Posts Tagged Corporate Governance
PERHAPS THE REPUBLICANS MIGHT HAVE UNCOVERED MORE THAN THEY HAD WANTED, IN THEIR QUEST FOR AN “OBAMACARE” FIX
As the Republican Party has been delving into alchemy, for almost seven years, in its search to replace President Obama’s Affordable Health Care, it has determined that Americans need to be able to buy health insurance across state lines. And I agree completely. But, there’s more to the overall problem, than just where the insurance is sold!
Upon further consideration, however, their search also reveals certain risks in assuming that each of the 50 states already competently regulate the respective insurance operating companies doing business within their states. The regulatory problems have also become more difficult, especially as the parent companies grow more diverse–and the industry more complex.
Banks and Securities Firms are regulated by Federal Regulators, which enables them to examine, let’s say, Bank of America or Goldman Sachs, both across the nation—as well as across their various product lines. For Allstate or Nationwide, however, different state regulators examine the individual subsidiaries independently, without any coordination whatsoever—especially with regard to self-dealing among other out-of-state subsidiaries.
The idea of buying Health Insurance in Indiana or Ohio, or Homeowners in Texas versus Oklahoma, would be a simple enough change. That’s because the insurance risks, for comparable customers, would not change just because they live on one side of the state line, or the other. If Blue Cross-Blue Shield, for instance, could operate through just one, or perhaps, several subsidiaries nationwide, that would lower some of its redundant expenses, perhaps lowering the premiums, as well. But, the highest risk is at the Home Office–where the buttons are pushed!
A NY Times article, from 2009, described some issues with AIG, one of the very largest insurance companies, which operated through 71 insurance operating companies, that were spread among 19 states, and additionally in many, many foreign countries. Eventually, the Federal Reserve and the Treasury had to provide the largest bail-out in American History—some $182 billion. Otherwise, a collapse by AIG could have brought down the overall American Economy—or even worse!
AIG was playing a shell game with itself: the various operating companies were investing in each other, rather than properly diversifying their similar risks more adequately; some companies were shifting debt to other AIG subsidiaries, making it impossible for the various state regulators to ascertain their respective financial stability; and the parent company (AIG, Inc.) had engaged in “Credit Default Swaps”, the so-called “toxic assets”, whereby it guaranteed Wall Street assets valued at more than its own Net Worth.
But, the final question is: How far will the Republican Party keep searching, if in looking for a replacement for “Obamacare” (as they call it), they might have the Insurance Regulatory Environment to deal with?
The controlling manner with which Donald Trump seems intent on forcing his ideas into all segments of the American Economy, at least to me, is reminiscent of the old Soviet Five-Year Plans. Who knew better than the apparatchiks, in Moscow, the number, size and cut of women’s brassieres that would be needed in Vladivostok, several years hence? Surely, their Command Economy knew better than that Capitalist “Invisible hand of the Markets.”
Just like the micromanagers in the Kremlin, or their counterparts at Beijing’s Central Party Committee, Donald Trump has been using old-fashioned jaw-boning: letting corporate CEOs what how he expects them to manage their companies; apparently offering tax incentives and promises to de-regulate, but only time will tell if it is working.
Surely, when GM committed to attend, Ford showed-up, as well. He started going through the Industries, one-by-one, and then the Unions. But, will smiles and small talk really convert to obedience? I doubt it! So far, all D. J. Trump has accomplished is more photo-ops.
Now, let’s get back to the Real World. If a corporate CEO makes a dumb business decision at the “suggestion” of the President, he or she could be sued by the company’s shareholders. And, assuming that the Board of Directors approved it, they would also be included in that suit! Until we have a Dictatorship, following instructions of the Tenant in The Oval Office doesn’t qualify as a rational business decision.
I have written about my supermarket before; but, the same goes for all, except the very smallest, businesses. Their computer systems, tied to the cash registers, keep track of their sales on a daily, even hourly, basis.
Inventories—by individual locations—are automatically reported to the Regional or Home Office. When required, inventories would automatically be replenished, with shipments from the appropriate warehouses. That even goes for women’s brassieres.
America doesn’t need the slight-of-hand of Donald Trump to keep individual companies, their industries or the overall Economy humming along. And, in case corporate leadership cowers to Mr. Trump’s browbeating, and indulges his ideas, there is still a Court of Law to bring him back down to earth. And Donald, lest you forget, Micromanagement, like Command Economies have never worked efficiently!
ENERGIZED BY TRUMP’S ELECTION VICTORY, THE GOP VOWS TO REPEAL, AND REPLACE, “OBAMACARE”. BUT, WITH WHAT?
House Republicans have voted 50 times already, to Repeal the Affordable Care Act, which they derisively call “Obamacare”. Over the six years, since ACA became Law, they have constantly been attacking it; however, the GOP has never presented a rational plan to substitute in its place. Additionally, looking at the World around us, all 19 of the other most-industrialized members of the OECD have Universal Health Care. Shouldn’t that tell the Republicans something? What do those nations know, that we don’t?
