Corporate Malfeasance Invites Big Changes

Posted: Oct 21, 2019 8:47 AM

Last week was bracketed with big companies behaving badly and many being called into account.  There were lawsuits and stock selloffs and shocking revelations.  While the stock market reacts as a proxy for society, the recurrence of these issues by many of the same companies could not only have long term negative impact to specific businesses and industries but could inform political actions and new rules of the road.

The bottom line is corporate malfeasance exist to generate or protect profits.

Corporate malfeasance is when an employee of high regard such as, an officer or executive member, commit a wrongful or unlawful act. The act can be anywhere from unethical to illegal. These acts are committed with the knowledge their acts are wrong, but they intentionally carry them out anyway, regardless of the consequences, not only to themselves, but to the corporation, the community, and their families.

Most cases of malfeasance are byproduct of negligence, ineptitude or need to cover up accidents and mistakes.  There is a growing sense this corporate malfeasance is now woven into the culture of certain industries and individual companies.  This week mixed into news of corporate earnings and economic data on housing and consumers will be legal updates and further investigation of breaking allegations.

  • Pharmaceutical Companies
  • Insurance Companies
  • Boeing (BA)
  • Johnson & Johnson (JNJ)
  • Goldman Sachs (GS), which has seen its third executive arrested in connection with insider trading in past 18 months

History is replete with big businesses that have been bad actors from working with Nazi Germany, to poisoning their people that worked in and around their factories, to even their customers.   Many of those businesses are still around, having weathered those ugly incidences.

I would caution big business, however, to do better at self-regulation before the public empowers politicians that hate capitalism to rein in malfeasance. 

Earnings & Economic Data

This week we’ll learn a lot about consumers via earnings from big names like Chipotle (CMG), McDonalds (MCD), and Amazon (AMZN) and updates on existing and new home sales.

There is a good chance the market could breakout to new highs this week with an avalanche of earnings and other data, but there is a limited amount of time before major indices would have to pullback at least 5%.  I think the pieces are in place to breakout, and it could have happened already except for dumb nonsense from the likes of Boing and Johnson & Johnson. 

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