J&J: America's "most admired unlawful company"

http://highline.huffingtonpost.com/miracleindustry/americas-most-admired-lawbreaker/chapter-1.html

Here's a multi-chapter story (2 parts published so far) about J&J, the company we know (and love) for no-tears baby shampoo, Band-Aids, Tylenol, etc. They make us feel better and healthier. But their low-margin consumer products division is only 9% of their profits, and their pharma/devices division is where most of the money (and controversies) are.

I interned at a J&J acquisition last decade, and of the 3 pharma companies I've worked at, I felt that J&J emphasized ethics the most. This is probably due to their "Creedo culture". Remember the 1982 Tylenol crisis where some guy in Chicago was opening up bottles and putting cyanide in them? That led to 7 customer deaths, and the voluntary development of tamper-proof drug containers by J&J that became the industry standard. That tragedy could have sunk the company (Tylenol's market share of analgesics initially fell from 35% to 7%... haha who were those crazy 7%, very loyal employees or people without TVs?), but J&J's leader at the time, James Burke, held the ship together and eventually restored their brand image. It is now a celebrated crisis mgmt. business case, and Burke won the Medal of Freedom in 2000 (I don't know if it was fully merited or not).

Part of their brand recovery plan was the drafting of the Creedo (written in stone like the 10 Commandments, and next to the Stars & Stripes), or guiding principles for what kind of company they should be. On paper is sounds very good and even inspirational (it was for a 23 year old): their order of priorities are customers/users, business partners, employees, communities, and lastly shareholders. Of course that challenged their fiduciary duty as a publicly-owned company, but the Board must have approved it. Maybe the thinking is that these stakeholders are not zero-sum; if you are good to patients and others, the money will also flow to shareholders (Merck says something similar). They drove these points home during new hire orientation, and also recognize employees each year who are especially faithful to the Creedo.

But apparently the "thought leaders" and businessmen (corporate criminals are overwhelmingly male) in the pharma/device divisions didn't really live it out on multiple occasions. I don't know how much "Creedo compliance" actually takes place - like are employees rated and comped for how ethical they are (how Google partly evaluates employees on their "Googleyness")? Doubt it. But maybe all of this lofty Creedo stuff is just a smoke screen to get patients, employees, and gov't to believe that medical companies are somehow more trustworthy and admirable than "regular companies" that just make widgets, because their higher mission is to save lives.

The record indicates that medical companies/providers are no more ethical than the rest of us, and are in fact also responsible for millions of deaths, billions in fraud, and countless injuries over the years (some preventable or willful). Sure, their net impact is probably positive, but the J&J case could be another big example why for-profit medicine does not lead to the best outcomes for society as a whole.

These people are supposed to protect us

We've already heard many stories about how the CIA, military, cops, justice/penal systems, and Secret Service have really messed up and violated the public trust. Apparently most other agencies are not immune either:

The FBI admits to overstating the conclusiveness of forensic biological evidence (hair) - hundreds of cases potentially tainted since 1972, incl. dozens of death penalty cases: http://www.washingtonpost.com/local/crime/after-fbi-admits-overstating-forensic-hair-matches-focus-turns-to-cases/2015/04/20/a846aca8-e766-11e4-9a6a-c1ab95a0600b_story.html

DEA agents attended wild sex and coke parties for years in Colombia, paid for by local cartels: http://www.usatoday.com/story/news/nation/2015/03/26/dea-brothel-prostitutes/70482964/

What is the point of funding these people and giving them broad powers, when this is how they serve us? I know plenty of security personnel are diligent, good people, but then they have a duty to call out or root out the bad ones among them. Their mission is to protect America against external AND internal threats, right?

At least I haven't heard any bad stuff about the Coast Guard. Well, they do interact with smugglers and cartels, so the opportunity for corruption is also there.

Ethics and young people

NPR had some good stories about this today.

http://www.npr.org/blogs/ed/2014/07/14/331346884/for-most-kids-nice-finishes-last

Should universities consider student EQ in admissions, not just the typical achievements? Those skills can be important for career and life success too, not to mention better leaders and a healthier society. As my favorite president Teddy R said, "To educate a man in mind and not in morals is to educate a menace to society" (emphasis mine).

This comes on the heels of a $7B federal fine on Citi for all sorts of professional/ethical violations associated with its MBS business (as usual, no one goes to jail). The fine is a tax-write off and about 7 months of profits to Citi - hardly a trip to the woodshed.

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What should it mean to "be a man"?

http://www.npr.org/2014/07/14/330183987/the-3-scariest-words-a-boy-can-hear

MBA students have highest cheating rates

http://www.denverpost.com/business/ci_4433207

Undergrads seem to have much higher cheating rates (into the 80%s!) But the survey is limited by self-reporting, and the data range is fairly narrow (56-45% over most majors). Though those principled humanities and social sciences students were the most ethical, down at a 39% cheating rate (because they know that even a 4.0 GPA won't stop them from being poor for life LOL). Interestingly law students had low cheating rates too, or maybe they just lied on the survey!

