Research Zeitgeist: Top Posts and Hot Topics
Throw a frog into a pot of boiling water and it will jump out. Put that frog in a pot of cold water and heat to boiling and the frog will stay in the pot until it is cooked as it doesn’t notice the gradual but catastrophic increase in temperature. Or so they say. Whether or not this is true, it makes for an appealing analogy.
It can be applied to the to all manner of ills in the financal and economic world, from the subprime crisis to global warming.
Another candidate for the boiling frog theory is corporate responsibility and management integrity, where the water appears to be getting warm enough for people to start taking notice.
This was evident in Research Recap’s most popular post of the week, based on an Audit Integrity report identifying stocks with questionable management integrity. Audit Integrity Chairman Jim Kaplan says the ratings are “cause for concern that the companies may be intentionally deceiving their shareholders to mask serious problems,”
Meanwhile, Sir Evelyn Rothschild, former chairman of NM Rothschild & Sons, laments the decline in ethical behavior in the financial sector, in a commentary in today’s Financial Times. “Financial services and banking should set the very highest standards for ethical behaviour, ” he writes.
Ethics is not only a question of acting correctly. It is a matter of not trying to avoid regulation even if one thinks one can get away with it.
“This must be taught at a very early stage and demonstrated in the way a firm is managed. I passionately believe that this is something that has deteriorated in the past few years,” he concludes.
Corporate behavior was also a theme of another popular post, on Berkshire Hathaway’s annual shareholder meeting. In the words of Berkshire’s Charlie Munger, “It’s a crazy culture of greed and overreaching and overconfidence in trading algorithms.”
Signs of improved corporate responsibility were evident in our post on Climate Counts’ latest ranking of companies’ commitment to fighting climate change. A cynic might say that the improvements registered over the past year represent a commercial calculation rather than a sudden ethical awakening. But the outcome is what matters, not the motivation.
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