An Ethical Crisis of Confidence

27 07 2010

 

Almighty God, we confess that we are often swept up in the tide of our

generation. We have failed in our calling to be your holy people, a

people set apart for your divine purpose. We live more in apathy than

in passion born of hope. We are moved more by private ambition

than by social justice. We dream more of privilege and benefits than

service and sacrifice. Help us to make room in our hearts and lives for

you. Forgive us, revive us, and reshape us in your image. Amen 

Nouriel Roubini

  The other day I was watching my stock market guru Jim Cramer on CNBC.  It was a down day in the market and he was railing against the Bears for their pessimism on the stock market.  Currently the stock market is in a very narrow range and actually seems to be slowly drifting down in spite of increased earnings by corporate America.  He was lamenting the fact that the retail investor like me seemed to be leaving the market in droves or at least was not investing as they had done in the past.  He only alluded to the fact that there was a crisis of confidence in the government, international affairs, and lack of confidence in Wall Street itself.  On other programs that I’ve watched recently that talked about the new Fin Regs just passed, there was less than enthusiastic endorsement of the new regulations.  Most of this was aimed at the fact that there was little confidence that these new regulations would make any difference and in fact would give the money merchants new loop holes to exploit.  The growing sentiment among many investors is that the Foxes are in the hen house and are making the new regulations and that everything is about the same as before.  Many people on both the left and the right believe that this is just the first step in our economic troubles.  Nouriel Roubini, author of Crisis Economics and one of those who first predicted the effects of the housing bubble contends that the next world economic crisis will occur in the next two years.  He predicts that there will be a long, painful, protracted economic downturn, evidenced first by deflation and then by hyper inflation. 

 So, what happens to all of us that are poor or middle class that have been living on borrowed money.  Roubini suggests two scenarios.  The first is Keynesian theory and the other is from the Austrian economic school.  With Keynes, the solution to economic crisis is infusion of capital into the economy by government in the form of stimulus dollars and direct payments for unemployment etc.  With the Austrian school approach the answer is “creative destruction” which is allowing the economy to go through the painful destruction of corporations, persons, or institutions that are weak or that have over committed.  The theory is that even though painful, the purging of inefficient and corrupt entities will be shorter and make for a stronger successor.  Roubini uses the term “moral hazard” to explain the behavior of some companies and individuals that take undue risks knowing that someone will bail them out if they get into financial trouble.  He uses Citi Bank as an example of the result of “moral hazard” going back to the great depression when the government bailed them out.  Since then, Citi Bank has been bailed several times because of credit problems due to being leveraged too much.  And who has had to pay for this?  The American tax payer.  “Moral hazard” also comes home to roost with individuals.  Many Americans have leveraged themselves into bankruptcy because they either want it now and easy credit is at hand or we live in a state of perpetual entitlement where our priorities are fixated on the material rather than the spiritual.  And who will suffer the most?  The poor and the young.  Neither Keynes or the Austrians have the whole answer to our situation, but most of us know that change is necessary.  Individual responsibility and self reliance are important but being concerned and committed to the whole is also important. 

 I contend that a solution lies in three areas—the long process of unwinding our debt, the preservation of person’s dignity and worth, and turning to the One that truly gives us meaning.  And the longer we wait to make these painful decisions and changes the more painful it will be.  So where do we place our faith?  Jeremiah and other prophets believed that the answer to our predicament lay in our turning away from the lesser gods of our culture and placing our faith in the God of new life and creation. “Nearly 90 percent of Americans, according to the CIA World Factbook, identify themselves with a religion. But only 12 percent of American adults say faith is a top priority in their life, according to a new study released Monday by the Barna Group.”   It may be charged that suggesting that we turn towards God in these times (as well as in good times) is naïve and impractical.   We’re not ready to give up our little gods and until we do, we will suffer the pain of attachment. 

 “I will surely gather them from all the lands where I banish them in my furious anger to this place and let them live in safety.  They will be my people, and I will be their God.  I will give them singleness of heart and action, so that they will always fear me for their own good and the good of their children after them.  I will make an everlasting covenant with them; I will never stop doing good to them.”  Jeremiah 32: 37-39  

 Jeremiah states that God will gather all who have been banished and will be the God of all people.  I believe that even if there are those who do not accept the presence and influence of God, we are all still under God’s reign.  It is for those of us who believe in that reign to live into God’s purpose.  The outcome may not be what we want, but it will be God’s outcome.


