Monday, April 27, 2009

What Part of "Are You Out of Your Mind?" Do You Not Understand?

Sunday's New York Times carried a page-one story by Louise Story about the "bounce back" in Wall Street pay.

My "favorite" quote came from Sandy Gross, a managing partner of Pinetum Partners, a financial recruiting firm: "Wall Street is being realistic. You have to retain your human capital."

Realistic?!? If that's realistic, I'm the tooth fairy. (Full disclosure: I'm not.)

Morgan Stanley, for example, set aside more than $2 billion (yes, that's with a "b") last quarter for compensation, even though the firm lost more than $500 million (with an "m") in the same quarter. In other words, it could have avoided posting such a drastic loss by setting aside less for compensation. I don't know about you, but to me, this is a classic example of carts before horses.

Beyond that, the financial firms have been shedding thousands of employees for months now. So I find it hard to believe that banks would have trouble finding highly qualified employees.

It was one thing when investment banks were all privately-held partnerships, and the partners could divvy up the cash left at the end of the year as they liked. But today, when they are largely publicly-traded -- and taxpayer-bailed-out -- such sums seem not just unethical, but obscene.

If there is money piling up, shouldn't it go as dividends to bank shareholders, who have seen their wealth evaporate as share prices fell precipitously over the last year?

Friday, April 24, 2009

How Long Would You Think Before Approving a Game Called "Baby Shaker"?

Apple has apologized for -- and removed from its iTunes store -- a $0.99 iPhone application called "Baby Shaker" (quiet a crying baby by shaking the device until red x marks appeared over each of the baby's eyes!). It took only two days for the "game" to be introduced and removed, but honestly, don't you think two days is about 47 hours, 59 minutes, and 58 seconds too long?

The BBC reported that the "game" was developed by a company called Sikalosoft, and that Apple would not answer questions about who approved the application for sale, nor how many people had downloaded it. The original application did apparently carry a caveat that one should, in fact, never shake a baby. is a place-holder website, which acknowledges that the "game" was "greatly lacking in taste".

I'm mildly interested in who at Sikalosoft thought that such a game concept would be "entertaining", but I'm much more interested in who at Apple approved its sale. What processes exist that would let something like this happen in the first place?

I believe in "disaster training" for companies. I don't mean that only in the sense of the traditional fire drill (though they're a smart idea!), but in the sense of, What's the worst piece of news that could hit our company, and how would we handle it?

Companies tend to come out with far-fetched answers and then dismiss the whole subject. A car company, for example, might answer flippantly that someone invents a teleportation device, thereby obviating the need for vehicles to get us from point A to point B. But by dismissing the likelihood that bad news could strike unexpectedly, a company loses the opportunity to think proactively about what it does, what it says, and the processes by which decisions are made. I'm sure Apple is rethinking the approval-for-sale process now.

Do I hear a barn door being locked after the horses are gone?

Tuesday, April 21, 2009

What is it about Full Disclosure that's so Hard to Get (and to Do)?

Here I am again, on my favorite soapbox. Well, one of my favorite soapboxes.

Andrew Ross Sorkin has an excellent column in today's New York Times about banks' attempts, as he puts it, "to pull a bunny out of a hat" and make their earnings statements look better than they really are. For example, Bank of America trumpeted its most recent quarterly results ... but neglected to point out that there was a big one-time gain from the sale of its stake in China Construction Bank, and oh yes, there was that valuation of Merrill Lynch assets, which were acquired last year, that was higher than the valuation Merill Lynch had used.

Guess what? The investors who follow financial stocks weren't impressed. Bank of America is now trading around $7 a share -- better than it was in late February, I'll grant you, but less than a year ago it was trading above $40.

Sorry to pick on BoA (actually, I'm a retail customer, and as such have no complaints). But really, how stupid do they think we all are?

It was this sort of dopey financial shenanigans that got this whole crisis started. Wouldn't it be terrifically refreshing to read an earnings report that, as Sorkin says, "could fit on the back of an envelope, with no asterisks and no fine print"? Wouldn't we applaud that company, even if the results were pretty ugly, for facing its situation directly (and showing us the plans to do something about that situation)?

I know that full disclosure is hard -- it's hard for most of us to admit to mistakes, even little ones like forgetting a thank-you note, or inadvertently bumping into someone in a checkout line. Sometimes "I'm sorry" feels like the hardest thing in the world to say. But if you try it, you'll find that it's refreshingly empowering.

