2009 December » Tax Research UK

Powerful people more guilty of ‘moral hypocrisy’

Dec 312009

Powerful people more guilty of ‘moral hypocrisy’, study finds – Telegraph.

Experts say that these so-called “powerful people” also make stricter moral judgements of others – while doing exactly as they please.

Professor Adam Galinsky, from the Kellogg School of Management at Northwestern University in Illinois, said:

“According to our research, power and influence can cause a severe disconnect between public judgment and private behaviour, and as a result, the powerful are stricter in their judgment of others while being more lenient toward their own actions.

“The past year has been marked by a series of moral transgressions by powerful figures in political, business and celebrity circles.

“And this research is especially relevant to the biggest scandals of 2009, as we look back on how private behaviour often contradicted the public stance of particular individuals in power.

“For instance, we saw some politicians use public funds for private benefits while calling for smaller government, or have extramarital affairs while advocating family values.

“Similarly, we witnessed CEOs of major financial institutions accepting executive bonuses while simultaneously asking for government bail-out money on behalf of their companies.”

I guess we knew all that really.

But we need to have it said time and again.

Precisely because we need to remind those in power that we know it.

A tale of 2009, heading into 2010

Environment, Ethics 8 Responses »

Dec 312009

Christmas and New year are times when you meet people who you don’t expect to meet again for some time, if ever, again. The result is that they are times for candid conversation with guards let down.

I had one such conversation over Christmas that seemed to summarise many similar snippets I’m hearing from a wide variety of sources. The person I was talking to (who will remain nameless) was referring to the attitude of senior management in the organisation for which she worked. As the person was, I established, very senior in that organisation, the observations were informed by an insider’s perception.

My conversational partner was disturbed. A mood of perverse bullishness had taken over the management of the organisation. This was not based on any market perception. Far from it. Nothing suggested that things were going very well out there in the real world. She was worried about this. But her colleagues were not. They were on acting as if on a high.

Their talk is, apparently, continually about how the staff now have to be grateful to them for having a job. They talk continually of making people redundant. Selected people are already being weeded out – new mothers seem to be the latest target. Two maternities and you’re out seems to be the rule. And despite the business remaining more than acceptably profitable the Christmas party was cancelled – as were bonuses. Except for the directors that was. They dined and bonused away – which they staff, inevitably knew because like it or not accounts departments and PAs. The resulting resentment is widespread.

But no one can say anything. The inner coterie (all male) of bosses have complete power now: argue and you’re out is the message they are giving to all.

The person with whom I was talking was in despair. She can see good people planning to leave – quite understandably. And even in this job market the best can always leave. It’s the weaker candidates who can’t. The business is heading for massive problems.

But she too can say nothing. Her own attempts at challenging the situation – arguing that people matter – have given rise to fairly direct comments that everyone, senior managers included, are expendable.

Well, of course that is true. And I only heard one side of the story. But I’m hearing it time and again – that some businesses are using fear as a weapon to a much greater degree because of the recession. This is management at its very worst. It’s privilege seeking to abuse. It is the example of the bankers transferred out into the wider boardroom. It is a belief that no one is as important as the person in charge.

It explains why the FT has reported that corporate optimism is at its highest level for six years but most people don’t share that view – the FT also noting the British as a whole are only beaten by the French for pessimism right now.

If the recession is to be an excuse to make the privilege gap bigger, the wealth gap bigger and the quality of life poorer then we’re heading for troubled times. And as my conversational partner gloomily concluded, this is the inevitable consequence of Thatcher – because she set out to destroy community, and did.

The year in cuts | The Spectator

Economics Comments Off

Dec 312009

The year in cuts | The Spectator.

The Spectator looks forward to 19% cuts in government spending…

You have to wonder what sort of warped mindset thinks that devastating the economy by destroying the welfare of those in need of support, undermining education, denying healthcare to many, cutting demand for much of the private sector (so much of which is dependent on the state as a major customer, directly and indirectly) and crushing all hope of future investment would achieve.

Is it that they feel so secure in their privilege that they feel invulnerable?