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Ethics and Supporting Small Business

13 07 2010

I almost feel unpatriotic writing this piece.  Having invested in the stock market since I was fourteen and being in business myself, I believe that business should be the cornerstone of our American economy as opposed to big government being the watchdog and driver of economic well being for the average American.  But recently I have become aware of a disparity that needs discussion—the role of big business and small business in bringing our economy back to health. 

 Currently big businesses such as Microsoft, Cisco and Exxon, just to name three, are sitting on huge reserves of cash.  Needless to say with the uncertainty in financial markets in the past few years and the probability that we will see the other shoe drop again in the future, it still calls into question what companies such as these should be doing with their cash.  First of all, big companies need a lot of cash and they employee a lot of people.  But many of these companies in past years have cut back the number of employees.   But we are told that in order to get the economy back on track we need to improve employment.  We’ve lost about 7million jobs in the past few years and are limping along at less than replacement employment.  We’re told that the private sector needs to add jobs.  But where will these jobs come from?  Most large businesses cut jobs in the past recession and are reluctant to add jobs.  One reason is that there is not the demand for their products to justify those increases; which brings us back to cash.  If the cash is not to be used for growing organically, where then will growth in those companies come?  Some suggest that it will come from acquisitions and mergers.  Ignoring questions concerning anti-trust issues (you remember anti-trust don’t you), one consequence in M&A is that often by absorbing competition the acquiring company is not only able to get rid of competition but it’s also able to have a more efficient operation by combining operations which often results in loss of jobs.   Many of these companies are also outsourcing jobs to other countries further creating job loss in the U.S.  In some case the word multi-national actually means non-American. 

 In the case of the “too big to fail” banks, many of them are doing extremely well considering they have been able to borrow money for 0% and lend it out at much higher rates of interest.  This has been great for U.S. taxpayers who are hopefully getting much of their advance of funds back for helping bail them out.  But what of those smaller banks that have gone under and have been sold to bigger banks.  Again we often see that as a part of cost cutting, branches are closed or consolidated and persons laid off.  So, the big get bigger and to what end?—more service to customers? More dividends to shareholders?  More taxes to local and federal governments?  So, what’s the answer?  The proposed new bank regulations seem to indicate that the game is rigged.  In spite of all the gnashing of teeth about change, the indication is that not much substantive change will occur.  And there are many pundits that believe that within a couple of years the banking system will be back in trouble.  And pundits can’t decide whether we’re in for massive inflation or painful deflation.  My sense is that big business and big banks will do what is in the best interest of big business and big banks and if it contributes to job creation, so be it, but I wouldn’t count too heavily on them getting us out of the recession.

 We keep hearing that the answer to getting out of the current recession is the creation of new small businesses and in small business hiring more workers.  I agree.  But there’s not much encouragement for this.  Everything from local restrictions and regulation of small business, future healthcare liability, lack of availability of financing, and even cracking down on immigration policy are seen by some as hampering job creation.  In a recent poll of small business by the Biz Roundtable, a very pessimistic future was painted by those interviewed.  There just doesn’t seem to be much excitement in hiring more people even if financing is available when there doesn’t seem to be much of a market for the goods and services produced by these companies.    

 Currently there are proposals being bantered about concerning creating tax credits for hiring new workers and tax credits or accelerated depreciation for purchasing new equipment.  When these have been done in the past they seem to have had a positive impact on the economy.  Another possibility would be to have a lower effective income tax rate for small businesses.  But at the end of the day, the most important consideration for small business is the ability to get into business and to stay in compliance with the myriad of laws and regulations, both local and federal, which impedes the small business to function and to be the engine of job creation that it’s been in the past.  Add to that, small business’ often not being able to compete with big business’s ability to sell for less and the consumer’s perception that they can get it cheaper at the big box store and that it will be in business a lot longer than the small local operator, the deck seems to stacked against small business.  You may wonder what all this has to do with ethics.  For we consumers, there are some fundamental issues that we control.  Who will we support? Are we willing to support local small businesses, even when prices may be more than at the big box?  Small business needs to do its part by being more customers focused and offer something that big businesses can’t always add and that’s relationships with the customer.    Many people, particularly in smaller communities around the country are answering this question by coming down on the side of home grown businesses. They question the consequences of having the Wal Mart come into their town that undercuts local merchants that result in Main St. becoming a ghost town? In a city like Houston more often than not, we don’t have the same relationship with small businesses that are available to small town dwellers.  It’s just easier to go to the national company rather than seeking out a local business.   . 

 I believe that we should encourage people to start small businesses and for our communities to enhance the potential of these job creating engines.  So, my suggestion to us all is to support our local small businesses and support regulations that will enhance those business persons efforts. 

 What small businesses do you support?


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Is My Bonus too Big?

