The Ethical Barometer

Let’s recap. Wells Fargo has experienced the following events in the past 12 months:

In September 2016, it uncovered 2.1 fake or unauthorized account set up by employees pursuant to a sales goal program (account reps were using fictitious names, opening accounts for relatives and then having them closed once the sales goals were met, and, in an old fashioned twist, just opening accounts up in customers’ names without the customers knowing

Shortly thereafter, Wells fired 5,300 employees, all whilst proclaiming that the sacked employees simply did not follow the bank’s motto of putting the customer first.

Some months later, mortgage repayment terms were changed without authorization in bankruptcies of Wells loan customers.

Two months ago, Wells disclosed that 800,000 loan customers had auto insurance they had not authorized.

Last week Wells announced that it was wrong on that number of unauthorized accounts, and added another 1.4 million to the original 2.1 figure.

The third-party investigation that uncovered the problems was an important step for Wells. And the voluntary disclosure was a big step as well. However, there comes a point when credibility, trust, and competency are in doubt. The steady drip, drip, drip leaves the impression that the bank still does not have its arm around one thing: What kind of culture do we have that these behaviors keep cropping up? And one important question has to be answered: Why would our employees believe that what they have done is acceptable behavior at Wells Fargo? Until the bank’s leadership and board know the answer to that question, its full-page apologies, its promises to do better, and its assurances that things are under control begin to look comical. The bank that can’t shoot straight. Wells stock has remained flat for a year. Chase, Bank of America, and Citigroup have an average gain of 40%. And let’s not even mention what has happened to new business at Wells. That is one ugly set of figures.

Wells is not there yet. A culture study, a strategic revamp, and different incentive plans are needed. Until the board comes to grips with the stories about employee actions and what they were doing (and apparently still doing) they cannot get the bank back on track. Answer that question, and you move forward. Ignore it, and the drips will continue.

Gerard Baker, the editor in chief of the Wall Street Journal sent an e-mail to the staff of the Journal on their coverage of President Trump. Mr. Baker described the coverage of the president’s trip to Phoenix as overly opinionated, “Sorry. This is commentary dressed up as news reporting.” He then added, “Could we please just stick to reporting what he said rather than packaging it in exegesis and selective criticism?”

Robert Bartley, the former editor in chief, would be proud. He took great care to separate the news reporting staff from the opinion staff. Just the facts. Just the facts. We can do our own takes on all things Trump.

Three cheers for Mr. Baker for a stand of journalistic integrity. Feelings about Trump aside, the press is too close to the line of losing credibility because commentary masquerading as reporting have crept in on a daily basis. Now, if he could just convince his colleagues to do the same introspection.

Response to Herman Miller CEO, Max De Pree, from a young employee in Herman Miller’s research department when Mr. De Pree told him that he was thinking about writing a book on leadership and requested his help on editing.

Now, that’s a culture in which employees feel free to speak their minds. Google could learn a few things from Mr. De Pree’s acceptance of criticism from employees. Mr. De Pree died August 8, 2017 at age 92 in his beloved Michigan. RIP, Mr. De Pree, and thanks for your book on leadership that taught us to have covenants with employees, vendors, and customers. Peter Drucker thought that Mr. De Pree had important things to say; he just kept it brief.

Rajat K. Gupta,former Goldman Sachs director, former McKinsey consultant, who was convicted of insider trading for tipping off Raj Rajaratnam (Galleon) about Warren Buffett’s critical $5 billion infusion into Goldman in 2008. Mr. Gupta served a two-year prison sentence, and the Second Circuit has agreed to review his conviction.

His post-prison perspective is incorrect. He tipped off a guy who made a great deal of money on Goldman stock through the use of an inside scoop fed to him by Gupta, who breached his fiduciary duty as a director in so doing. That’s insider trading, with or without a politically ambitious prosecutor and “stupid” juries.

Dr. Carmen A. Puliafito was a heck of a dean at the USC medical school. Under his leadership, the school went up in the rankings and hauled in millions in donations. However, it seems there was some extracurricular activity on the dean’s part. Photos emerged showing Dr. Puliafito lighting a glass pipe for a female companion who was smoking heroin. Then there was the video showing the dean popping ecstasy and saying to the camera,“Thought I’d take an ecstasy before the ball.” School officials were then given a tip that a young woman (age 21 and reportedly a prostitute) who had been partying with the dean at a Pasadena hotel was hospitalized for an overdose. Following the overdose report, Dr. Puliafito resigned as dean to “pursue outside opportunities.” Adam Nagourney and Jennifer Medina, “Scandal Sinks Dean at U.S.C., Shocking a City,” New York Times, July 26, 2017, p. A1. However, he remained on the faculty and continued to see patients.

Once the Los Angeles Times reported on the drug issues, USC’s president issued a statement saying,“. . .it is clear to us now that the university currently has only loosely defined procedures and guidelines for dealing with employee behavior outside the workplace that may be improper or illegal and has the capacity to affect USC. And, presently, the university has very limited capacity to conduct investigations and follow up on leads or anonymous reports of such employee behavior.”

