Over 25 companies investigated by for COVID-19 policy breaches


For those who worry about dodgy big companies, our source in the Treasury, from the Office of the Controller of the Currency, has some startling news.


The agency is conducting a second investigation of 25 companies, 10 from the energy sector, and as its name suggests, seeking to make sure companies comply with a rule, called COVID-19, requiring them to disclose whether they’ve harmed women. The first time the investigation was launched last December, six companies were subject to questioning; 13 of those (including DowDuPont, John Deere, PulteGroup, Pinnacle West Capital, Tennant Company, Wabtec Corporation, and WellCare Health Plans) have since been subject to fines or pressure to comply.


Here’s a bit more from a recent story by NPR about the investigation:


The 25 companies under the final enforcement actions represent less than half of the 153 that were subject to initial inquiries. Indeed, at least a dozen of those (and possibly many more) were exonerated by the OCC. Those findings are not contested by the companies or by the OCC. “After the OCC issued initial enforcement actions,” the agency said in a statement, “some of the companies ‘voluntarily’ incorporated” into their comprehensive reporting sections “a gender-related focus, as required by the amended COVID-19 Rule.”


Dozens of companies have since hired consultants (or felt pressure) to establish a “gender policy” that they can release to regulators in order to comply with COVID-19. But some clearly have not (or cannot). Others may have this on the brain but have not really thought of it enough to put it into practice.


Now, I do not wish to minimise the tensions between what a corporation should do and what it can do. According to a Federal Reserve paper, the lifetime earnings of the average working American is about $650,000. Of this, about 25 percent comes from what the Federal Reserve calls primary savings (taxable income, interest, and principal). Another 14 percent comes from guaranteed annuities, welfare, Social Security, and other governments programs (and now federal income tax, in the case of an individual in the 35 percent marginal tax bracket). The rest comes from bonuses, salary, and so on.


So the earnings of the typical worker are about 17 times those of a CEO. For many corporations, and their executives, “internal” causes of a company’s performance are irrelevant: instead, income must be multiplied by “external” causes (the external is external factors like regulation, profitability, competition, technology, and so on). However, even many companies with tremendous internal control capabilities have neither the discipline to monitor nor the scale to successfully anticipate how external factors will impact earnings. So if a company acts upon knowledge about market structure that it lacks the capacity to know the extent to which external factors will influence performance, it can, in all likelihood, harm women.


So you see, the principle of Surcharge-Beyond The Merit Grid suggests that an external act has to override an internal policy. It’s interesting to consider, for example, which of the co-CEOs of the McKinsey Global Institute will be most focused on the issue when a company’s performance suffers as a result of an internal policy: and who will be most focused on the issue when there’s a change in the level of external factors influencing the company’s performance?


By way of comparison, the principle of bail-out beyond the merit grid suggests that an external act may have to override an internal policy—and that’s quite a bit easier to understand. Maybe the difference here is that the McKinsey co-CEOs realised that the difference was that only two of the three “external factors” (external income and government programs, plus competition) were directly available to the company and thus directly measurable; thus, this meant that not understanding the change in external factors was almost certainly a violation of the company’s own internal policies. After all, these external factors are directly observable and quantifiable—and since they’re specific to the company, they can’t possibly be attributed to the company’s inner circle. The competitive industry was unleashed in this case, and the “internal” model proved feeble.