2 03 2010

Over the past year we’ve all been inundated with articles about large executive compensation packages and in particular about compensation packages to executives in companies that received bail out money from the government.  And this at a time when those same companies were laying off thousands of lower level employees to cut expenses.  Of the eight banks bailed out, Citigroup, Inc.  seems to be the most beleaguered and along with Goldman Sachs and AIG has received the most criticism for their high executive compensation packages.  One of the major arguments in favor of these high salaries and bonuses is that in order to keep good talent you have to pay high salaries.  Some might say and have said that if these are the best minds to run the business, that American business and in particular banking is in big trouble.  The disparity between the top and lower level Citi employees is huge and the anger among the rank and file is well documented.  A blog run by Indeed, Inc., an executive employment website documents numerous postings about Citigroup’s wage levels.  Here’s just one:

 “A Citigroup recruiter called me for a  SENIOR Accountant position @ Citigroup. I was told that the position maxed out @ $35k. For a SENIOR level position. I would hate to see what they pay their entry level people.”   

 From Zacks investment research           “Citigroup Inc.  may cap cash bonuses for 2009 at below $100,000. The 2009 bonus pool at the company is expected to be similar to the 2008 level, which was low compared to the other years. Citi may pay a large part of the bankers’ and traders’ bonuses in stock that cannot be sold for a number of years.

Citi may pay up to 40% of bonuses in the form of deferred cash and stock and the balance in the form of non-deferred cash and IOUs, which will turn to common stock in April.

Currently, Citi is working out the details of its bonus plan. Recently, New York Attorney General Andrew Cuomo asked Citi and 7 other of the largest banks in the nation that received significant federal aid under the Troubled Asset Relief Program (TARP) to provide information on the amount of 2009 bonus packages and their structure. Cuomo also asked the banks to explain the effect the bonus pools would have had if the banks had not received the TARP funds.

 According to Cuomo, the full disclosure and transparency of the bonus information are essential as recent government actions have given rise to public accountability issues, and TARP banks are struggling with these actions.

Citi received $45 billion in bailout money from the TARP at the height of the credit crisis. Later, around $25 billion of that was converted into common stock, representing nearly 34% of its stake held by taxpayers. The company repaid the remaining $20 billion in bailout money in December 2009, freeing the obligatory pay restrictions on its key executives.

  Citi’s plan to cap cash bonuses is to save the bank from people’s fury over the TARP banks’ 2009 bonus plans. However, the bank says may still find it difficult to keep its top employees.”

 From Reuters      “Regulators, lawmakers, and others are trying to determine how changing compensation packages might reduce the chances of future financial meltdowns. The Federal Deposit Insurance Corp is considering charging lower rates for deposit insurance to banks with pay practices that it deems superior.

According to a July report from New York Attorney General Andrew Cuomo, Citigroup as a whole paid $5.3 billion of bonuses for 2008.

 Officials at rival companies told Reuters that Citigroup employees will essentially receive at least 60 percent of their bonuses in cash or stock that can quickly be sold. That level is high compared to some rivals, which could help the bank retain employees.  But some Citigroup employees groused at the relatively low portion of the bonus that will come in cash.

 Loren Steffy in the February 26 Houston Chronicle reports on executive pay for the General Motors Ceo, Ed Whitacre and past interim CEO Fritz Henderson.  Whitacre’s package includes $1.7million a year plus $7million in stock.  Fritz Henderson who for all practical purposes was fired is being given a $60,000. per month consulting agreement plus an expense account.  He is required to work at least 20 hours a month on the job.  Steffy suggests that Whitacre take the job for $1. per year since he received $158million from AT&T when he retired.  The interest on the $158million is about four times the $1.7million he’s receiving now.  By contrast Ford CEO Alan Mulally agreed to accept a $1. salary if Ford needed a federal bailout.  That was not necessary and Ford has gained market share and is expected to soon be in the black.  Mulally’s salary is slightly more than Whitacre’s at $2 million.  Last year GM received about $50 billion in bailout.  And as a result of that bailout you and I are now Whitacre’s employer. 

The media, the public, government regulators and congress are going through their hand wringing dance asking what should we be doing with all the bad guys.  Much of what has happened in the past few years was a long time in coming.  Questions of whether employment contracts should be honored in companies that are either bankrupt or being kept afloat to keep from going bankrupt are being used as a defense of big severance packages.  Arguments about high paid executives going elsewhere if they aren’t paid huge pay packages seems a bit contrived.  Where will they go?  Hedge funds which have shut down over 200 shops in the last two years?  Or, Europe which hasn’t had the bottom fall out yet?  Probably the best place for many of them to get employment would be with lobbyists who deal with the Washington bureaucrats, regulators and politicians who will probably not make any substantive punitive changes except as it may affect those companies and executives who played the game ethically and by the rules. 