I find it hard to explain their thinking in any other way.

The highs and lows of 2009

Blogging 3 Responses »

Dec 312009

I haven’t got time for a long review of 2009. Its pace has not slowed as the year draws to a close, and there is a great deal of work to get through. As a result some lists of highs and lows, hopes and aspirations will have to do.

Highs from the world at large for 2009 include:

1) Barack Obama becoming US president. Make no mistake: no progress would have been made on the tax haven issue if the Republicans had won;

2) The April G20. Oh, I know, it could have done so much more – but let’s celebrate what we got;

3) Gordon Brown and Nicholas Sarkozy endorsing country by country reporting. There is a long way to go – but again, let’s celebrate what we have got;

4) The UK government committing to government spending to keep us out of recession – as is essential;

5) The unfolding financial crises in the world’s secrecy jurisdictions, as foretold here, which foretells the demise of their so called ‚Äòbusiness model’. I stress, this has nothing to do with the places in question – and all to do with the finance industry that operates from them.

Lows from that same world at large are:

1) The OECD undermining the G20 process by setting absurdly low targets for tax havens to achieve on information, linked to the fundamentally useless Tax Information Exchange Agreements;

2) The failure of the UK and USA to really tackle banking reform;

3) The failure of the UK to adopt the Green New Deal;

4) The Copenhagen summit;

5) Everything George Osborne has said, all year – the man is a walking economic disaster that I hope might not happen.

There were also personal highs:

1) I’ve worked with some great people – from the TUC, Tax Justice Network, the Green New Deal group, the Task Force on Financial Integrity and Economic Development, Christian Aid, Action Aid, Compass, the World Bank, Global Witness, PCS, the BBC, Greenpeace and more besides. To them all a big thanks.

2) I guess being a blogger at the G20 was a high.

3) Getting a radical tax agenda into the public domain has also been a high – whether it be on tax havens, progressive taxation or now the Tobin Tax. All are real indications of change, and the agenda is really changing as a result.

4) Finishing a book on tax havens – to be published in January 2010 – was also a high. Thanks to my co-authors, Ronen Palan and Christian Chavagneux are appropriate.

5) In a small way the change in the VAT relationship between the UK and the Isle of Man was a high, because it showed one person and a blog can change things.

And personal lows? I’ve had a few, but too few to mention.

It was a good year. The tax justice agenda has made massive steps forward. Of course it is dismissed by its opponents more vociferously than ever – but precisely because they are so worried about our success. And right now I see no reason why that success cannot continue, not least because this is a worldwide agenda, not one for any country in isolation. And around the world the appetite for change, to collect tax that is rightfully due, and to tackle the cheats (and most especially those who assist them) is growing. That is good news for all democrats, all believers in the rule of law, all who believe in society and all who want a fair world in which each can play their part in a way the market will never allow without government correcting for its inherent weaknesses. That’s me. I go forward in hope, and expectation.

This was quote of the year

Economics Comments Off

Dec 312009

This is my quote of the year, from Prof David Blanchflower, in the Observer magazine, 27 December 2009, not available on line:

If a new government got in and started cutting public spending [unemployment] could rise to four or five million. It would be the economics of lunacy to cut public spending any time soon – certainly 2010 and maybe 2011. We’d have a double dip recession, maybe even a triple dip.

This starkly summarises the difference in approach to the recession from left and right, pulls no punches, explains why unemployment has stabilised and makes clear what the Tories want to do and what the conseuqnces will be. As Blanchflower makes clear:

you reduce the stimulus too soon and get a double dip – the economy goes off a cliff – it’s not a good idea to risk going over Beachy Head.

But that’s what George Osborne wants to do.

Blanchflower was right in calling the recession in the first place. He’s right on this. But will people listen this time?

Bankers still don’t get it

Banking Comments Off

Dec 312009

FT.com / UK / Politics & policy – Banking industry chief slams attacks on bonuses.

