The Ethical Barometer

Senator JimCarlin, after receiving three reports from Iowa Workforce Development, is targeting what he calls the “habitually unemployed.” These folks, in order to stay on unemployment, fulfill their requirement for seeking employment by applying only for jobs for which they are not qualified. They can prove their applications and their rejections and continue to receive unemployment. What pushed the senator over the edge was when he was trying to hire a paralegal and received applications from pizza-delivery folks who had zero experience.

He has resistance because one example touted was an applicant who applied for a job as a computer technician after losing his restaurant job. He said that he had no experience but he was willing to learn. The young man testified of a chilling effect on people in his position who want to work.

The senator says that he is willing to tweak the bill, but he wants to keep going to penalize those who are not really trying to find a job in a market that is looking for workers.

Further proof that we need to be careful what we incentivize. People will find a way to get the money — in this case, a way to get the money for not working.

O tempora! O mores!

Does that mean 44% do not want financial security? Or does it mean that 56% don’t need “head over heels” love? Or does it mean that they are fine with “run of the mill” love?

SOURCE: Merrill Edge Report, based on a survey of 1.034 adults earning between $50,000 and $250,000 annually

The words of a parent of a child seeking admission to one of New York City’s hoity-toity high schools upon having an admissions exam tutor offer a copy of the high school’s admission exam. The parent said that he/she did not look at the exam or allow his/her son to do so because he/she considered it cheating. Who would conclude that it was not cheating?

The tutor explained that he had obtained the exam by sending “spies” in to take the exam. New York City needs to do something about its admission process for its high schools. Over the years the number of cheating stories, with limitless creativity, have appeared in the New York Times. The kids cheat, the parents get the kids tutors who cheat, and it seems that no one gets caught or is sanctioned.

The ethical dilemma the parent presented was whether to send the test back to the school anonymously or with identity disclosed and whether to report the tutor. The response of Times‘ Ethicist was that it was unlikely that the high school would make the students retake the exam. Why would that be? That remedy is the teaching moment: If one student cheats, everyone is affected. Indeed, that is the very definition of the ethical mind — the ability to understand what would happen if everyone behaved in the same way. If everyone has a copy of the admissions exam, there really is not an admission process. There is no longer a system of merit, but one of corruption. Whoever can get the best tutor wins the admission lottery. Then whoever can pay the tutor the most gets the exam..Funny, they call this graft and corruption in foreign countries. We can take some small comfort in knowing that New York is teaching this system of banana republic corruption to children early and often and all through the public schools.

The richest man in the United States blogged that he has a problem. The National Enquirer threatened him with publishing photos that were obtained somehow from his private e-mail. The photos were of Mr. Bezos were described as follows: “A full-length body selfie of Mr. Bezos wearing just a pair of tight black boxer-briefs or trunks, with his phone in his left hand — while wearing his wedding ring.” The photos were sent to Lauren Sanchez, with whom he was having an affair, an affair that resulted in the announcement of the Bezos divorce.

The soap-operaish magazine offered to not publish the photos if Mr. Bezos would acknowledge that the Enquirer’s coverage of him was not politically motivated. Mr. Bezos wrote that he would not “capitulate to extortion and blackmail.” The coverage of the story has praised Mr. Bezos for his brilliant strategy to thwart the efforts of the Enquirer. One commentator noted that Mr. Bezos has greater stature because we now know he is “like one of us.”

