Goldman anger is misplaced
The following is a guest post by Dana Radcliffe, a senior lecturer of business ethics at the Johnson Graduate School of Management at Cornell University. The opinions expressed are his own.
The day after the Securities and Exchange Commission announced its $550 million settlement with Goldman Sachs, three noted business journalists appeared on a popular current affairs TV show. They concurred that the deal was a win for Goldman since the dollar amount was surprisingly low — equal to what the firm earns in just a few weeks. They felt the SEC’s case was weak and that, legally, Goldman had done nothing wrong and would have prevailed in court.
They also agreed that people were understandably appalled by some of the firm’s conduct in the subprime mortgage crisis in light of the flood of emails and other internal company documents released by Congress and Goldman. Grasping for a way to express what was repellent about such actions, one of the writers described them as “icky.” Another airily noted that they might be seen as wrong “in some ethical, moral, or philosophical sense.”
What is remarkable is while all three pundits shared the common view that Goldman had behaved offensively, they would not say that Goldman’s behavior was “unethical” or “morally wrong.”
This reminded me of the most notorious article ever published in the Harvard Business Review — a 1968 piece by Albert Carr, a former advisor to President Truman. In it, Carr argued that business is akin to poker, where bluffing is often legal and expected. While allowing that deception in one’s personal life violates “private morality,” Carr contended that business and poker are strategic competitions whose rules permit participants to profit from misrepresentations. Indeed, he wrote, being a skilled practitioner in either endeavor requires occasional bluffing.
Carr has been rightly faulted for ignoring crucial differences between poker and most commercial interactions, where asymmetries of power and information typically give executives a distinct advantage over customers, employees, and other stakeholders. However, what about business activities that do resemble those of players in a poker game in which sophisticated investors bet against each other? Could it be that when a type of business activity is truly analogous to poker some artful moves that don’t break any laws qualify as bluffs?
Refuting healthcare myths
– David Magnus, Phd, is the director of the Stanford Center for Biomedical Ethics. The views expressed are his own. –
The public discussion of healthcare reform has been full of so many lies and myths that it is less a policy debate than bad theater.
Critics of reform (conservatives hoping to score political points and oppose Obama on anything; free market ideologues; those with threatened financial interests) have stooped to absurdity in their public pronouncements. One publication declared that severely disabled physicist Stephen Hawking would never get life saving medicine in a national health system, ignoring that Hawking is British—virtually all of his life saving treatments were done through their National Health Service.
As debate over reforming health care continues, these are some of the key myths that get in the way of truly meaningful discussion.
Myth #1—We have the best health care in the world
This is probably true for some Americans. But on the whole our system is among the poorest of all developed nations. We spend far more per capita than any of our peers on healthcare, yet health outcomes measures are no better in aggregate. The World Health Organization ranking of health systems rated 36 other countries as having better health systems despite spending far less. The U.S. was right behind Costa Rica (and only two spots ahead of Cuba).
But the reality of the failure of our health system is best seen by the thousands of people being turned away in Los Angeles last week at the massive free clinic set up by the Remote Area Medical Foundation (see Reuters story). When the country spending the most money can not meet the basic medical needs of so many of its citizens, it does not have a good (or just) health system, much less the best system.
This country can no longer keep what passes for a health care system. I believe the survival of the republic is at stake here. A healthy nation is a happy one, and we have a right to pursue happiness.
from For the Record:
A is for abattoir; Z is for ZULU: All in the Handbook of Journalism
Dean Wright is Global Editor, Ethics, Innovation and News Standards. Any opinions are his own.
The first entry is abattoir (not abbatoir); the last is ZULU (a term used by Western military forces to mean GMT).
In between are 2,211 additional entries in the A-to-Z general style guide, part of the Reuters Handbook of Journalism, which we are now making available online. Also included in the handbook are sections on standards and values; a guide to operations; a sports style guide and a section of specialised guidance on such issues as personal investments by journalists, dealing with threats and complaints and reporting information found on the internet.
The handbook is the guidance Reuters journalists live by -- and we're proud of it. Until now, it hasn't been freely available to the public. In the early 1990s, a printed handbook was published and in 2006 the Reuters Foundation published a relatively short PDF online that gave some basic guidance to reporters. But it's only now that we're putting the full handbook online.