Let me respond to some of the GOP’s fallacious attacks on ACA. Web sites always seem to overload when a new program, that potentially expects tens of millions of applicants, has some problems at the start! Health insurers did cancel some older plans; however, they replaced them with updated ones, in order to qualify under ACA. Many medical conditions, which had been covered, were added—such as Maternity and Pre-natal care for young women! Annual insurance premiums did not rise as much as they would have, had ACA not been in effect! Also, the “Mandate” that required Americans to buy insurance, which might be subsidized if necessary, is necessary to eliminate the potential refusal of coverage, by the insurance companies, for “Pre-existing Conditions”!
It is important for ACA to be retained, and improved when necessary, as it was always expected to be. That “One Payer” system, by the way, does not mean just “One Provider “, as had been suggested by the nay-sayers. For instance, my Wife and I each have Medicare, and we still go to all the same doctors, and facilities, as we had before. When a One Payer system is established, the costs of health care can be reduced considerably. And, that is how ACA had always been intended to work!
When the overall participant pool increases, insurance companies are able to estimate the various medical factors more accurately, across the larger number of participants. That allows for more accurate health care expense projections, as well as a reduction in administrative expenses. For instance, the Medical Loss Ratio, under ACA, requires that insurance companies spend at least 80% of the premiums on Health Care, and no more than 20% on Administration.
Over the past six years, the two alternatives to ACA, which some Republicans have floated, are: a “Voucher” system (Speaker Paul Ryan), which means out-sourcing insurance coverage; and “Block Grants” (Mr. Donald Trump), which distributes funds to each of the states, so each might meet their health care needs, as they wish. Vouchers do not guarantee minimum services, co-pay limits, or maximum percentage used for administration. Block Grants have neither national consistency, nor federal oversight–and they are subject to the vague whims of each state. Neither Vouchers nor Blcok Grnts necessarily works in the best interests of the average consumer.
Lastly, the assumed underlying reason for the GOP’s numerous attempts to repeal the Affordable Care Act, currently enjoyed by some 20 million previously uninsured Americans, is Money. The maximum tax rate for higher income individuals was raised partially to help fund the ACA. Most of those tax-payers, all of whom assumedly have gold-plated health insurance plans themselves, seem to feel that they shouldn’t have to help make life a little safer for those at the bottom of the economic ladder. And apparently, these are the people that the Republican Party prefers to cater to.
RACISM HAS GRADUALLY BEEN DESTROYING AMERICA’S PUBLIC SCHOOLS, AND BETSY DeVOS MIGHT BE MORE CAUSE THAN SOLUTION!
On May 17, 1954, Thurgood Marshall, Chief Counsel for the NAACP, successfully argued the case of Brown v. Board of Education of Topeka, Kansas, before the U. S. Supreme Court. In it’s ruling, SCOTUS overturned the 1896 Plessy v. Ferguson decision, which established the “Separate, but Equal” status in America’s Public Schools. The divided school systems, however, were anything, but “Equal”. Institutionalized-racism might a be better term! In 1967, Mr. Marshal was sworn-in, as an Associate Justice, on the U. S. Supreme Court.
Racism remains ever-present within our Public Schools today. Some is institutionalized, and some is political. Consider several of the more appalling varieties:
1. Since real estate taxes are a primary funding source of public schools, the “White Flight” of higher-income families to the wealthier suburbs, generally in separate counties and school systems, results in better-funded suburban schools, as compared to those in the Inner Cities (i. e. Chicago, Detroit, and Philadelphia).
2. Some states allow smaller “independent School Districts” to be formed in wealthier areas. Higher income families seek larger, more-luxurious housing, which leads to higher property taxes and, thus, to better-funded public schools. (Similar to #1 above.)
3. Politicians often create the atmosphere where newer, and better, schools are located in wealthier areas, with some minority students bused-in. Accordingly, these schools have better teachers, and newer equipment and facilities, as compared to public school schools in poorer parts of town.
4. Charter schools may be established separately from the public school system; however, they receive funding from it—thus reducing the local system’s financial resources. Charters are generally able to be more selective in the students they admit, but there is often little correlation between selectivity and performance. Prerequisites for the corporate organizers of Charters, as well as the administrators and teachers are often dubious, depending upon the particular state.
5. Vouchers transfer a portion of the per-student amount,received by the school system, from the state and local government, to private schools that accept them. Since private school tuition and fees are usually much more expensive than the voucher provides, poor families generally cannot afford the differential for their children to attend, especially if they hame several children in school. But, wealthy families get a freebie!
