What does ECOA say about rating agency scandal?

This week the rating agency scandal was in full bloom before the public's eyes in Congressional hearings. It showed a colossal and appalling failure of business ethics that materially contributed to the global financial system meltdown that is now threatening to turn into global recession and that is having profound adverse impact in untold ways in the lives of tens of millions of Americans, not to mention around the world.

Is the rating agency scandal the Katrina of the business ethics industry? Is there going to be soul searching by the industry concerning how all its work, efforts, systems, studies, and conferences did not prevent the rating agency scandal; and to ask what went so wrong, and what can the industry do in order to better accomplish its mission of inculcating ethical business conduct by corporations?

For more than a year I have been pushing on the ECOA that the law undermines the business ethics industry in the prosecution of its mission in a manner that I have explicated in my writing Does the Law Undermine Business Ethics?. I have urged the ECOA to explore this with its members in the ECOA's conferences and other educational programs with a view to deciding what the ECOA thinks and whether the ethics industry can do anything about it if there is a problem. Thus far I have been unsuccessful, as I reported to ECOA members in this letter.

I hope the rating agency scandal is a Katrina for the business ethics industry that will lead to more openness on the part of the ECOA in considering my proposition that the law undermines the industry and the industry ought to take a stance on the matter.

Prof. Cohen

From: RDShatt
To: cohenm@uchastings.edu
Sent: 10/16/2008 7:43:49 P.M. Central Daylight Time
Subj: Re: Please see my blog entry re: Prof. Marsha Cohen's WSJ letter. ...

Thank you for replying, Prof. Cohen. In my proposed project, there is no need whatsoever to agree, just state views on some significant public legal policy issues.

Sincerely,
Robert Shattuck

In a message dated 10/5/2008 2:53:10 P.M. Central Daylight Time, cohenm@uchastings.edu writes:

Hmmmm, I imagine that we wouldn’t actually AGREE on this subject.
I guess there are a LOT of Bob Shattucks. As there are a lot of Marsha Cohens. So if you were the one from Paterson, NJ, you probably would’ve pointed that out ................... --
Professor Marsha N. Cohen

Prof. Alan Weisbard

From: RDShatt
To: weisbard@wisc.edu
Sent: 10/16/2008 7:33:24 P.M. Central Daylight Time
Subj: Re: Please see my blog entry re: Prof. Marsha Cohen's WSJ letter.

Thank you very much, Prof. Weisbard.

Both elitism and cowardice are understandable in academia. Please consult Prof. John Lachs of Vanderbilt University as to the phenomenon of cowardice ( "Intellectuals and Courage"), and, as to elitist arrogance, the ECOA would provide you with some excellent drinking buddies (see ECOA correspondence ).

Now, if you desire to engage in some intellectually respectable dialogue, I would be very pleased to engage with you.

Sincerely,
Robert Shattuck

In a message dated 10/6/2008 10:57:21 A.M. Central Daylight Time, weisbard@wisc.edu writes:

Dear Mr. Shattuck,
Please add me to the list of law professors summarily dismissive of your efforts.
Thank you, Alan J. Weisbard

Email to the law professors today

From: RDShatt
To: ______
Sent: 10/5/2008 _____ P.M. Central Daylight Time
Subj: Please see my blog entry re: Prof. Marsha Cohen's WSJ letter

Please see my blog entry re: Prof. Marsha Cohen's WSJ letter.

Please contact me if you would like to participate in a letter or letters to The Wall Street Journal or possibly other newspapers or periodicals.

Thank you.

Sincerely,
Robert Shattuck

Prof. Marsha Cohen's WSJ letter

Professor Marsha Cohen of the Hastings College of Law wrote the below letter to The Wall Street Journal commenting on the Journal's op/ed piece "The Tort Bar's Comeback" from September 16, 2008 that appears below the letter.

I think Professor Cohen and other law professors ought to have a lot more to say on the subject than this brief letter. I have in the past advocated a letter to the Journal that "frames" the important issues (see this entry) and further have advocated the taking of positions on the issues (see this entry). As indicated in the first link, the idea of "dueling" letters took my fancy.

I will probably resume the efforts I made in 2004/5. This seems particularly appropriate in light of the significant economic problems the country is facing and the need for reducing waste and increasing efficiencies in the economy.