We've decided to make the handbook available to everyone for a number of reasons. Among them:
- Transparency: At a time when trust is an endangered commodity in the financial and media worlds, it's important that news consumers see the guidelines our journalists follow.
- Service: As we've seen over the past decade, the barriers to publishing have dropped so that anyone with an idea and a computer can be a publisher. But it's also become clear that publishers have a varying standard of truth, fairness and style. Our handbook is a good place for budding journalists to begin.
- Geography: Reuters serves a global audience and the handbook recognises the cultural and political differences that our journalists face in reporting for the world. This is a handbook not just for English-language journalists in the United Kingdom or the United States, but for wherever English is used.
Many entries deal with words that are sometimes confused or misused. Turning randomly to the "H" section, we learn the difference between hyperthermia and hypothermia (The latter means "Too cold. Think that o rhymes with low" while the former means "Too hot. Think of 'er' as in very."); Haarlem and Harlem (the latter is in New York City, the former in the Netherlands); hangar and hanger (the latter is for clothes, the former a shelter for aircraft); and hale and hail (the former means "free from disease, or to pull or haul by force." The latter "is to salute or call out, or an ice shower").
Note to those who have raised questions: We have been having some technical issues with the PDF format, which we’re working to resolve. In the meantime, we’ve removed the PDF download link from the main page.
from For the Record:
Oscar special: Journalists on film
Dean Wright is Global Editor, Ethics, Innovation and News Standards. Any opinions are his own.
It’s Oscar time, and I’m again reminded of the debt Hollywood and journalists owe each other. Journalists supply Hollywood with great stories and Hollywood sometimes makes us look cool—or at least worth a couple of hours of time and the price of a ticket.
Put aside the fact that a number of Hollywood movies literally are made from the pages of journalism --“Saturday Night Fever,” “Dog Day Afternoon” and “Adaptation,” to name only a few, were all based on magazine stories. We journalists are also the very characters that Hollywood screenwriters sometimes love.
In addition to sometimes bringing out our cool factor—although, really, what aspiring reporter could resist Robert Redford’s corduroy suits in “All the President’s Men”? -- Hollywood movies can illuminate the kind of ethical, moral and values issues that journalists have to deal with.
This year’s slate of Oscar nominees again includes a movie with journalism as its subject. “Frost/Nixon,” the film adaptation of the Broadway play about British journalist David Frost’s pursuit of the ultimate interview with disgraced former U.S. President Richard Nixon, is nominated for five Oscars.
So here is a completely arbitrary list of my top dozen movies about journalism that have something to say about the way we do our jobs--ethical or unethical, selfish or selfless. Aside from that, about the only thing they have in common is that they all were at least nominated for Oscars. I'll also acknowledge that most of the films are U.S.-oriented, like the Oscars. So I want to especially encourage feedback and suggestions for films from all parts of the world. (A word of warning: There will be plot spoilers.)
The envelope, please.
Ah, yes. -30-. I remember first learning of “double trucks” and Bodoni type faces when, if I recall correctly, Jack Webb orders up a page with a picture of a storm drain with words to the effect of: “I want a double truck with a picture of the drain and a 48 point Bodoni headline, ‘Hey, Kids, Stay Away From This.” It was certainly public service.
Ethics without regulation won’t cut it
– James Saft is a Reuters columnist. The opinions expressed are his own –
There has been a lot of talk in Davos about improving business ethics, and mercy knows there is certainly room for that. The past few years, like the end of most booms, have included plenty of fraud, self-dealing, and general all-purpose unethical behaviour.
I think it’s fantastic that business should seek to raise ethical standards. It’s good business, and not before time. I do understand that a lot of what happened was a social phenomenon, and that a change in mores can only help.
But frankly, a new emphasis on ethics is a sideshow, and among some who propose it, a diversionary tactic.
While I agree that mankind is perfectible, as an investor, a citizen and hopefully some day a retiree, I am not willing to bet my future or the future of my children on it.
I want some guarantees.
This is a multi level issue
There is a way to avoid unethical / criminal behaviour in the broad business community including the financial sector which is riddled with sharp practice. The regulators must banish any scheme where the underlying rules and costs are not completely transparent and fail to conform to prescribed set guidelines.