From the FT this morning (edited):

Angela Knight, chief executive of the British Bankers’ Association has decried the government as “deeply irresponsible” and potentially “stupid enough” to act “emotionally and not logically” in its attack on banks, bankers and bonuses.

She is particularly damning of the 50 per cent supertax on bonuses revealed in Chancellor Alistair Darling’s pre-Budget report this month.

She writes in a new year message to members: “There are literally tens, if not hundreds, of thousands of British jobs directly and indirectly related to banking – bringing billions of pounds in tax income.

“Some of this is now at risk … Decision makers increasingly either wish to ignore it or – even more dangerously – choose not to believe it.”

Angela, I’ve got news for you.

There are 2.4 million out of work becasue of banks.

There is the biggest peacetime deficit because of banks.

We have the worst recession since the 1930s becasue of banks.

We need banks, I agree.

But we don’t need casinos or the jobs and chaos they create.

Now quietly go away and sit in a corner and get on with making amends. Nothing else is acceptable, and all you say and do of this sort harms your cause.

IMF report: banks that take biggest risks lobby for least regulation

Banking Comments Off

Dec 312009

IMF report: banks that take biggest risks lobby for least regulation | ToUChstone blog: A public policy blog from the TUC.

Although it probably shouldn’t surprise anyone, it’s nonetheless interesting to see a group of International Monetary Fund (IMF) staff have reported (although this is not a statement of IMF policy, necessarily) that the US banks most active in lobbying against regulation of the financial sector are the ones who took the biggest risks over the mortgage and other deals which caused the crisis. Their paper explores the evidence behind the‚Ä¶

“anecdotal evidence [which] suggests that the political influence of the financial industry contributed to the 2007 mortgage crisis, which, in the fall of 2008, generalized in the worst bout of financial instability since the Great Depression.”

As Owen Tudor on the TUC blog concludes:

It’s a fantastic paper, forensic and damning, which explores other, more innocent explanations for the data. Innocence is not what they found‚Ä¶..

“To the best of our knowledge, this is the first study to examine empirically the relationship between lobbying by financial institutions and mortgage lending in the run-up to the financial crisis. We construct a unique dataset combining information on mortgage lending activities and lobbying at the federal level by the financial industry. By going through individual lobbying reports, we identify lobbying activities on issues specifically related to rules and regulations of consumer protection in mortgage lending, underwriting standards, and securities laws.”

Of course that gives rise to the question “what do you do about it?”

Well, in the first instance simply knowing empowers politicians to ignore them.

Also ran

Accounting, Big 4 1 Response »

Dec 302009

Quotes of the year must have some essential qualities. They must be routed in reality. They must encapsulate a moment. They must have inherent in tem a demand for action. Hopefully they’re elegant, pithy, pertinent and prescient all at the same time.

The following from Steve Hadrill, new head of the UK’s Financial reporting Council responsible for regulating auditors fails on elegance. It also needs contextual setting so it is not pithy. But it’s good on the other two. In December 2009 he said, when speaking about whether a fifth large firm of auditors was needed:

[T]he priority for us has to be that we are prepared for the worst and that is where I will put my focus

Blow creating a fifth firm in other words, making sure we keep four is going to be tough enough in his view, and mine.

The prescience? Threefold, I suggest: first, failure of one of the Big 4 is inevitable; second, he has no idea what will happen if they do and third we’re setting ourselves up for another ‚Äòtoo big to fail’ scenario. As the pillars of our current version of capitalism collapse all around us all we seem able to do is prop them up until like dominoes they’ll fall again.

It’s not encouraging. And it shows, time and again, that the wrong people are in the regulatory jobs.

So near, but not it

Economics Comments Off

Dec 302009

It’s hard to believe Alistair Darling will ever get quote of the year award. I suspect he doesn’t mind. It’s just not the man he is. This was near though, not for style, but content:

The choices are between going for growth or putting the recovery at risk. To reduce the deficit while protecting front-line services or cuts which put these services in danger.

Eloquent? No. But it showed he got it: that Keynes is the author of the only way out of the mess we’re in right now. And that’s enough to prove what he said: there will be a choice at the 2010 general election.