SEPTEMBER 27, 2008
China Could Use Tort Lawyers, More Accountability

It is ironic that you picked Sept. 16 for one of your periodic editorial attacks on the civil justice system ("The Tort Bar's Comeback," Review & Outlook) in light of the news breaking on the same day about the tragic harm to a large number of Chinese babies from infant formula contaminated by the industrial chemical melamine. The same chemical was responsible for the deaths of many Americans' pets some months ago, also because of contamination originating in China. Why are Chinese products causing so much consumer harm (both there and, because of our globalized marketplace, here as well)? China has neither well-enforced regulatory mechanisms nor a torts/insurance system to protect consumers, although my understanding is that it is moving to adopt both. Without a civil justice system that enables those harmed to seek recompense from those who caused them harm, why would any product seller bother to invest in quality control or any other product safety measure?

Are there unethical plaintiffs attorneys? Sure. And there are unethical defense attorneys as well. Are there bad judgments made in personal injury decisions? Absolutely. But there are probably as many denying compensation as granting too much of it. While there are undoubtedly more efficient and equally fair ways to assure appropriate compensation to those injured by economic actors, demonizing the entire civil justice system is an entirely ineffective way to galvanize support for systemic change.

Republicans and Democrats are equally likely to be the unfortunate victims of accidental harm.

Prof. Marsha N. Cohen
University of California
Hastings College of the Law
San Francisco




REVIEW & OUTLOOK
SEPTEMBER 16, 2008
The Tort Bar's Comeback

As voters mull the stakes in this year's election, here's an issue that ought to ring alarms in the ears of serious people: tort reform. After 20 years of state and federal efforts to reform a runaway legal system, the trial bar is reviving the monster.

At the federal level, lawyers and law firms invested in 2006 more than $85 million to get pro-lawsuit Democrats elected. Congress's new leadership has begun a political repayment plan -- packing legislation with provisions to increase the number and size of lawsuits. So far, this effort has been largely stymied by President Bush's veto threat. The tort bar sees 2008 as the real prize; it has already thrown $107 million toward increasing Democratic majorities.


The trial barons are making more progress at the state level, as described in a report by the American Tort Reform Association. States had been making progress: New laws cleaned up venue requirements, reformed punitive and noneconomic damages, and enacted medical malpractice reform. So-called "judicial hellholes" like Texas and Mississippi have seen insurers return and premiums fall.


The trial bar is fighting back, with success. In last year's legislative session, Michigan lawmakers proposed repealing safeguards for prescription drug providers; Maryland legislators wanted to revoke medical liability reforms; and Florida's legislature entertained the nullification of its joint and several liability reforms. The trial bar's big coup was in Colorado, where Democratic Governor Bill Ritter signed a law increasing previous limits on noneconomic damages.


Lawyers have also been laboring to create opportunities for more lawsuits, more money and more time to sue. Last year, Alabama saw legislation that would allow a tort claim to continue even after a plaintiff had died, while California proposed authorizing lawsuits for any violation of privacy. New Mexico and New Jersey passed laws authorizing citizens to file "false claims" suits on behalf of the state -- in effect turning private individuals into state bounty hunters.
Four states -- Colorado, Washington, Illinois and Texas -- considered proposals to increase the size of awards plaintiffs could claim, and with it attorneys' contingency fees. The tort bar pushed bills across the country to expand "consumer protection" damages and in at least three states to allow plaintiffs to claim damages for "emotional harm" when their pets are injured. In Maryland and Oregon, lawyers successfully shepherded new laws to extend the time in which plaintiffs could file lawsuits.


Plenty of legislatures remain wary of walking back down the highway of ruinous lawsuits, while many Governors say they'll veto this legislation. Still, the lawsuit industry is counting on discontent this fall to help flip a few more legislatures and governorships to pro-tort majorities, laying the groundwork for their proposals to become law. Tort reformers will have to push back.

Opportunity to solicit views of HR

This also was on the agenda update for the ECOA Annual Conference this coming week:

Measuring the Divide between HR and Ethics featuring Patricia Harned, president, Ethics Resource Center and Deborah Keary, HR director, Society for Human Resource Management. This plenary session will review and analyze results of two recent surveys, each of which separately asked HR professionals and ethics and compliance professionals about their experiences and perceptions regarding working with the other.

