The Wrapper On 2012
What a year it was. I started this blog and its associated Twitter account, @ethicsbite, in March and since that time have covered and commented on an amazing number of stories. When I scroll down the list of tweets I realize first hand the extent of ethically questionable (and many times illegal) corporate behavior in our country. Ponzi schemes, insider trading, money laundering and (in the UK) phone hacking are among the illegal. Providing financial advice to clients while your own firm profits by the reverse position is unprofessional. Manipulating the rate determination for an international banking benchmark is likely a violation of regulations. I’ll stop there as the full list would no doubt cause my readers to move on. So we’ll switch to sex.
The Petraeus sex scandal seemed to dominate the corporate ethics news at the end of the year. The New York Times story regarding Walmart’s Mexico operations was more significant in scale. But all of that was eclipsed by juicy, titillating tales from Washington, Tampa and Afghanistan.
In addition to being amazed at the plethora of unethical activity, I have marveled at the crassness of the people involved. One has to wonder how they would explain their actions to Mom.
In terms of sheer and utter crassness, the 2012 award truly has to go to the News of the World, whose employees allegedly hacked into the cell phone of a young British girl who had disappeared, then proceeded to delete some of the messages on her cell phone so they could capture potential new incoming messages. Her parents detected that something was going on and informed the police. That case led to the demise of one Rebekah Brooks, a Rupert Murdoch “protégé” and the editor of News of the World. Ms. Brooks and her husband’s relationship with David Cameron, the British Prime Minister, tainted 10 Downing Street and created a political situation that could not be ignored. As the investigation continued, Rupert found himself testifying at Parliament and Ms. Brooks was formally charged in May, together with her husband and four others, with conspiring to interfere with the investigation. She allegedly attempted to carry off the evidence in boxes she took out of News of the World’s offices. Moreover it has turned out that phone hacking may have been a relatively common tool at News of the World as close to 200 individuals, many of them celebrities and political figures, have filed suit over the hacking of their personal cell phones. News of the World was shut down by Mr. Murdoch and he subsequently re-organized the News Corp. entity.
A close second place in crassness would be Chesapeake Energy’s founder, Aubrey McClendon. Mr. McClendon showed little bounds in his use of the company’s money and making a name for himself with it. From such relatively small amounts as corporate payment of his personal staff (to be reimbursed at year end without interest on the amounts advanced) to the millions of dollars he authorized be invested in a local NBA team and the construction of a shopping mall that just happened to have eateries owned by Mr. McClendon, the CEO continually used corporate funds to “match” expenditures from his personal wealth to foster his interests. Chesapeake by this time was a publicly held company traded on the NASDAQ and the CEO’s use of money in this manner should have been overseen by the Board. But as is often the case, the Board was beholding to the CEO. Chesapeake’s stock fell on bad times (from around $34 on 8/1/2011 to around $17 on 12/14/2012), four new independent board members were elected and McClendon was stripped of his Chairman title. But those who paid the cost were the shareholders, of course.
What Will We See In 2013?
Here are our predictions: Rebekah Brooks will go to trial. JPMorgan will further increase its reserve for bad trades by “The Whale.” No one in the investment banking industry will go to jail for anything other than insider trading. Goldman Sachs will continue to be bad. The global economy will continue to improve. Slowly. More dirt will come out regarding Walmart’s non-US operations. Somewhere in the US a bank will go under.
And there will be at least one big sex scandal.
As the French say, “the more things change, the more they stay the same.”Follow @ethicsbite