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Tuesday July 13, 2010

Release Date: 07.13.10 | Location: All Metro Atlanta | Organization: SCORE Atlanta

The success of Obama's financial reform initiative weighs heavily on ethical behavior, transparency and enforcement

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By: Jerry Chautin, SCORE volunteer, business columnist

SCOREing small-business success

Unethical Behavior, Lack of Transparency and "Greed" Can Thwart Financial Reform

Signing major legislation is a joyous occasion. Souvenir pens are distributed, champagne corks popped and lobbyists cash their success fees. This is especially the case with President Barack Obama's attempt to fix the broken financial system because so much is at stake for bankers, consumers and our country's future.

Chris Dodd, chairman of the Senate Committee on Banking and Barney Frank, chairman of the House Committee on Financial Resources Chairman have orchestrated an omnibus bill that is as good as they could get in the politically charged Congress.

Yet, they have sidestepped reforming Fannie Mae and Freddie Mac, the secondary market mortgage giants that continue to soak up billions of taxpayers' dollars. It is understandable, however, since the secondary-mortgage goliaths are indispensable until the housing market recovers. Additionally, critics are questioning whether it will deter "greedy" Wall Street types from making outrageous fortunes by exploiting loopholes in the law.

But long after the nuances are understood and loopholes closed, diligent enforcement and ethical business practices will ultimately foretell if it is successful.

"Is there, or can there really be, such a thing as changing the moral fibers of individuals via the rule of law, policy and procedure?" asks writer Donna Flagg, in a Huffington Post article. She does not think so because "Integrity can't be written into organizational behavior"

Likewise calling an Alpharetta de novo bank "Integrity Bank," did not assure its integrity or that it would follow ethical business practices — even though it was founded on Christian principles. Its employees had prayer meetings. The bank gave out free bibles to customers and its motto was "In God We Trust."

Steven Skow, Integrity's founder, gave away 10 percent of annual profits to churches and faith-based charities. "We just managed the bank on godly principles, like the golden rule," he said to reporters.

But Integrity, with assets of $1.1 billion, failed in 2008 and was merged with an affiliate of Regions Bank. Two of its vice presidents, Douglas Ballard and Joseph Todd Foster, and Guy Mitchell, a builder were charged with "bank fraud, conspiracy and bribery," said United States attorney Sally Quillian.

Ethical behavior is not ensured by religious principles alone.

David Ryan, an American Baptist minister and recently formed the Helpers Exchange group. He advocates helping others as a measure of ethical behavior more than he does religious activities. "I would use the criteria of helpfulness as being more important than any outward display of piety or generosity," he says "There are no absolutes in my judgment but I think there are highly probable provisional ethics."

The Florida resident says that "transparency is essential for all ethics (and) when processes are transparent, it is harder for people to deceive and cheat." Furthermore, transparency and ethical behavior starts at the top.

Robert Noyce, a pioneer in the computer-chip industry and Intel co-founder, said, "If ethics are poor at the top, that behavior is copied down through the organization."

Because of his ethical leadership in the financial industry, James Mitchell was listed in Ethisphere Magazine as one of the "100 Most Influential People in Business Ethics." The Longboat Key, Florida resident retired as chairman and CEO of IDS Life Insurance Co., a subsidiary of the American Express Co.

The magazine asks, "Did the individual conceive of new approaches or otherwise materially contribute to the field of business ethics theory in a way that could be easily applied by corporate leaders?" as part of its criteria.

Congress and President Barack Obama amassed a 2,000-page, financial reform bill. It has many features that make another financial meltdown less likely. But in the end, transparency, ethical behavior and enforcement will be the glue holding it together.