Not being able to immediately find an email address for Ms. Keary, I sent the following email to each of the SHRM directors shown on the SHRM website:

From: RDShatt
To:
Sent: 9/21/2008 ____P.M. Central Daylight
Time
Subj: HR and Ethics & Compliance


Dear ________,

I am writing this email to you in your capacity as a director of SHRM and because I have noticed that Deborah Keary is speaking this week at the Annual Conference of the Ethics and Compliance Officer Association on the subject of the experiences and perceptions of HR professionals and ethics and compliance professionals regarding working together.

The reason for my interest in this is that I have been badgering the ECOA and ethics professionals with the question, "Do you think the law undermines business ethics?" My question has been accompanied by this argumentation in which I set forth a "yes" answer based on common knowledge about human nature and common sense analysis of what is needed for society to be able to regulate behavior to be ethical.

In my argumentation, I supplicate ethics academics, officers and consultants as follows:

[You ethics officers] have front line involvement and first hand experience that specially enable [you] to discern circumstances and factors that abet or that impede the inculcation and institutionalized practice of business ethics in [your] corporation. [You] are in the best position to evaluate my descriptions of how the law affects the pychology and thinking of employees when it comes to deciding to engage in an unethical activity or not. To the extent [you] ethics officers are uncertain about what I describe, [you] can conduct interviews and surveys of employees to find out about employee thinking and psychology. [You] consultants and academics working in the business ethics field also have a close in view of things.

For good or bad reasons (you can decide which; see Letter to ECOA Members), the ECOA has told me not to bother them anymore.

My feeling is that HR has as close in a view of the employees as the ethics officers, HR's thoughts about my argumentation would be of equal value as those of ethics officers, and my question about the law undermining the business ethics of employees is something HR, as well as ethics officers, can and should have a legitimate interest in.

If you would care to inform yourself about what I have been urging on the ECOA and to offer me your thoughts from an HR perspective, I would be very interested in hearing from you.

Thank you.

Sincerely,
Robert Shattuck

Profs. Agle, Hart and Thompson re ethics "surveys, ratings and metrics"

Email earlier today to each of the three professors:

From: RDShatt
To:
Sent: 9/19/2008 ____-P.M. Central Daylight Time

Subj: Profs. Agle, Hart and Thompson re ethics "surveys, ratings and metrics"

Dear Professors Agle, Hart, and Thompson,

The below is from an updated agenda release of the ECOA I saw related to its Annual Conference:

Surveys, Ratings, and Metrics: Ethical Issues in Data Collection and Analysis
featuring Brad Agle, Associate Professor of Business Administration, University
of Pittsburgh; and, from the Marriott School of Management at Brigham Young
University, Associate Professor of Ethics and Public Management David W. Hart
and Assistant Professor of Public Management Jeffrey A. Thompson. The professors
address the numerous traps and failings that can undermine efforts to build
accurate ethics and compliance metrics. They will help attendees learn how to
see behind published surveys and ratings to see if the underlying methodology
makes them invalid or, even worse, misleading.

I am not sure exactly what the parameters are of "surveys, ratings, and metrics," but I have a question I am interested in that I think falls within the scope of the same.

For the past year I have been an Ancient Mariner asking of ethics academics, officers and consultants, "Do you think the law undermines business ethics?" My rhymes may be found here.

In my rhymes, I supplicate ethics academics, officers and consultants as follows:

[You ethics officers] have front line involvement and first hand experience that
specially enable [you] to discern circumstances and factors that abet or that
impede the inculcation and institutionalized practice of business ethics
in [your] corporation. [You] are in the best position to evaluate my
descriptions of how the law affects the psychology and thinking of employees
when it comes to deciding to engage in an unethical activity or not. To the
extent [you] ethics officers are uncertain about what I describe, [you] can
conduct interviews and surveys of employees to find out about employee thinking
and psychology. [You] consultants and academics working in the business ethics
field also have a close in view of things.

I ask you, Professors Agle, Hart and Thompson, in your consideration and evaluation of "surveys, ratings and metrics" related to ethics, have you delved into, or are you aware of others delving into, surveying of employees and their thinking and psychology, as referred to above, that may reveal something that has an effect of making their conduct less ethical?

Just asking.

Sincerely,
Robert Shattuck