Link Between Economy and Ethics Focus of World-Press Stories

Nov 24th, 2008 • Posted in: News

Tin cups in hand, U.S. auto execs flew luxury private jets to Washington to seek bailout; Newsweek profiles firm that made ethical subprime lending pay; Scotland launches an effort to help socially responsible firms

VARIOUS DATELINES
Several moral aspects of the world’s economic turmoil were highlighted last week. Among those grabbing headlines:

• The proposed U.S. auto bailout hit choppy waters on several fronts, with the ethical issue of executive compensation again capturing the attention of the press. In a widely cited story, ABC News reported that the CEOs of the big three automakers flew to Washington to ask for bailout money aboard luxurious private jets. Investigative reporters Brian Ross and Joseph Rhee calculated that GM CEO Rick Wagoner’s round trip cost his struggling company $20,000. In comparison, seats on a Northwest Airlines flight covering that route were available online for $288 coach and $837 first class. Wagoner declined to comment on the issue. In related news, Bloomberg reports that the proposed bailouts may spark trade disputes over claims that the United States is trying unfairly to subsidize its auto industry. The European Union has threatened to lodge a complaint against any U.S. bailout, according to Bloomberg.
• Under the right circumstances, subprime lending can be ethical and profitable, according to Newsweek, which profiles the firm Clearinghouse CDFI (Community Development Financial Institution). Since 2003, the for-profit firm in California has made $220 million in subprime mortgages, with 90 percent of home loans going to first-time buyers, about half of whom are minorities. Of its 770 single-family home loans, seven foreclosures have been reported, according to the firm’s CEO, Douglas Bystry. His secret for staying solvent? Ethical subprime lenders carefully evaluate each application, do not pay big fees to brokers to steer clients into high-rate loans, and mostly hold onto the loans they write, rather than resell them, according to the report. “If one of our employees pushed someone into a house they couldn’t afford, they would be fired,” Bystry told Newsweek.
• The Edinburgh Scotsman reports that the nation’s mergers and acquisitions market is being revved up by a program that helps socially conscious firms take over family businesses that are for sale. The Big Lottery Fund, a grant-making agency of the National Lottery, founded to fund ethical causes, has donated about $738 million to the effort. According to the Scotsman, the funding will help small family companies that want to sell out but have trouble finding a buyer, and will aid socially conscious firms that want to acquire them. The paper cites the example of Aberdeen Foyer, an organization that offers jobs to vulnerable young people, which has become increasingly active in acquiring small businesses in Scotland.

Sources: Bloomberg, Nov. 21 — Scotsman, Nov. 21 — ABC News, Nov. 19 — Newsweek, Nov. 15.

For more information, see: Related Newsline story, Nov. 17 — Related Newsline story, Nov. 10 — Related Newsline story, Oct. 27 — Related Newsline story, Oct. 20 — Related Newsline story, Sep. 8.

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One Response »

1. Ethics Newsline® » News » Bonus Checks May Be Slashed as Boards Eye Ethics Implications on December 8th, 2008 at 11:30 pm:

   [...] more information, see: Related Newsline story, Nov. 24 — Related Newsline story, Nov. 17 — Related Newsline story, Nov. 10 [...]

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