My observation is that most relational issues such as this begin as ethical issues and because a minority acts unethically, new laws and regulations are passed in order to close loopholes or deal with unintended consequences.  But the sad truth is that those that want to circumvent the law will find ways to do so, and in so doing will effect the ability of the rest of us to carry on ethical business dealings.


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Confronting the Shadow Side

10 11 2009

06pDichotomy75

In the last year Americans have been appalled and angered by the actions of some on Wall Street.  But the anger is not held exclusively for Wall Street.  Washington and our legislature and agencies charged with the job of protecting persons’ life savings have also been viewed as culpable.  It’s as if our ethics and morality have been thrown to the wind and the forces of greed, ineptitude and incompetence have taken over.  And currently, to get out of the mess, we have to put our hope and faith in many of the same people who got us there in the first place.  As I write, it seems that most of those who were responsible for the financial debacle will go unpunished and in fact will come out whole and still in power.  There are a few exceptions to this such as Bernie Madoff and Allen Stanford, but they seem to be the exception.     

            Add to the mix, our need to overhaul healthcare, environmental concerns, education, immigration, the wars, energy independence, and a host of other important national and international issues and it’s no wonder that the average American is angry and has lost faith in both business and government. It’s as if we either don’t know the difference between good and evil or that we just don’t care. The elections of 2008 gave President Barack Obama and the Democratic congress a mandate to bring about change.  The President talked about a new age of bipartisanship and cooperation to change the way Washington did business.  To date, most of his initiatives have been met with petty bickering and political posturing with Washington and the average American more conflicted and angry than ever.  The forces of the Free market economy and those seeking more governmental involvement in every phase of human life and commerce, are more conflicted than ever as each seeks to carve out its territorial interests.  Some believe that more laws and more restrictions are the answer while others believe that less governmental intervention and more personal freedom is the answer. 

            Even in our churches there is rancor and discontent. Whether it’s the belief by many that the Church today is irrelevant to their lives or the ongoing conflicts over inerrancy, homosexuality, and abortion, the Church’s voice is often narrow and intolerant.  So, is there no answer to our plight? 

            I think there is, if we are willing to confront our shadow side and make a continuing assessment of our relationship with that shadow side and our relationship with God.

In his compilation on ethics, Dietrich Bonheoffer states that in humanity’s decision to know the difference in good and evil (through the Fall), the results is separation from God.  In Gen 3: 22 it says, “The man is become as one of us, to know good and evil.” “ In knowing good and evil he knows what only the origin, God himself, can know and ought to know.” (Bonheoffer)  We have separated ourselves from the Source.   Bonheoffer goes on to say, “the good and evil that humanity knows are not the good and evil of God but good and evil against God.  They are good and evil of man’s own choosing, in opposition to the eternal election of God.  In becoming like God, man has become a god against God.”

            When we dig deeper, we see that this is a trait that we all have and more often than not it hides itself in our psyche in the forms of denial, grandiosity, and self delusion.  Paul says in Romans 7: 18-20, “For I have the desire to do what is good, but I cannot carry it out.  For what I do is not the good I want to do; no, the evil I do not want to do—this I keep on doing.  Now if I do what I do not want to do, it is no longer I who do it, but it is sin living in me that does it.”   We just don’t think that deeply about it.  In today’s permissiveness, not many persons would see themselves as Paul did.  There are some good reasons for not sharing Paul’s feelings, since historically as Christians we have seen the overwhelming negative effects of religious guilt.  Today we see God, if we believe at all, only as a positive force and the creator of love.  These are all part of God’s nature, but the God of the scriptures also warns us to be conscious of the shadow side and that our disobedience of His law has consequences.  These are not consequences that a capricious God inflicts upon us, but the consequences of God’s natural law.

            It may be that what we continue to see in the unethical and greedy behaviors of persons in business, politics and all other areas of life, only reflect this permissiveness and assent to self will.   It also reflects our western idea of individualism and self reliance; that we are the masters of our fate and destiny.  Our beliefs in God also often reflect our prejudices and will to power.  We twist our belief system into thinking that if God is a part of the equation, it is us who really influence God’s actions through our belief that God is on our side, even though we may be imposing our self will on Him. 

