"The greatness and the genuine trait of your thought and writings lie on the fact that you positively and interestingly make use of philosophical thoughts and thoughtfulness in order to deeply and concretely cogitate about America's social issues. . . . This does not mean that your thought is reducible to your era: your thought, being inspired by issues characterizing your era . . . , overcomes your era and will still likely be up to date even after your era, for future generations." Bruno Valentin

Saturday, March 18, 2017

A Religious Stockholder-Test for Wells Fargo: Confronting Mediocre Accountability

Orienting executive compensation to accountability is easier said than done. For example, it might be supposed that the cause of accountability was aptly served by John Stumpf’s forfeit of $41 million in unvested stock when he resigned under pressure as Wells Fargo’s CEO because of the bank’s systemic overzealousness in signing customers up for unwanted services. Unfortunately, he “realized pretax earnings of more than $83 million by exercising vested stock options, amassed over his 34 years at the bank, and receiving payouts on certain stock awards.”[1] In other words, the man who presided over unethical business practices at the expense of customers received double that which he was forfeiting. How can accountability have any meaning against $83 million? This figure connotes reward rather than punishment. Tim Sloan, who succeeded Stumpf as the bank’s CEO, received compensation in 2016 of $13, up from the $11 million in 2015. Interestingly, it may have been religion to the rescue.
 Where accountability is so lapsed concerning even such a sordid organizational culture as that of Wells Fargo, it is interesting that the Sisters of St. Francis of Philadelphia were taking an active role as stockholder activists. The sisters wanted the bankers to commit to “real, systemic change in culture, ethics, values, and financial sustainability,” according to Sister Nora Nash, who is the order’s director of corporate social responsibility.[2] With the secular business ethicists presumably on the sideline, an order of nuns had come out swinging. The nuns even had a proposal to be voted on at the 2017 shareholder meeting demanding a full accounting on the root causes of the bank’s fraudulent activity, and the steps being taken to prevent taking advantage of customers in the future. Given the bank’s own lack of accountability with respect to executive compensation, I’m not sure that an internal investigation even by the bank’s board could be trusted. To be sure, the bank had fired four senior executives—including the former chief risk officer of the bank’s retail banking division and two regional presidents—who had been accused of wrongdoing. Even so, changing a company’s culture—especially one as cut-throat as Wells Fargo’s—is difficult at best.
Perhaps what the bankers really needed were regular visits from the nuns volunteering their time to see that the bank’s wealth is rightly used. A manager from another major bank said at the time of the scandal that it was well-known in the industry that "when you go to work for Wells Fargo, you know you are selling your soul to the devil." Perhaps it is no accident that the stockholder activists would be nuns, for they doubtless have prayerful radar for that sort of thing. Getting the lost back to right use of wealth would be a step in the right direction, for right use is two degrees of separation from using wealth in ways that harm other people.
When profit-seeking and wealth began to be accepted by theologians in the context of the commercial revolution, the legitimacy was conditional on right use.[3] Aquinas’ allowance of moderate profit on trade, for instance, was predicated on the assumption that the profit would not be subsequently used to hurt people. Such a use would violate Jesus’ notion of self-giving neighbor love. Similarly, the theologians during the Italian Renaissance stressed the virtues of liberality and munificence in the use of wealth, as opposed to self-serving uses or even hoarding. From this standpoint, $83 million is difficult to justify.
So the nuns could have added a second proposal—one that would reduce executive compensation. Lest it be supposed that talent would flee or avoid the bank, consider what sort of “talent” $83 million had bought. Turning an organization based on the sin of usury—which is based on the taking advantage of others instead of helping them (the original purpose of lending!)—to right use would be right and proper religious activity for the sisters, as secular ethicists look on from the sidelines.

[1] Stacy Cowley, “Wells Fargo Leaders Reaped Lavish Pay Even as Account Scandal Unfolded,” The New York Times, March 16, 2017.
[2] Ibid.
[3] Skip Worden, God’s Gold (Seattle, WA: Amazon, 2016)

Friday, March 3, 2017

Uber Tricking Law Enforcement: An Unethical Corporate Culture Externalized

A company with a culture in which in-fighting andheavy-handed treatment of subordinates are not only tolerated, but also constitute the norm can have good financials. With operations in more than 70 countries and a valuation of close to $70 billion in 2017, Uber could be said to be a tough, but successful company. Yet the psychological boundary-problems that lie behind such an organizational culture can easily be projected externally to infect bilateral relations with stakeholders. In the case of Uber, those stakeholders include municipal law enforcement. Even more than as manifested within the company, the external foray demonstrates just how presumptuous “boundary issues” are. Such presumption can blind even upper-level managers to just how much their company has overstep. In reading this essay on Uber’s program to evade law enforcement, you may be struck by the sheer denial in the company.

“Uber has long flouted laws and regulations to gain an edge against entrenched transportation providers.”[1] This statement alone suggests a rather sordid mentality—a sense of entitlement. The evasion included “a worldwide program to deceive authorities in markets where its low-cost ride-hailing service was being resisted by law enforcement, or in some instances, had been outright banned.”[2] In particular, the company began using its Greyball (think “blackball”) app as early as 2014 as part of a broader program called VTOS “to identify and sidestep authorities in places where regulators said the company was breaking the law goes further in skirting ethical lines—and potentially legal ones, too.”[3] One method involved drawing a digital perimeter around city officials’ offices on a digital map of the city that Uber monitored. “The company watched which people frequently opened and closed the app . . . around that location, which signified that the user might be associated with city agencies.”[4] Another technique involved looking at the user’s credit card information and whether that card was tied directly to an institution such as a police credit-union. Uber would also search social media profiles. Once a user was tagged, fake digital cars would show up on the app used to hail a car.

In a statement, Uber states, “This program denies ride requests to users who are violating our terms of service—whether that’s people aiming to physically harm drivers, competitors looking to disrupt our operations, or opponents who collude with officials on secret ‘stings’ meant to entrap drivers.”[5] The stings were not meant to entrap drivers; instead, the aim was to catch Uber breaking the law. The company’s emphasis on “opponents” reflects the contentious atmosphere within the company rather than any actual collusion externally. In actuality, Uber’s program was designed to evade law enforcement. To an overreaching mentality, such enforcement is bound to be dismissed rather than accepted.

Put another way, a company that views local law enforcement in such terms (i.e., in collusion with opponents) and goes to such lengths in investigating and tricking city officials is not going to be very tolerant of employees who claim that using the Greyball app “to identify and sidestep authorities in places where regulators said the company was breaking the law” skirts “ethical lines—and potentially legal ones, too.”[6] In other words, the aggressive internal culture not only mirrors, but also protects the external ethical over-reaches. “Inside Uber, some [employees] who knew about the VTOS program and how the Greyball tool was being used were troubled by it.”[7] Yet they feared retaliation. The culture in which in-fighting and the heavy use of power have been the norm could not have been irrelevant in this regard. It is not surprising that some of those employees provided documents to The New York Times rather than trying to navigate through the sordid organizational culture. Hence we have a glimpse of how an unethical organizational culture characterized by aggression can be associated with the unethical treatment of stakeholders, which in turn can not bode well in terms of long-term financial performance.

[1] Mike Isaac, “How Uber Used Secret Greyball Tool to Deceive Authorities Worldwide,” The New York Times, March 3, 2017.
[2] Ibid.
[3] Ibid.
[4] Ibid.
[5] Ibid.
[6] Ibid.
[7] Ibid.