What do these organizations have in common?

Based on the question asked above, I want you to think about the following organizations for a minute: Adelphia, American Express, Bank of America, Citigroup, Duke Energy, Enron, GM, Goldman Sachs, Healthsouth, Lehman Brothers, Lumber Liquidators, Marsh and McLennan, Massey Energy, Merrill Lynch, Penn State University, Toyota, Tyco, Volkswagen, and Wells Fargo.

What thoughts pop into your head? What do these organizations have in common? Yes, they have all been successful and many still are. The answer I am looking for is they have all been fined, publicly shamed or found guilty of some level of malfeasance, criminal neglect or fraud. The disappointing truth is I have been a shareholder in four of these organizations, so it hurts me both morally and financially, to see leaders forsake their roles as stewards of the company.

Volkswagen is the latest to join the infamous group. I was speaking with a Volkswagen owner the other day. While I was talking about the fine and decline in stock value around their purposeful fraud to avoid poor EPA emissions test results, he was thinking of it as a further depreciated car value. As with the others, what Volkswagen did was wrong and it will hurt them for a long while. The poor emissions will be hurting all of us until the cars are fixed. The CEO resigned earlier this week, and well he should, as a fraud like this has to be understood or even sanctioned at the very top. As of this writing, some car owners and shareholder groups are considering class action lawsuits against Volkswagen’s leadership.

Why do I bring this up today? Quite simply, we have politicians running on a platform of eliminating regulations so business can flourish. We often confuse bureaucracy with regulations. We need to investigate and remedy inefficiency in the latter, as bureaucracy can be antagonistic to efficiency. But, we need to also challenge ourselves to be smart with our regulations. If regulations are not efficacious, we should make changes, which might include their elimination. But, as evidence of the above well-known examples, which do not include countless others, doing away with regulations carte blanche would be unwise and foolish.

So, when you hear a statement like “we must do away with regulations,” ask yourself why? Who does that serve? The answer may be illuminating. I will leave you with a quote from Senator Elizabeth Warren who led the effort to create the hugely successful Consumer Financial Protection Bureau. This agency has fined several of the financial companies above for hundreds of millions for aggressive marketing and outright fraudulent practices, over 90% of which goes back to the impacted customers. In response to a question about why she does not like Wall Street, she said “I like Wall Street, I just do not like cheating.” Neither do I, nor should any of us.

8 thoughts on “What do these organizations have in common?

  1. Note to Reader: I have written before about various leaders I have encountered in my consulting work. I have worked with CEOs and Board Chairs that are the most gracious and approachable people. I have also worked for some that are the greediest SOBs you will ever meet. It is all about them and they will do whatever it takes to make themselves look good. Regulations are written largely for these people and yet, they complain the most.

  2. Oh, how I appreciate your expose on these pirates and scalawags. I am still locked in bitter saber-fights with Bank of America, Citigroup, and potentially Wells Fargo. They have used vampire credit-card schemes to suck all the blood out of my financial future. (I am one of those fools who trusts a wife with credit cards, so I bear a bit of guilt too.) And health insurance in Texas is like trying to recover from a cold in a mosquito-infested swamp,

    • Thanks for your comments and I feel for your credit problems. The Consumer Financial Protection Bureau fined Bank of America $780 million for aggressive marketing practices selling you services that you did not request. And, the GOP hates this group. Why is an excellent question. The other banks have also been fined for similar transgressions. As reported on 60 Minutes, Lehman Brothers moved $50 Billion from the UK books to their US books while being audited and then moved it back after the audit was over. That is fraud in my view.

  3. Note to Readers: One of my favorite stories about the financial crisis, is a Texas CFA who advises clients noticed that people who could fog a mirror were getting mortgages from fly by night loan companies. The loans were packaged together and sold as investments, in other words the investor would get a return on the repaid loans. Yet, the risk was far worse and people thought it was OK if you pooled all bad risk. The CFA got a meeting and showed the CFO of Bear Stearns in 2007 that his company was heavily invested in these and the analysts were assuming that housing prices would always go up. The CFA said that is not a good assumption and told the CFO that they need to worry about this. The CFO dismissed him and said we had it covered. The CFA said I am going to bet against you. A year later, Bear Stearns did not exist and the CFA made a fortune betting against them.

    Moral to the story – if something is too good to be true it usually is. And, if someone forewarns you, you should at least look into it.

  4. I, too, am amazed when politicians talk about removing regulations like it would be a good thing. Even more amazed when their followers (who are not corporate sponsors) agree. The VW scam was so disappointing to me. I was very close to to buying a Jetta TDi several years ago.

    • Janis, I feel for those who went through with the Jetta purchases. I am glad you stopped short. Doing away with regulations is one of those lines that sound great until you think about what it means. Thanks for your comment. Keith

    • Kimberly, you have hit it on the head. We need to make sure cheaters are caught and held accountable. Some industries like pay day lenders and for-profit colleges prey upon consumers. Thanks for writing, Keith

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