CQ: What does “Wealth” Mean to me?

 

Wealth. I suppose some would call defining the concept of wealth creative. I don’t. After being a finance professor for over 27 years, I take the word “wealth” in a very literal sense. No arguments! I’m the finance professor in the room.

In a capitalist society such as the one we live in here in the United States, wealth is simply defined as the monetary or exchange value of something. Economic value, if you will. An example. Investors and speculators own corporations. Each part of the corporation is called a share. Each share has a monetary value. If a share of XYZ, Inc. is worth $10, then an investor who owns 10 shares has $100 of value in that corporation. That is called shareholder’s “wealth.” After my own professors in my Ph.D program convinced me of this,, through fear of retribution, and teaching it for so many years, I do indeed believe that wealth can be defined in terms of economic or monetary value.

Wealth is used in a similar manner throughout the quantitative business disciplines. I take the concept of wealth as factual and accurate and as I defined it in the first paragraph.

Can “wealth” and “creative” be used in the same sentence? Some large banks, non-banking institutions, and other financiers certainly tried to do that during the recession of 2008 when they used all sorts of creative financing methods to lend money to homeowners who really didn’t qualify for mortgages. The economy almost collapsed due to such shenanigans. That’s what I call the creative use of the word “wealth.”

Are there other creative meanings to the word “wealth?” I suppose we could say we are wealthy if we have a plethora of kittens or puppies or the love of our families. That is the warm and fuzzy side of wealth and I think there should be another word to describe such states of mind, not the word “wealth” which is clearly so useful in the business world. Maybe we should say we have an abundance of kittens or our cornucopia runneth over with the love of our families instead of using the business-honored word of wealth. We certainly would not describe the state of our corporations’ shareholders by saying “shareholder’s abundance” or “the shareholder’s  of XYZ, Inc.’s cornucopia runneth over,” would we? That would not be correct business terminology. Wealth has to be quantifiable, measurable. It’s hard to measure the value of said puppies or kittens or the love of our families.

Now you know this writer’s definition of wealth. What you don’t know is how much fun it has been writing this post and being the curmudgeon in the room! #amwriting #amblogging #writing #creativequestions

In response to Creative Questions

#SoCS November 12/16 Remembering my Dad….

img_0319

Yesterday was Veteran’s Day. Linda reminded us that it’s also Remembrance Day in Canada. I have remembering on my mind, particularly remembering my dad. He fought in World War II. It was his side of the family from which my Canadian relatives came. The Ottawa and Thunder Bay areas.

I was a Daddy’s girl. He was my hero from the time I have any memory. He had a big voice, a big laugh, big arms, and a bigger heart. He wasn’t home a lot. In those days, when a man couldn’t find work at home, he left home to find work as close as he could. It was the late 1950s when my memories of him start. The supposed halcyon days in the U.S. except they weren’t. Times were hard in northeastern Kentucky where I grew up. My dad worked hard.

He tried to come home on the weekends. That was my favorite time because no matter where he had to go and what he had to do on Saturday and Sunday, he took me with him. I went to lots of lumber companies, sawmills, and hardware stores! I learned about lots of things little girls didn’t often know. But, no curse words, nothing bad. My dad’s friends would never say or do anything bad in front of me. I wore little pairs of blue jeans and flannel shirts, just like he did. We took these weekend trips until I was 15 years old or so. Sometimes even after that. If he was going to work on someone’s house, I would even go with him to do that.

When I was in the third grade, my dad left home to work in Wisconsin. He was gone for an entire year. That was one of the hardest years of my life. I found out many years later that my parents had actually separated that year. I’m glad I didn’t know that then or I would have been terrified. I wrote him thousands of letters and he responded to every one. They apparently worked something out because, at the end of that year, he thankfully came home.

When I met my first boyfriend, I think it hurt him. He worried. I was only 15. He was 16. But sending me off in a car to be with our friends scared my dad to death. I see that now. Of course, I didn’t then. It turns out that he was right to be scared.

I went to college in my hometown and lived with my parents. That’s all they could afford and there really weren’t scholarships to go to the Ivy League like I wanted to do and like you can find now as a high school student.  I graduated from college early. I was 20. I moved to Frankfort, KY, the state capitol, and worked in state government for six months. I’ll never forget the day I moved. My dad cried. That was before the days of cell phones. My dad gave me a telephone calling card. He told me to call him daily – more than daily if I wanted. I still had that credit card, and used it, the day he died about 10 years later.

