Thinking Ethics was a project launched in Geneva to foster the debate about ethics. A few friends, fed up with only reading about abuses in the media, decided to hold a forward-looking seminar on five subjects: ethics and performance, ethics and knowledge, ethics and consciousness, ethics and disobedience and ethics in real time. If moral has to do with right and wrong, then ethics is its application in society. We believe that people need to talk about the subject to determine the level of ethics they want. The book Thinking Ethics, a result of the seminar, is to start the discussion. This blog is a contribution to the conversation. :
The results of an MIT survey show that Americans now rank climate change the most pressing environmental problem (3 years ago it ranked 6th). Al Gore and an inconvenient truth must be making progress in raising people's awareness to the issues.
The Observatoire de la Finance, a Swiss non-profit foundation dedicated to promoting and encouraging ethical practice in financial institutions, has just launched a new prize to promote greater awareness among young people throughout the world of the benefits of ethics in finance. More
The *Robin Cosgrove Prize*, which aims at promoting ethical awareness among young people in banking and related industries, will award USD 20,000 for creative papers setting out projects or proposals for innovative ways to promote ethics in finance and banking. It honours the vision of the investment banker Robin Cosgrove who died at age 31 and who believed that a major barrier to economic development was the absence of integrity and ethical practice in banking and financial systems.
We are moving into that time of year when employee evaluations happen, and companies start thinking about pay raises. As usual, there will be a lot of scrutiny of top executives pay packages. And executive compensation is usually based on comparisons with other companies in the same industry - benchmarking. So peer pressure regulates/justifies the raises. The composition of the peer group can skew the results. Size matters, so does complexity, international exposure. I would argue that the situation of the company - in a growth phase, in a slump, downsizing, turnaround, in a merger negotiation, etc... - should also be part of the considerations.
The SEC seems to want to improve the disclosure of how the compensation was set - which is going to be a step in the direction of transparency. It really does not matter how they justify the packages - there are a lot of people who think the compensation is excessive. In the end, shareholders might want a bigger say in this matter. If the compensation decision is taken over by the shareholder meeting, then boards will have proven that they are not doing what the shareholders have elected them for. More on the subject in the New York Times.
Interesting article with examples in the Washington Post about executives serving on non-profit boards, and what the executives learn there, and how they can use it in their main jobs. Besides giving back - one can really make a difference in a small non-profit organization. It is also a good experience for people who might want to become independent board members. In the Washington DC area there are several organizations that offer board training for this type of situation, amongst them: Boardsource and Greater DC Cares Board Leadership Program.
Now that the democrats have taken control of the US House, it would be nice to see some action on the ethics front. Corruption and integrity was the number two concern of the voters. Word on the Hill is that democrats are split on how far to go with the ethics law (article in the New York Times here). Easy to criticize the opposition - less easy to put in a proper control mechanism that might also cramp your style. It seems that the dems are moving on a law to prohibit members from accepting gifts from lobbyists, but it falls short of doing any real campaign financing reform. Not to mention the crying need for an independent ethics committee, with well respected, professional, INDEPENDENT members. Not playing partisan politics. If they had the courage to put this type of committee in, they might regain a bit of good reputation for politicians in general.
The UK government is launching a plan to turn kids into ethical "tycoons". Gordon Brown announced it at the same time as the Social Enterprise Action Plan. The idea is to give 10£ loans to 1'000 kids to creat a business and try to make a social impact. The 50 who make the most money and the 50 who have the biggest social impact in one month will win prizes. Schools and colleges will distribute the money and decide on the suitability of the projects. They hope the kids will reimburse the loans. Anybody who does not return 60% of the money will be banned from future participation. more on the bbc website. Besides the educational aspect - there is another angle: we all heard of microcredit for developing countries - maybe it will work in more affluent societies as long as we start the entrepreneurs earlier.
Boulder in Colorado is the first US city to impose a carbon tax. Carbon taxes are supposed to incite people and businesses to reduce gas emissions, and the money collected is used as an incentive for people to increase their energy efficiency, or switch to renewable energy (solar, wind, etc). The city of Boulder intends to use the money to pay for the Climate Action Plan, and the tax will be based on the number of kilowatts used. The City estimates that it will cost homeowners 16$ more per year, and businesses 46$ more, and expects the revenue to reach 6.7 million $ by 2012. more in the New York Times and on the Boulder web site.
Yesterday I posted under "Fire the messenger" the story about whistleblowing in a Chinese Bank. On the same suject of the cultural pitfalls of good corporate governance, there is an article in the Washington Post describing the purchase by CitiGroup and some partners of 85.6% of Guangdong Development Bank for 3.1 billion dollars. It took them a year to get the deal done, as China is reluctant to open it's financial sector to foreigners, although they must by the beginning of 2007 under the WTO trade agreement. This is an incredible opportunity for CitiGroup to try to modernize China's financial landscape. CitiGroup has an incredibly good program of ethics training, which is mandatory for all executives, and is a leader in the financial field. So if they can bring some of this to China, it might set the standard in that country for better corporate governance and fairer financial transactions.
The New York Times had an impressive supplement called Giving. It gave an overview of charitable activities performed by U.S. groups, from management programs with school kids to use of technologies in developing countries. The main article summarizes very well the current thinking that social impact will come with a business driven approach. Rather than trying to "sell" sustainability as doing good only, "philantrepreneurs" apply the rules and strategies of the business world in their socially- and environmentally-conscious activities.
Non-performing loans in Asia are a subject of concern to investors. The West has spent years cleaning up its savings and loan scandals, and tightening up credit risk assessments. In Asian cultures, where "favor" with important people and networks is even more important than in Europe and the US, it is hard not to think that their ratios of non-performing loans would exceed what was found in the US. The non-performing loans that came to the surface after the meltdown in Thailand are still being cleaned up. And since cronyism and corruption are still very much part of the culture in China it is more than likely that the problem is not being dealt with as strongly as western investors would hope. Two factors influence this - the lack of a risk assessment culture and trained professionals, and the will to do it (would not help their balance sheet).
An article in the New York Times describes the firing of the senior risk advisor (an American) who repeatedly tried to warn about the hiding of non-performing loans at China's largest state-owned bank, the China Construction Bank. So it looks like this: a Chinese bank wants to raise capital, so hires a senior risk officer to give the impression that risk assessment is under control and properly done. The risk officer warns about irregularities, and gets fired. After all the stories we have read in the last 20 years about savings and loans, whisleblowing in banks and companies, it is hard to believe that there would not be some truth in this matter.