The Ethical Barometer

Under the Grand Slam rules in tennis, coaching during the match is prohibited (ATP Code). It is a Code violation, and for the first code violation, players get a warning. Under those same rules, racket abuse is also prohibited.

i) Players shall not violently, dangerously or with anger hit, kick or throw a
racquet or other equipment within the precincts of the tournament site.
For purposes of this rule, abuse of racquets or equipment is defined as
intentionally, dangerously and violently destroying or damaging racquets
or equipment or intentionally and violently hitting the net, court, umpire’s
chair or other fixture during a match out of anger or frustration.

Racquet abuse could get a warning as well, but if it is the second code violation by a player during a match, the second violation would be a point losss.

Under the Code, Players may disagree with officials:

Responsible expressions of legitimate disagreement with ATP policies are not prohibited. However, public comments that one of the stated persons above knows, or should reasonably know, will harm the reputation or financial best interests of a tournament, player, sponsor, official or ATP are expressly covered by this section.

However, disagreement by players has its limits. For example, it is a Code violation for a player to engage in verbal abuse. Verbal abuse is defined under the code as “s statement about an official, opponent, sponsor, spectator, or other person that implies dishonesty or is derogatory, insulting, or otherwise abusive.”

For a first violation, players could receive a warning. For a second violation, players could lose a point. For a third violation in the same match, the penalty could be the loss of one game, which could mean the loss of a match.

In 2016, Carlos Ramos, a tennis umpire, issued a code violation to Andy Murray because he believed Mr. Murray had called him a “stupid umpire.” Murray responded that he had said, “Stupid umpiring,” and not “stupid umpire.” “Stupid” whether coupled with with “umpire” or “umpiring” is derogatory.

Serena Williams called Carlos Ramos a “liar” and a “thief” and also received a code violation. “Liar” and “thief” do not imply dishonesty. They are labels of dishonesty. She was given a one-game penalty, which Ms. Williams decried as unfair and an example of male players getting away with more than what she did. Actually, male players have been known to scream at refs, but they were not calling umpires “liars” and “thieves.” In fact, most penalties are assessed against men. As for the level of the penalties, it all depends on the number of the player’s violations per match. By the third code violation in the same match, an umpire could impose a warning, a one-point loss, or a one-game penalty. The application is not unfair. Sometimes cries of unfairness have resulted because of a lack of accurate information. Ms. Williams is comparing apples and oranges. Facts prove the umpire was correct and was just following the rules. New concept in this era.

The chief medical officer at the Memorial Sloan Kettering Cancer Center in New York City, Dr. Jose Baselga, forgot to disclose the millions of dollars that he received from Roche and Bristol-Myers Squibb and others for his work on cancer therapies and break-through drugs, a requirement of the American Association for Cancer Research. In addition, the compensation and relationships with the drug companies were not disclosed in research articles published in Cancer Discovery. Also, Dr. Baselga did not make the disclosures when he served as editor-in-chief of Cancer Discovery. Charles Ornstein and Katie Thomas, “A Top Doctor Didn’t Disclose Corporate Ties,” New York Times, September 9, 2018, p. A1.

In conferences in 2017 and 2018, Dr. Baselga put positive spins on Roche-sponsored clinical trials without disclosing his Roche ties and compensation. Many physicians considered the trials to be disappointments. Dr. Baselga says that his relationships were public knowledge. And he added what all those whose conflicts are revealed: “While I have been inconsistent with disclosures and acknowledge that fact, that is a far cry from compromising my responsibilities as a physician, as a scientist and as a clinical leader.” In other words, “How could you think that I would ever compromise my integrity as a researcher?” I will give Dr. Baselga that he has more integrity on his research than any physician who has ever walked the earth. That assumption arguendo changes nothing. There was still a conflict, and the only remedies for a conflict are not doing the conduct or disclosure BEFORE the newspapers publish it. The disclosures in the case of research are for us and others so that we can evaluate the design, conduct, and conclusions of the research GIVEN the conflicts. But, we need to know that before we read and analyze, not after.