It is difficult to expect that Donald J. Trump, who has vowed throughout his campaign that he will use Charter Schools and Vouchers to “improve our Educational System”, will not nominate an Education Secretary who will not advocate for “School Choice”, as well as other forms of institutionalized racism. If Mr. Trump really did want to improve the American Educational System, he would nominate someone with actual education experience—rather than someone who ereportedly contributed $11 million to his campaign!
Betsy DeVos, who is Trump’s nominee for Education Secretary, is a member of the super-wealthy DeVos Family of Amway Fame. Mrs. DeVos is active in the National GOP, advocates for School Choice, and was one of the architects of the Detroit Charter Schools Program, which apparently has performed on a par with the City’s overall failed and underfunded Public School System.
Betsy DeVos is hardly a realistic solution for America’s Educational System!
A primary cause of The Great Recession, the financial melt-down of late 2007 until early 2009, was the lax regulation of the banking industry—especially among the largest ones, both here and abroad. Due to the depth of that recession, the Recovery, at least in the U. S., has been slow, but continuous. Overseas, however, many nations are still struggling in their recovery efforts.
On September 15, 2008, Lehman Brothers, one of the largest investment banks in the U. S., filed for Chapter 11 protection, and that event served as the proverbial straw that broke the camel’s back. The actual economic slide had already begun in October of the year before, when the stock market peaked and started a descent that lasted until early March of 2009. When President Barack Obama took office, in January of 2009, he called for legislation to rein-in the banks and provide stronger regulation. First proposed in June of 2009, President Obama signed Dodd-Frank into law, on July 21, 2010.
Wells Fargo is the current symbol of egregious banking activities. The bank had been caught opening unauthorized bank accounts and credit cards for customers, from which the bank’s retail revenue benefitted. Whatever the reason, Wells Fargo created the environment, and paid bonuses for employees to carry-out this fraudulent scam. But, other banks have been performing similar unauthorized activities too!
The Dodd-Frank Legislation, among many other things, created the Consumer Financial Protection Bureau. The CFPB, which was Senator Elizabeth Warren’s brainchild, before she was a Senator, is the agency that uncovered the Wells Fargo illegal scam. No doubt, a customer of Wells Fargo, or perhaps more than one, probably reported the scam to the agency. The CFPB is an important consumer safeguard against all financial institutions treating their clients’ unfairly. The web link is: http://www.consumerfinance.gov.)
Oddly, in today’s political environment, Secretary Hillary Clinton has been accused of considering Wall Street as a “Special Interest Group”. Let’s not forget, however, that President Barack Obama also accepted campaign contributions from the Financial Services Industry, and he still called-for banking reform, and he also signed Dodd-Frank into Law. Currently, banks appear to have realized that greater regulation will be forthcoming; however, they are totally afraid of Donald Trump’s suggested Isolationism and Protectionism.
Former Wells Fargo CEO John Stumpf (having just resigned yesterday) recently appeared before several Congressional Committees, and the attacks on him, and the bank, were both bipartisan, and quite angry. But, some of those Congressmen and Senators were really taking that tact for the hometown audience. After the hearings, the Republican members will probably return to their normal ideological voting agenda.
The Republicans in Congress have been trying to reduce the impact of what Dodd-Frank is intended to do, or to repeal it all-together. The current GOP Candidate for President has vowed to repeal Dodd-Frank, and so had mostly every other candidate in the GOP Primaries. That pledge is also frequently mentioned by other Republicans in the Halls of Congress.
How many times have we heard Republicans talk about eliminating the Federal Reserve, repealing Dodd-Frank and doing away with all regulation, in general? If there is another emergency, such as The Great Recession of just a few years ago—or perhaps something even worse—who or what will guarantee our bank deposits? Who would make sure that the banking system doesn’t take un-due risks? That banks have sufficient capital—think emergency reserves—to weather any storm? This would be where the Fed, Dodd-Frank and the CFPB would safeguard our very way of life!
Wells Fargo is just the latest member of Corporate America to get caught with its hands in its Customers’ pockets. Wells’ opening of non-authorized credit cards, and other accounts, generates increased revenue for the company. You might have noticed questionable additional charges on your utility bill, received the hard-sell to accept unnecessary options when you bought a car, or were charged for unnecessary “extras” on your cell phone bill. Unfortunately, this happens everywhere today, it seems.
Many employees have noticed that the corporate contribution for their health care, retirement and other so-called employer-sponsored benefits (if they have them, at all) have been reduced, as the workers are now expected to pay even more. In essence, Corporate America has been pulling-back those benefits that attracted employees to begin with. Yes, the cost of those benefits do eat into corporate profits; but, the commitment of those same employees, to the corporation’s success, hasn’t diminished one bit!
There’s a new Sales Paradigm in many companies that’s intended to fill the vacuum for employees taking greater ownership of their own benefit programs. More and more, a greater portion of employees’ compensation is based on meeting sales and referral goals, which can actually improve their livelihood in the long run. So, let’s focus on the Banking System for a moment, since this is where many in Congress are fighting against the interests of the American People.
