THE BREEDING GROUND

Stories that organizations ‘Sell’ There is a problem with Honesty. It does not appear on the balance sheet of an organization. Goodwill does appear as an intangible asset, which could be a function of organizational image. It represents the worth of a company’s brand name, patents, customer base and other items that are difficult to price, but that help to make a company valuable. It acquires tangibility in case of an acquisition or merger, when the price paid is higher than the total value of the assets of an organization. Negative goodwill denotes a distress sale, and most organizations would not like to reach that stage. The truth lies somewhere in between the two points, and it could touch zero. Goodwill may be seen as inconsequential to the balance sheet of an organization. Ethics does not figure anywhere. The Wells Fargo scam has drawn attention, for the 5300 layoffs of junior staff, and maybe the scale of fraudulent operations. Organizations maintain an external layer, which can be shed, if a crisis erupts, to ensure the safety and ‘teflon coating’ of the core group. There is no major fluctuation in the Wells Fargo stock prices, and ‘Business as usual’ is reported after the record fine of $185 million was imposed. For all you know, this could have been a negotiated amount. http://www.marketwatch.com/story/its-business-as-usual-at-wells-fargo-after-record-fine-2016-09-09 “The fine is a rounding error, and I don’t see any unintended consequences.” So said FBR analyst Paul Miller, describing the $185 million in fines and penalties, plus another $5 million for “customer remediation,” that Wells Fargo & Co agreed to pay. Wells Fargo’s punishment comes to only 0.9% of the $22.9 billion that the bank earned last year”. 1. Culture I am not sure if culture eats strategy for breakfast. But culture is created by strategy. Profitability and Growth are touted as key drivers, and the behavior that attracts maximum returns, translates into the culture of the organization. This may be only a grandiose projection of convoluted reality. There are actually, no financial returns. Take the example of organizations, where internal competition is supported. While one channel is claiming its incentives and awards, for its ‘amazing’ contribution, nobody stops to question why the entire book does not reflect the incremental growth. They might have cannibalised on another channel or business, but yet, that is hailed as the ‘Way to Go’ in an unending stream of congratulatory mails (all marked to the senior layers of management). Sectarian interest prevails, and obvious factors are overlooked and indirectly, endorsed. The (mis)selling of unit-linked insurance products has taken the cake, icing and frills et al, till the regulatory bodies came down with a heavy hand. The employees who had just logged in a policy, or pinged to say that a high-value cheque has been collected, were hailed as national or regional heroes. The congratulatory messages were flashed to the team late night, to glorify the heroes and their untiring efforts to close deals at midnight. At times, they have been awarded trophies in gala events, and the cheques from customers have bounced subsequently. The KYC documents submitted have turned out to be forged. Subsequent lapsation of policies is only a continuation, or logical course that the story was expected to take. Creation of a hype is the behaviour that is encouraged and rewarded, and gets ingrained in the culture of the organization. 2. Incentivization Variable pay, incentive schemes and contests are all meant to boost business, but they end up boosting the personal accounts of manipulative employees. The sales teams have gained expertise in discovering the loopholes in the scheme, compare the schemes applicable to different channels and work in tandem, to maximise returns. The same business is circulated from one segment to another, to maximize returns from the incentive scheme. Is this possible without any approvals, or an implicit sanction of unethical behavior? If the crisis is seen as blowing beyond proportions, a few threatening sounds of ‘clawback of incentives’ from the minions down below, are heard on calls. The fat executive bonuses and ESOPs however, remain safe. 3. Window Dressing Nobody talks about this anymore, as it is a well-known and accepted secret. The RBI has initiated efforts to clean up bank balance sheets of disguised NPAs. The dressing up of the liabilities book continues to be a non-issue. The quarterly average balances, and quarter-end balances of many banks will show a wide discrepancy. QoQ or YoY growth is a mockery of whatever ethics or principles one can think of. 4. The hoax of the Whistleblower Policy Pic: mi2g.com Whistle-blowers have never led an easy life after speaking up, be it Richard Bowen from Citi, or Eric Ben-Artzi from Deutsche. Employees do not venture into this territory, unless they are willing to let go of their positions, and everything else that comes with the package. A new initiative called Banking Whistleblowers United has been launched by four people — Richard Bowen of Citi, Michael Winston of Countrywide, Gary Aguirre, a lawyer and former investigator with American SEC, and Bill Black, author of ‘The Best Way to Rob a Bank is to own One” & a professor of Economics, in February, 2016. The acceptability and impact is yet to be seen. http://neweconomicperspectives.org/2016/01/announcing-bank-whistleblowers-groups-initial-proposals.html https://www.youtube.com/watch?list=PLhvPB4lyc4dSPe8ezXLMFKUmK7vDB4JWT&v=z28Q-ml6hP8 In Part 2 of the above-mentioned video series, Michael Winston, the CountryWide Whistleblower says “Well, they did not fire me a blessed day. They retaliated against me in every imaginary way possible. But sometimes you have to deal with your conscience. I said ‘No’ to play to market, ‘No’ to play to insider trading. Consequently, in a 35-year career, for the first time, I was unemployed.” Richard Bowen, the whistleblower at the CitiGroup says, the “1,000 pages of fraudulent activity I had documented was not only buried, it was locked up. The SEC classified my testimony as “confidential and trade secrets” and has repeatedly refused to release it, despite much of it being public information.” He hints at a revolving door relationship between the Wall Street bankers and SEC (Securities Exchange Commission), and that anyone who walks out of SEC has readymade positions in the banks. (Source: http://www.richardbowen.com) “Dishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence.” (Source: neweconomicperspectives.org) Like this: Like Loading… Originally published at reinventionsreena.wordpress.com on September 11, 2016.