Archive for January, 2009

I always know something peculiar is going on when my father calls me from Madrid for apparently no reason in the middle of the day.  Today was one of those days.  He had spent the day glued to the TV, following every word that was said, every song that was sung, every poem that was recited in Washington DC.  I forgot his excuse for the call.  The truth is he was moved, excited and hopeful about the inauguration of President Obama and he just wanted to get a sense for how this historic day was being lived in the US.  His reaction was beyond political.  In fact, he’s always leaned towards the conservative party in Spain.

I followed up the call by reading some of the leading newspapers in Europe and other parts of the world.  “Obama appeals to hope”, “Obama promises a new era”, “Obama promises the triumph of hope over fear”, “Obama inaugurates the era of responsibility”, “Obama extends a hand to Islam”, “America is ready to lead once more”.

During the last two presidential elections the world outside the US was at best divided between the candidates if not outright anti-Bush.  It is remarkable how this time around the entire world seems to have concentrated dreams and hopes on one individual.  The expectations deposited on Barack Obama are in fact so mind-boggling that many are understandably worried that today’s hopes will unavoidably turn into disappointment.

I am actually intrigued by how far that unprecedented amount of global goodwill can go, and how long it can last.  I am amazed by how one man’s message was able to cross cultural boundaries and touch the hearts of billions of different people.  And I too am hopeful that perhaps that hope may move mountains.

On a lighter note, I loved the closing benediction by Civil Rights Movement leader Rev. Lowry:

Lord, [...] we ask you to help us work for that day when black will not be asked to get in back, when brown can stick around … when yellow will be mellow … when the red man can get ahead, man; and when white will embrace what is right. That all those who do justice and love mercy say Amen.

As part of this year’s “Davos Questions” (an open debate on YouTube), WEF founder and chairman Klaus Schwab asks whether management needs to adopt a code of professional conduct, just like other professions have done.  I just posted the following video response:

I am happy to see that the World Economic Forum has restarted the debate of whether business managers should be required to take an oath of professional conduct.  In an informal YouTube poll, the yeas are beating the nays hands down (84% to 16%).

In 2003 a group of young leaders in Davos proposed doing exactly that.  German newspaper Handelsblatt facilitated an on-line debate that attracted contributions from Deans from around the world.  These were the years of Enron and WorldCom… and yet, to many educators, imposing a code of conduct on future managers was anywhere from useless to plainly wrong.

We went ahead nevertheless.  In 2004 I joined Thunderbird, and soon after students, faculty and the school’s board had embraced the idea and formally adopted an Oath of Honor which is now part of the School’s ceremonies and curriculum.  The impact it has had on our academic culture and programs has been remarkable.

As we accumulate business failures of deeper and wider magnitude, the idea of the Oath seems to be gaining momentum and acceptance.  Better late than never, as they say.

In the work by the World Economic Forum’s  Global Agenda Council on Entrepreneurship which I am chairing (see short video from recent meeting in Dubai here) we have consistently arrived at two central themes or rationales for why entrepreneurship ought to be at the forefront of any developmental agenda: innovation and inclusion.

New companies may introduce new breakthrough technologies that challenge the status quo, radically transform markets, increase productivity and provide new solutions.  But most new companies in most parts of the world play a perhaps less glamorous but equally vital role: spread opportunity, create jobs and allow more individuals to be productive.

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One of the most interesting things I read over the holiday break was an excellent account by Peter Goodman and Gretchen Morgenson of the New York Times about the Washington Mutual failure…. a powerful story of how simple short-term profit maximizing, even within the limits of the law, can lead to disastrous outcomes, not just for shareholders, but for clients, employees, and many others.

Between 2001 and 2007, Mr. Killinger received compensation of $88 million, according to the Corporate Library, a research firm. He declined to respond to a list of questions, and his spokesman said he was unavailable for an interview.

During Mr. Killinger’s tenure, WaMu pressed sales agents to pump out loans while disregarding borrowers’ incomes and assets, according to former employees. The bank set up what insiders described as a system of dubious legality that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers, sometimes making the agents more beholden to WaMu than they were to their clients.

WaMu gave mortgage brokers handsome commissions for selling the riskiest loans, which carried higher fees, bolstering profits and ultimately the compensation of the bank’s executives. WaMu pressured appraisers to provide inflated property values that made loans appear less risky, enabling Wall Street to bundle them more easily for sale to investors.

“It was the Wild West,” said Steven M. Knobel, a founder of an appraisal company, Mitchell, Maxwell & Jackson, that did business with WaMu until 2007. “If you were alive, they would give you a loan. Actually, I think if you were dead, they would still give you a loan.”

I recently asked a Thunderbird alum, who’s a regional president with Wells Fargo why he thought they survived the credit meltdown and others didn’t.  While he recognized the answer to be much more complicated, he honed in on their mission statement, which helped them make what time would prove to be the right decisions:

We want to satisfy all of our customers’ financial needs, help them succeed financially, be the premier provider of financial services in every one of our markets, and be known as one of America’s great companies.

Is the ultimate purpose of a bank to maximize shareholders’ returns, even if it is at the expense of clients and employees?  Or is it to provide competitive returns to shareholders and opportunities to employees by serving the interests of clients?

I don’t know how long this has been the case, but this is how the new WaMu (now part of JPMorgan Chase) describes itself… may be after all the crisis did help us learn a few things:

Now part of JPMorgan Chase, you’ll know right away that we’re not like other banks. We’ve always been about making things better for people-our customers, employees and neighbors.