Could we pause for a minute? Those of us who reach 55 years of age, as Mr. Bezos has, (or older) have learned learned a thing or two and grown up a bit or three. Here is a list of some of the lessons we who will never be billionaires have learned:

1. What you send in e-mail is not private. Hackers, who are also wearing only underwear, sit int their basements day and night, some in Pakistan and some in Duluth, finding ways to hack into others’ information. They prefer credit card and bank info, but if they can entertain themselves with photos of scantily clad entrepreneurs (old guys) trying to charm younger women, well, they are all in.
2. Selfies of oneself in briefs is really not at the heart of true romance.
3. Grow up, stay grown up, and find something better to do, such as setting an example for your three children.
4. There is no correlation between wealth and intelligence. Hollywood is a lab of Petri dishes for that hypothesis.There are also various political labs around the country testing the same theory (see the Commonwealth of Virginia). Sometimes the intelligence was never there, sometimes the intelligence loses in a coup d’stat of the brain by ego, money, or hormones. but disappear it does. Like all powerful leaders, Mr. Bezos needs a few non-sycophantic folks around him, at the ready with the phrase, “Not a good idea.” He has the funds for a nixer, a sort of substitute for arrested intelligence and/or good judgment. Ah, the blessing of self-made discretion that modest means offer.

Virginia — Is there an elected official in the Commonwealth who does not have bizarre yearbook issues, sexual assault allegations, and/or incredibly poor responses to either? From 35 years ago to 15 years ago, the indiscretions and misconduct of the past have percolated to the surface. The process of redemption is possible, but does require a step back for reflection. That no one in the top four slots in government is willing to take that step tells us that no one there is quite ready for forgiveness.

Saudi Arabia – Crown Prince Mohammed has said that he had no involvement in the murder of journalist Jamal Khashoggi. However, an intercepted and recorded conversation of the Prince in 2017 finds him saying that he would use “a bullet” on Mr. Khashoggi if he did not return to the kingdom and stop criticizing Saudi government. True enough, a bullet was not the choice of weapon, but Mr. Khashoggi met a grisly death at the hands of a squad of folks close to the Prince who were dispatched to an embassy far, far away. The very same embassy into which Mr. Khashoggi walked but never emerged, at least not living.

Entrepreneurial spirit has kicked in now. Principal Communications, a major Hollywood player when it comes to representing stars and handling media relations, had created a new company, Foresight Solutions, which will work with Edgeworth Security, a firm with former U.S. government sleuths, to offer preemptive services — they will find the skeletons and yearbooks in your closets before someone else does. That way, the Oscar folks can research their potential hosts and screen out those with problematic Tweets, Facebook posts, or yearbooks. Foresight says that it will comply with all privacy laws because, “Ethics and standards have to be major guideposts.”

Between social media, intelligence, memories, and yearbooks, young people today have two important lessons: Truth percolates and what you do and say, even as a young ‘un, or in private conversations counts and can and will be used against you. There is one sidebar lesson — those yearbooks have been beasts for everyone from Supreme Court nominees to governors to comedians called upon to host the Oscars.. No images yet from Prince Mohammed’s yearbooks.Although, the Barometer believes that one gets the Princeship regardless of flawed behavior in the past.Indeed, even flawed behavior in office is not a deal breaker, which brings us back to Virginia. A governor who changed his denial and nearly did a moonwalk to illustrate his confessed black-faced conduct is still in office. So are his direct reports.

The bankruptcy of SunEdison took an interesting turn with a court filing by an attorney for one of SunEdison’s creditors. The filing, based on an investigation that the SunEdison board launched after receiving reports from employees, alleges that McKinsey and SunEdison executives worked together to be sure that McKinsey was paid. The scheme alleged was one of McKinsey no longer directly billing SunEdison but calling back its unpaid bills and then rebilling them to several solar projects for SunEdison customers.

Problem with the scheme? McKinsey had not done any work on those projects. In fact, e-mails setting up the plan have a McKinsey partner writing, “Acknowledge that this is not ideal,” and that “we should anticipate some spirited opposition from PMs (project managers).” Spirited opposition? If you were a PM and suddenly got bills for your project for which there was no work, you bet your boots you would push back. Hence, the SunEdison employees reports to the company about cash flow issues. Hence, the investigation.

In bankruptcy, scheming to get paid ahead of other creditors before bankruptcy is declared is prohibited, and the court is permitted to call back any such payments. When there is deception involved in getting the payments, well, the court has broad discretion. The creativity of McKinsey is stunning. And creativity may be a charitable term. The pleading asks for McKinsey to return $37 million in fees paid through the arrangement. Ah, the doctrine of voidable preferences. Ah, the tangled webs we weave that are foiled through our own e-mails.

