Walmart,,, Again?

Tazreen Fashions Ltd., that’s the company where a fire left scores injured and 112 dead. At first Walmart claimed they had no connection to the Bangladesh factory. Then they said they had cut their association before the fire. Then when it turned out that more than a third of the massive eight-story factory was producing goods for five Walmart suppliers, they claimed the suppliers acted on their own against instructions from the company. It may be true that Walmart told their suppliers that Tazreen was no longer to produce their goods. However, that message was likely lost under the pricing pressure the retail giant exerts on all their suppliers.

The details of this fire are horrific. When the fire alarm went off the stairwells that served as the sole exit from the upper floors were blocked by managers who told the workers that it was just a drill, to return to their sewing machines. In a few minutes screams from below and smoke filled the workspace, the managers had disappeared and a stampede of workers jammed the narrow stairwells. The windows were covered with iron grilles. Sixty-nine of the dead were found on one floor. Scores were saved by a worker who escaped. He then climbed a scaffolding, smashed a window grille and helped workers out and down the scaffold.

Bloomberg reporters Renee Dudley and Arun Devnath dug up information on a retailers’ meeting in the spring of 2011. Concerned with safety lapses and deaths from fires in Bangladesh, the group attempted to forge an agreement that would provide support for the factory owners to create safer working conditions. Only two brands, Tommy Hilfiger and German retailer Tchibo, were willing to sign on. Minutes from that meeting included this statement: “We are talking about 4,500 factories, and in most cases very extensive and costly modifications would need to be undertaken to some factories. It is not financially feasible for the brands to make such investments.” 

According to published reports Walmart “most strongly advocated this position.” Walmart says their objections were taken out of context. Gap, however, has put forward a plan to, “Make Bangladesh garment factories safer. It includes hiring a chief fire safety inspector to inspect factories, giving suppliers as much as $20 million in capital to make safety improvements.” 

Walmart and the others feeling pushed on one hand for higher shareholder value and on the other to lower prices, have chosen the wrong path in Bangladesh. To put the lives of human beings at extreme risk to cut a buck or two off the cost of some piece of clothing, tool or toy is not an acceptable choice. Walmart and the others struggling to meet the demands of the marketplace as they see it ignore the evidence that an ethical business model makes you more competitive and more profitable.

My 2012 Top Ten 

Business Ethics Milestones

This year as every year almost everyone and almost every business strives and succeeds to maintain the highest ethical standards. It’s our nature and we know that our most precious asset is our reputation. After all, who wants to do business with a crook? It is, however, a struggle; and it’s too easy to take that first little step over the line onto the slippery slope. Of course there are those who seem ethically challenged. They spend a lot of time and treasure scheming and even more trying to cover their tracks. Ultimately they end up at the bottom of the slope, way past ethics into criminal territory. Most of this year’s milestones fall into the latter category, but there are some outstanding rays of sunshine.

#10 Let’s start out with some good news. A nationwide research study by Satmetrix, a West Coast provider of customer experience software, measured the attitudes of 30,000 consumers. Their findings reinforce the ethical business model’s value. It’s no surprise that companies boasting a long history of ethical standards top the list. Wegmans, Costco, Apple, Jet Blue, American Express, Virgin America, Amazon, Lowes, Google, all the usual suspects lead when it comes to doing the right thing. And guess what? They are leaders when you check their bottom line.

#9 There’s no such glow when you look at a few of our wealthiest Americans and biggest financial institutions; you get more of a Greasy Sleazy Feeling. They think nothing of turning our commodity markets into gambling halls, manipulating the price of food and fuel. Markets designed to support commodity producers have become a playpen for those with more money than morals. There’s a cure: limit commodity purchases to end users. Good for producers, good for end users, good for consumers, good for America.

