The post-Sept. 11 fallout in the banking industry lowered interest rates to an unheard of 1 percent, said Keith T. Darcy, executive director of the Ethics and Compliance Officer Association.
“And that led to NINJA ”“ no income, no jobs or assets loans. Those mortgages were bundled and sold, and Bear Sterns was loaded with some highly toxic assets as a result.”
The bankruptcy of IndyMac, Fannie Mae and Freddie Mac became what Darcy called “wards of the state.” Add to the mix Lehman Brothers”™ bankruptcy, the sale of Merrill Lynch to Bank of America and a number of other financial failings “saw the near-death of capitalism on September 18, 2008.”
Darcy made his comments following the Rockland Economic Development Corp. luncheon Nov. 18 at IBM Dolce Palisades Center. Awards for economic distinction were given out at the event. (See box). REDC President/CEO Ron Hicks announced prior to the event that he was resigning to join the transition team of Dutchess County Executive-elect Marcus Molinaro.
With an extensive resume in the finance industry, Darcy used his banking and investment expertise to teach ethics and leadership in executive programs at several prestigious colleges. The ECOA has 1,200 members worldwide and is the largest association dedicated exclusively to ethics and compliance executives.
Darcy told the crowd of 300, “The Great Recession has become The Great Stagnation. The turnaround people hoped for has not come. If you read ”˜Future Shock”™ by Alvin Toffler in the 1970s, we are even more disoriented than Toffler said our society would become.”
Toffler”™s predictions seem timid compared with those we actually face, Darcy said. He highlighted the constant cyber threats, the unparalleled growth of social media that spawned a new Mississippi law restricting social media contact between teachers and students, as well as the slippery slope Facebook and other social media users may find themselves in when they are out looking for work. “Are job candidates making fools of themselves on Facebook or You Tube?” asked Darcy. “Employers are looking.”
“Good companies want team players. Where there is a culture of integrity, culture trumps compliance. When we fail to set boundaries, government steps in. Will it be, ”˜business as usual”™ ”“ or will there be change?” Darcy asked.
Regulations like Sarbanes-Oxley are not needed in China. “For those involved in the tainted milk scheme, the result was simple: execution of the executives.” But in other companies where corruption reigns, the corporate culture is keeping its “head in the sand to keep problems from going public.”
Companies working in “silos” ”“ where each segment of its corporate makeup works separately and distinctly only nurtures and promulgates the dysfunction. “When you work in ”˜silos,”™” he said, “you can”™t fix what you can”™t talk about.”
For companies in need of a corporate culture fix, it”™s become easier to blow the whistle. “The SEC (sec.gov/whistleblower) is getting three to four phone calls a day … when it used to get one or two a month. Any settlement in excess of $1 million can earn the whistleblower between 10 to 30 percent.”
There is “an extraordinary lack of trust,” Darcy said. “You can”™t legislate it. You don”™t need SOX or Frank-Dodd to tell us what to do. It only takes a single betrayal to shatter a trust ”“ and there has been a shattered trust ”“ ”˜The American Dream.”™
“Culture is a system of shared values and is one of the single biggest expectations. Business leaders need to give workers meaning, or there is no loyalty to the organization.”
While not endorsing the Occupy Wall Street movement, Darcy said the movement is helping to shape America into “The Tea Party versus Occupy Wall Street … and our Generation ”˜Y”™ ”“ the bright and plugged in ”“ admit to cheating and stealing, feeling the pressure to get ahead and with an attitude that ”˜everybody else does it.”™”
People may be begging to go back to “business as usual,” said Darcy, “but that”™s what got us into trouble. We can”™t do enough to help each other. ”¦We need to redouble the efforts.”