Friday, April 17, 2009

Enough, Already, with the "Brand You"

I'm tired of hearing that I'm responsible for building "Brand Me". Yes, I get it -- if I don't present myself on the Web, the Web will present me, whether I want it or not (I thought I'd destroyed all the photos of me wearing '70s "fashions", but apparently not). And while I do want to give potential clients a clear picture of what I can do for them, the reality is that there's more to me than just "Brand Me".

This reminds me of a conversation I had with a friend. I don't know whether he'd describe himself as a conservative or a libertarian, but he came up with a great program by which federal taxes could be eliminated, and replaced by government bonds. In effect, he said, the government would be like any other investment, and if I thought it was worth while, I could buy bonds; and if I didn't, well, there were plenty of other places I could put my money. There were enough people who supported various government programs, he asserted, that taxes could be completely eliminated and it would have little effect on government revenues.

He was so pleased when he presented his thesis to me. He had already run it by a number of economists -- even Nobel Prize winners -- and they had all been impressed by his logic. What did I think of it?

It makes sense, I said, except that I'm not just an economic Consumer. I'm a Citizen. I consider taxes to be, as Oliver Wendell Holmes said, the price I pay for civilization.

Yes, "Brand Me" is important. But I'm more than that fundamentally economic label. I'm a citizen, a spouse, an ethicist, a gardener ... and much more besides. Let's stop reducing people to the level of their spending habits.

Monday, April 13, 2009

Pay for that Paper. Please.

Ever since I heard that the Boston Globe might be shut down, I've been thinking about newspapers and the economics thereof. The Globe is hardly the first daily newspaper to face this threat -- hello, Rocky Mountain News and (sort of) Seattle Post-Intelligencer -- but I grew up in New England, and (full disclosure!) my first job after college was as a reporter for a "dead-tree" daily, so it hit me.

The problem, of course, is that putting out a good newspaper doesn't just cost a lot of trees; it costs a lot of money: reporters and bureaus, printing and distribution. And when "everyone" seems to be getting the news online, and free, newspapers are hurting.

In the days of Web 1.0, I remember hearing people talk about how great it would be to create "personalized" papers: you could program a bot to scour the Web for you for stories that were of particular interest to you, whether your passion was NASCAR racing, commodities trading, chocolate recipes, or Ukrainian poetry. You might even create a "community" of Ukrainian poetry fans.

But we're compartmentalized enough already. What great papers do is tell you about the world, and especially about the parts that you think you're not interested in. Every day, I find myself reading stories that I would never have programmed a bot to look for (fish-farming in Iceland, or the closing of a music store in Manhattan -- and I don't even play an instrument!). Every day, stories make me understand viscerally the truth of John Donne's over-quoted line that "no man is an island". And isn't that worth paying for?

So: drop those quarters into the newspaper box. And read.

Friday, April 10, 2009

Remember: Legal Does Not Always Equal Ethical

According to Don Van Natta Jr.'s article in Wednesday's New York Times, the investment bank Morgan Keegan found a particularly effective and profitable way to market complex municipal bonds to small towns in Tennessee: play for both sides.

Van Natta reported that "The municipal bond marketplace was so lightly regulated in Tennessee Morgan Keegan was able to dominate almost every phase of the business."

The mayor of Lewisburg, Tenn., where bond payments recently quadrupled, is quoted as saying, "We're little, and we depend on people wiser than us in financial ways to keep us informed."

Unfortunately, too many players on Wall Street seem to have read "little" as "easy to fleece". And sadly, if may not be that Morgan Keegan has done anything illegal. Van Natta noted that representatives of the bank said that they had "saved cities and counties money for years by delivering lower interest rates, and that the economic decline that created the turmoil in the bond market was beyond their control." That's probably true. But I'll also bet that they never pointed out the levels of risk that towns like Lewisburg were taking on. Municipal bonds have traditionally been a virtually risk-free way to invest money, and they were also a virtually risk-free way to raise money. Not any more.