#8 The ethical cesspool at the center of the media colossus Rupert Murdoch spawned on London’s Fleet Street, is beginning to suck him into its vortex. Unfortunately, it’s spread beyond his native Australia and Great Britain; it has spilled onto our shores. Murdoch became an American citizen so he could legally own broadcast properties here. He bought a couple smarmy newspapers like his British rags. He has also taken over and is twisting the once the once well-regarded Wall Street Journal. His big bucks come from broadcast holdings; satellite operations in Asia and Great Britain, cable outlets here. And then there’s his production arm producing television programs and motion pictures. Murdoch lunged over a line that most media tend to avoid, plunging into politics, even attempting to pick out his own presidential candidate. That kind of activity is common in Great Britain, not so much on this side of the pond. It’s especially disturbing when practiced by Scum-Lord Rupert Murdoch.

#7 Big Pharma's Big Con. The real cost of bringing a new drug to market averages $90 million a pop; a lot of money but a fraction of the$1.3 billion dollars they claim. Unless of course you include marketing, that’s where the big bucks go: flooding doctors’ offices with materials and samples, even hiring them to pitch other docs on the newest, latest, slightly updated drug. Add in the avalanche of print and television advertising urging patients to pressure their doc. It all adds up to sky high drug prices. Prices protected by a law prohibiting the government from negotiating lower prices– all courtesy of Big Pharma’s friends in the Congress. It’s enough to make you sick.

# 6 When the lobbyists pushed through “The Commodity Futures Modernization Act” opening up Wall Street to gambling, they unleashed a chain of events that resulted in the collapse of the world economy eight years later. Wall Street began leaping one ethical barrier after another and today everyone but the bankers is suffering. Dodd-Frank is designed to rein in some of the worst of this. The bankers are fighting these sensible controls. Our economic future depends on how it works out.

#5 Foxconn, a Taiwanese company with operations in China and around the world, makes many of the electronic toys that fill our lives. A British newspaper report described the life of a 21-year-old woman working ninety hours a week for less than fifty dollars a month. They calculated that allowing for inflation that fifty bucks comes to, “about half the wage weavers earned in Liverpool and Manchester in 1805.” Ponder that ethical issue the next time you finger the electronic toys in your pocket.

#4 Little did we know that the HSBC slogan, “Bank as easily around the world as you do at home” was to be taken literally. That this British “too-big-to-fail” bank was laundering cash for Mexican Drug Lords, hiding funds from the IRS in far off India for wealthy Americans, providing US currency to a Middle Eastern bank said to be a source of terrorist funding, and generally thumbing their nose at American laws and regulators. The bank has been hit with a record $1.9 billion fine in the US. The $27.5 million Mexico hit them with last summer along with the legal fees they have run up brings the total over $2 billion. That sounds like a lot of cash until you compare it to their 2011 profit, nearly $17 billion, or to a bonus pool of more than $4 billion that the HSBC executives split up. And surprise, it looks like none of those big-wigs are facing jail. The $2 billion amounts to pocket change for HSBC, just another minor cost of doing business.

#3 “Income Inequality” is a really big deal in the minds of Americans. A Pew study found it to be our greatest source of tension. Two thirds of the respondents see the divide between the super rich and those on down the food chain as our major concern. Reinforcing that view, in a Bloomberg Global Poll more than 1,200 investors, analysts and traders say it harms the economy and harms growth. Why is nobody willing to do anything about it?

#2 How can we turn our backs on sexual abuse? The Church, College Athletics, The Boy Scouts, who knows where it will be found next? The abuse of our children by institutions we trust is horrific, to cover it up is unforgivable.

#1 The Gift of Life - 4,800 people died last year waiting for a kidney. There were nearly 100,000 waiting for one a few months ago. The numbers are similar across organ donation programs. How could that happen? Consider that the latest available annual highway death toll (2010) totaled 32,885 individuals, a tragic number. But most with healthy organs, it’s disgraceful that so few remember that should something fatal befall us, our organs could help others live. Every business, everywhere we gather, organ donation should be a primary focus. We can think of no higher moral and ethical goal than assuring that if we give up our lives, we give life to others.

A Return To Stability

Close to 3000 movers and shakers took to the world stage in Switzerland last week (01.25-29) for the annual World Economic Forum, commonly referred to as Davos. This year’s theme was The Great Transformation, Shaping New Models. And while there was much discussion on new models, most looked a lot like the model that emerged from the Great Depression and served America well for two generations. That would be the model we dismantled in the 1980s and 1990s.