Some possible reasons for this:
- With so much competition for top education and jobs (and those factors greatly influence lifetime earning and even quality of life), grades and scores are more critical than ever.
- Education is more and more seen as a means to an end, with grades as the goal instead of mastery of a subject (in that case, cheating would be counter-productive).
- Students are exposed to way more examples in the popular culture and mainstream media of cheaters prospering (or at least getting away with it), rather than cheaters getting punished and honest people prospering.
- Anti-cheating tech lags far behind cheating-enabling tech
- Parents and society are emphasizing individual accomplishment, status, and material wealth more than selflessness and personal character (maybe humanity has always been like this to a certain extent, but as an example of how character used to trump even survival under different social expectations: http://www.northcountrypublicradio.org/news/npr/150421710/why-didn-t-passengers-panic-on-the-titanic)

More on the "cheating culture" in the US: http://www.kqed.org/a/forum/R201204240900

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Yes good point. Students and their families feel like they are forking over so much $ that they are "entitled" to get good grades and good jobs. And they know they will be under financial pressure right when they graduate, which is a potent motivator. Apparently student loan interest rates may double this summer, unless Washington gets its act together and extends the deadline.

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Definitely growing up college degree was never a question in my household, it was a "must" requirement before my sister and I moved into adulthood. So we took out student loans and followed down the yellow brick road.

But we weren't talking $100k like some of these recent grads interviewed by NPR and Yahoo in recent months.

I wonder at what price point does college degree becomes "not worth it"?  When I was in college, $100k debt was something that was only associated with JD or MD, whole another 3-4 yrs of education.  However, apparently college tuition has soared since those days that college grads are leaving with 6 figure debts (either I'm really old or tuition has gone up at alarming rate)

I understand that the job market is getting tougher and college degree has become somewhat of a norm, but may be then it's time to change that social perception? May be we as regular persons and employers should be open to seeing more people not going to 4 yr college? I wonder if that is possible.

Also, what is the driver behind the rising cost of higher education, higher than that of rise of standard of living, inflation etc? most schools are classified as "non- prof" orgs so I assume it isn't for profit.I'm sure the schools have their "reasons" but where is it (money) going? who actually ends up with them?

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First off, tuition since my son started college 3 years ago has gone up 80% in that time.  Professors haven't had raises(unless they were promoted) in the last 10 years.  Meanwhile, the administrators enjoy an average 10% increase annually in that same timeframe.

Secondly, the reason tuition is going up is because the regents of these not for profit schools who, at one time, were committed to the education of Californians, have been taken over by privatization hounds.   

http://ucsdfa.org/ucsf-chancellor-susan-desmond-hellmann-corporate-privatizer-and-union-buster-wants-ucsf-out-of-the-uc-system/530
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And funding from tax dollars has become so precarious for some public schools that they are shifting the costs to students or semi-privatizing (professional schools can do this easier). And with the surge of cheap credit in the '90s and promise of lucrative jobs in the bull market, I guess the regents felt they could keep raising fees above inflation as students and their families became less price sensitive. Now that the recession has hit (it hit school endowments and donations too) and some families are over-leveraged, school really looks unaffordable, yet demand is inelastic because a bachelor's or above is so critical for better pay and more stable employment.

Since elite colleges are so pricey and hard to get into, some org's are looking into giving "substitute degrees" or "open universities" to students who learn over the web. Our economy is in such need for skilled tech labor, and there is an untapped talent pool in Asia (and at home) that can't access or afford top Western tech schools. So by getting similarly rigorous online classes and some sort of certificate, hopefully they can be eligible for jobs in the West too. I am sure it won't be a fix-all, but we need to rethink alternatives to the expensive and arguably obsolete 4-year university system - and no I don't mean Univ. of Phoenix. Maybe there can be more tiers of degree types beyond just associate and bachelor's.

http://www.kqed.org/a/forum/R201204091000

Regarding the UCSF situation, I think that is sick also. Since UCSF is a grad school, its cost structure is a lot different, and because it is an elite health science hub, of course it is more profitable than UC Riverside. But the UC charter is to serve the interests of the PEOPLE OF CA. And within the UC System, the strong should support the weak, meaning UCSF is supposed to subsidize UC Riverside. Just like there is a net outflow of federal taxes from places like NY and CA to places like AL and SC. That is part of being in a community, unless we want to espouse social Darwinism like the Romney types promote.

