September 24, 2007
General
In his piece, James refers to the arguments put forward by John Reich for the banishment of corporate social responsibility:Reich has always argued in the past that CSR is about the externalities. Specifically he has argued CSR is about proactively identifying the externalities that pose the greatest risk to intrude into the enterprise and become much more serious internalities if left to hang. Similarly, George Soros, arguably the world’s highest value philanthropist, in his book Open Society argues that businesses should adopt CSR to the extent that doing so reduces risk and therefore improves shareholder value. But in objecting to the enterprise culture of Asda, Sainsburys, Morrisons, Tesco and Safeways Dennis seems to be confusing the role of corporate governance and the role of government.I can assure James I am not in the least bit confused…. Corporations play by the rules that they are given and it is up to citizens and their elected representatives to change the rules.I’ve no idea which way I lean seeing as I find interesting parts of what both left and right wing politicians have to say…. If that is true then the farmers markets and organic producers would be faring badly.No corporation can survive, much less prosper if it blatantly ignores or flagrantly abuses the trust that society confers upon it…. But it is in James’ rationalizing of low prices I have the greatest problem:If you don’t like the enterprise culture of Tesco then it really is an issue for the government to decide whether choice, quality, convenience and low prices are to offset the social and environmental issues associated with long supply chains and the overshadowing of local businesses.This argument conveniently forgets that while the consumer may be winning on one side, (albeit in the case I was citing, the consumer has lost to the tune of £270 million) Tesco in particular, is exposed as an abuser of trust…. Since it seems that in CSR and GRC it is impossible to rely on self-regulation then government has little choice but to step in. Whether it chooses to do so is another matter.Simply waving the spectre of higher prices and reduced consumer choice doesn’t wash with me.
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September 24, 2007
General
Just when you thought that accounting couldn’t get more insane, along comes FAS 159 for our friends in the US. This is about mark to market asset and liability valuation…. Enter stage left Morgan Stanley, Lehman Brothers and Goldman Sachs…. Yet, according to the Wall Street Journal:Morgan Stanley said it booked about $390 million, or about 26% of its third-quarter profit, “from the widening of credit spreads on certain long-term debt†that it has issued…. Goldman Sachs said Thursday it booked a gain of “a little bit under $300 million†because of adjustments in accounting for its structured notes. That’s a sliver of the $2.9 billion of net income it reported in the third quarter, but still helped offset some of its fixed-income and equities losses.Anshu Sharma explains it in layman’s terms, adding wit into the mix…. Marc Andreessen, he of Netscape fame calls it for what it is:One of the dirty little secrets — or rather, dirty huge non-secrets — of Wall Street is that public company accounting has been diverging further and further from cash accounting — which is to say, reality — over time.CPA firm McGladrey and Pullen called the creative use of FAS 159 as a ‘free pass’ myth back in April 2007. While in New York last week, my friend and fellow Irregular Jason Wood called foul on the Wall Street practice of using high levels of gearing to support investments in the hope those same investments would come good…. What’s more, many investors didn’t realise what was going on.” I hope that kind of thinking doesn’t end up permeating the buccaneers on Canary Wharf.
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