Tuesday, April 7, 2009

Tossing the Big-Bucks Blame Around

There's been a lot of vitriol tossed about recently regarding executive pay. And it's not hard to understand the anger of most of us non-CEOs, struggling with a deepening recession and widening pools of layoffs. How is it that Dean Scarborough, chief executive of Avery Dennison, can get a 245% (no, that's not missing a decimal point) increase in his total compensation from 2007 to 2008 (to $6.44 million), when his company's overall performance was down 35%?

I have nothing against Mr. Scarborough; I don't know him and I'm not invested in Avery Dennison. He's just an example, and he's hardly alone. I picked him pretty much at random from a table of 2008 compensation for 200 chief executive officers of large public companies published by the New York Times on Sunday.

But -- at risk of being hit by some of that flying acid -- I really wonder if Mr. Scarborough and his fellow executives are the proper target. It's corporate boards of directors, after all, who set and approve executive compensation. And the relationship between boards and chief executive officers (who are, all too often, also chairmen of those boards) has been and continues to be way too cozy.

Even when the intentions have been good, the results have often been bad. When a CEO appears to perform well for Company A (and don't get me started on the subject of short-term results vs long-term...), the board not surprisingly jumps on the pay-for-performance bandwagon, and ups his or her pay. Since there are several other companies competing in Company A's marketplace, the board looks at what those other companies pay their CEOs, and makes sure that their CEO's compensation package is above the average. But all the other boards in that marketplace are doing the same thing -- it's the Lake Woebegone effect, where, as Garrison Keiller put it, "all the children are above average."

Good chief executive officers are indeed a rare breed, and deserve to be well-compensated. But: who determines that a particular CEO is "good", and how is that determination made? Should the board alone make that determination? Is the company's stock price the only factor? (Apparently not, given the examples found by the Times)

Friday, April 3, 2009


Someone said once that ministers all have just one sermon that they feel they need to give, and then they spend their careers finding umpteen different ways to give that same sermon every Sunday. I don't think that's true, but I'm starting to worry that I have just one blog post, because here I am, once again thinking about full disclosure and the ease of being corrupted.

Roni Caryn Rabin had an article in yesterday's New York Times ("Doctors Urge End to Corporate Ties" -- online at reporting that a group of prominent physicians and researchers "urged professional medical groups to 'wean' themselves from industry support and move toward a complete ban on corporate money for things like souvenir pens, tote bags, and the sponsorships of committees that develop clinically important guidelines and training programs."

Can a doctor really be corrupted by a "gimme" pen? Probably not. But don't you, as a patient, want to be 100% sure that your doctor is prescribing Medication X, as opposed to Medication Y, because she truly thinks that X is the best drug for your situation, because she's reviewed the scientific evidence and taken your other prescription(s) into account?

Do you even want the thought to enter your mind that she might have a financial incentive? Perhaps as well as having a private practice, she does research on your particular disease, and some of the cost of conducting research is paid for by Pharma Giant A. If Medication X is produced by Pharma Giant A, what are you going to think?

Think I'm exaggerating the situation? Consider this: in yesterday's Boston Globe (online at, Carey Goldberg reported that "Virtually all the psychiatrists who wrote the latest clinical guidelines for how to treat depression, bipolar disorder, and schizophrenia had financial ties to drug companies..." Virtually all. Now, do you really feel just as confident taking that prescription med?

Wednesday, April 1, 2009

Do the Right Thing, Even for the Wrong Reason

What is that, some kind of April Fool's Day joke? Do the right thing, even if not for the right reason? Isn't that a violation of ends-don't-justify-means thinking? Maybe, but it's also smart.

I learned my first lesson in management when I was still a lowly employee: Do not nickel-and-dime your employees.

It's not worth it. It breeds distrust and resentment. And they're way better at nickel-and-diming you back than you will ever be.

The lengths to which employees can and will go to get back at you are stupidly impressive. I have known of cars driven for business with several thousand fewer miles on the odometer than on the reimbursement-expense forms. I have seen orders for stationery shoot through the roof in the weeks before an office shuts down. I have seen... Well, you get the picture, and I'm sure you have stories of your own to share.

Don't get me wrong: I'm not condoning this behavior. But I do understand it, which is an entirely different matter. Those stationery orders would never have been placed -- it wouldn't have occurred to the employees to place them -- if they were not already feeling sorely ill-used by their employer.

And nine times out of ten, what's the root of the sense of being ill-used? Lack of information / full-disclosure / honesty.

So do the right thing, and I won't press you about your reasons.