Congess' outrageous insider trading

Corporate executives, members of the executive branch and all federal judges are subject to strict conflict of interest rules. But not the people who write the laws.

http://www.cbsnews.com/8301-18560_162-57323527/congress-trading-stock-on-inside-information
http://money.cnn.com/2011/12/07/news/congress_insider_trading/index.htm?section=money_topstories

"60 Minutes" had a recent report exposing the egregious insider trading conducted by members of Congress that is technically not illegal for them, but would put normal people in the slammer. Sensing that the gig is up and anticipating public outcry, the Senate is now resuscitating 2004's STOCK Act: a failed bill to explicitly ban insider trading by Congress, and require more frequent public disclosure of lawmakers' trading activities. In order to look ethical leading up to an election year, the bill has currently attracted 171 co-signers (possibly a record), whereas it couldn't get an ounce of support during its original drafting. Some critics say that the bill is unnecessary because regular trading laws already apply to Congress, and they are not "insider" employees of the companies whose securities they trade. But of course neither was Martha Stewart.

As an example, take September 2008. Lehman was about to go under, and the whole system was on the edge. Paulson and Bernanke called a select group of lawmakers for ultra-secret meetings to break the bad news and plan responses. Maybe it was just a coincidence, but one of the attendees, the ranking GOP on the House Fin. Svcs. Cmte., AL's Spencer Bachus, suddenly bought a massive amount of options that would pay out if the market tanked. Bachus was one of our elected officials who was supposed to avert the crisis, yet he had a clear financial incentive to let the market plummet. WTF?

Maybe another coincidence, but current House Speaker Boehner was trading in health insurance stocks during the health reform debate. Shortly before Washington decided to kill the public option proposal, Boehner bought shares of private insurance companies when everyone else was bearish on them. And of course with the news of the public option's demise, insurer's stock prices rose and he made money.

We already know that most legislators leave DC much richer than when they arrived (and it's not because of their generous salaries). They make decisions with millions or billions at stake, so of course private interests attempt to sway their opinions with bribes. It's not as bad as Nigeria or Iraq, but it happens here plenty. On top of that they need to play the markets too? Aren't they too busy running the country and serving their constituents to trade on the side? Most of us don't even have 5 min a day to watch the tickers, but trading is much easier when you are way ahead of the information curve. It's ridiculous, they are beyond shame.

Take this other example involving IPOs:

If you were a senator... and I gave you $10,000 cash, one or both of us is probably gonna go to jail. But if I'm a corporate executive and you're a senator, and I give you IPO shares in stock and over the course of one day that stock nets you $100,000, that's completely legal.

Look at Pelosi's reaction to questions about her profiting from the 2008 Visa IPO: http://www.youtube.com/watch?v=e0LMAP0L5G4

She claims to fight the big banks and help ordinary Americans, yet she accepted shares in Visa while helping to kill CC reform legislation back then that could have saved Americans billions during this horrible recession. The specific reform was eventually signed into law in 2010, but banks got 2 precious years to restructure their revenue models in anticipation of this change. So clearly it's not just a GOP problem.

I would go further than the STOCK Act: Congressmen can't trade in any equity, real estate, or international securities while in office, AND one year thereafter. Maybe bar their immediate families too. They get the pension anyway, why the need for more cap. gains? They can park their money in a 1% CD or money market account like the rest of us saps. They are public servants after all, and servants sacrifice, they don't get rich. How bad would it look if a US soldier in Iraq was in charge of protecting a BP facility, but one night insurgents blow it up? Then later his superiors find out that he was shorting BP stock a week before the incident. As far as I know, FDA employees aren't allowed to trade in stocks of the companies they're auditing, and I think employees at the Fed and Treasury have to sell all their financial stock before taking the job too. It's common sense, so why is Congress somehow exempt? Are they saints? I would also copy China and EXECUTE public officials convicted of corruption, fraud, etc. I'm against capital punishment except for this. I know China's policy hasn't fully stopped the problem, but at least it sends a message that people can't just profit with impunity and make a mockery of the law/public office. But this is America, the country that pardoned Tricky Dick. So tired of this crap.  

From "60 Minutes":
But what baffles Baird even more is that the situation has gotten worse. In the past few years a whole new totally unregulated, $100 million dollar industry has grown up in Washington called political intelligence. It employs former congressmen and former staffers to scour the halls of the Capitol gathering valuable non-public information then selling it to hedge funds and traders on Wall Street who can trade on it.

Baird says its taken what would be a criminal enterprise anyplace else in the country and turned it into a profitable business model.
Baird: The town is all about people saying-- what do you know that I don't know. This is the currency of Washington, D.C. And it's that kind of informational currency that translates into real currency. Maybe it's over drinks maybe somebody picks up a phone. And says you know just to let you know it's in the bill. Trades happen. Can't trace 'em. If you can trace 'em, it's not illegal. It's a pretty great system. You feel like an idiot to not take advantage of it.