By Haddon Libby
Corporate Cannibals consume their consumers. Ethics are a slogan and not an ethos. They pretend to be responsible Corporate Citizens by giving token amounts of their ill-gotten gains as donations to worthy charities. By making these charitable donations, they give an impression that they are responsible members of the communities that they serve.
Most people who work for these cannibals are good and wholesome – it is just that the corporate ethos puts profit ahead of everything else.
As part of my ongoing efforts to make our community a better place, I want to start acknowledging the companies that hurt our community in significant ways. From there, each of us can decide whether we want to support those companies by doing business with them or owning their stocks.
To make the Corporate Cannibal list, the company must have done something that is either illegal or highly unethical against a large portion of their customers or employees.
Seem fair? Now where to start?
The easiest pickings are in the financial industry. Industry practices caused the greatest economic downturn since the Great Depression.
Over the last seven years, the twenty largest banks in the world have paid one-quarter of a TRILLION dollars in fines with another $185 BILLION of fines pending. Of this, one bank represents one-third of all penalties.
The worst of this motley bunch is Bank of America/Merrill Lynch having paid $80 billion in fines. In second is JP Morgan/Chase at $40 billion. If this were the Olympics, the bronze would be a tie between Citgroup (Citibank/Travelers) and Wells Fargo with $14 billion in fines each. Also ranked in this bad boy competition includes BNP/Bank of the West, HSBC, UBS, Morgan Stanley, Rabobank and Barclays.
Bank of America is the poster child for Corporate Cannibalism as bad behavior can be found in most business units. Their mortgage unit led by Countrywide engaged in practices that brought the world economy to the brink of collapse. Beyond Countrywide, Bank of America received nearly $300 million in illegal kickbacks from mortgage loan insurers yet no one landed in jail for these RICO Act violations. Let’s not forget their fraudulent conveyances on homes that they foreclosed on. They have also used deceptive marketing practices on nearly two million credit card customers by charging them for credit monitoring and reporting services – services never delivered to those customers. Bank of America was also one of the firms fined for illegal foreign exchange rate manipulation.
As for how they treat employees, the bank has repeatedly paid fines for making their hourly workers work off the clock for free – a major violation of state and federal labor laws. There have been countless claims of age discrimination as well although Bank of America has defended against these claims by saying that they were simply eliminating the most expensive workers.
In an attempt to be viewed as a good corporate citizen, Bank of America gives approximately 0.2% of their revenues to charity annually.
Besides calling out corporate scum, we need to recognize companies that are doing things that benefit the communities that they serve while improving life for their consumers and employees. Generally speaking, community banks are your best choice.
The lesson that we can learn from Corporate America in the 21st century: people who know their customers and employees on a personal level are less likely to abuse those relationships. Using local businesses also helps to keep your community stronger financially as the large, faceless organizations pay the local workforce a fraction relative to executive pay.
As you think of other Corporate Cannibals and/or Corporate Citizens in any field of business, drop me a note and we will incorporate them into a future column.
Haddon Libby is Managing Partner of Winslow Drake, an investment advisory practice and co-founder of ShareKitchen. He can be reached at hlibby@winslowdrake.com.