Sometimes we get a report and hope that it goes away. That hope is always ill-placed. If what is reported is true, you have a problem. If it is false, you still have a problem to manage via communications and solid facts. Either way, once the reports and pictures emerged, the only alternative was an investigation. USC has hired a former federal prosecutor to investigate what happened. Now if they could just get the guy off the faculty.

Currently, 47% of high school graduates have an “A” average. In 1998, that figure was 38.9%. Since 1998, the SAT average has dropped from 1026 to 1002 (scale of 1600 points). Brilliant students who can’t take a test? Grade inflation? Teachers trying to be nice to get the young ‘guns into college? Or, should we mention that cheating in high school has been steadily increasing as well.

When all is said and done, for whatever reason, we reach a point where we can’t trust the measurements. The measurements mean nothing. As USA Today noted in covering these trends, “A’s” may be fool’s gold.

On Sunday, July 16, 2017, New York Times reporter Philip Galanes, had his 1 1/2=page interview with Bill Maher and Fran Lebowitz published as a front-page feature in the Sunday Styles section (that is the section with the weddings, goofy stories about weddings, weddings gone wrong, weddings postponed, weddings that involved cabs — you get the idea.

Ms. Lebowitz spoke of her school years and explained, “We said the Lord’s Prayer every morning. The 23rd Psalm was read from the Bible.” Mr. Galanes quickly asked, “Which one is that?” To his credit, Mr. Maher offered, “Yea, though I walk through the valley of the shadow of Death . . . ” And Mr. Galanes then responded, “Seems a bit dark.”

Sad that Mr. Galanes does not even know the Old Testament of the Bible as content that might have some literary value, not to mention offering a little insight into the human soul, Indeed, if Mr. Galanes took a little time to read that 23rd Psalm, he would find, not darkness, but hope:

Yea, though I walk through the valley of the shadow of Death. I will fear no evil: for thou art with me; thy rod and thy staff they comfort me.

6 Surely goodness and mercy shall follow me all the days of my life: and I will dwell in the house of the Lord for ever.

All in all, not bad promises and endings — the point being we are never let alone in dark places. And it would be nice if a national reporter understood that, before, during, and after the interview. The common references we once all knew, and Ms. Lebowitz explained that, are gone. The darkness is in the lack of knowledge about basic religious tenets. You don’t have to believe, but there should be a mild curiosity and, perhaps, respect.

Before the Greek debt crisis, the Greek government’s statistics agency, headed by Andreas Georgiou (yes, his name does end in IOU), manipulated the stats and made the Greek budget deficits smaller than the actually were. Under pressure from the EU, Georgiou changed the Greeks accounting, thus tumbling Greece into a crisis. Oh, what times are these when even the stats guys are under criminal charges.

There were grandiose plans. A full anticorruption effort complete with anticorruption prosecutor, 18 judges to hear corruption cases, and all within one year. Here we are, one year later, and the deadline has come and gone. Lawmakers could not agree on who should be the anticorruption prosecutor. The Senate failed to appoint any of the 18 anticorruption judges. And nearly one-half of the 32 Mexican have not passed any of the local regulations that were to also be part of the effort. Juan Montes, “Mexican Antigraft Efforts Falter,” Wall Street Journal, July 20, 2017, p. A18. https://www.wsj.com/articles/mexicos-anticorruption-efforts-stall-1500483099

The backdrop for all of this planned, albeit unexecuted activity, is that the U.S. will be demanding anticorruption provisions as part of the renegotiation of NAFTA. And, the fact that graft costs the Mexican economy $50 billion annually in lost output (according to the Mexican Institute for Competitiveness) did provide some motivation.

The movement for change started in 2014 when Presidente Pena Nieto had the embarrassing problem of his wife and finance minister purchasing homes on credit from a government contractor, a contractor with a close relationship with el Presidente. Small wonder that 82% of Mexicans believe the current party in charge is corrupt. No one in it is willing to create, implement, or enforce anticorruption laws. There are 352 graft cases, dating back to 2003, awaiting trial in the Senate, and they are taken in chronological order. Former President Javier Duarte, who left office when state auditors found a one-half billion dollar hole in the country’s coffers in 2015, has a long wait for his trial. And without a prosecutor and judges, well, without trials, the corruption might as well just sally forth.

There’s headline you don’t want to see. R. Seth Williams was charged with providing official favors to two businesses in exchange for cash, Caribbean vacations, airline tickets, expensive furniture, a Burberry watch, a Burberry purse for his girlfriend and a Jaguar convertible. In exchange, one business owner got a special badge and access and another received help with security clearance in getting back into the country. The items were not disclosed on the city’s required disclosure forms until Mr. Williams learned that he was under investigation. The judge sent Mr. Williams directly to jail in advance of his sentencing hearing because the judge was “astonished” at the evidence and could not trust that Mr. Williams would show up for sentencing. Pennsylvania lost its attorney general to criminal charges and a representative to 10 years in prison for an illegal $1 million loan to his unsuccessful campaign for mayor. Pennsylvania is still south of the number of corruption convictions in New Jersey and New York, but the high offices held by individuals convicted finds Pennsylvania taking the lead.