The paranoid side of me worries sometimes that the Wall Street Journal sends me articles no other readers can see or read. That could possibly explain why I seem to be alone in the world in my alarm about the latest alleged wrongdoings perpetrated by American Express, once one of America’s truly great companies. In my mind, a major financial services company advising businesses on how to rip off the government is a very big deal.
As reported by the Journal, AmEx is under investigation by the IRS for pitching to small business customers a tax break “based on a shaky interpretation of tax law.” The investigation appears to have been sparked by a whistleblower report filed with the IRS alleging that AmEx knowingly persuaded business owners to underreport their income and taxes. The Journal says AmEx’s tax avoidance pitch was part of a strategy to persuade business owners to sign up for costly payment services.
The Journal has previously reported (at least in the stories the publication sends me) that the Justice Department’s civil fraud and criminal divisions are investigating AmEx’s business-card sales practices, as are the Office of the Comptroller of the Currency and the inspectors general offices of the Treasury Department, Federal Deposit Insurance Corp. and Federal Reserve. AmEx understandably says it is cooperating with the investigations, a savvy move given that regulators have the power to yank the licenses under which AmEx operates.
Reports about corporate wrongdoing are so routine in the Journal they’ve become “Dog Bites Man” stories, so the public has become inured to them. One can credibly argue that corporations have an obligation to cut ethical corners. If Milton Friedman was correct in saying the role of public corporations is to maximize shareholder values, corporations who run their businesses ethically and honestly are at a major competitive disadvantage.
I suspect some folks at Warner Bros. didn’t feel good about deleting gay references in the latest Harry Potter film to comply with China’s censors, but they know their studio rivals do the same thing. A Hollywood studio executive won’t last long in their job if they go to their corporate bosses and say, “Yeah, I know we aren’t making as much money as Disney and Sony Pictures, but, like, we stood up to China’s repressive regime and didn’t give an inch to their censorship demands. Our company’s socially responsible ESG investors will be so proud.”
What angers me are corporations throwing their employees under the bus for pursuing management edicts on how best to achieve corporate profits. AmEx told the Journal that some employees “failed to uphold our values and had positioned certain products inappropriately, specifically with respect to tax benefits.” Sources told the Journal that AmEx has in recent weeks terminated “at least a handful of vice presidents who oversaw sales teams that pitched the strategy.”
I’m sorry, I don’t believe for a moment that the executives who oversaw the sales teams pushing the company’s alleged tax avoidance scheme or questionable business-card sales were a wayward bunch of employees who strayed from the values AmEx claims to adhere. Rather, I suspect they were under relentless pressure to hit sales targets, much like the Wells Fargo branch managers who oversaw the opening of phony accounts to meet the CEO’s ambitious growth targets. If the fired vice presidents violated AmEx’s ethics rules, how did they advance so far in the first place?
AmEx does have a “Code of Ethics,” one so lofty that if taken at face value, the company strives to be the corporate equivalent of a choir boy. The boxes are all checked: AmEx does what’s right because “customers choose us because they trust our brand and people. We earn that trust by ensuring everything we do is reliable, consistent, and with the highest level of integrity.”
AmEx places a premium on teamwork. “We view each other as colleagues – part of the same team, striving to deliver the brand promise to our customers and each other every day. Individual performance is essential and valued, but never at the expense of the team.” It will be interesting to see what AmEx will do if the IRS asks for a list of companies Amex advised on how to shortchange Uncle Sam, given that its ethics code declares, “we have (customers’) backs in everything we do.”
AmEx, of course, celebrates diversity. “We’re committed to ensuring that we have a welcoming and inclusive culture where everyone’s voice matters and where people of all races, ethnicities, genders, gender identities, sexual orientations, ages, religions, disabilities and viewpoints can thrive.”
But how could any thinking AmEx employee take their company’s code of ethics seriously when they also are being taught that capitalism is inherently “racist and evil?” It’s understandable why AmEx CEO Stephen Squeri might feel this way; in 2020, while most Americans were suffering because of the pandemic, Squeri earned $24.2 million, 396 times the median pay of his employees.
Centene Corp., a St. Louis-based company that invariably rolls off the tongues of experts when I ask about sleaze in the healthcare industry, also pays lips service to having high standards of ethics.
“Nothing is more important than conducting our business with honor, integrity and respect,” the company declares on its “ethics and integrity” page. “It is our policy to conduct business affairs in accordance with the standards and rules of ethical business conduct and to abide by applicable laws, both in letter and spirit. In this, there is no room to compromise.”
Centene in the past 10 months has settled with nine states over accusations that it and its pharmacy business overbilled their Medicaid programs for prescriptions drugs and services. The company has set aside $1.25 billion to pay for those settlements.
Here’s what Ohio attorney general Dave Yost said about Centene after suing the company and obtaining $88.3 million in restitution for ripping off poor people in The Buckeye State.
“Centene used sophisticated moves to bill unearned dollars – moves known only at the top levels of health care companies,” Yost said in a news release. “It has taken a huge effort by my team to untangle this scheme-and now that we know how it works, the alarm bells should be ringing for anyone using similar tactics.”
Despite the damning allegations and settlements, Centene has repeatedly denied any wrongdoing. What lesson does that impart to its employees?
Sarah London, who in March was named CEO of Centene after serving as vice chairman for a couple of years overseeing various critical functions including compliance, strikes me as someone who’s learned to make ethical compromises in her ascent to corporate power. According to her bio, London began her healthcare career at Health Leads, a national nonprofit whose corporate vision is “health, dignity, and well-being for every person, in every community.”
One person who doesn’t appear enamored with London is Leslie Norwalk, a former Acting Administrator for the Centers for Medicare and Medicaid Services. Norwalk was elected an independent director to Centene’s board in January but resigned on Friday because she was dissatisfied with the governance relating to “a recent important decision.” Norwalk served on various Centene committees, including compliance, environmental and social responsibility, and government and regulatory affairs.
As Norwalk serves as an advisor to three private equity firms and APCO Worldwide, a controversial PR firm, it’s far from certain that she resigned because of ethical concerns relating to Centene’s business practices.
Companies can easily measure whether their employees understand their ethics policies and believe whether they are sincere. Decades ago, I represented a major Canadian bank whose then management genuinely cared about ethics and integrity. The company’s PR department launched a Say/Do survey listing the bank’s core values and asked employees whether they believed the bank practiced what it preached. To the chagrin of management, employees were critical. It led to meaningful changes in the bank’s business practices that adversely impacted short-term profits.
I’m doubtful most U.S. companies would dare conduct such a survey. The value of “Codes of Ethics” statements is that companies can point to them when they fire employees for following implicit directives and then express umbrage for violating clearly stated corporate values. Evidence that a “code of ethics” policy was regarded as bullshit by rank-and-file employees wouldn’t look good before a jury.