I, then, moved to Lexington, KY, the second-largest city in the state. A wonderful city. As a girl from the country, it was pretty overwhelming. Daddy helped me find an apartment where I would be safe. I worked a few years but I wasn’t satisfied. I needed to go back to school. I was interested in teaching in a university. My dad had paid for my education as an undergraduate student. He then paid for me to get my Master of Business Administration (MBA) degree even though I was working and had married in the interim. He wouldn’t even discuss letting me pay for it myself.

My dad was a blue-collar worker. My parents weren’t exactly rolling in money. They got by. Financing several college educations for me could not have been easy in any way. There was no arguing with him.

That wasn’t all he did. My husband and I were married very young. We bought a small home in a nice section of Lexington. Not only did my dad fix everything that was wrong with it, he insisted on making the down payment and helping us with house payments until we got on our feet.

I finished my MBA at the University of Kentucky and was recruited by the Director of the doctoral program to go into that program which would lead me, if I wanted, to a career in college teaching and research. Since I loved living in Lexington, I decided to start the doctoral program there, at the University of Kentucky in 1981. Once again, my dad insisted on paying for it.

My area was finance and it was hard work. I studied a lot and when I wasn’t studying, I was teaching classes. I didn’t see my parents much, even though they only lived 70 miles away, during the next couple of years. They understood.

Then the unthinkable happened. My dad was 63 years old. He became ill. He was diagnosed with lung cancer the second week of November, 1983. I spent as much time as I could with him. It was hard. I was in denial. He wouldn’t talk to me about it. I was in school and working. A horrible time.

From the time he was diagnosed until the time he died, only six weeks passed. My mother called me on December 20, 1983 and told me to come home as soon as possible. My dad had surgery but the cancer had spread and he was home but in pain and having trouble breathing. As soon as I got there, we called an ambulance to take him to the hospital in Lexington. My dad, who loved Christmas and who had made me love Christmas, died on December 22, 1983 and was buried on Christmas Eve.

He talked to me some, as much as he could, those last two days in the hospital. I remember every word of those conversations. He was in a coma at the end, but if I would speak to him, he would nod his head and open his eyes. It must have taken a super human effort.

I was in shock and incredibly sad for a long time. When I went back to school in January, I found that he had already paid my tuition for the spring semester. I took incompletes in my classes that semester. I just couldn’t do it. By fall semester, 1984, I had pulled myself together and finished up the class work for my doctoral degree.

I’m retired now from my career as a Professor of Finance. I had a wonderful career. It was thanks to my dad.

Someday, I’m going to write a book about him, but probably a funny book because he could be a hilarious guy, especially when he was with his brothers and sister. He was the son of immigrants from Sweden, fought in the WWII, and had a really interesting life. It’s been 33 years since he died. Maybe, by then, I won’t cry when I write about him. #SoCS #family #amwriting #amblogging #writing #WWII #USSBlessman

*This post is sponsored by SoCS Nov 12/16

Thanks, Linda!

My Issues with Wal-Mart

image

Many people will say that Wal-Mart has given people in small communities, particularly, a low-cost way to shop. That may be true. But at what cost? What are they buying? Is the quality of those low-cost goods adequate for the people buying them?

First, at what cost is Wal-mart to local communities? Has it been worth it, or not, to bring Wal-mart into small communities for low-income shoppers. Some would say Wal-mart appeals primarily to down and out shoppers. In the small town where i live, everyone shops at Wal-mart, from the down and out to the working person to the happy couple and to the teenager. Do you know why? There is no other place to shop.

It’s an interesting phenomenon. My town is not that small. It is a university town. When I was growing up here, there was a thriving business district on Main Street. There are a few viable storefronts left on Main Street but very few. When Wal-mart came to town, the small business person could not compete with Wal-Mart’s lower prices. Many of our businesses went out of business. It seemed that the bright sunshine shined only on Wal-mart. The cost of Wal-mart was the loss of the small business in my town as it is in so many small towns. They were also offered incentives to locate here, tantamount to giving them the proverbial ice cream with a cherry and sugar on top.

Wal-Mart has no twin in the business world. Many call them the worst company in America, primarily for some of their labor practices. Even though they have a problematic relationship with their employees, they refuse to even consider allowing labor unions to get involved. As one of America’s top companies, they set a bad example by not only using a lot of foreign labor but also child labor overseas. Look at where Wal-Mart’s products are made sometime. I think you will find almost all are made overseas.

