Category Archives: Corporate governance

Bill Black: My Class, right or wrong – the Powell Memorandum’s 40th Anniversary

Yves here. Black’s post discusses a turning point that is not as well known as it ought to be. Thanks to reader John M for bring this post to my attention.

By Bill Black, an Associate Professor of Economics and Law at the University of Missouri-Kansas City. He is a white-collar criminologist, a former senior financial regulator, and the author of The Best Way to Rob a Bank is to Own One. Cross posted from New Economic Perspectives

August 23, 2011 will bring the 40th anniversary of one of the most successful efforts to transform America. Forty years ago the most influential representatives of our largest corporations despaired. They saw themselves on the losing side of history. They did not, however, give in to that despair, but rather sought advice from the man they viewed as their best and brightest about how to reverse their losses. That man advanced a comprehensive, sophisticated strategy, but it was also a strategy that embraced a consistent tactic – attack the critics and valorize corporations!

He issued a clarion call for corporations to mobilize their economic power to further their economic interests by ensuring that corporations dominated every influential and powerful American institution. Lewis Powell’s call was answered by the CEOs who funded the creation of Cato, Heritage, and hundreds of other movement centers.

Your Humble Blogger Asked Larry Summers a Question He Did Not Like

A funny thing happened at the INET conference. First, I got to ask Larry Summers a question because Martin Wolf, who was moderating the session, is a good sport. Normally, at this sort of event, only At Least Semi Big Names get to interact with Big Names. Yours truly is a minimum of a rank or two below At Least Semi Big Names.

You will find our question at 55:40.

David Apgar: What Was So Unpredictable about Deepwater Horizon?

By David Apgar, the Director of ApgarPartners LLC, a new business that applies assumption-based metrics to the performance evaluation problems of development organizations, individual corporate executives, and emerging-markets investors, and author of Risk Intelligence (Harvard Business School Press 2006) and Relevance: Hitting Your Goals by Knowing What Matters (Jossey-Bass 2008). He blogs at WhatMatters.

It’s tempting to look for a little consolation on the anniversary of the oil spill from BP’s Deepwater Horizon rig in the idea that our worst industrial accidents are unpredictable and not the result of negligence. The only trouble is that the BP disaster in the Gulf of Mexico was predictable.

Jim Boyce: Tax Havens or Financial Sinkholes?

By James K. Boyce, who teaches economics at the University of Massachusetts, Amherst. He is co-author, with Léonce Ndikumana, of Africa’s Odious Debts: How Foreign Loans and Capital Flight Bled a Continent, to be published this year by Zed Books.

Tax havens have got a lot of press lately. In Britain, the UK Uncut movement has mounted demonstrations across the country against tax dodging by large corporations and wealthy individuals – making the connection between profits parked abroad and deficits and budget cuts at home.

Conflicted JP Morgan Next up for a Reputation Hit

Louise Story at the NYT has this: In the summer of 2007, as the first tremors of the coming financial crisis were being felt on Wall Street, top executives of JPMorgan Chase were raising red flags about a troubled investment vehicle called Sigma, which was based in London. But the bank chose not to move […]

Japan Earthquake Shows Business Reengineering Relies on Bogus Thinking Similar to Financial Engineering

Gillan Tett’s latest offering in the Financial Times discusses the woes that have befallen various major companies that find themselves exposed as a result of having extended supply chains that have Japan-based manufacturing as an important part. She correctly depicts this as a symptom of a much larger problem, of having pushed the idea of wringing out production costs too far. But perhaps due to space constraints, she fails to draw out the most important conclusion: just as with financial engineering, management incentives favored ignoring risk, and the resulting blow ups were predictable.

