Putting People First

One of the most inspirational moments in my career happened when I was just a young accountant, starting off on a professional journey that lasted many years and eventually landed me in the United States. 

I was thrilled to have been invited to the company’s global seminar, held that year in Vittel, France, and I was totally wowed by the events and speeches but the special moment happened rather unexpectedly one afternoon when the founder and chairman and I were passing each other in a busy hallway.  He stopped to smile at me, reached out to put an arm on my shoulder and spoke with me for a few short minutes, asking me with an utmost sincerity how I was doing and assuring me that he appreciated my work and how important it was to the success of the group.

Imagine, the chairman of a global corporation stopping to give a moment’s attention to a little known employee from somewhere across the world !!  I did not get a pay raise but I was absolutely motivated to do more as a result of that encounter.  Maybe I didn’t or couldn’t work any harder after that but I have no doubt that the experience taught me how to be a more caring, approachable and effective leader. 

As we enter a new era of challenges as the economy slowly recovers from its dramatic downturn, corporations, executives and political leaders will have to learn new motivational skills.  If, as some economists have predicted, the rate of unemployment will remain stubbornly high for some years to come, wages will fall and that will in turn demoralized the workforce.  As their pocketbooks shrink, it will feed into the negative spiral downwards - corporations will attempt to boost profit margins by cutting costs, one of which may be through a greater exodus of jobs to countries with cheaper labor.  To break that vicious cycle, political and corporate leaders (the people with the means and the ability to influence the outcomes) will have to value the workforce in ways that they have not done in a long time.  Budgets will be tight (if they aren’t already so) and higher paychecks or benefits are harder to justify.  Absent those financial incentives, they will have to win their constituents’ trust, loyalty and hard work by demonstrating more of their humanity and show greater empathy and appreciation of their contribution to the company profits and to the country’s economy.  In short, they must learn to put their people first. 

I recently stumbled across an ancient Chinese philosopher as I was doing some personal research work.  Mozi (墨子) lived sometime between 470 and 391 B.C. and his teachings were quite startling and refreshing.  I was never much of a student of Chinese history when I was growing up so the discovery of other Chinese philosophers besides Confucius was a revelation of sorts.  If, like me, you’ve not heard of Mozi or his teachings before, it is quite fascinating to read.  The Stanford Encyclopedia of Philosophy has a write up about Mozi’s teachings.  [For a Cliffs Notes style summary of his teachings look up Mohism on Wikipedia.]

While imperfect, Mozi put forward certain thoughts that are worthy of further examination.  Among other things, Mozi taught that a leader’s role is to live up to a set of high moral standards that are inclusive and indiscriminate – and his followers would then emulate his example.  Failure to follow that principle would result in chaos and the loss of the leader’s mandate. 

In a section titled “Critical Assessment”, the author of the Stanford Encyclopedia’s entry wrote: “Model emulation is indeed a powerful educational process, as any parent knows, and many of our values and judgments are in fact learned by following the example of admired role models. Social coherence, peer pressure, and the approval of superiors are important motivational factors even for critical, reflective adults.”

If business leaders want to overcome the general perception that they are solely focused on profits and personal enrichment; and political leaders want to inspire their constituents to do greater good; they would do well to get down from their ivory towers and walk among the people and occasionally put an arm on a shoulder and offer that someone words of appreciation and encouragement.  As they see more of what the everyday man or woman has to go through to put a meal on their family’s dinner table, to put clothes on their kids and to send them off to school, they might regain their humanity and find it harder to justify the increasingly huge gap between their own paychecks, bonuses, stock options, etc., and the wages of the average workers. They will find it difficult to explain, to the people they have touched and connected with, why their jobs have been or will be sent overseas and they might even reverse the tide by bringing those jobs back to the US.  They will recognize that with a concerted effort by all, unemployment will ebb and consumer confidence and spending recovers, sales and profits will quickly grow again.

Half a century after Mozi’s teaching on inclusive care, Jesus taught his followers that there is no credit for loving only those who love them (Luke 6:32) and he gave us the “do as you would be done by” rule.  Our job on earth is to leave it a better place and we can only do that by putting people first.  Nothing is as important as how our actions (or a lack thereof) impact and affect other peoples lives.

Laws and Moral Obligations

Just because there are no laws about certain acts, it should not be interpreted to be a free-for-all, do as you please, wild-wild-west playground where the strong and the quick are allowed to prey on the less nimble and the weak.