In an effort to be fair, Wal-Mart does offer valuable goods and services that some people could not afford otherwise. But their quality is suspect. They have a large electronics section which is valuable in a small community, but no significant computer repair. They offer gardening implements and outdoor plants, in season. They offer indoor plants year round, such as the Christmas cactus.They offer everything from clothes to groceries to soft goods for the home.

But, in this writer’s opinion, none of that makes up for what they take away from a community. I will write more about this company and its problematic business model in a blog post in the future. #amwriting #amblogging #writing #Wal-Mart

Thematically Correct

 

 

The Glass Ceiling

image

There are women out there right now reading this blog post for one reason — the title. The glass ceiling. Women and members of minorities work hard all their lives and often can never reach their potential in their chosen profession. Why? An invisible barrier that is unofficially acknowledged in business that especially affects women and minorities but can affect men too. That barrier is called the glass ceiling, a term coined in the 1980’s which represents a barrier to a forbidden level of achievement in the business world, usually upper management.

The glass ceiling is actually an unfair system of prejudices through which employees can see the next level of advancement above their current professional positions but can’t attain those positions because of gender, age, ethnicity, or political and religious affiliation. The media focuses mostly on the inability of women to break through the glass ceiling, but minorities have just as many problems as do women and so do older employees and those of political or religious affiliations that do not set well with upper management. These employees who are staring straight up at the glass ceiling are just as qualified and deserving as other employees who are not hampered by the glass ceiling.

Hillary Clinton, when she won the Democratic Presidential nomination, shattered the highest and hardest glass ceiling in the world. That did not solve the problems for all the women in the world who will still be banging their heads on that glass. There are a plethora of metaphors that are offshoots of the glass ceiling metaphor. For example, young black women claim that there is no glass ceiling for them. They can’t even see through that ceiling and they call it the concrete ceiling! Working mothers call it the “maternal wall.” Asian employees refer to it as the “bamboo ceiling.” There are even more associated metaphors.

Lest the white males who are reading this post feel left out, they are not. There has been more than one case of a man choosing a profession usually reserved for a woman or a member of a minority group who has run up against the glass ceiling. There is a case study of a man who entered the field of sales and applied for a job selling beauty products. He encountered substantial resistance from women in the field. The fields of nursing and public relations are other examples. Those are traditionally women-dominated fields. Men entering those fields often face increased scrutiny, stereotyping, and they bump their heads on the glass ceiling. It forces men to face what women have been encountering in forbidden career choices for years.  When men are affected in this way, it is called the reverse glass ceiling.

Most business analysts believe the glass ceiling has been cracked but not broken. Women still have a hard time climbing to the top. I experienced this myself and you can read about my struggle in my own career in Women and Autonomy: Self-Determination. Baby boomers who have retired and are re-entering the workplace because, perhaps, their retirement savings is not enough to sustain them face age discrimination. Black Americans, Asian Americans, Native Americans – they face the same struggles women face in climbing to the top in the management of businesses. Employees who loudly express political views and employees who make their religious affiliations known may also have problems climbing to the top.

Some in the media and the business world like to claim that the glass ceiling has been broken because of women like Hillary Clinton and Carly Fiorina, who was head of Hewlett-Packard. Fiorina proclaimed the days of the glass ceiling to be over. Fiorina is wrong. Jone Johnson Lewis, in her article Glass Ceiling for Women, cites a Reuters study, conducted in 2008, that says 95% of American workers believe that strides women have made in the job market have improved dramatically, but 86% say that the glass ceiling has been cracked but not broken. There are only women in 14% of the major CEO jobs in the U.S. There are five Black Americans who are CEO’s and Asian Americans are less than two percent of CEO’s of Fortune 500 companies.

There is some hope for the future. Another blogger has found that companies with diversity goals pay their female employers a premium salary in order to draw them in. Check out her blog post. Another blogger encourages women to be their own advocate in her blog post. Yet another blogger discusses how to break the glass ceiling.

The glass ceiling may be an old concept but the U.S. still has a long way to go in order to fix the problem and break the glass ceiling and the “good ole boy” mindset that causes it. #amwriting #writing #blogging #womensissues

 

 

Women and Autonomy: Self-Determination

image

One of my passions is writing about women’s issues. Another one of my passions is thinking about the concept of women and autonomy. Why? Back in the 1970s and 1980s, I decided I wanted a professional career. Not only did I want a professional career, but I wanted a career in a male-dominated field. I wanted to get my doctorate in Business Administration and teach on a university level in a business school, specifically in finance.

