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Customer Service: United Sates of Greed

Customer Service: United Sates of Greed

You probably know by now, that in my posts I try to highlight customer service. In this post, though, I’ll provide some insights as to why I think customer service, in general, is on the wane in our Country.

We humans – almost all of us, anyway – are the most evolved species inhabiting our planet. This is because thanks to evolution, we’ve separated ourselves from the rest of the pack with traits that they don’t possess but define us. Traits like: empathy; compassion, generosity; etc.

Unfortunately, these traits are in short supply for some of our fellow humans who are the who’s who of the business world. These uber groups of individuals pretty much run our Country… um, I mean their companies, and for the most part, it seems the conventional rules that govern the day-to-day lives of average stiffs like us, do not seem to apply to them.

Take for example the entrenched practice of allowing companies and individuals (usually the top brass of these companies) to settle federal regulatory charges without admitting that they actually did anything wrong. C’mon, you’ve heard about it, right? It happens all the time: The government announces some giant settlement – thumping their chests - with a company that’s been accused of doing something wrong. The company agrees to pay a massive fine. Then, in the fine print, there’s something along the lines of: …”The company neither admits nor denies any wrongdoing.”

We the people, pause for a second, commend the law enforcement agencies for doing a great job sticking it to the bad guy, and then move on with our lives. Stop. Don’t, because this is a shining example of our government’s impotency at its best.

The Securities and Exchange Commission (SEC) is the regulatory agency that is responsible for fighting these “White Collar Crimes/Criminals.” Statements from people within the agency send a clear message to these criminals that they’re all bark and no bite. Matthew T. Martens, once a chief litigation counsel at the SEC, tries to deflect the blame with the “everybody else is doing it” explanation. “Every other federal agency settles cases similarly – and some of them allow a defendant to explicitly deny the charges”, he said. He further states “because the SEC’s court papers detail its assertions about how securities laws were broken, the public is not left wondering what bad conduct has occurred when we bring complaints.”

Similar sentiment is echoed by lawyers both inside and outside the SEC, who argue, that the “neither admit or deny” settlements are perhaps the only way to get companies to settle fraud cases because to admit wrongdoing would open them to civil damages. Additionally, they assert that a settlement with the above provision helps the victims because it allows for higher and quicker settlements. Otherwise they feel it takes a lot of resources to build the kind of case that would achieve an admission of guilt, and that they need to be prudent in picking their battles on cases that they can take to trial.  

The essence of my argument is captured vividly in an op-ed piece Sen. Elizabeth Warren wrote for New York Times on the 29th of January 2016. The following are some excerpts:

I just released a report examining 20 of the worst federal enforcement failures in 2015. Its conclusion: “Corporate criminals routinely escape meaningful prosecution for their misconduct.”

In a single year, in case after case, across many sectors of the economy, federal agencies caught big companies breaking the law — defrauding taxpayers, covering up deadly safety problems, even precipitating the financial collapse in 2008 — and let them off the hook with barely a slap on the wrist. Often, companies paid meager fines, which some will try to write off as a tax deduction.

The failure to adequately punish big corporations or their executives when they break the law undermines the foundations of this great country. Justice cannot mean a prison sentence for a teenager who steals a car, but nothing more than a sideways glance at a C.E.O. who quietly engineers the theft of billions of dollars.

These enforcement failures demean our principles. They also represent missed opportunities to address some of the nation’s most pressing challenges. Consider just two areas — college affordability and health care — where robust enforcement of current law could help millions of people.

When the Education Management Corporation, the nation’s second-largest for-profit college, signed up tens of thousands of students by lying about its programs, it saddled them with fraudulent degrees and huge debts. Those debts wrecked lives. Under the law, the government can bar such institutions from receiving more federal student loans. But EDMC just paid a fine and kept right on raking in federal loan money.

When Novartis, a major drug company that was already effectively on federal probation for misconduct, paid kickbacks to pharmacies to push certain drugs, it cost taxpayers hundreds of millions of dollars and undermined patient health. Under the law, the government can boot companies that defraud Medicare and Medicaid out of those programs, but when Novartis got caught, it just paid a penalty — one so laughably small that its C.E.O. said afterward that it “remains to be seen” whether his company would actually consider changing its behavior.

Enforcement isn’t about big government or small government. It’s about whether government works and who it works for. Last year, five of the world’s biggest banks, including JPMorgan Chase, pleaded guilty to criminal charges that they rigged the price of billions of dollars worth of foreign currencies. No corporation can break the law unless people in that corporation also broke the law, but no one from any of those banks has been charged. While thousands of Americans were rotting in prison for nonviolent drug convictions, JPMorgan Chase was so chastened by pleading guilty to a crime that it awarded Jamie Dimon, its C.E.O., a 35 percent raise.

To be fair, weak enforcement is sometimes a result of limited authority. Despite the company’s history of egregious safety failures, for example, the former C.E.O. of Massey Energy was convicted only of a single misdemeanor in the deadly Upper Big Branch mine disaster that killed 29 miners in West Virginia in 2010, because federal mining laws are too weak. It’s on Congress to stiffen such penalties.

But in many instances, weak enforcement by federal agencies is about the people at the top. Presidents don’t control most day-to-day enforcement decisions, but they do nominate the heads of all the agencies, and these choices make all the difference. Strong leaders at the Environmental Protection Agency, the Consumer Financial Protection Bureau and the Labor Department have pushed those agencies to forge ahead with powerful initiatives to protect the environment, consumers and workers. The Special Inspector General for the Troubled Asset Relief Program, a tiny office charged with oversight of the post-crash bank bailout, has aggressive leaders — and a far better record of holding banks and executives accountable than its bigger counterparts.