            The question arises, if we admit our frailties and separation, won’t we be immobilized and guilt ridden to the point of inaction and self recrimination?   For most this is only a fleeting thought.  Too much navel gazing can get one in trouble.  In today’s world, not too many people are doing much navel gazing.  Even though many professions such as attorneys, engineers, doctors, psychologists, CPA’s and corporations are now requiring that members take periodic ethics courses, secularism tends to be ethically sterile.  Professional standards for ethical behavior are a step in the right direction, but more is required.  Our society relies heavily on secular laws that have become so complicated that it is almost impossible to interpret them without an army of lawyers.  In making laws so complex, it makes for whole industries that flourish on interpreting and finding ways to bypass those laws.  Just one current example is the over two thousand page proposed healthcare bill.  And no matter how many laws we pass some people will believe they are above the law.

But there is another aspect of the shadow side.  That is the creative nature that is within us all.  Humans have the capacity to turn their destructive and grandiose attributes into positive actions with positive outcomes for one another.  Our hidden motives may still be out of self interest, but the results can be different.  A person may work for a better education system, because they not only want others to be able to flourish, but at our core we still see that to have an educated populace and workforce, that it is in our best self interest.  Selfish or selfless?  Who is to say?  

There are many individuals, corporations, non-profits, and congregations that carry out their mission with integrity and compassion.  A business person can have as a goal of making a profit but also use their work to benefit the community at large, employees, and the customers served.  There are also many dedicated political and community leaders that give of themselves unselfishly.  Their dedication should be given proper recognition. 

            So how do we confront this shadow side?  How do we unleash the creative positive side of the shadow side?  First, the process is ongoing and one that we work on all our lives. We have to start by recognizing the existence of the shadow side.  And what is the shadow side and why is it so difficult for us to acknowledge its existence and then do something to change it?  Carl Jung believed that the shadow side was that part of us that we were afraid of.  It encompasses those traits and attitudes within ourselves that we do not want to acknowledge.  It’s that part of us that we want to avoid that exposes our deepest fears and inadequacy and our lack of meaning.  But it is also those creative qualities that have been responsible for human progress.  What then motivates us to confront the shadow side and to use those creative forces positively?   We have to conclude that what we’re doing and how we’re living is not the answer to happiness and we want our lives to be different.  We want to connect to the emptiness inside and the lack of meaningful human contact as well as a desire for transcendence.

 There are at least two primary ways that humans deal with their environment.  One is to live a life based only on self interest.   What’s in it for me?  How can I maximize my positive feelings both physical and emotional?  And the other way is to live ones life with compassion and concern for others and all of creation.  This is the message of the prophets and the messiahs.  But even this is done out of self interest.  I give of myself and risk being hurt emotionally and physically for the greater good or for a more meaningful existence.   This dichotomy is always held in tension.  The recognition that this tension exists is the first step in confronting the shadow side.  To deny it or to try and suppress it like Paul will only make it worse.  But acknowledge its existence, we must.  Ultimately, in order to be whole we must come to love the shadow side as being part of us and that it is a powerful source of creativity.     As a Christian, I believe there is hope and there is a way to confront our shadow side with a degree of honesty.  I say a degree of honesty because the shadow side is always trying to hide itself.  Even though I’m not much for formulas the twelve steps of AA is a system that has helped millions of people around the world. Instead of alcohol, insert the words “shadow side” or whatever negative influences dominate our lives.

1.) We admitted we were powerless over alcohol–that our lives had become unmanageable.

2.) Came to believe that a Power greater than ourselves could restore us to sanity.

3.) Made a decision to turn our will and our lives over to the care of God as we understood Him.

4.) Made a searching and fearless moral inventory of ourselves.

5.) Admitted to God, to ourselves and to another human being the exact nature of our wrongs.

6.) Were entirely ready to have God remove all these defects of character.

7.) Humbly asked Him to remove our shortcomings.

8.) Made a list of all persons we had harmed, and became willing to make amends to them all.

9.) Made direct amends to such people wherever possible, except when to do so would injure them or others.

10.) Continued to take personal inventory and when we were wrong promptly admitted it.

11.) Sought through prayer and meditation to improve our conscious contact with God as we understood Him, praying only for knowledge of His will for us and the power to carry that out.

12.) Having had a spiritual awakening as the result of these steps, we tried to carry this message to alcoholics, and to practice these principles in all our affairs.

            This process of confrontation, confession, self evaluation and the desire and act of change can make a difference in the way we see ourselves, our relationships, and God as the ultimate authority in our lives and in the world.  Changing the world begins by changing ourselves and by holding ourselves accountable for our actions.  Christians are called to love neighbor as one self and part of love of self is loving even our shadow side.  Only then can we turn outward and require accountability from others.


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