Corporate corruption has become commonplace, and we’re often the victims
"We should be alarmed that corporate wrongdoing has come to be seen as such a routine occurrence," Eduardo Porter writes in today’s New York Times.
His “Economic Scene” column is the most thoughtful analysis of corporate corruption I've seen in this year.
It certainly caught my eye after yesterday, when I wrote about a new survey that found an appalling number of financial services professionals believe that unethical behavior is the key to success.
The fact that we may not be able to trust the people who handle our money is unsettling to say the least. But are we surprised?
As Porter notes, the latest Gallup Polls show our confidence in the banking industry is at a record low and corporate misconduct of all types is no longer a surprise to most U.S. citizens.
The list of corporate-executives-gone-wrong seems endless. These days a scandal is simply just another link in the chain.
Porter poses an interesting question: "Have corporations lost whatever ethical compass they once had? Or does it just look that way because we are paying more attention than we used to?"
He says that some of it may be cyclical and points to a study published by economists Betsey Stevenson and Justin Wolfers in the American Economic Review. It suggests that trust and confidence in institutions – particularly in the government and the financial sector - falls when unemployment rises.
But corruption seems to be spreading more than it has in the past.
"In 2001, Transparency International’s Corruption Perceptions Index ranked the United States as the 16th least-corrupt country. By last year, the nation had fallen to 24th place," reports Porter.
The scandals seem to be getting bigger as well.
The London Inter-Bank Offered Rate or LIBOR, Porter points out, is extremely important. It determines savings yields, mortgage rates, car-loan rates and is the benchmark for hundreds of trillions of dollars in financial contracts.
The fact that the world’s largest banks may have colluded to fix the rate to enhance their profits is about as shocking as it gets.
So yes, I think the moral transgressions are greater than in the past.
But we’re also paying more attention to corporate ethics and scandals?
Absolutely. How can we not?
These same companies are closing the pension plans that provided comfortable retirements for our parents, grandparents and great grandparents.
We're being forced into do-it-yourself retirement plans, such as 401(k) plans and Individual Retirement Accounts, which rely on the stock market to be successful.
That's our savings on the line when deceitful CEOs and their minions manipulate earnings reports and stock prices, or ransack corporate coffers.
When these guys cheat, more often than not, they’re cheating us.