Tag Archives: commission

Is there too much white collar crime or are we lucky there isn’t more of it?


We live in a society where white collar crime has never been higher, or more well protected.

Just read any book on the GFC or High Frequency Trading. You will quickly learn how so many became so rich at the expense of the hard working lower and middle class. Like you and me.

And no-one has been charged with committing any crime.

In the GFC companies (driven by individuals within them) made junk loans to people they knew were never going to pay them back. They then packaged them up and called them A+ secure, sold them to other investors for huge commissions then bet on those same junk loans defaulting.

And yet we still listen to those corrupt ratings agencies, Standard and Poor and Moodys, and the ratings they put on investments today. Why? Because the corrupr at the top welcomed them back with open arms as being fellow greedy and unlawful money makers, just like them.

They made millions, some billions, and yet no-one was held accountable.

Indeed the senior ezexutives of companies they knew were going to collapse, sold their company for a bargain price but not before they votes themselves huge bonuses. These bonuses were then paid by the US government bailout funds. Tax dollars of individuals put to good use…NOT.

As soon as the GFC was exploding around them the same firms started high frequency trading. I will not attempt to explain it in detail here, because not even some of those who participated do not know how it works. Suffice it to say that the big end of town were making stock trades that made them hundreds of millions while the average investor, often their own clients (people like you and me) lost everything.

Given these are only two situations that we actually know about, there must be many, many more. The current Royal Commission into the finance sector here in Australia has revealed much, but only because the Australian Government was forced kicking and screaming to agree to setup this investigation. They were trying to protect their mates.

Is it a coincidence that our Prime Minister made a fortune as a merchant banker and therefore would have countless contacts, friends, amongst the senior executives now being investigated?

As disgusting as all these examples are, I now believe that the ease that people and businesses can make themselves richer and the poor (us) poorer, we are actually fortunate it doesn’t happen more often.

If you read enough books, and get a pool of money together through friends, family and a few acquaintances you too can rip people off to your benefit.

So as bad as it is, and it is pretty damn bad, I actually believe we are lucky more people do not succumb to this temptation.

Corruption in our society starts at the top with heads of big business and political parties, and as proven many times over the fish rots from the head. So they are setting us all an example that we could easily follow. That example is greed.

Yet approximately only the top 5% do so. It should be more widespread but I do not believe it is. Why? Because the majority of people have ethics and morals that prevent them from acting as decedantly and greedily.

Yes, we live in bad times like never before as the gap between rich and poor grows by the hour.

However I like to believe that it could be a lot, lot worse and will stand with those trying desperately to shine light into dark corners.

Because greed is not hard wired into our system, helping others is.

I just hope there are enough of us to stem the growing tide.

Bonuses – why they should be banned


Awarding bonuses is something I have read much about, taught and experienced firsthand in my career.

They are almost always misused. Instead of encouraging better performance from employees the only thing it encourages it greed, lies and discontent.

Bonuses are usually paid from middle management on up, and therefore breed discontent and envy from everyone below middle management.

Why?

Because the success of a business rests upon every employee performing at their best, not just a select few.

There is now a whole industry that has been built around team building, team bonding and trust, fuelled by bonuses. This is because bonuses are 95% of the time given to individuals, not teams.

This conflict, and disconnect between performance and reward breeds nothing but bitter rivalry.

It also encourages illegal activity, such as we in Australia have seen recently with the Royal Commission into banks. The corruption that bonuses perpetuate has also been evident for a long time and played a significant role in the Global Financial Crisis.

Bonuses are mostly put in place by people who want to motivate their employees, and so they can argue for a bonus system for themselves.

If middle management are given the opportunity to earn a bonus, then surely those above them should be offered one as well! And so it goes, to the very top.

This is where the rot really sets in.

For example; there is a team of five salespeople and it is coming to the end of their reporting year. Three of the salespeople have passed their performance benchmarks but two have not, but they are not far behind.

As the salespeople get a bonus only if their overall targets are met the three salespeople who have already qualified will start to allow the credit for their sales to go to the other two. This way they have a chance of meeting their bonus targets.

It is now just two weeks from the cutoff date to achieve bonuses and one salesperson is still behind. If this remains the case no-one will get a bonus for the past twelve months work.

The senior salesperson has been keeping the Sales Manager aprised of what is going on, because of course the Sales Manager wants his/her bonus as well. They have also been getting more and more phone calls from their Regional Manager who also has a bonus, but theirs relies on the Sales Manager hitting their target.

And so it goes up to the CEO.

So in order to achieve their target, and therefore achieve a bonus for everyone, the leading salesperson goes to the Sales Manager with a proposition. What if they create a fake sale that will meet their target, and everyone elses?

The Sales Manager goes to their Regional Manager and over a coffee proposes the sales person’s idea. Because the bonuses get larger as you go higher up the corporate ladder the Regional Manager will lose far more than the Sales Manager if they just fall short.

So the Regional Manager agrees to let it slip through.

Their Manager might realise it is a fake order when it comes across their deak, but they of course approve it because they want their bonus. After all it is the salesperson and Sales Manager who will take the fall if anything happens.