The Barometer has a question: What kind of government regulations could look at a flight by the U.S. Secretary of the Treasury on the private jet of a convicted securities fraudster and conclude that no ethics waiver was necessary?

Treasury Secretary Steven Mnuchin flew from Washington to Los Angeles on the private jet of the king of junk bone, Michael Milken, and the Treasury Department said, “Nothing to see here. No problem.”

When the optics are this bad, the rules are irrelevant. We can talk ourselves blue trying to justify the actions:

Mr. Mnuchin reimbursed Mr. Milken for the flight
The two are old friends (not sure this one helps, but the regulations are more liberal for optically challenging conduct when friendship rests beneath the interaction).
They are unsure whether the two discussed a potential pardon for Mr. Milken.
Mr. Milken has been a philanthropic giant, complete with the Milken Institute, a think tank. He has funded projects for increasing global prosperity, helping youth, and advancing medical research. Purchasing goodwill for pardon purposes does not make a private jet flight any less tacky. In fact, given the formulaic approach of philanthropy to felonious reprieve, the jaundiced eye takes on greater tint.

Despite all attempts at mitigation, the whole thing shows, at a minimum, poor judgment. A cabinet official trekking across country with a felon who committed securities fraud is a story that will not go begging for coverage. Cozy relationships undermine public trust, no matter how much reimbursement come along.

Purdue Pharma has been running ads about its role in stopping the opioid crisis. However, a court filing reveals that members of the Sackler family, founders of Purdue, took a slightly different track upon learning of abuses of their prescription drug, OxyContin. E-mails from Richard Sackler, included in a court filing read, “We have to hammer on abusers in every way possible. They are the culprits and the problem. They are the reckless criminals.” The attorney general of Massachusetts revealed the e-mails as part of a suit against the company seeking recovery for the costs to the state of dealing with the addiction problem. The e-mails were during the 1999-2003 time period when Mr. Sackler was CEO of Purdue. At that time, the company was receiving information that OxyContin was being abused and sold on the street.

The e-mails also direct sales representatives to encourage doctors to prescribe the highest doses possible of the drug. The drug was the company’s most profitable one.

Purdue has already entered a guilty plea to federal charges that it misrepresented the dangers of OxyContin. The company paid a $634.5 million fine in2007 following the plea. The Sacklers were not named in that case.

On the bright side, one sales rep complained to the company about Mr. Sackler’s micromanagement of the company and his attempts to control what sales reps were saying.

A study published Friday in the JAMA Network Open finds a link between those counties in which physicians receive the highest number of gifts and payments from pharmaceutical companies and the rate of opiod overdose in those counties. Scott E. Hadland, Ariadne Rivera-Aguirre, and Brandon Marshall, et al., Association of Pharmaceutical Industry Marketing of Opioid Products With Mortality From Opioid-Related Overdoses, January 18, 2019, https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2720914.

Herewith the findings:

In this population-based, cross-sectional study, $39.7 million in opioid marketing was targeted to 67 507 physicians across 2208 US counties between August 1, 2013, and December 31, 2015. Increased county-level opioid marketing was associated with elevated overdose mortality 1 year later, an association mediated by opioid prescribing rates; per capita, the number of marketing interactions with physicians demonstrated a stronger association with mortality than the dollar value of marketing.

In other words, the rules of conflict of interest apply, even to physician relationships with pharmaceutical companies. While the physicians will always believe that they are doing what it best for their patients, the subtle influence of “stuff,” including cash, cannot be dismissed even in those with the noble goal of caring for the health of others. Nobility cannot trump the power of the mind’s need to respond in a positive way to those who help us, give us stuff, or, are just plain nice to us.

We can talk until we are blue in the face about how the medical profession answers a higher calling. Even those in the highest of calling suffer from human foibles. Nearly all of us suffer from the weakness of taking stuff from other. We just have a need to quid their pro.

