The Positive Power of Negative Thinking
Prior to and during the financial crisis of 2008, the focus for managing risk by financial institutions was to implement a newly designed Enterprise Risk Management (ERM). Corporate Governance, which typically included some degree of ethics and integrity, was reborn to include an acceptable layer of criminal behavior. “Risk versus Reward” was the passphrase for most C-Suite’s and Principal Financial, under Larry Zimpleman’s rule, was no exception.
If one were to revisit most of the financial disasters leading up to and included the crisis, the lack of moral integrity on the part of corporate executives was at the top of the list of causes for their failures. The BP oil spill was a classic… the field managers were told to increase production by corporate, and safety issues were set aside. Under ERM, hindsight would take the position that communication failed to flow vertically, and the C-suite was not aware of the problems. It wasn’t the corporate leaders that failed the system, it was “the system” that failed, and the end result was loss of life and profits for BP.
I recently watched a YouTube video of a Tom Stanton talking about the importance of enterprise risk management in organizations and how it is crucial for avoiding a disconnect between top management and lower management. Stanton, a former staff member of the Financial Crisis Inquiry Commission, and a lawyer in Washington, D.C., advocates for enterprise risk management. While his presentation is a good one, he and others in Washington and elsewhere have overlooked the issue of ethics and integrity. Had every corporate officer he describes in his narrative had the moral integrity and ethics required for the positions they held, none of the “disasters” he described would have happened.
Principal ascribed to ERM in 2008 when the company stole billions from investors. I would compare ERM to Jesse James robbing a bank. Had Mr. James had ethics and moral character, he would have never robbed banks for a living. Using the ERM approach, in which he balances risk versus reward, Jesse robbed those banks, killing an looting, because he felt the reward quantified the risk. Larry Zimpleman and he co-conspirators, looted 401k savings accounts because, in his mind, the reward was worth the risk involved. If Zimpleman was of moral character, his company would have never taken earlier risks, over-extending high risk loans to developers, and their investors would be enjoying secure retirements today, and I would not be sitting at my desk right now describing the failure of Enterprise Risk Management.
ERM is, and has been, a gross mistake for corporations. Corporations must include, in large part, a preponderance of integrity and ethics in their corporate governance plans to survive. Our country was built on ethics and integrity. More recently, individuals in positions of authority, in government and business, have turned their backs on those factors. Trump promised to clean the swamp, and voters listened and believed him. Today, the immorality of our business leaders and government officials is staggering, but once again, the people are listening and taking action to curb the problem.
Federal regulators need to step up to the plate once again and deal directly with criminals like Zimpleman. If they fail to do so, the next financial crisis will possibly destroy the retirement industry as we once knew it. There is a growing lack of confidence by the millennial generation, in politics and the financial industry. Those Americans in their 50’s and 60’s still trust financial institutions, and that is a mistake. Their savings will be lost at the time when they need their savings, and is what happened a decade ago.
Federal regulators need to wake up and take action… Principal and other insurance companies have bribed politicians for decades to pass laws favoring their industry, and are continuing to do so. The 401(k) was borne through the wallets of congressmen bribed by insurance companies to make laws to favor them and harm the worker. Those laws remain on the books… if you believe your insurance company 401(k) has the same regulatory requirements as a 401(k) purchased through a banking institution, you are badly mistaken.
The following report illustrates how, in just one day, Principal managed to pad the pockets of Washingtonians with money to pay for Honorary Expenses to visit the Smithsonian National Museum of African Art. The so-called “payee” is the Smithsonian, but the National Museum of African Art’s director just happened to be Principal’s lead lobbyist in Washington at the time…
I could publish dozens of other reports showing contributions like these made to leaders in Washington, but I think you get the point. If our President restricted access to lobbyists in government, they would simply devise another way to pay such bribes. I doubt that any congressional leader expended $2000 to walk the 2 miles to the Smithsonian. This is what happens in Washington, D.C. on any given day… because we let it happen.
You may ask, what does all this have to do with the positive power of negative thinking? If you have been following my blog, as thousands of you have been doing, you will notice the obvious negativity in my posts towards the Principal Group of Companies. Today is unique… and it requires unique minds to cope with today’s problems. We cannot solve problems by sticking our heads in the sand… it simply does not work. While your head is in the sand, someone is kicking you in the butt, and often you can’t even find the wrongdoer. We all do stupid things. Many think I should forget this blog and stick my head in the sand with the others. I recently published the fact that 69 countries had visited my website and blog-posts. I won’t say how many Principal employee hits I get every week, but the number is staggering.
I don’t solicit comments, but I do publish a contact email address, where visitors can send me messages. I have a twitter account with almost a 1000 followers, some of whom are Principal executives and employees. This is good, because we need an open society where the truth can be heard (and read) without reprisal. And as far as Principal is concerned, I plan to continue my blog-posts until someone does something about fixing the problem at Principal. Recognizing it isn’t enough. It has to be fixed. The company has to have a serious house-cleaning, and that includes all of the corporate executives, most general managers, sub-managers, and the entire Board of Directors. These positions have evolved into a massive “Good Ole Boy’s Club,” where they all profit from bad judgment and a lack of moral integrity and ethics. Corporate decisions are based on personal wants… Principal purchased on behalf of investors several multifamily and condo properties simply because they are located near a sports complex, either in San Francisco or elsewhere. The Principal U.S. Property Separate Account paid to build a Marriott Hotel/Golf complex with a $100 million construction cost over-run, simply because Zimpleman enjoys golfing. These properties and others are all private limited liability shell companies, unable to be audited, and a money laundering resource…. hundreds of them exist at the expense of investors, all created by the Principal Group of Companies.