Laws, rules and regulations cannot be (and we should not expect it to be) so comprehensive that it fully protects against every possible scam or scheme concocted by some clever guy who knows the rules and the loopholes.  Clearly, any rule that is comprehensive and complete would be so voluminous that it would be too costly for individuals and businesses to keep tab of and to adhere to.  It would be equally costly for the government to ensure compliance.

Even the Ten Commandments are merely broad, basic tenets to live by. “Thou shalt not kill” does not prescribe the ways that one can commit murder.  It wasn’t and it shouldn’t be necessary.  The intent is clear and we are expected guided by our conscience, our inner moral selves.

Where the law is silent, the unwritten moral code must come into play.  The question that we must always ask of ourselves is: “Is it morally correct to do this?”  It is hard to codify morals.  Even so, it is our duty to ask that question and apply the standard of moral that is appropriate, acceptable and expected of us.  The more power we exercise over others and the more our actions impact the lives of others, the higher that moral standard becomes.

The image of America and Americans in the eyes of the world suffers when, as a result of our actions (or inactions), a global crisis ensues.  Our struggle against terrorism will fail if the world perceives us to be worshippers of greed and gold, ready to sacrifice the well being of others for personal gains.  Capitalism without morals erodes the very foundation of our country, our unity, our strength. 

The founding fathers of the United States of America, in crafting the Constitution, began it with a short preamble that is just as important, if not more so than all the articles of the constitution that follows it. 

“We the People of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defence, promote the general welfare and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United Sates of America”. 

It is an emphatic summary of the overarching goals of the Constitution, the law of the land.  It underscores the moral objectives behind each article of the Constitution.  It brings out the need to apply the ‘spirit of the law’ – captured in the preamble itself - where the ‘word of the law’ is absent or silent on a particular issue. 

The success of America on the world’s stage stems from its willingness and ability to think and act for the common good of everyone; its generosity when calamities befall others; and its willingness to stand up and fight for freedom and the basic rights of ALL people, as if we are ONE people. 

When we look back at history, the defining moments of greatness and success are always associated with what one has done to establish justice… promote the general welfare of all people… and secure the blessings of liberty to ourselves and our posterity.  It is not “all about ME” and it certainly is not all about the millions in profits and bonuses that some would brag about. 

The success of an individual is measured not by his/her wealth but by his/her legacy of deeds that has benefitted others.  We can inherit wealth but we cannot inherit greatness. 

The goodness of our actions is not defined by whether it is legal but by whether it is moral.

A Thing Called Freedom

Way back when I was in my early teens, I was taught that freedom can only exist within a framework of rules. Without rules, freedom would run amok and result in more harm than good. Clearly defined rules and good enforcement help build trust in a system and ensure that it is functioning properly for the benefit of all.

As an analogy, anyone with a valid driver’s license may drive a car provided that he or she is prepared to respect all traffic signs and rules posted. If the rules are not obeyed, there would be total chaos on the streets and innocent pedestrians and other drivers would be at risk of harm and injury. Traffic rules are built on logic (reaction times, road conditions, etc.) – they are not there to impede progress but to keep order so that everyone can get to their destination safely in due time.

The notion of absolute freedom cannot exist in any society because the good of the larger community must prevail. The driver’s right is not prejudiced by the traffic rules – he/she is free to drive so long as the rules that applies to everyone is followed.

Why am I writing about freedom and rules? Quite simply, in the light of the financial debacles we have recently witnessed, it is clear that the degree of freedom that was accorded to the financial industry led to abuses and ultimately a crash that hurt many innocents and retirement egg-nests’ values were destroyed or, in the worst of cases, completely wiped out. In the light of what has happened, it is clear that we need a fresh look at how to prevent similar crashes in the future and we need to write smarter rules.

For far too long, we have relied too heavily on the word of the law and not the spirit of what was intended by those laws. This trend stems from the fact that it is easier to apply a prescribed set of do’s and do not’s than to leave it to the interpretation of the authorities. The problem with that thinking is that as new processes and technology is adopted, hard coded rules must be revised to keep up and we end up with volumes and tomes of legal prescriptions that no lay man can hope to fully grasp or understand anymore. At the same time, the ‘pros’ exploit the gaps in the rule books to profit from the unwary and uninformed.

The recent meltdown of what were once giants in financial institutions and insurers, the investment fraud perpetrated by Madoff point clearly to the need for a more comprehensive and intelligent way of ensuring compliance and reliability of the system.

