three core reasons why Wall Street failed so badly in the fall of 2008: The firms lacked a higher purpose, lacked a clear strategy, and mismanaged their risk.
via Why Be an Ethical Company? They’re Stronger and Last Longer – BusinessWeek.
Companies that didn’t go boom in the bust:
Charles Schwab & Co. (SCHW) has largely avoided the huge fallout. So has US Bancorp (USB). A quality both of these companies share is a laser-like focus on customer service and on honesty and transparency. This comes from their cultures.
Neither company touched the subprime mortgage securitization market, because they saw it as risky and simply not the kind of business that served the company’s long-term interests. I’d wager, as well, that these companies didn’t feel comfortable asking their employees to sell unethical mortgages to customers, a practice undertaken by many subsidiaries of the big Wall Street investment banks and large bank-holding companies.
People in the corps that lost money were afraid to speak up about what they saw that was wrong, because “The silencing of employees who sought to challenge strategy and risk-management practices likely also undermined the banks’ moral authority and emboldened those who already felt inclined to do the wrong thing.”
The big bonuses being given out by firms like Citibank, suggest they are still on the wrong-track with a short-term focus on making money quick. The author gives examples of companies where ethics has tempered greed, and the businesses have profited or done better than the cut-throats.
Costco, where they pay employees more, and also the differential between what the CEO makes and regular employees is not as great as at many businesses, has a better employee sales rates than its competitors.
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Barbara K Iverson 