During those years, there were very few women in the field of finance. Sorry, guys, but back then, that meant I was fighting an uphill battle. To be fair, I think the men of 2016 are far more accepting of women in previously dominated male professions than some of the men were in 1979, when I embarked on studying for my career.

If you look in the dictionary, you will find that the word “autonomy” has several different meanings that actually all mean the same thing. It is defined as “the freedom to determine one’s own actions” and it does not say one thing that is gender-specific. It isn’t just specific to men…..or women.

When I made the decision to study for and embark on my career, I didn’t feel the need to ask anyone, including my husband, if that was an acceptable decision. I felt like, as an individual human being, that I had the autonomy to make this decision myself. I did. It was my right.

I studied for and obtained my Master’s degree (Master of Business Administration or MBA) and then, I studied for my Doctor of Business Administration or DBA. It wasn’t easy. The coursework was hard. Writing the dissertation was hard. Not only did I work the entire time I was going to school, but I was also married and taking care of my mother. At first, I taught at the school from which I got my doctorate. Later, when I was working on my dissertation, I taught at a school 75 miles away and commuted to work. I always laughed and told my friends that my dissertation was written in the middle of the night because that is the only time when I had the time and quiet to do it.

I had a lot of friends who were also studying for their doctorates. Most of the other students in the program were men. There was only one other woman in my field of finance. We had friends, however, across disciplines — in marketing, management, etc. All the women had a similar life and similar schedule to mine. The men were a different story. Either they were single and could concentrate totally on their studies or they were with a supportive partner who carried the load while they studied. Not so with the women in the program. We had to continue on with our traditional roles as women. We saw this as unfair.

Back in those days, others saw it as fair. After all, we made the decision to seek out a non-traditional role for ourselves. It felt like punishment. Even though we had taken back our autonomy as human beings to seek out our careers, we were being punished for not pursuing our traditional roles as women.

The discrimination continued when we took our newly-minted degrees and started applying for jobs. Of course, the discrimination was unspoken and subtle because laws had already been passed before the 1980s prohibiting such discrimination. The women I knew in finance at my school and other schools were seen as odd to have pursued a degree in an all-male field. Lucky for us, universities needed us at that time. The concept of diversity was becoming important. Universities were being encouraged to have a more diverse faculty and hiring a woman for their finance department fit the bill. We all got jobs.

I could keep talking about this endlessly. About how women in male-dominated fields in universities have to work twice as hard for 3/4 of the pay. About how it is extra hard for us to get promotion and tenure. About how our portfolios for promotion and tenure have to be superior to any male colleagues’ portfolio. About how our salary increases never match those of our male colleagues. About how, by the time  I retired, I still didn’t make as much money as male colleagues who had the exact same credentials as I did. About how the schedules I taught, semester after semester, were more difficult than any male colleague I had.

It all finally burned me out. I was tired of fighting. It was a fight. Right up until the end. When I reached the point where I could retire with most of my pension and my health insurance, I did just that. Retired.

I’ve never looked back. I’ve never been sorry I retired. I’ve never tried to get another teaching job even though I am more than qualified. I decided, 27 years before the time I retired, to reach out, take back my autonomy, and have a professional career. It was the most difficult thing I ever did……and, despite the hardships, the most rewarding. I loved teaching. I taught mostly Appalachian students. I loved seeing their eyes light up when they “got” a concept I was teaching. I miss those students. I miss teaching them.

I don’t miss the discrimination and the politics of academia. I don’t miss the service on unnecessary committees. I also loved to do the research that is required of college professors, but there is not enough time given to professors due to such heavy teaching loads to do good research. If I am going to do research in my field of finance, it is going to be good research or I’m not going to do it.

My point in writing this post is to encourage women to take back their autonomy. If you have a passion to do something — anything — do it! You won’t be a fulfilled person if you don’t. If you aren’t fulfilled, you won’t be any good to your family or your community. I urge you, as strong women, to think about what you want to do with your life, get the education you need to do it, and then go and do it. You will be a better, more fulfilled person for it. #amwriting #writing #blogging #womensissues

 

Social Responsibility in Banking

image

2008 Financial Collapse in Banking

Since the near collapse of the U.S. financial institutions at the end of 2008, the social responsibility of these and other institutions have been front and center in the American consciousness. It became apparent that the big banks and other financial institutions were all about profit and shareholder’s wealth in the short-term and not about their customers at all. It also didn’t seem that these corporations cared about their long-term profits or wealth of their shareholders because they allowed greed to take them so close to financial collapse. This attitude flies in the face of every principle of financial theory under which publicly traded institutions should operate.