A Sloan Kettering spokeswoman said that Dr. Baselga had made all the required disclosures about his financial ties to the hospital. However, the spokeswoman also noted that it was Dr. Baselga’s responsibility to make the proper disclosures to the 17 journals in which his work has been published sans those disclosures.

The CEO of Sloan Kettering, Dr. Craig B. Thompson settled lawsuits brought by the University of Pennsylvania and an affiliated research center over a disputed allegation that he hid research conducted while he was at the University of Pennsylvania in order to start a new company on the basis of that research and not have to share the earnings.

When asked about the extensive relationships between physicians at Sloan Kettering and the drug companies, the spokeswoman noted that Sloan Kettering cannot fulfill its charitable mission without working closely with corporations.

The journals noted that they do not have the resources to check on author disclosures and that they rely on “trust and integrity.” Don’t we all? ‘Tis is a shame we simply no longer can.

The Grand Slam prohibits coaching from the stands to players on the court. In Saturday’s women’s finals match between Naomi Osaka and Serena Williams, the chair empire, Carlos Ramos, issued a warning to Ms. Williams because he had spotted her coach, Patrick Mouratoglou, making hand gestures from the stands. Mr. Ramos believed the hand signals to be coaching, something that Mr. Mouratoglou later admitted to be true.

However, Ms. Williams saw things differently. She was upset and told Mr. Ramos, “I don’t cheat to win. I’d rather lose.” Her behavior disintegrated — racket abuse penalty (loss of a point), demands by Ms. Williams that Mr. Ramos apologize and announce that she was not being coached, then Ms. Williams calling Mr. Ramos a “thief,” which then resulted in a penalty of a lost game. Ms. Williams continued to argue with Mr. Ramos, the crowd got into booing, Ms. Osaka won, and the ceremony was tense. To her credit, Ms. Williams stepped in to stop the crowd’s booing and to offer her congratulations to Ms. Osaka.

We are all left with sad hearts. There are now cries of sexism over the penalties for Ms. Williams because, as she has argued, male players are given more latitude. However, the bottom line is that the call on coaching and an admission of its truth (a truth that emerged after the match with the coach’s self-admission) might have halted the inexorable march to anger, ruined rackets, confrontations, and a bittersweet victory for Ms. Osaka. This match was not a study in sportsmanship. This was a study in the truth percolating. When coach and player cannot keep their stories straight, the chair empire is correct in calling it as he saw it.

For those of you following the bouncing Elon, here’s a brief summary of his activities:

1. Tesla met its production goals of 5,000 S3 vehicles per week in June by adding a third production line in a tent, but has not met the 5,000 production goal since.
2. On August 7, 2018, Musk tweeted (always a good way to announce a stock-purchase plan) that he had secured funding for taking Tesla private at $420 share. The Twitter/weed subculture noted that 420 is code for marijuana.
3. The SEC announced an investigation because, well, those kinds of announcements about going private can affect markets.
4. Once the Tesla board got involved, Musk decided in mid-August there were too many problems with going public.
5. The SEC is still investigating.
6. Tesla’s chief accounting officer then resigns — suddenly, last week. He had just had his first day on August 6 and noted that “the Tesla culture proved to be a bad fit.” This kind of activity also tends to move markets.
7. Elon Musk showed up on a podcast with comedian Joe Rogan, drinking whiskey, and then smoking pot. With each assuring the other that smoking pot was “legal.”
8. Not announced yet — the Air Force will need to catch up on the marijuana — it may be legal in some states, but for security clearance, necessary for the work SpaceX does for the federal government, Mr. Musk needs to be drug-free, including marijuana. There is a notice on the security clearance form that reminds applicants for clearance that legality in the states makes absolutely no difference to the federal government. Marijuana is a no-no for federal contractors.

Erratic behavior, defiance, and a company sinking. Classic entrepreneur with a big vision who cannot do nuts-and-bolts of the day-to-day drudgery of running a business within legal and ethical boundaries. The pattern is always the same. Think Uber, American Apparel, and a host of Silicon Valley firms grappling with visionary CEOs who buck the system to develop their products and then continue bucking the system as they try to operate a business — unless they are reined in. That’s a board job, but the vision of strong directors who take charge is still missing and inaction has its effects. Tesla’s stock is down to $260 per share. The SEC has its case made.

