Was this economic crisis caused by the lack of integrity?
In the accompanying post, we discuss the global distress resulting from the dramatic nosedive of world economies. The general belief is that this situation was brought about by greed and corruption in financial firms, while our government loosened regulations and oversight. Most of you will agree that the lack of integrity (excerpt from lecture in September 2007 (3:09): Make Integrity a Habit) is a major cause for this mess. But but is there more?
Has there been a lack of all five positive core values (integrity, commitment, persistence, teamwork and communication) in the actions of corporate executives and government?
Can you discuss this, citing examples?
In regard to Scottgass comment. Here are some of the GM mistakes
First, the fundamental mistake made by GM was to underestimate for quite some time the effect of higher oil prices on demand for the cars it made. While GM continued to manufacture its range of gas-guzzling models, its Japanese competitors had designed and launched fuel-efficient vehicles.
The second mistake was while GM concentrated on upgrading sports utility vehicles, its competitors upgraded their range of normal cars and increased their market share in this premium segment.
Third, GM had to pay $2 billion earlier last year to wriggle out of a potential commitment to buy out Fiat, the sick Italian car company in which it had invested $2.4 billion some time ago.
The latest problem confronting GM is the investigation into its accounts by the Securities and Exchange Commission nd a restatement of its accounts for 2001. This has eroded the confidence of investors. It is burning cash at the rate of $5 billion a year.
http://www.rediff.com/money/2006/jan/27spec4.htm
Interesting, Roy. PC
The sad part of losing trust with the public is that, even you make ammends in some regards, the past mistakes loom large in the minds of the people where they are not willing to buy in to the new makeover. GM has started the route back to smaller or at least more fuel-efficient vehicles that are less harmful to the environment, with better quality interior and ride comfort than in the past. I was surprised when I rented a Chevy Malibu recently on how they had improved on styling, not just on the outside, but also on the inside! Plus, I’m sure we’ve all seen the advertisement on T.V. how the new hybrid escalade gets better gas mileage than a Mini Cooper. That is innovation, although it might not be the RIGHT innovation in light of 10-20 years down the line.
But, the truth of the matter is, the auto industry is built on experience and if GM dropped all their large vehicles and only produced the smaller ones, they’ll be just as bad in trouble. The reason being, there are still “rich” folks out there with the “need” for big flashy SUV’s and trucks and the profit margin on their successful products would have disappeared while one of the copetitiors got on better ground in this financial situation. I agree with Scott & Roy about all the mistakes mentioned, but just feel that GM is going to have a hard time convincing the masses that they are getting better till some time of consistent quality has been exhibited in their products
In response to your comment Jimy on “there are still “rich” folks out there with the “need” for big flashy SUV’s and trucks”. I don’t think “rich’ is always the case, in some cases it is greed and lust for attention that drives them to the big flashy suv’s. Anyone driving a Hummer is guilty of this. Consumer demands and wants are the reason that the car manufacturers got away from putting their resources into small, fuel efficient cars. Until gas reached $4/gallon the mindset was the bigger the vehicle, the better. I will admit that I don’t drive a gas saver (a Jeep Commander) but it is not because I am flashy, it is because I have 1 in a car seat and 2 in booster seats. You don’t fit that into a gas saver. But, I got a great deal on it because everyone is trading in their gas guzzlers for gas savers.
http://www.oxfonline.com/Geiger/sst1208.ht...
The Old Rules of Money No Longer Work
Just like you, banks and governments are watching the world economy spin out of control…and they don’t have a clue about what’s happening or what to do about it.
Everything these so-called experts predicted was going to happen hasn’t happened. And what’s happening can’t be explained by their “tried and true” theories.
Think about it:
Market swings of 300 points used to be called “wild.” Now, daily rides of 600 to 700 (even 1,000 points) barely make the Wall Street Journal’s front page.
You’d expect gold (the only real “safe haven”) to be shooting through the roof in a market like this. But gold – against all expectations – has done anything but.
The U.S. Government hands out $700 billion in freshly printed dollars, devaluing the entire stock of American debt… and the dollar, against all odds, goes up.
Banks take billions in government loans to free up credit, but instead of lending the money, they use it to buy other banks. Are the inmates in charge of the prison?
The big question is where is the Banks integrity?
Well stated, Roy. PC
If the US dollar was backed by gold, would we still have the crisis or would it stop the government from printing new money?
The Lacck of integrity is one of the reason for this economic crisis. Analysis indicates that the lack of corporate social responsibility is another reason for such crisis.According to Jan Phillips, author of “The Art of Original Thinking,” employees are in “pursuit of purpose-driven lives and principle-driven workplaces.” They are “searching for meaningful workplace experiences, looking for organizations whose commitment runs deeper than the traditional bottom line.” They “want to align their purpose with businesses that are purpose-driven as well as profit-driven.” Economic survival requires that the number of companies taking CSR seriously will actually increase during this economic downturn… especially as more companies embrace a more complete view of the inextricable connection between long-term economic sustainability and CSR. Companies making the commitment to Integritizing their business as a cornerstone of their sustainability and CSR strategies stand to profit most during this economic downturn through simultaneously enhancing their Social Capital and their Corporate Reputation. Hence my statement that “Integritizing your company maximizes your triple bottom line.”