The financial crisis in the U.S. really started back in 1999 when the Glass-Steagall Act was repealed. This legislation protected customers and shareholders alike because it prohibited banks of all sizes from engaging in both investment and commercial banking. Banks either had to be an investment bank which sold securities to the public or they had to be a retail bank that accepted deposit accounts and made loans. They could not do both. When Glass-Steagall was repealed in 1999, the scenario that followed was an almost exact replica of what happened in the 1920’s and the resulting stock market crash. Back then, banks were allowed to both accept deposits and make loans and issue securities. A bubble in the stock market resulted due to fraudulent activity and the stock market crashed. In 1933, Glass-Steagall was passed and protected shareholders and consumers alike until 1999. Then, the cycle began all over again. By 2007, banks were facing a crisis of liquidity and by the end of 2008, we really don’t realize how close our banking system in the U.S. was close to complete collapse. It would have collapsed had the Federal Government and the Federal Reserve not bailed them out.

By 2008, the banks had been mingling the investment and deposit functions for nine long years. They had been issuing securities and making loans. We know at least part of the story and there are many causes of the 2008 financial collapse. It was, indeed, a worldwide collapse. Consumers of financial products, such as mortgages, were not blameless. Even though corporations like the  big banks and non-banking corporations that failed, like Lehmann Brothers and AIG, are responsible for protecting their shareholders and consumers, those stakeholders pushed these corporations hard for these financial products. In the giant real estate bubble that resulted from the banking practices during that time, it was hard to say no.

Banks and other financial institutions should have said no. They should have stood up to their ethical responsibility to their shareholders and consumers, as well as to their employees. They are the experts. They are the ones with the full financial information, not the shareholders or consumers. They should have used their expertise to stop the fraudulent and unwise banking practices that were the “soup of the day” at that time. But, they did not. They paid the price and so did the consumer.

Banks used their ability to offer investment banking and loans to develop rather exotic financial products such as the subprime loan. This was a mortgage loan made to risky borrowers with poor credit histories that struggled to pay off these mortgages and many of them defaulted. They were then turned into pools of mortgages, called mortgage-backed securities, and were gathered into securities by the big banks called collateralized debt obligations, given high ratings by the credit ratings agencies, and sold to investors. Unfortunately, investors found out later they really weren’t worth anything. Interest rates were low and banks kept searching for riskier and riskier products in which to invest.

Mortgage-backed securities began to fail and collateralized debt obligations proved to be worthless. The banks’ capital positions began to erode. Banks have to always have a certain percentage of capital on hand to be sure they have adequate capital to meet the demand for customer withdrawals and loans. Bank regulators, charged with insuring that banks have adequate capital, seemed asleep at the wheel. Even as this was happening and banks were operating with a razor-thin capital position, consumers were demanding more and more low-interest mortgages.

In late 2008, it all came tumbling down. Banks and consumers alike realized that prosperity could not be built on bigger and bigger piles of debt. Investors suffered because the exotic securities they had purchased were worthless. The housing bubble burst and the price of homes dived steeply. It was a buyer’s market and seller’s just sat on their houses. Capital ratios for banks were so thin as to be non-existent and they had to be bailed out.

Had the financial institutions just remembered that one of the tenets of financial theory is not only maximization of shareholder wealth  but also social responsibility, none of this would have happened.

Not only do the managers and directors of a publicly-held business firm have a responsibility to maximize the stock price of that firm, they have a responsibility to maximize the stock price in a socially responsible manner. If a bank were a steel mill, they wouldn’t spill all their pollution into the air  because, in the long run, this would lower their stock price as investors and consumers alike would eventually feel the effects of that pollution. In banking, if the managers engage in risky behavior with the money of the consumers and stockholders and the jobs of their employees, they may reap the benefits for a short time, but in the long run, that bank runs the risk of financial collapse. Just  what happened in the 1920’s and again in 2008. Social responsibility is the only reasonable strategy for business firms if they want to survive in the long-term.

*Photo by waxesstatic @ flickr.com 2008

Freeman, R. Edward, ―A Stakeholder Theory of the Modern Corporation,‖ in Ethical Theory and Business, 5th and 6th edition, Tom L. Beauchamp and Norman E. Bowie, ed., 1997, 2001 Prentice Hall Inc.

Palazzo, Guido, ―Corporate Social Responsibility, Democracy, and the Politicization of the Corporation,‖ Academy of Management Review, 33 (2008), 773-75.