In a working paper, “Last Prices,” economist professorsLauren Cohen, Christopher Malloy, and Quoc Nguyen, gathered together the annual (10-k) and quarterly reports (10-q) of publicly traded companies and discovered something investors should consider: the numbers are not the answer; the key is in the wording. Actually, the key is in the CHANGES in the wording. For example, look at the risk discussions of companies. When the wording changes, trouble’s a’comin’. For example, following the findings in this important research, the Barometer took a look at Tesla’s latest reports. Walk through the 10-q’s for the last year. In the risk discussion — watch the increasing length. The longer that discussion, well, you could draw a parallel graph for the also increasingly bizarre behavior of Elon Musk over the past year.

Figures don’t lie, but liars do figure. However, they will not risk minimizing risk. They can fool around with the numbers, but you cannot withhold increasing risk. They didn’t. It’s just that investors were so enamored of Tesla that they didn’t read. We should.

Hacienda Health Care in Phoenix is under investigation for two reasons:

A woman who has been in the Center since she was 3 in a comatose state was sexually assaulted. Since the now 29-year-old woman cannot speak or move on her own, the assault was discovered when she gave birth to a baby boy on December 29, 2018. A frantic 9-1-1 call found the staff member admitting that no one at Hacienda knew that she was pregnant. The Phoenix Police Department is now investigating and has taken DNA samples from all male employees.

The Center is now under investigation for Medicaid Fraud. From 2009 to the present, Hacienda has received at least $6.7 million in Medicaid funding. The recently resigned CEO’s pay doubled between 2008 and 2017 — to $674,212 for 2017 in compensation.

A case against Hacienda is pending before the Arizona Appeals court because of its refusal to turn over financial records in response to a subpoena from the Arizona Health Care Cost Containment System, which began an investigation at Hacienda for what it has called “suspicious payments” between 2013-2014.

The executive Vice President of the Hacienda board has indicated that Hacienda would “accept nothing less than a full accounting of this absolutely horrifying situation.”

Perhaps the board should have stepped in earlier — in 2016, when the first questions emerged about Medicaid payments. Where there is trouble with fraud, there is trouble because no one is watching, whether it be the employees with patients or different employees with billing. These events are tragic on so many levels. The most vulnerable among us are the victims when leaders and managers are asleep at the wheel.

Over the past few weeks, the newspapers have been delving into the subject of lying.  The Mueller investigation has resulted in criminal charges for lying to various folks (FBI, Congress, Mueller and his folks).  Books have been written about lies and lying.  The truth is, we all lie.  When someone asks, “Do I look okay?”  We often answer (in fact, if the Barometer’s data are correct — it is 87% of us), in the interest of being kind, “Of course.” Even when we do not believe our friend, family member, or co-worker does indeed “look okay.”  That type of lie, often called the white lie, is not motivated by malice or intended to deceive.  We do not speak what we truly believe because of our concern for the other’s feelings.  

Yet, we have not spoken aloud what actually went through our brain.  Therein lies the rub.  We wear down our ability to speak the truth, and we chip away at the conscience that spurs us on when we need to tell the truth.  

Sometimes we are accused of lying, but we really have forgotten the truth and just spout what we believe to be the truth.  Again, there is no malice, but what we have done is still misleading,  We will eventually be confronted with, “But you said this,” or “Hey, you told me this!” In that careless moment we have compromised trust  and set up an incident that will be long in the tooth when it comes to what others remember about us and our actions.

Rather than trot down these two difficult paths of rationalization, use alternatives.  When the Barometer seeks a spousal opinion on appearance, the spouse of 42 years responds, “Do you want the truth or do you want to feel good?”  If there is not a 42-year relationship whose terms include tolerance, humor, and heavy doses of reality, make a suggestion about appearance that causes you to believe that the person does not “look okay.”  “Let’s get that spot out.”  “Maybe we could press the jacket.”  These phrases offer some signal that sends folks back to the mirror for a more introspective and a rethinking of reality.  