Meanwhile, the Securities and Exchange Commission, suffering under weak leadership, is far behind on issuing congressionally mandated rules to avoid the next financial crisis. It has repeatedly granted waivers so that lawbreaking companies can continue to enjoy special privileges, while the Justice Department has dodged one opportunity after another to impose meaningful accountability on big corporations and their executives.

Each of these government divisions is headed by someone nominated by the president and confirmed by the Senate. The lesson is clear: Personnel is policy.

Legislative agendas matter, but voters should also ask which presidential candidates they trust with the extraordinary power to choose who will fight on the front lines to enforce the laws. The next president can rebuild faith in our institutions by honoring the simple notion that nobody is above the law, but it will happen only if voters demand it.

Listed below are Sen. Warren’s 10 of the 20 worst enforcement failures of 2015.

 1) S&P's credit ratings: Accused of defrauding investors by misrepresenting the credit risks of mortage-backed securities, S&P and the Department of Justice settled on a $1.4 billion fine -- one-sixth what the DOJ and 19 states initially sought.

2) "The Cartel": Traders from four major banks allegedly formed a secret group known as "The Cartel" and made their banks billions by manipulating exchange rates. The banks admitted guilt but avoided major financial consequences, and none of the traders were prosecuted.

3) Deutsche Bank's LIBOR settlement: After being accused of manipulating the key LIBOR benchmark on which $10 trillion in loan interest rates are based, Deutsche Bank paid a $775 million fine. The SEC continued to allow the bank to be treated as law-abiding.

4) Citigroup bonds: Citi's investors lost out on $2 billion after the bank allegedly falsely claimed its highly leveraged bonds carried low risk. Citigroup settled with the SEC for $180 million but did not admit wrongdoing.

5) Deutsche Bank's derivatives settlement: The SEC fined Deutsche Bank $55 million after saying the bank hid losses of more than $1.5 billion during the financial crisis. The bank admitted no wrongdoing.

6) JPMorgan's conflicts of interest: JPMorgan paid $307 million in fines to the SEC and the Commodity Futures Trading Commission for numerous alleged conflicts of interest in managing customers' money. The fine amounted to less than 1% of the company's annual profit.

7) EDMC's high-pressure recruiters: The for-profit college received $11 billion in payments from students over the course of eight years after the DOJ said it had paid recruiters to bring in students. It settled for $95 million and admitted no wrongdoing.

8) Navient and Service Members: The student loan servicer was accused of overcharging service members for their loans and settled with the DOJ and FDIC for $100 million. The Department of Education took no action against Navient, Warren says.

9) GM's ignition switch problem: Following a coverup of an ignition switch problem that caused a number of deaths and injuries, GM paid the DOJ a fine of $900 million, equal to less than 1% of the company's annual sales. No criminal charges against any individuals were filed.

10) Honda's airbag settlement: After failing to disclose 1,700 reports of injuries and deaths related to its faulty airbags, the National Highway Traffic Safety Administration fined Honda $70 million -- the maximum allowable fine.

The above op-ed piece and the examples cited make it clear that we the consumers/voters/stockholders should do a better job of knowing our rights and exercising those rights accordingly. As a consumer we can stand up and demand better service. As a voter, we can be more engaged in our electoral process and choose candidates that will best serve our interests and not vote simply along party lines. After the elections we need to hold these officials accountable for their actions which include making sure they deliver on their electoral promise of “fighting for the little guy.”

Similarly, as stockholders of these giant corporations, we need to raise our voice for good corporate governance. I know this is a tall order, because, as individuals we don’t have much say (voting power), but collectively, we stand a chance to hold the board, the CEO and the top brass of these corporations accountable.

We’ve established in this post that the so called “stewards” of these giant corporations are in it for themselves. Their lust for money and power is unquenchable. They will do everything in their means to squeeze that last extra cent in profit from the company if it increases their salary/bonus. Combine that with the laws of the land letting them off with a wink and a nod, and these “pillars of our communities” are emboldened to commit even more brazen theft with every passing day.    

It is for the reasons mentioned above, that in the last two decades, we’ve witnessed a change in corporate philosophy. Before, when a customer invested in a company - through his purchase of a product - the company invested right back in that customer in the form of customer service. Now, though, the same companies view their customers as income, but they view customer service as an expense. And these days, the word “expense” is a taboo in corporate America. 

It is for this reason nothing is ever made in the USA anymore. Because, when companies reduce their production costs, their profits soar. And it is these profits that line the pockets of the top brass running these companies. The result: inferior products for the customers.

It is for this reason the prices have been on a steady climb, because when you start with greed and combine that with expenses that need to be recouped when companies pay out those huge fines for their shenanigans, how do you think they’re offsetting those expenses? The result: by passing on those expenses to their customers in the form of increased prices.

It is for this reason when you call a company’s customer service hotline, you endure wait times that can sometimes run into an hour(s), or when you schedule a service call, it can be days before your problem is addressed, because of the reduced head count. The result: a general resignation among the customers that they’ve been abandoned, and are left to fend for themselves after a purchase.

It is for this reason wages have been stagnant for more than a decade, and productivity has been at its highest, and yet, customer service is on a run to the bottom. The result: over worked and under paid employees, low on morale, unfairly venting their anger at their customers.

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Last Updated: 2017-10-26 20:00:54


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