Post Enron, Tyco, and WorldCom, the Sarbanes-Oxley Act of 2002 imposed more stringent rules and yet failed to prevent the current crop of failures and disasters. Clearly, this point to a lack of enforcement and, even more alarming, the lack of understanding or knowledge necessary for a proper examination of the underlying risks in the newly minted derivative financial instruments, even in the reputable credit rating agencies. If they claim to have the necessary competence, then it raises questions on their independence and ability to voice their concerns, given the fact that they are paid by the very organizations and transactions that they are rating.

The question before us then is: Do we need more intelligent rules to govern financial reporting, trading in securities and derivative instruments OR, more importantly, do we need better enforcement of those rules?

Prior administrations have increasingly weakened the enforcement arm of the SEC by defunding and deregulating the financial industry on the basis that regulations impede business and profits as well as the ability of the US exchanges to compete internationally. That is hogwash and serves only to promote the false notion that the market will regulate itself. The problem with that self-regulation notion is that it fails to take into account the human factor we know as ‘greed’.

The consequence of the latest round of financial fiasco was a near total collapse in faith and trust in the system worldwide by all players, including the banks themselves – demonstrated by the sudden credit freeze when banks feared to lend to other banks. Had it not been for the massive intervention by the government here in the US and in the UK and elsewhere, things could have been worse. The problems seen in Iceland and Ireland could have been spread across the globe faster than the latest strain of the flu virus and caused more devastation in its wake.

I’m not advocating that businesses or profits are bad – far from it. Businesses exist for a profit motive and I strongly believe in industry and reward. However, businesses should not dictate its own rules and business lobbyists should not have such a strong hold on the government that it can. Capitalism should not mean freedom for the strong to prey on the weak nor for the present generation to pass the mess on to future generations. We have a responsibility as good citizens to ensure that the soul and strength of the nation is not destroyed by the greed of the few.

Ignore At Your Own Peril

Lest it be misunderstood, the crux of my previous posting titled ‘Pointing Fingers’ was not to absolve those people in positions of power. By their callous and careless actions, they have created the gigantic sink hole we are witnessing – a crater filled with lost jobs, foreclosed homes and wiped out retirement savings. History will judge them for what they have done. Their reputation will turn out to be less-than-flattering when the book is closed on this chapter of our history.

The point is that we need to take responsibility for our individual actions because collectively ‘We the People’ have the power to determine the course of how things turn out. By our daily decisions on what we do and what we consume, we have the power to determine which services or products and, by extension, which companies succeed and which fail. Because what we can expect in the future is determined by what we do today, we have a duty to ourselves and to future generations to be more thoughtful and less ignorant of the longer term impact and benefits of our decisions.

If we had not ignored the possibility that a finite supply of fossil fuels would result in ever increasing energy costs, we would have more aggressively pursued the development of technology to tap into alternative and renewable energy sources. We would not have abandoned the idea of the electric car and we certainly would not have bought into the deceiving appeal of gas guzzling SUVs. We would have severely restricted or discouraged suburban sprawl requiring longer commutes.

If commodity traders and hedge fund managers had not ignored the fact that oil prices above a certain threshold would have the impact of a sudden and massive reduction in consumption, companies would not have had to cut back production and factories would not have had to close or to lay off workers.

If executives in corporations had not ignored the impact (to the very consumers they rely on) of their relocating all types of jobs overseas, there would have been a less of a drain on the US consumers’ power to spend and there could have been fewer home foreclosures.

If bankers and housing developers had been less speculative and had not ignored the possibility of the housing bubble bursting, fewer new homes would be on the market and fewer sub-prime mortgages would have existed and fewer foreclosures would have resulted.

If home buyers had carefully weighed their income against their mortgage obligations and considered the effect of a change in circumstance such as illness, loss of job, decline in property values, they would not have taken risks they can ill afford or fallen prey to predatory lending practices.

A progressive society is one that has a conscience and does not chose to ignore the future consequence of its actions today. Ignoring tomorrow does not make it go away. We need leaders that are forward thinking and who understand that we can’t mortgage our children’s future for our own short term enjoyment.

We can learn to say “NO” and we can learn not ignore the danger signs. Some did and are surviving the present crunch. It was encouraging to hear on the news today that a small bank in Kansas stuck to its policies by not making risky loans in exchange for higher profits. In addition to remaining financially sound, it helped its customers by discouraging speculative borrowing.

Survival is a long-term game and ‘We the People’ are all in it together.