Tett tells us the Japan-related disruptions are merely the most visible symptom of a widespread pathology:

Why Adulterous Failed Banker Sir Fred Goodwin’s Covered-Up Workplace Affair is a Matter of Public Interest

We will probably see in the next few days whether the newspapers manage to get the super-injunction by Sir Fred Goodwin, the CEO of failed bank RBS, lifted. Since the facts of the matter, or “speculation” if you will, are now all over the Internet, keeping the super-injunction in place seems pretty pointless, as the Telegraph confirms in Sunday’s Links.

So what’s the real point of this circus? A demonstration of the superiority of the Web over the tabloid press as a mechanism for transmitting salacious tittle-tattle? A grandstanding MP working parliamentary privilege to get a bit of banker-bashing publicity? Naked Capitalism getting into the regulatory arbitrage game and thumbing its nose at the UK court order from the relative safety of its NYC-hosted web server? Or perhaps it is blogger Guido Fawkes sarcastically pointing out that the law is now officially an ass:

So there was this ****** bloke who worked closely with another ****** colleague, they apparently began an adulterous affair not long after the ****ing crisis of 2008. He went to Court to stop it getting out that he had been banging her. Because he is the most notorious ****** of his generation he also banned references to his profession lest he be identified. Guido would be in contempt of Court if he told you his name or profession…

Indeed, the law should not be mocked; but who’s mocking it? The UK certainly needs major overhauls of its privacy (and libel) laws, rather than the current abusive shambles, but in this particular case, one might contend that it’s Sir Fred who’s doing the mocking.

Matt Stoller: Angelo Mozilo, Tea Partier?

By Matt Stoller, a fellow at the Roosevelt Institute. His Twitter feed is http://www.twitter.com/matthewstoller Mozilo’s emails expose a political philosophy borrowed from Ronald Reagan. I was combing through the Financial Crisis Inquiry Commission resource materials, and I found an interesting email from former Countrywide CEO Angelo Mozilo to his senior executives. It was written in […]

The £1bn-plus HBOS Fraud Investigation That Lloyds Keeps Trying to Brush Under the Carpet

By Ian Fraser, a financial journalist who blogs at his web site and at qfinance. His Twitter is @ian_fraser Lloyds Banking Group, the financial behemoth formed from the September 2008 “merger” of Lloyds TSB and basket-case Scottish lender HBOS, is a bank that never ceases to surprise me. Take the bizarre contortions the bank has […]

The Project Merlin Back Story

Not a bad couple of week’s work for the banks, since the “Project Merlin” publicity? Actually it’s taken a bit longer than that, and reconstruction of some of the behind-the-scenes action might be instructive. Although other banks get walk-on parts, the story is mostly about Barclays. Let’s start the timeline in September 2010, when John […]

King Dinged

Soon-to-be-unemployed sports team managers the world over know what it means when they receive an affirmation of full confidence from the club chairman. Accordingly, we know roughly what to make of this: ‘The Bank of England has credibility,’ said Osborne (pictured). ‘I have complete confidence in it.’ The chancellor will not alter the 2% inflation […]

Barclays’ Bob Diamond to Non-Bankers: Drop Dead

Bob Diamond, Barclays’ chief executive officer, no more said something as inflammatory as “drop dead” to the UK Treasury select committee yesterday than Gerald Ford did in a 1975 speech refusing to extend financial assistance to save New York City from bankruptcy. But the substance was every bit as uncooperative.

Despite its artful packaging, Diamond’s presentation was yet another reminder of the banking industry’s continued extortion game, namely, that they can take outsized, leveraged risks and when they work out, pay themselves handsome rewards, and when they don’t, dump them on the taxpayer. And they’ve only been encouraged to up the ante. Not only did they get to keep their winnings from their last “wreck the economy” exercise, no senior executive was fired, no boards were replaced, and UBS was the only major bank required to give a detailed account of how its screwed up so badly as to need government support. And before you tell me Barclays was never bailed out, tell me exactly how well it would have fared had any other major UK or international bank failed, or had the officialdom not provided extraordinary liquidity support when interbank funding dried up.