Banish the use of small print in insurance contracts, investment products, consumer sales contracts, etc, and create a situation where what you see is exactly what you get. The words “Conditions Apply” should be discontinued in all advertising. Simplicity must be paramount because most of the people being hurt by these practices are unsophisticated and very easily misled.
At the same time the regulators must look at the more sophisticated “products” like derivatives, ETFs, options,futures, etc, and gauge to what extent they have contributed to the current crisis. If it is felt that abuse of these products is a factor then they should be banned if they cannot be properly controlled. Regulators must ignore the wails of protest from vested interests. Rather allow unscrupulous financial practioners to lose their jobs than create more misery amongst the unwary
While the rules of the game are being changed, there should be global campaign which warns the man in the street and investors to stay away from products and shemes which they do not fully understand.
from For the Record:
Reporting in Gaza: Striving for fairness
Dean Wright is Global Editor, Ethics, Innovation and News Standards. Any opinions are his own.
Let’s say it up front: Almost all of you will find something in this column to take issue with.
That’s because the subject is the conflict in Gaza and perceptions of bias in reporting on it. News consumers detect media bias on any number of subjects, but there is nothing like the continuing Mideast conflict to bring out the passions of partisans on all sides.
Here’s a small sample of some of the more restrained comments that have come in to the Reuters reader feedback line:
--“It seems like the whole world wants to condemn Israel for the war/actions it's taking. Sorry Reuters but for me, I can see right through your pro Palestinian slant. Why don't you investigate how a U.N. Camp was used as a staging area for Hamas rockets? …”
--“Your pro Israel reporting from Gaza makes one thing perfectly clear. Israel has some control over Reuters. You are in their pocket. Why else would you choose to slant information?”
--“Why does Reuters insist on letting someone such as Nidal al-Mughrabi cover the war on Gaza? His reporting is completely biased and filled with inflammatory rhetoric. Doesn't Reuters have a reporter that understands both sides of the issue and that can JUST REPORT THE NEWS!! I consider such reporting on your part as an insult to my intelligence. Why must you participate in antisemitic propaganda?”
A very well-reasoned summary of your challenges and successes in covering a devastating event under such debilitating conditions. Kudos to you for the astounding effort. I believe Reuters in the pre-eminent source for news on the conflict given your boots-on-the-ground and the US mainstream media’s refusal to provide accurate information from Gaza.
from Reuters Editors:
Typewriters, Technology and Trust
Dean Wright is Global Editor, Ethics, Innovation and News Standards. Any opinions are his own.
A little girl in my family got a typewriter for Christmas.
Not a laptop. Nothing with a screen. A typewriter. The old-fashioned manual kind with a smeary ribbon and keys that stick.
Typewriters had pretty much gone the way of dodo birds, car tail fins and cigar-chomping editors who yell “Stop the Presses” quite some years before my granddaughter was born. But it was the typewriter used by the school-age, aspiring journalist in the movie “Kit Kittredge: An American Girl" that captivated her.
Or maybe it was the way the typewriter was used. In the movie, a tween-ish girl, played winningly by Abigail Breslin ("Little Miss Sunshine"), does old-fashioned journalism and writes stories that help right a wrong in Depression-era Cincinnati. Kit may be young, but in a challenging environment she keeps her wits—and a strong sense of ethics—about her.
In today’s rapidly realigning media landscape, typewriters have long since given way to laptops, BlackBerries, camera phones, video phones and Twitter. But here at Thomson Reuters, and in the media as a whole, the need for a strong sense of ethics has never been more necessary.
Not all Hollywood depictions of our profession are that inspiring to would-be journalists — mainly because of the way some on-screen reporters behave.
from Reuters Editors:
And the band played on: covering the economic crisis
I recently visited one of the most frightening sites on the Web—the place where I look at my shrinking retirement account.
As I calculated the investment loss since the steep decline in the markets began, and particularly since the collapse of Lehman Brothers in mid-September, some questions arose (in addition to: Will I ever be able to retire?).
--Did we in the media do our job in reporting on the run-up to the crisis?
--Now that an “official” recession has been declared in the U.S. and the depth of the crisis is becoming clearer around the world, are we in the media keeping things in perspective? Should we even be using words like “crisis” or “meltdown?”
On the first question, I can’t help thinking of Claude Rains’ “Casablanca” character Captain Renault, who was “shocked, shocked to find that gambling is going on” in Rick’s club. In hindsight, given the current state of the financial markets, wasn’t it obvious a problem was brewing?
