Today in the Boston Globe in the business section were three stories about mismanagement and greed.
The first was of the collusion of a mortgage broker and an insurance agent/financial advisor who persuaded an elderly couple to take out a reverse mortgage on their fully paid-off home and to then use the money unnecessarily to invest in annuities.
The second was the continuing tale of Wells Fargo and the impossible goals set by managers and their lack of scrutiny on how those goals were met, leading to the opening of 2 million sham customer accounts by the bank employees.
The third was of United Airlines who forcibly ejected four clients from one of their flights so that four of the airline’s employees could get to assignments at the destination city. One of the passengers who refused to relinquish his seat was dragged out and in the process was physically hurt.
So what do these incidents have in common?
- Lack understanding of any fiduciary responsibility – that the client’s best interest needs to be put ahead of your own. There is a need to make every profession adhere to fiduciary standards (Real Estate already does)
- Deficient training of the employees of a corporation on what is in the best interest of their clients, proper behavior and how to act honestly and openly
- Misconception about what ultimately is the mission of any company – to serve its customers- making sure the customer is always right. Whether selling a product or offering a service, no matter if a company is selling shoes or financial products, fixing computers or ferrying people from place to place, the goal is to satisfy the needs of the customer
After all isn’t it the consumers, who are paying the salaries, bonuses and dividends of the corporation and its employees from the CEO on down and determine the success or failure of any business?
So, what happened to as a result of these detrimental actions?
– The broker and the agent involved in scam were sued, lost and had to pay a fine and restitution. Rules on offering reverse mortgages and collusion of agents/advisors and mortgage brokers were changed by HUD, and several institutions
– Wells Fargo is seeking restitution of the $75 million in bonuses given to two managers who were responsible and ‘retired’ from the bank, and is paying $185 million in penalties and fines to the government
– The airline is “investigating” the incident and government departments will undoubtedly issue new reviews and surely the airline will be sued by the passenger who was hurt in the incident.
In short, the mismanagement and lack of training, the greed, disinterest and condescension towards their customers cost those at the top and their underlings money and loss of reputation.
However as it seems to happen over and over, the message doesn’t seem to sink in. And now with the administration’s push to deregulate and cut oversight, we can surely expect many more tales like these.