Much has been written, blaming the overall Banking Industry for The Great Recession, which was caused mostly by the larger banks, just eight years ago. Sub-Prime Mortgages, Credit Default Swaps, rating agencies benefitting from fraudulently-assigned Bond Ratings, illegal currency trading, etc, abounded throughout the Banking Community. But, schemes like the Wells Fargo credit card scam are now invariably part of everyday Corporate America.
When corporate executives change the method of paying employees—away from salary-only to include a significant bonus option—there will always be some employees who figure-out how to enhance their take-home pay. And, once the landscape changes within a company, the malfeasance can spread, and become ingrained.
Intermediate managers also benefit from the increased revenue, which the new paradigm generates, and probably have goals for their departments, as well. Perhaps, some managers, in turn, might be most happy to point-out the higher incomes of some employees, to others who didn’t seem to “get the message”. All of such managerial encouragement is, no-doubt, subliminal, but absolutely necessary for this to work. The whole corporate executive food chain, however, benefits from the new Sales Landscape.
In July of 2010, President Barack Obama signed the “Dodd-Frank Wall Street Reform and Consumer Protection Act” into Law. Dodd-Frank was designed to rein-in the American Banking System, and to prevent it from ever again engaging in such illegal activities. In fact, Senator Elizabeth Warren’s (D-MA) brain-child, the Consumer Financial Protection Bureau, a vital component of that Bill, was specifically intended to protect American Consumers against scams such as the opening of unauthorized credit card accounts.
The Banking Industry has been working overtime to de-fang and, perhaps, repeal Dodd-Frank. Their Republican Allies in Congress have graciously accepted campaign contributions in order to accommodate the bankers’ goals.
Back in the 1940s, notorious bank robber Willie Sutton was asked why he robbed banks. Sutton responded: ““Because that’s where the money is!” Well, now we know why!
This Sunday, we commemorated what took place at the World Trade Center, the Pentagon and Flight 93, where passengers purposely crashed their terrorist-controlled airliner into a rural Western Pennsylvania field, rather than be sacrificed in that act of piracy. Donald J. Trump, however, might have been one of the few who were actually celebrating at Ground Zero today, since one of your real estate projects—40 Wall Street—qualified for a small business re-construction grant of $150,000, even though it suffered no damage
Yes, Donald, you have been vowing to build a Wall; but, one already exists. You might not know that among the three locations, which were savaged that day, there were people from all over the world—Americans, Blacks, Latinos, Asians, Europeans, Muslims, Women, Disabled, etc. But, they came together. They helped each other try to escape, and some comforted each other, when they realized that their fate was sealed. And, that included many of the first responders—running into danger, against all common sense!
A week or so ago, it had been one year since that three year-old Syrian boy’s body washed-up on the shore in Greece. His mother and five-year old brother drowned, as well. Germany gave the father asylum. Did you see it, Donald? He looked like he was sleeping, like many children, head down and rump in the air. But, I didn’t see a terrorist—even a future one. All that I could see was a littler boy sleeping, just like my three year-old grandson does.
Perhaps you view all of these refugees as terrorists, drug traffickers and murderers; but, have you ever really thought about them? In most cases they are just trying to escape gang-controlled cities with some of the highest murder rates on the planet. Do you really think that coming to America, to be a migrant farm worker, is a great career move? They are just seeking a better life for their families!
Two years ago, I described the unbelievable love and kindness shown by the Great People of Gander, Newfoundland. I have linked that blog post as a note, below. This time, however, I have linked a column from the Washington Post, the title of which I believe says it all: “On 9/11, a tiny Canadian town opened its runways and heart to 7,000 stranded travelers.” Its linked as follows: https://www.washingtonpost.com/local/on-sept-11-a-tiny-canadian-town-opened-its-runways-and-heart-to-7000-stranded-travelers/2016/09/08/89d875da-75e5-11e6-8149-b8d05321db62_story.html.
You see, Donald, many great things happened that fateful day in 2011—as they have every day since. All the world declared they were American that day. The colors of our flag were displayed on great buildings around the world, flags everywhere were at half-staff. moments of silence were held, for those who died. But, I believe that that love, and that humanity, that the Great People of Gander, Newfoundland displayed that day personifies the very Wall that, perhaps, you have been seeking to find.
But, Donald, the Great Wall of Humanity is there for us to see. t’s all around us, everywhere we go. Granted, we do have to accept the bad with the good, which is much much greater. But, you can see that Wall, Donald, and you just have to look for it!
A great book about what happened with all those planes, running low on fuel, having just crossed the Atlantic, read: “The Day the World Came to Town: 9/11 in Gander, Newfoundland”.
by Jim DeFede.