The Ethical Barometer

The 13-year-old brutes mocked, taunted, and jeered 69-year-old school bus aide, Karen Klein.  Their profanity would make a longshoreman blush.  For 10 minutes, the “utes” did their worst.  Mrs. Klein sat and took it in silence.  Great shall be her reward.  Thanks to Canadian Max Sidorov, a fund he established now has a cool $380,000 in it.  Originally, Mr. Sidorov intended to raise enough money to give Mrs. Klein a lovely vacation.  Instead, Mrs. Klein will have a lovely retirement.  A pox on the houses that raised the hooligans.  Many blessings and a long life to Mrs. Klein.  The meek do indeed inherit the earth, or at least 380-grand comes close.

The very best information about what’s happening in any organization rests with the employees on the frontline.  If you want to zero in on accounting fraud, pay a visit to the loading dock.  If the employees have a 32-day month that they use for shipping records, well, you have an accounting problem.  And if you want to know if a company used customer money for hedging, go to the back-office employees at MF Global.  Investigators finally did, and lo and behold, they found what they needed.  In the week before MF Global’s bankruptcy, those back-office employees Continue reading →

GM had a little difficulty with an undisclosed conflict of interest.  The company awarded a $600,000 contract to ad agency, Mother New York, for promotion of the centennial celebration of Chevrolets.  However, Pernilla Ammann is the chief operating officer at Mother New York, and her husband, Dan Ammann is the chief finance officer at GM.  Because the contract was over $120,000, GM policy requires that GM’s CEO and chief general counsel sign off due to a conflict of interest. 

Somehow no one noticed until a corporate governance audit of contracts and relationships of contractors with GM employees picked up the Ammann connection. GM’s CEO approved the transaction after-the-fact, and GM filed an 8-K with the SEC to reflect the information.  The disclosure insists that Mr. Ammann was unaware of the contract. 

We have no reason to doubt his word.  But shouldn’t the wife, as COO of a smaller ad firm, have mentioned a $600,000 contract with her husband’s company to her husband?  If the disclosure rules don’t work, then surely a little common sense combined with pillow talk would have.  One gets the idea Continue reading →

Yahoo CEO, for now, Scott Thompson, earned a degree in accounting and computer science from Stonehill College in 1979. Slight problem; Stonehill College did not offer a degree in computer science until 1983. This guy was REALLY ahead of his time. A hedge fund owner wants him ousted, and the board slogs onward to investigate because as an anonymous company source put it, “Maintaining him as CEO of Yahoo at this time is more important than whether he had a computer science degree or not.” And an ethical wizard from an executive coaching firm offered this nugget, “It would be catastrophic to Yahoo if they pulled him out.”

Actually, Cato, it would be catastrophic if they leave him in his position. For the employees, there is the morale problem as well as the signals on ethics. If they would be fired for the same offense, Thompson needs to go. For the investors, well, there is already a proxy battle, and it looks like the outside forces, who are not happy with the $10 to $20 per share hover for four years after the decline of a Microsoft $33 offer, have won, and all over a misrepresented degree. Thompson has only one full quarter as CEO under his belt. The company needs credible leadership.

What the Barometer finds interesting is the thinking on the various news websites about “to terminate or not to terminate, that is the question.” Herewith, more from the minds of our fellow Catos: Continue reading →

Since the Greg Smith letter of resignation from Goldman Sachs via the op-ed page of the New York Times, Wall Street has been on defense. Well, more accurately, Wall Street has been in full rationalization/justification/”it’s just what we do” mode. Herewith a few of the classics:
• “Instead of ‘examining’ unprovable accusations, Goldman and other banks should ditch the ‘clients-first’ mantra they constantly recite and state clearly what they are about.” (Wall Street Journal columnist, Francesco Guerrera) Okay, here goes, the new approach to clients: “We’re in it for the money, not you, and we don’t make any bones about it, so invest with us.”
• “Banks aren’t charities—they should have said Continue reading →