Chicken, Egg? Or: Egg, Chicken?

We had seen plenty of examples since the near-implosion of the financial sector in 2008 of bankers behaving badly (you can find an oldie-but-goodie here).

I've even wondered whether the problem was more with the individual bankers or with the banking organization (here), and came to the conclusion that it was some of each.

Today's New York Times carried a brief article by Douglas Quenqua on some fascinating research by University of Zurich economists, reported by Kerri Smith in the journal Nature (here) that "bankers were about as honest as anyone else — until they were reminded that they were bankers." So it's not just the individual, or the organization: it's the overall culture of banking.

The economists asked more than 100 employees of a major bank to participate in their study. As Smith reports, 

...[Half of] the participants were quizzed about their jobs and their company, to prompt them to think of their identity as bank employees. The other half answered questions about their hobbies.

The participants were then asked to toss a coin ten times, unwatched by the researchers, and to report the outcome. They could earn money if they reported flipping more heads than tails — and up to US$200 if they reported flipping all heads or all trails.

The first group reported flipping heads 58.2% of the time — significantly higher than would be expected by chance alone. The control group reported tossing 51.6% heads.

And in case you're wondering whether people in other professions would show a similar pattern, the answer is: No.

The study authors suggest some possible measures to combat bad banker behavior, "such as having bankers swear a professional oath to consider the impact of their work on society — akin to the Hippocratic oath taken by physicians — or stopping companies from rewarding employees who behave dishonestly."

Good luck with those.

Who's Trustier than TRUSTe?

Lots of folks, it seems.

I've thought well of TRUSTe, a company that is (to quote their website) "the leading global Data Privacy Management (DPM) company and powers trust in the data economy by enabling businesses to safely collect and use customer data across their customer, employee, and vendor channels."

Moreover, "All TRUSTe solutions are engineered to enable businesses to continuously develop new and innovative products and marketing programs while adhering to best practices for providing customers with transparency, choice and accountability regarding the collection and use of personal information."

OK, that's a little heavy on the marketing-speak, but you'd think I'd like something that promised consumers "transparency, choice and accountability", right? The little TRUSTe symbol on a website seemed like a Good Housekeeping seal of approval.

I'd even assumed -- without really thinking about it -- that a company that certified websites for adhering to privacy standards was probably a not-for-profit.

Turns out I was wrong on several counts. (Sigh. Not for the first time, of course, and surely not the last.) Well, I was half-right about the final assumption: TRUSTe was founded as a nonprofit in 1997, but converted to for-profit in 2008. Let's just think about that for a moment, shall we?

In today's New York Times, Edward Wyatt reports that the Federal Trade Commission has penalized TRUSTe "$200,000 in profits... as part of a settlement for failing to annually recertify the privacy practices of companies in more than 1,000 instances while claiming on its website that it did so each year." (Full article, here)

The commission said that from 2006 to January 2013 TRUSTe failed to conduct annual privacy checks on some of the companies it certified. The company also failed to require companies using its seal to indicate after 2008 that the company was no longer a nonprofit corporation. 

In a blog response (here), TRUSTe CEO Chris Babel wrote that companies that were not reviewed annually were those that had multi-year contracts, which "represents less than 10% of the total number of annual reviews we were scheduled to conduct" and that "over 90% of multi-year clients" had two-year contracts, which meant that "the vast majority were reviewed every other year."

Babel also promised, "We have taken swift action to address the process issues covered by the agreement [with the FTC]."

Remember what your mother taught you? "Fool me once..."

We'll be watching.

This represents less than 10% of the total number of annual reviews we were scheduled to conduct during that time.
Multi-year clients that did not undergo the annual review step of their certification were reviewed when their agreements were up for renewal. Because over 90% of multi-year clients signed two-year contracts, the vast majority were reviewed every other year.
- See more at: http://www.truste.com/blog/#sthash.zpAk8r7s.dpuf

his represents less than 10% of the total number of annual reviews we were scheduled to conduct during that time.
Multi-year clients that did not undergo the annual review step of their certification were reviewed when their agreements were up for renewal. Because over 90% of multi-year clients signed two-year contracts, the vast majority were reviewed every other year.
- See more at: http://www.truste.com/blog/#sthash.zpAk8r7s.dpuf

At the Risk of Repeating Myself:

If people are dying because of your product, you should really really do something to fix the problem.

Trust me on this: Sweeping research under the rug is not going to make the problem go away.


Less than a year ago, I asked how many people had to die before a company would wake up and start recalling their product (full post, in re GM's ignition switch defects, here).

I'm asking the question again today, as more information comes out about airbag defects at Takata.

According to an article by Hiroko Tabuchi in today's New York Times, the Japanese airbag manufacturer, "alarmed by a report a decade ago that one of its airbags had ruptured and spewed metal debris at a driver in Alabama", conducted secret tests, using airbags retrieved from junked vehicles. The results? According to former employees (anonymous "because of continuing ties to Takata"):

The steel inflaters in two of the airbags cracked during the tests, a condition that can lead to rupture, the former employees said. The result was so startling that engineers began designing possible fixes in preparation for a recall.....

But instead of alerting federal safety regulators to the possible danger, Takata executives discounted the results and ordered the lab technicians to delete the testing data from their computers and dispose of the airbag inflaters in the trash, they said.

Those secret tests were conducted a decade ago, "after normal work hours and on weekends and holidays during [the] summer". 

That was four years before Takata, in regulatory filings, says that it first tested the problematic airbags. The results from the later tests led to the first recall over airbag rupture risks in November 2008.

The current recall has grown to involve ten automakers (BMW, Chrysler, Ford, Honda, Mazda, Mitsubishi, Nissan, Pontiac, Subaru, and Toyota) and 14 million vehicles. A more complete list of years and models affected, compiled by the National Highway Traffic Safety Administration, can be found here.

I understand the pressures that automakers and their suppliers face - to keep costs down, to meet brutal "just-in-time" manufacturing schedules, not risking penalties for late deliveries. But:

“That put a lot of pressure and incentive on us to never miss a shipment,” said one of the former managers. “I’d argue, ‘what if my daughter bought the car with the bad airbag?’ But the plant would tell us, ‘Just ship it.' ”

"Just ship it"? Really?