Corporations behave badly and we all pay
By Margaret Wente, Globe and Mail,July 5, 2012
It’s been a dreadful week for corporate reputations. In London, the greatest banking scandal since – well, the last one – has shoved Rupert Murdoch off the front pages. The public is outraged over revelations that some of the world’s leading banks have been rigging interest rates for their own benefit. Bob Diamond, the brash American head of Barclays, has regretfully resigned. But why pick on Barclays? As he pointed out Wednesday, his bank was only doing what everybody else was.
Meantime, GlaxoSmithKline, the world’s second-largest drugmaker, agreed to pay a record $3-billion to settle a giant fraud case launched by the U.S. government over illegal and unethical practices that went on for years. Prosecutors said the company used illegal tactics to push its pills, bullied its critics, and suppressed data that raised questions about the saf ety of a new blockbuster diabetes drug. It even unlawfully paid obliging doctors to push antidepressant use in children. Commentators point out that these practices were common in the industry, and that other companies have also paid enormous fines.
Once upon a time, banks and drug companies enjoyed good reputations and a relatively high degree of trust. Most people regarded them as useful industries that created products and services that benefited society. Sometimes the people who ran these companies even lived down the street. Those times are long gone. Today these industries are movie villains – multibillion-dollar enterprises portrayed as so rapacious they’ll do anything to turn a buck. Judging by current events, this characterization is all too true. Some of the most powerful people in these lines of work will lie, cheat and steal until they get caught, all the while assuring us that they are adding incomparable value to society.
What happened? Both banking and pharmaceuticals went global, and the stakes (and rewards) shot up. Today they count their sales and profits in the billions. Today they’re led by corporate rock stars who make more money than most people can ever dream of. Their compensation is tied to stock prices, which means they have every incentive to do whatever it takes to goose short-term results. This is called “aligning management’s interests with the shareholders,” and for years was thought to be a good thing. Unfortunately, it’s not always such a good thing for the public.
Few of the people who lead these companies are inherently corrupt. The problem is that the penalties for bad behaviour on their watch are relatively puny. Barclays forked over $450-million for its part in the interest-rate rigging scheme. But in 2009, at the height of the scheme, its net profits were $14-billion. And Glaxo’s $3-billion settlement seems pretty small when you learn that sales of its diabetes drug alone amounted to $10.4-billion.
Simple logic dictates that if the risk is small and the reward is great, the temptation to lie, cheat and steal will occasionally prove overwhelming. Those billion-dollar fines are just the cost of doing business.
There’s an even more powerful check on wrongdoing, of course – shame. Sadly, shame doesn’t count for much in our culture. We do not expect those who have presided over dishonourable conduct (such as peddling antidepressants to small children) to fall on their swords. Unless, like Bernie Madoff, you have personally looted widows and orphans of their savings, you will not pay a price when the industry or firm you lead is caught behaving badly.
Bankers are not drummed out of polite society, and pharmaceutical executives aren’t booted from their country clubs. They are in no danger of being shunned by their peers, nor will they suffer any serious financial penalty. (Mr. Diamond has received at least £120-million in compensation since he joined Barclays in 2005.) Their children will continue to attend the finest private schools, and their wives will never have to shop at Target. Glaxo’s former top executives, for example, have gone on to lucrative new jobs, and no one thinks the worse of them. Meantime, the new executives at Glaxo sincerely reassure us that all that noxious behaviour is ancient history, and the industry has learned its lesson, and integrity is at the core of everything they do.
And perhaps that’s even true. Until the next time.
And let's face it, there will certainly be a next time. We have all "bought-in" to a culture in which money and the accumulation of money has replaced pursuing the public good. It is not only globalization's impact on the size of the numbers in the profit column, or the size of CEO pay and bonuses upon termination after an ethical and fiscal disaster, or the over-commitment to marketing to the detriment of research among the pharmaceuticals, but it is the convergence, the combination of many factors, all of which implicate all of us in the way we see the world.
Governments, too, have been, and continue to permit themselves to be "bought" because, after all, isn't everything, literally everything including everyone's grandmother, FOR SALE?
And the flip side of that equation is that if you have the money, you can have whatever you want, because after all, everything and everyone has its price.
Sounds like a street trade equation for the "oldest profession" in the world, no?
If we have a skill set, and if we can and do master the skill of selling that skill set, then we can make a living, and, apparently only then.
Yet, what has happened to the things that were never FOR SALE?
Like the morning coffee with a spouse who just wants to be there with you?
Like the motorcycle ride through the farm fields in the blustering summer wind?
Like the brief conversation with the man who "works with troubled youth" in Syracuse while riding a ferry across part of Lake Ontario/St. Lawrence River?
Like the phone call from a daughter who is expecting her second child in December, reflecting on the most recent memories of her two-year-old's perceptions, phrases and actions, both for their comic value and their display of her uniqueness and character development, even at two?
Like the words of a co-worker who had struggled with new technology and new ways of doing things for years, only to find that he could master new tasks with new technology, without fear of failure or rejection?
Like the discovery of the "god-particle" after predicting its existence some four-plus decades ago?
Like the discovery of a home test for AIDS?
Like the discovery of a new approach to C-difficile, the virulent virus that seriously impacts many in hospitals?
While some of these have an inherent "cost" in financial terms, there is more to each of them than their money value. And it is the return to those "non-monetary" values that will be the most secure, if not the only route, to a more compassionate, humane, less judgemental and more forgiving culture in which our grandchildren can grow and develop...and there is a long road in that direction.
Those leading the major corporations would not be doing the things they are doing, "if everyone else were not doing it too" as the most preferred defence when they arrive in the witness box to testify.
And that does not mean only the people occupying the offices of the CEO's in other corporations or banks. It means every single person in the country, in the villages and towns and farms and hamlets and cities across the land.
Sad it is that some states had to pass what became known as "Samaritan" laws, in order to protect medical professionals from law suits, if and when they stopped to offer assistance at roadside accidents.
Nevertheless, human greed made that necessary. And still, some drive by, preferring to avoid the possibility of conflict, should their interventions go awry.
Let's put the poetry back into our language, our perceptions and our relationships...and let's put this ship back on course, a common, protective, humane and even humble course, that looks after each of us as a guiding principle, rather than pursuing the most acquisitions in the frame that he who has the most toys at the end wins.