Not necessarily. And it probably wouldn’t have been obvious to anyone reading online or print coverage or watching television news in the United States.
A look at a study by the Pew Center’s Project for Excellence in Journalism indicates that, in the United States, coverage of the economy was pretty much drowned out by coverage of the presidential election—at least until the two stories converged in mid-September. Indeed, as the Pew material shows, in the month preceding the week of Sept. 15, which saw the Lehman bankruptcy, the Merrill Lynch sale, the AIG bailout and large drops in share prices, the proportion of the news hole devoted to the economy reached a low for the year, filling only 4.8 percent of the time on television and radio and space in the print and online media. Since then, that focus has shifted, as the presidential campaign narrative became, again, “it’s the economy, stupid,” and as the presidential transition has focused on U.S. economic problems.
Is journalism about reporting or investigating? We can all blog and report and describe what’s happening, the media is no longer needed for that. We can all report numbers and say what other people told us they mean. What we need is investigative journalism that tests the assumptions that are being made, that shines the spotlight on those who gave bad predictions and that helps us understand where and why did we get it so wrong.
Well done Dana Radcliffe. It’s not a sarcasm. Contrary to the hotheads you have analysed the Abacus deal set in a (despicable) gambling environment where a zero sum transaction was executed.
A looser and a winner would emerge from transacting synthetic securities. No ‘serious’ cards were hidden under the table, i.e. as the long parties to the transaction would need to see or analyse before closing.
Talking about gangster-like methods indicate little, if any knowledge of previous gambling attitudes in the market. GS had no fiduciary duty to ACA and IKW Bank (the long parties) – two opportunistic and badly managed players, eventually loosing their shirts…. one of which led to mayhem for German tax payers and investors, but not for US tax payers.
This is not to say that GS are saints and without any negative impact on the former bubbling housing market and US pension funds’ wealth, but in other transactions. All up, GS had a very limited negative impact on the MBS market, while the big players such as Countrywide, Fannie, Freddie, Citi, Bear, Lehman and Washington Mutual, were the front runners in this bizarre circus fully supported by Alan Greenspan, Ben Bernanke, Democrats (for promoting home ownership for more people), some Republicans and indeed, by the SEC through this regulator’s lack of competence, (maybe integrity) and interest in the what they should regulate.
The Abacus case was merely a political stunt as the White House was in dire need for a case on which its current masters could build their case for new financial regulation initiatives. President Obama was scheduled to open the financial show case in New York only four days after the SEC announced the fraud case against GS.
Have a look at how out-of-money GS option puts traded the day before disclosure. Not even mad investor parties such as the ACA representatives would have bought such puts one day before expiry without some info of what was coming up the next day. Who was in possession of such info? Reportedly not the GS camp, but only people from the SEC environment. The profits made were in the thousands of per cent, while the put sellers were left with equivalent losses.
I encourage everyone to analyse the trades themselves. So, why didn’t the SEC and the NYSE launch an investigation? The answer appears to be obvious.
SEC’s fraud case was not a zero sum ‘transaction’, possessing the characteristics of a scenario where none of the parties could afford to loose the case. As such, an out of court settlement was required, all of which was evident from the outset.
The SEC would have had significant problems winning this Mickey Mouse initiative, so getting some money to the treasury without loosing face became a must.
Same for GS, as it’s loss of reputation was (and still is) significant, but unbearable for management and board should such a court ruling (in 2011 or 2012) not be heading their way…. without any distractions as to daily routines. This would have been a poker game to continue such a case in court all of which the SEC would have understood.
My business partners and I believe that GS was the best managed financial institution reducing their housing risk significantly by hedging initiatives. However, it appears that they did not hedge their exposure to AIG sufficiently, riding towards significant losses if AIG went into Chapter 11 or final bankruptcy.
We believe that the previous government made a significant error of judgement when the former GS executive Hank Paulson was left in charge in the September / October days of 2008 because of his potential conflicts of interest. Potentially, this cost the tax payers dearly and equally bad, has led to America’s declining financial market superiority in Europe and in emerging markets in Asia.
Blankfein performed in late 2008 a brilliant job from the perspective of GS’ shareholders by eliminating GS’ exposure to AIG. Who should or could blame him for doing so?