Sometimes, generic advance suggestions head off the need for the “okay” appearance evaluation. For students who are headed into interview season, we sit them down and show them what will make them look okay before they are headed into the one-on-one,  If we wait until the day of their interviews, we face of choice and saying, “Lose the 15 bracelets,” or sending them into the interview with a lie and unshaken confidence because we do not want a last-minute discussion of the dangling bangles.  Topics of discussion in advance generic session include tight clothes, short skirts, shaving, footwear.  

For the second “lie” of misremembering, before spouting answers, learn some phrases to clarify your certainty, “I believe this is what happened, but let me check.”  Or, “I am not sure, but I may be able to look back through my e-mails.”  Or, “I don’t know.”  Warning:  That last one is tricky.  If you know, but you are saying “I don’t know,” then we are back into lying territory, and probably with intent.  The same with, “I don’t recall,” or “I don’t remember.”  If you truly do not recall, you have spoken the truth.  If you recall, but do not want to answer, then you have a lie. See congressional testimony of James Comes for 245 times of saying one of the following: “Don’t know,” “Don’t recall,” and “Don’t remember.”

The Barometer has done quite a bit of work with companies and organizations that are grappling with the fallout from ethical lapses. One common thread that emerges in gathering information about how these folks got into difficulty — they all had very positive reports from consultants. “Mature compliance program”. “Top tier of companies on employee engagement.” “Has all the components of a compliance program as recommended by the federal government.” Still, many of these organizations are under CIAs, despite the reassurances third-party consultants gave to them about their ethics and compliance programs.

The Barometer has concluded that management and boards commission these consultant reports to provide themselves with the cover of being able to check the dashboard measures of a good ethics and compliance program. Wells Fargo would be an illustration — off the charts in ratings on ethics and compliance. The consultants provide technical reports that provide the assurance that all is well.

While managers and boards relied on these reports, their organizations were spinning into legal and ethical difficulties, sometimes quite quickly. Julie Sweet, the CEO of Accenture, had an interview with the New York Times on her journey to and experiences as a CEO of an organization of 469,000 employees. Her closing key to success, “I don’t care what level you are, there is a need to offer straight talk when you’re working with clients. You have to have the courage to deliver tough messages. We’re living in a world where clients constantly are saying to me, ‘The most important thing you can do is to tell me what I need to hear, not what I want to hear.'” Enough said.

David Gellis, “Living as an Example of ‘Leading by Example,'” New York Times, January 6, 2019, p. BU6

There is little question that Carlos Ghosn, the former CEO and Chairman of the Board of Nissan, has experienced a stunning fall from iconic businessman to a jail cell in Tokyo. His arrest was based on charges of his failure to report income and the use of company funds for personal expenses.

Collecting information over the past month since his arrest, the Barometer feels the “deja vu all over again.” From Enron to WorldCom to Madoff to Musk to Kozlowski and Tyco. The pattern emerges again. Brilliant and visionary business people with ideas, drive, and stunning success. Wealth beyond even their dreams. The bizarre expenses, and then the fall, sometimes through financial collapse, sometimes through arrest, and sometimes both.

In Ghosn’s case, a recap of his lifestyle as CEO:

His compensation was 11 times that of the chairman of Toyota
Lear-jet, worldwide travel
He commissioned a sculpture for Nissan headquarters by a Lebanese artist and friend for $888,000 following his earning the moniker of “Le Cost Killer”
His second wedding was na extravagant event with Marie-Antionette costumes (oh, and the cake for eating too, lots of cake)
While driving a Porsche through he streets of Tokyo, he grazed a couple and injured them (not driving a Nissan was a bit of a problem for the Japanese)
Shareholders tried to rein in compensation, and Mr. Ghosn dismissed their arguments

More than the financials, more than management discussion, more than any financial analysis — the behavior patterns of CEOs offer the real story of where a company (and the CEO) are headed.