There comes a point when those in charge at Wells must pause and wonder, “What’s up with this place?” As the bank trots through its rebirth (if the ads and billboards accurately reflect intentions), government sanctions, and board members ousted by the Fed, new issues keep popping up hither and yon. The hither this week was the termination of more than a dozen employees in its investment bank for altering time stamps on emailed receipts for their dinner.

The Wells policy on dinner reimbursement permits employees to order in food and be reimbursed if they are staying late to work on deals or with clients. Some employees were regularly placing orders for dinner at times earlier than the 6:30 PM time that the earliest the policy permitted for reimbursed evening meals. Those employees who altered the time stamps were terminated.

The irony is that some at Wells are questioning whether termination was too harsh. If this type of activity is not a line-crosser that is clear to employees, there is a cultural problem. That there is disagreement indicates a bigger cultural issue. If you are willing to falsify records in order to get free meals, imagine what you would do to meet your numbers and goals for your bonus. Why, you might be tempted to make up accounts or improperly charge customers for services or keep fees that should be returned to your portfolio customers. Oh, wait — employees at Wells did all those things and more, according to pending investigations.

There is something deep within the Wells culture that has not made its way to surface and has not yet been addressed. Sometimes employees do engage in behaviors such as these that make no sense given their employer’s regulatory status. However, when they do such things it generally means, as with VW:

1. The compliance function is still not operating well or is not trusted.
2. The management team gives lip service to its commitment to fly right, but lives in denial, and employees see it.
3. Employees and management believe that they just need to get through the investigations and oversight and then they can go back to the way things were.
4. Employees believe that they are doing and were doing nothing different from what other banks were and are doing.

Sometimes the root cause of a troubled ethical culture is a combination of these issues (and many others, more complex than these). Regardless, Wells needs to get at what is really going on in its culture. If at least 12 employees in your investment bank are falsifying documents, more yon events will be percolating to the surface.

Headline, New York Times, top-fold, p. A1. August 30, 2018. The story beneath it describes anti-Trump symbolism in Senator McCain’s planning for his funeral.

There are some of us who, knowing that the last word rests with someone waiting beyond the surly bonds with our books of life, would prefer that our post-mortem headlines reflect character that rose above the pettiness of insults, egos, and vindictiveness:

“McCain Gracious and Inclusive to the End”

Somehow being a last-word freak is not the best legacy, particularly because its so detracts from Senator McCain’s other accomplishments.

Larry D. Thompson, the federal monitor for VW, issued an interim report on VW’s progress. Mr. Thompson’s April report indicated that VW had not taken sufficient action to hold executives accountable and reform its culture. Since that report, several executives have been charged in the German courts. The continuing problem? Despite the arrests, many of the same executives are still at VW and, they are, living in denial.

Cultures cannot change when those who were in charge when the illegal conduct occurred remain in charge. ‘Tis an interesting phenomenon in organizations, post-ethical lapses. When executives remain in place, they see themselves as victims of overzealous regulators. Their view is that they just need to survive the consent decree, the deferred prosecution agreement, the sanctions, and the monitor. They can then return to business as usual. They are never the problem. They are the victims.

With this management issue, VW has a long way to go. Mr. Thompson reached the same conclusion. As one VW board member put it, going “from “shock to shame to change” is one tough slog. Yes, yes it is.

The Freedom From Religion Foundation (a group of agnostics and atheists) had a full-page ad in the New York Times today (August 28, 2018, p.A5). The title line is, “It’s Time to Consider Quitting the Catholic Church.” The remainder of the ad focuses on the recent whistleblower letter on Pope Francis’s alleged knowledge and excerpts from the Pennsylvania grand jury report on the predatory conduct of 300 priests and 1,000+ victims. A cartoon shows a priest reading a newspaper with the headline, “Pedophilia At Michigan State,” and the priest saying, “Amateurs.”

The vultures do circle when there is trouble.