As the doings began at Davos, Bloomberg released their Global Poll of more than 1.200 investors, analysts and traders who shared their thinking on the state of the economy. Surprising numbers; more than half agree with the Occupy Wall Street movement that income inequality harms the economy, harms growth. Seven in ten believe the banks have too much control over government. Two-thirds of the respondents think governments should pursue policies to tackle that issue.

A participant on the opening panel at Davos, Sharan Burrow, general secretary of the International Trade Union Confederation said, “If you’ve got a group that is too big to fail, what it means is that you are the biggest bullies on the planet. The financial sector has lost its moral compass.” More than 80% of the respondents to the Bloomberg study think banks need to be regulated so they’re not too big to fail.

 

About two-thirds see at least some truth in the argument that bankers’ actions are driven by greed and harm the economy. This is in line with studies showing that when executive pay scales escalate too far above the average employee in their company, it takes focus off what’s best for the company and moves it to what’s best for those at the top. When bankers start focusing on their pay, they forget their role in the community. They forget they are there to protect the funds the members of the community entrust to them. They forget that they are there to find local businesses that need loans to grow. They forget that they are there to help people in their community finance their homes. 

When it comes to the investment bankers on Wall Street, they get so focused on their paychecks that they forget they are there to help create capital. Instead they are busy devising ways to play high-stakes gambling games, all the while setting up their customers to take the fall if the bank’s bet goes south. Moral compass? There’s none to be found. While most business people and small businesses are striving to do the right thing every day, the Wall Street types have the morals of an alley cat.

Just in Time for Christmas

As day after day of misery goes by in the lives of the little folks crushed by the financial crisis, one question lies in the back of their minds. Who did this to us? Who’s looking for them and when will they be punished? We have known the answer to the first question for some time. The Wall Street investment banks’ sophisticated (read Crappy) investment packages whipped up a perfect storm.

They sold this Crap (their term not ours) to people who should have known better based largely on stellar ratings from the agencies charged with vetting these investments. The ratings agencies were pushed by their customers (big banks)  and did not look – as hard as they should – at the packages.

And it turns out that the bailout bucks we knew about (TARP) were nothing when compared to the zero interest loans the Federal Reserve was handing out to keep the banks afloat, trillions in secret loans. Bloomberg Markets Magazine blew the lid off this program. It was ten times the size of TARP.  By far the biggest hunk of these bucks (63% of the daily average) went to the same gang that got us into this mess – six humongous banks.

How did these half-dozen too-big-to-fail banks position themselves to come out of any crisis they might create covered in gold? Over a couple of decades they conned Congress into repealing the laws designed to prevent things like the 2008 crash. They even got “The Fools on the Hill” (AKA the Congress) to exempt banks from State Lottery laws. Who helped this along?  Clinton’s Secretary of the Treasury, Robert Rubin, fresh from 26 years and the top job at Goldman Sachs.

When the house of cards collapsed, who came up with the plan to save the banks? Bush Secretary of the Treasury Hank Paulson, fresh from the top job at Goldman Sachs, led the charge to save his comrades.  It gets even better; in 2006 Goldman Sachs was able to foresee that the crap was really crappy and likely to crash. Did they sound the alarm? Of course not, that might have interfered with their efforts to sell crap to their customers. Instead they bet it would crash and reaped a huge profit.

What ties this all together? Two of the key players, Rubin and Paulson, both came from Goldman at just the right moment to get rid of the pesky banking laws. So in addition to the efforts of all the banking lobbyists, you might say it was an “Inside Job.”

However, our wait to make those responsible pay may be nearly over. The SEC has charged six former Fanny Mae and Freddy Mac executives. More important, New York State Attorney General Eric Schneiderman and other State AGs are looking at criminal and civil charges. It would be nice to see a few of the arrogant bankers on their way to jail?  When you think about it, what they did was harmful than Bernie Madoff’’s scams. “Pants-on-Fire” Goldman CEO, Lloyd Blankfein has another view; bankers, he says, are “doing God’s work.”