Tuesday, May 19, 2009

Ethics

I just finished by Master's Degree in Information Management at ASU - congratulations to me! - and was a little surprised at one of the convocation speeches.  If I remember correctly, it was the Dean of the School of Business, and what was surprising was how many times he talked about ethics and being ethical.  He spoke of President Obama's commencement speech that blamed the current financial crisis on Wall Street and urged all of us to conform to ethical standards so that we do not have these sort of crises in the future.

I was struck at how true those statements were.  Many on the left are blaming our problems on under-regulated capitalism.  Their solution is more regulation.  I don't think that's the case.  Our current financial problems have been caused by greed and lack of ethics.  More regulation may or may not have slowed the descent but as long as greedy and unethical behaviour continues, we will continue to have these issues.  Capitalism, like democracy, can only function well in honest and ethical hands.  

One of the great things about capitalism is that it's self-correcting.  Businesses run by the greedy and unethical tend to collapse in on themselves (Enron, Worldcom, large banks, etc).  This clears the way for other businesses to step in and take their place.  Unfortunately, our government has decided that certain businesses are too big to fail and are propping up those companies with taxpayer money.  This seems to send the message that it's OK to lie, cheat, and steal as long as you know that the government won't let you fail.  I don't think that's right.

We live in difficult times.  We are suffering from the aftermath of unrestrained selfishness and greed.  I hope that as a society, we can overcome this and start bringing ethics back into business and government alike.  That is the only way we will be able to weather this storm.

Wednesday, May 06, 2009

When Government "Rescues" The Auto Industry


There is an excellent column today in the Arizona Republic by Robert Robb. It's called The Chrysler Power Grab. Don't get confused, this is not about Chrysler grabbing power but the government using its "bailout" to benefit the union.

Mr. Robb points out that the terms that the government is forcing Chrysler to ask for are as follows:

The Obama administration is attempting to muscle past this law. Under its proposal, the health care trust of the auto workers' union, an unsecured creditor, would forgive 57 percent of what Chrysler owes it, and receive 55 percent of the company's equity in exchange. The federal government would forgive about a third of what it would loan Chrysler and receive 8 percent of the company's equity. Fiat would pay nothing for its 20 percent initial ownership.

The secured creditors, with the first claim on Chrysler's assets, were asked to forgive 70 percent of what they are owed and receive nothing in equity. When they refused and forced the company into bankruptcy, they were excoriated by Obama – a shameful act by a president who pledged to uphold the law, not make it up as he went along.

This is the equivalent of you going bankrupt and the bankruptcy court deciding to give your house to the credit card companies and telling the mortgage company to forgive 70% of your mortgage and to give up any ownership of the house. Does that make any sense? Well, it turns out the credit card companies appointed the judge...

This is why government should stay out of business.

Read the column. It's very good and kind of scary at the same time.