recent U.S. House of Representative hearings asked the remarkable question: “Mr. Secretary,” he drawled in his southern gentleman twang, “is this the end of the Free Market?” The inappropriate timing of the question left even the Treasury Secretary stunned. He repeated the question. “Secretary Paulson, do you believe this is the end of the Free Market?” “Congressman,” Paulson replied stoically, “the Market needs discipline.”

Congress has been tallying up the bill for the no-holds-barred wild party the financial industry enjoyed over the past the seven years since September, 11, 2008. That day we are hit hard by foreign forces; it seems only a few years later from the same streets where our brethren breathed their last, we are taken down by our own.  The tally is not over. The economic casualties stretch far and wide.

First there was the government bankrolling of 30 billion for the collapse of Bear Stearns, then 200 hundred billion for Freddie and Fannie, followed by 85 billion for AIG, the 121 billion for US Government Discount Lending , and adding the 700 billion dollar request for bad debt, the Government’s bill to date is $1,436 trillion dollars and counting.  The securities industry write-downs are estimated so far at around $500 billion. Jobs lost since January 2008 total around 650,000 - 84,000 of which are for August alone.  Wall Street job losses total upwards of 90,000. Fifteen major bank and mortgage lending institutions closed their doors this past year. Washington Mutual Bank, a Pacific Northwest and national bank, heavily invested in toxic subprime loans, collapsed with 188 billion dollars in assets – the largest bank failure in U.S. history. In the first eight months of 2008, there were over one million new personal bankruptcies, 400,000 business bankruptcies, over 2.2 million foreclosures, $32 billion investor losses at Lehman and Bear alone, and hundreds of billions more investor losses world-wide.

The American way of life is at risk; the global economy is deeply compromised. All because of the unrestrained, extreme recklessness, and indifference of what Paulson calls, “raw capitalism.” Congressman, not only is the Free Market not Free, the price we are paying is inexplicablr.  The myth of the Free Market is that it never really was free. There was always a cost for someone. There was always a loser at the other end of the win. Someone had to pay if there were no rules.

Yet there were rules once - self-restraint kind of rules. For a time the business world possessed a kind of mutual morality, based on a sense of honor and integrity. Not for everyone, but for many people business based on trust  existed. In our nation’s financial history not so long ago, some can still remember, a time when a handshake was a fair deal; a man’s word was his bond and a bond meant something real.  

What happened to that? We got off the track somewhere and the train derailed and crashed at top speed.  There exist many in the business world who still rely on their word as their bond and a handshake to secure the deal. You of honor and integrity have been silent these long years. Sadly, the cost of that silence is too great.

The current financial collapse has made it the duty of every business person and professional with a sense of responsibility to the whole economic system to speak up for a new way to profit - one that doesn't take the system down with it. We have a choice in this economic crisis to rise like a phoenix with something completely new, yet in some ways age-old. An economy based on measured risk and responsible reward. We can choose to let go of the old ways and understand the old ways of indifference that have collapsed our system is the result of a inherantly flawed business model. We can instead as business persons seek something new - a new model where value is created and how we profit. 

The price of the Free Market with the growing tally of market losses reveals the free market is really not free at all. The market must guarantee freedom for those at the bottom and in the middle too, not just the top. Something is not free if others pay the price for that freedom. Congressmen, this may be the end of the "free market" as we have known it these last few years.  It may be the right time to create a new system where the rules of the game are clear and fair and serve everyone not just the select few. That is the guarantee of freedom. One system with Liberty and Justice for all. And sir - it is long overdue.  

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Investor Genocide: A modern question

BERKSHIRE HATHAWAY headed by investor extraordinaire Warren Buffett sold their remaining shares of PetroChina, a unit of the China National Petroleum (CNP), in October 2007. CNP had been the target of harsh criticism for their business ties to the militant Sudanese government. The Chinese oil company is accused of financially supporting the genocide in Darfur. Warren Buffet claims no humanitarian basis for the sale of his holdings. However, Buffet long ago proclaimed his view on ethics, “Always act with integrity; don’t follow the crowd.”

According to Investors Against Genocide, Fidelity Funds have filed a shareholder proposal with the SEC for a vote against “genocide-free” investing. Fidelity, Vanguard, T. Rowe Price, Franklin Templeton, Barclay’s currently own significant shares of PetroChina. Each fund has proposed a shareholder vote to measure support for these holdings.

Shareholder votes on genocide issues are highly irregular and symbolize an important shift in the marketplace view of “social responsibility.” Investors Against Genocide and journalists like Marc Gunther of Fortune Magazine can be credited with bringing a heightened awareness of the human cost of indiscriminate profiting to the business community.

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