These sad, similar stories of suffering in all types of organizations, from corporations to universities to churches to sports organizations to Hollywood cliques to television networks with their inactions, inadequacies, and insensitivity have been with us for too long. Have we not seen enough of a pattern to understand the patterns? Have we learned that it is the responsibility of every member, employee, coach, leader, an bystander to speak up until it stops?

Joe Paterno, former head football coach at Penn State. Michigan State University former gymnastics coach, Kathie Klages. Ohio State head football coach, Urban Meyer. The late Coach Paterno was told about the behaviors of now convicted child molester, Jerry Sandusky, and aware of reports made by others about that same behavior. Kathy Klages retired last year after 27 years at Michigan State when she was accused of trying to cover up allegations of sexual abuse of young female gymnasts by then team physician, Lawrence G. Nassar. Nassar is in prison for 40-175 years and Ms. Klages was just charged with lying to authorities about her knowledge of Nassar’s crimes. Urban Meyer, according to a $500,000 investigative report Ohio State’s Board of Trustees commissioned, had a blind spot when it came to the debts, the spousal abuse allegations, the affair with a football department secretary, and a rehab stint of his assistant coach, Zach Smith. And the strip bar trips only got a warning. Nothing seemed to faze the coach; taking action found him frozen. Mr. Meyer ran a program in which no one felt comfortable enough to report Smith’s participation in lewd sexual activities at Ohio State facilities. And the investigators are not sure whether Coach Meyer deliberately deleted texts from his phone.

Think about this — these are coaches in the rugged world of college sports. Performance is everything, and their jobs are on the line with every game, meet, and championship. These are the people who are demanding disciplinarians. However, when it came to taking action to stop behavior that was hurting deeply so many people inside and outside their programs, they choked.

There remains one additional puzzle in all of this: Why hasn’t every coach around the country taken a hard look at their own programs, personnel, and conduct, and stood up and taken the heat, the consequences, and the burden of saving those who are powerless and abused? Well, that would be because a three-game suspension doesn’t sting as much. And when your record is stripped but then restored and there is still a day at the stadium that honors you, why bother? Full retirement is not a bad result for shielding an abuser. Humans respond to the pain that is in front of them. Given our laxity in dishing up consequences, why would they not remain sullen and mute? We share the blame for our tolerance of the outrageous and failure to demand consequences.

Asia Argento, actress and director, was one of the first Hollywood women to accuse producer Harvey Weinstein of sexual assault. Following her October 2017 revelations about Mr. Weinstein,a young actor maintains that she arranged for payments totaling $380,000 to him because he apparently reminded her that she assaulted him in a hotel room in California when he was 17 years and 2 months old. Age of consent in California is 18. The lad, now 22, had played Ms. Argento’s son in a 2004 film.

Because California does not permit nondisclosure agreements in contracts involving these kinds of activities, the lad has taken the payments and still spoken out, including sharing a picture of the two together in bed. Whatever objectionable types of activities Hollywood depicts in its movies these days pale in comparison to what is going on in their lives. But the film noir of the 1940s got it right — payoffs for keeping quiet almost never work. The shake-down continues or they sing. Hollywood always had the script on this stuff.

It seems that some folks were asleep during the mortgage crisis, thus failing to internalize the risk of mortgage fraud. This time, the alleged frauds involve commercial mortgage loans for rental properties. In order to pump up the perceptions of their income stream, the owners of rental properties who were seeking mortgages on those properties made their occupancy rates look higher than they really were. By placing mats outside apartment doors (along with pairs of shoes) and placing radios playing music inside apartments, and even hiring women in apartments turn away inspectors with stories of “sleeping boyfriends,” the owners were able to secure substantial mortgages. Their staged Potemkin villages were just the ticket for securing high-dollar mortgages, which were, of course, then securitized. Lo and behold, we are back in 2006 once again.

Dodd-Frank imposed income verification requirements on consumer loans, but the statute missed multifamily unit mortgages. One expert in the field noted about multi-family unit lending, “All the systems will work fine as long as people are being honest.” Ah, there’s the rub indeed.

Perhaps trust but verify should make its way into commercial lending. We might put it this way — where there are lax processes, creative minds find a way to game those systems. Assume creative minds, and insert verifications to pick up the slack and deter the creative.