And so it goes, all the way to the top where the CEO’s bonus could be worth up to a million dollars or more (disgusting but true, just read the financials of the big banks, or any of the top ten companies in Australia).

So everyone gets a bonus that year, everyone is happy…until next year.

This year has been particularly difficult, and it looks like only one salesperson will meet their target. But now they have a ready made solution, and because all levels of management let it go last year, surely they will let it go this year?

So a much larger fraud is committed, but again who is going to complain? If anyone did they would all lose their bonuses.

Although a somewhat simplistic example, this is exactly the way bonuses work. If you set a team bonus the above scenario will occur, and if you set team bonuses (sales team, regional management team, product management team) internal resentment occurs because the top salesperson earns just as much as the salesperson who is lazy and doesn’t care.

You also alienate the people in customer support, who are talking to customers all day, trying to make them happy. Surely the salespeople wouldn’t get their results without the help of customer support? And what about the staff that key in the orders, shouldn’t they receive a bonus for accuracy, because it costs the business a lot of money if they slip up?

Now you have discontent between departments.

Bonuses should be banned altogether. I believe they do nothing but create friction in the workplace and sanction greed.

In my own experience with bonuses I was awarded a trip overseas. I didn’t deserve it on my own because I had a great salesperson and also because one customer placed a huge order that year, the only year they did. What eased my conscience was that my salesperson went as well.

I also was a Regional Manager when our region won a table tennis table. I was told by my immediate boss to take it home and enjoy it. I would have loved to, but I knew it was because of the sales in our Western Australian branch that got us over the line. So I told my boss to send it to the WA office. On my next visit there they were still struck dumb as to why I would do such a thing, and sadly my response of “because it was fair” was considered unsatisfactory.

As I have said, bonuses are like a cancer to a business as they only encourage greed and false reporting. Everyone knows it, which is why my WA team couldn’t believe I had behaved fairly.

If no-one believes bonuses are fair, even if they are rewarded by one, then surely it is game over?

One final thought. If you have to offer someone a bonus to motivate them, are they worth employing?

The Decaying Morality of Big Business in Australia


Once upon a time…yes I am using a fairytale opening, because big business and morals in this country has now become a fairytale concept.

With the Royal Commission into Banks, who would be naive enough to think that all the other big publicly listed businesses actually do the right thing?

Why would they?

Their advertising says that you, the customer, are the most important thing to them when in fact it is hitting targets to gain bonuses. They couldn’t care less how they achieve their bonuses just as long as they receive them.

When was the last time you heard of a major Australian public company contributing to a crowdfunding campaign for someone in desperate need? I cannot remember one.

Small businesses have, however, and enjoy a far better image as a result.

The four major banks should have an ‘Humanitarian Budget’ which is allocated to the worthiest causes as judged by senior, or even middle management (remember them?). They can, and should, by any moral or ethical argument put some of the Billions of dollars in profit they make each year towards dozens, perhaps hundreds, of worthy causes. Their bottom line would barely be affected.

The one stupid, contrary argument (and unfortunately it is law) is that as publicly listed companies they must put shareholders interests first. In other words they must maximise shareholders’ dividend payments.

As mentioned they could easily give away $10M each and split it up into hundreds of worthy causes. However their shareholders would rightly ask “Hey, by law you have to put us first and by giving that money away I got $10 less in dividend income!”

With the law on their side unfortunately it is a circular argument, a Catch 22.

As long as that law remains as it stands, profits will always be put before helping people where public companies are concerned. Perhaps a ‘tweaking’ of the law is required?

Many large private companies (but still too few) are well known for their generosity. I argue it is because they decide what to spend their profits on, not a horde of needy shareholders.

At this stage I must put my own hand up, and reveal that I have owned shares and as a shareholder I lived for those dividends. Yes, I am two faced but at least I admit it and am ready to discuss badly needed change.

The big four banks might point to a number of charitable donations, but they seem to only contribute if they can place a huge logo on it, in order to achieve a return on investment for their marketing dollars. Yes, they call helping people in need “Marketing”.

Westpac used to have a lovely rescue helicopter flying around but only because it was saturated with their logo. Then they did some analysis and ROI (return on investment) calculations and ceased funding this rescue helicopter. Not because they couldn’t afford it, but because they need to put shareholders first followed closely by their bonuses (or is it the other way around?).

Putting bonuses ahead of helping people is disgusting and definitely unAustralian. Which is ironic because had they helped more families they would have received more favourable media coverage and may not be facing a damaging Royal Commission right now. It would definitely would change our perception of them.

But there is one final problem, and this is the biggest and by far the most difficult to understand. Almost everyone hates the big four banks, and will complain about them ad nauseum but they will not close their accounts and take their business elsewhere! The big four easily have 85% of the total market, so there is no incentive on them, at all, to change their ways. In fact it encourages them to behave badly because their customers do not leave them.

So, in the end, it is your own apathy and unwillingness to follow through on your complaints that makes them so comfortable. It also creates the perfect environment for corruption, because they know that no matter what they do their customers, by and large, will stay with them. So up go fees, down goes quality of service and contributing to the community.

Well done Australians, you reep what you sow.

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