The lack of core values is also the reason for such crisis.
I get angry when I think about the behavior of some of these companies and how they wonder why they are in the situation they are in.
GM is the main one. There are many articles and forums that bash GM for their actions. It may be true that Richard Wagoner may not be able to help the actions of past CEOs, but it is true that the current leadership/management has not looked in the right direction. There are some interesting views in the forum at the link below…
http://forums.sporttruck.com/70/7274613/the-lounge/gm-ford-chrysler-bailout/index.html
I think GM has had a lack of all 5 positive core values, but some more than others. Some specific examples include the lack of persistence when not challenging union demands and the lack of communication when making multiple versions of the same vehicle. Apparently, not many people liked the Denali, the Tahoe, or the Suburban, and those vehicles are cosmetically about the same as the trucks, except the backs are enclosed.
I would go so far as to say that there is a lack of teamwork that is illustrated by all the competitiveness between the takers that work there and the takers who have already retired. Everyone seems to be all about themselves and the high wages that have historically been paid.
I do agree that the current economic downturn was spurred by the lack of integrity throughout the financial industry including the government and private sector. Individuals and organizations use greed to meet the desire of financial requirements that they are looking for, without concern for others or the ultimate consequences for the others in the same waters. The lack of integrity in any situation from personal to professional may temporarily lead to satisfaction of that need, however eventually this satisfaction will lead to an unwanted outcome. We must be honest with ourselves and others in all of our actions; otherwise the consequences will be undesirable as seen in the current economic situation around the world.
Entrepreneurs must ask themselves several questions in order to determine if their actions will maintain a high level of integrity.
*Is my business in line with my values?
*Does the vision of who I want to be and the life I want to create fit with the business decisions I have made?
* Am I certain my success is not coming at the expense of my health, my relationships or the planet?
If these questions cannot be answered the plan of action must be changed to maintain a level of integrity within a business.
Reference:
http://www.flyingsolo.com.au/p257918924_Why-business-integrity-is-so-important.html
There has been a lack of core values in the actions performed by the existing government system and corporate executives including integrity, commitment and persistence.
The government has lacked the integrity of knowingly not protecting the people and other organizations against mistrust within the business world that they were aware of. However, the organizations and corporate executives that have performed these actions have considerable lack of integrity and core values. The corporate executives are responsible for this lack of integrity and core values. They desire financial success and look beyond the consequences of their actions. For example, the drug manufacturer Merck knowingly overcharged Medicaid (government) for drugs, while offering large discounts to private hospitals. In this situation the government lacked the persistence and commitment to monitor these transactions between vendors. They are aware of these problems but have not shown the initiative to impose sanctions on these organizations to prevent future situations until recently. It was noted in the following article that some states require drug manufactures to provide the same pricing to governments and private organizations and these prices must be disclosed to government agencies. Without these laws in place organizations can continue to take advantage of others without the desire to maintain any level of integrity. The responsibility of the government should be to protect and prevent situations like this from occurring within the business world.
CNN Money Daily Briefing (example)
http://dailybriefing.blogs.fortune.cnn.com/category/corporate-integrity-agreements/
Note: I could not get the link to the audio file to work
Insider trading scandals and inflated stockholder reports were the news several years ago. Those actions were typical of the lapses in integrity that have contributed to the problems we now face in our economy.
Regardless of the root cause, regardless of who is to blame, our country is starved for virtuous leaders whose word can be counted on. [ http://d-group.ning.com/profiles/blogs/integrity-in-economic-crisis ]
The FBI has opened investigations into more than 500 cases of alleged corporate fraud, including 38 that involve major firms and are “directly related” to the national economic crisis, FBI Deputy Director John Pistole told Congress today. [ http://abcnews.go.com/TheLaw/Economy/story?id=6855179&page=1 ]
The lack of integrity in their dealings has thus been a cornerstone in the fall of the economy and also points towards the need for virtuous new leadership in bringing us out of this mess!
I was shocked to read the article on the alleged corporate fraud. I know there is always going to be these types of allegations within the corporate business world. Although with over 38 major firms are being investigated for some type of fraud there actions could have definitely impacted the economy. The loss of trust this has created for consumers even creates a larger problem in the current economic situation since consumers are wary of where their money should go. Can they trust these companies anymore? Can they trust anyone with their money anymore, even banks?
The government needs to take control of these allegations and sanction those involved, to make it known this is not acceptable in today’s business world.