Donald Trump’s ‘Fiduciary Duty’ Excuse on Taxes Is Just Plain Wrong - TIME

Donald Trump’s ‘Fiduciary Duty’ Excuse on Taxes Is Just Plain Wrong Posted: 03 Oct 2016 05:06 AM PDT It’s hard to know what to say to the New York Times’ revelation that Donald Trump lost so much money running various casino and hotel businesses into the ground in the mid-1990s ($916 million to be exact) that he could have avoided paying taxes for a full 18 years as a result (which may account for why he hasn’t voluntarily released his returns—they would make him look like a failure). But predictably, Trump did have a response – fiduciary duty made me do it. So, how does the excuse stack up? Does Donald Trump, or any taxpayer, have a “fiduciary duty,” or legal responsibility, to maximize his income or minimize his payments on his personal taxes? In a word, no. “His argument is legal nonsense,” says Cornell University corporate and business law professor Lynn Stout, author of “The Shareholder Value Myth,” and one of the smartest people I know on such matters. “If such an idea were true, we would breach our duties to ourselves by making charitable contributions (which reduce our income) and by earning income in the first place (which increases our taxes). The concept of fiduciary duty simply doesn’t apply to individual decisions to earn income, make charitable contributions, or refrain from using tax loopholes.” In a way, the very notion of bringing “fiduciary duty” into a conversation about bankruptcy-related tax losses would seem to give credence to the idea that he actually did run his businesses into the ground, something he’s thus-far denied (Trump and his camp are always quick to point that he never went into Chapter 11 – only the corporations he either ran or had a stake in did). But then, there are so many worms in the can that the Donald has just opened with the “fiduciary” comment, it’s hard to know where to begin with a critique. As Stout points out, Trump and his campaign seem to be parroting the flawed argument sometimes made by business executives seeking to defend irresponsible or unethical corporate behavior—“fiduciary duty made me do it,” with “it” meaning everything from orchestrating dicey mergers to turn a quick buck, offshoring jobs to cut costs in a way that increases corporate risk (remember the Rana Plaza disaster in Bangladesh?) or using spare cash to bolster the stock price with buybacks rather than making long term investments in things like worker training, better pay and benefits, or new product research and development. Yet even in public companies, experts say that there is no enforceable legal duty to “maximize shareholder value”—the business judgment rule protects independent directors’ decisions about the best way to serve the interests of the corporation and its shareholders, including decisions that reduce share price or profits in the foreseeable future. Despite what corporate leaders (and people like Trump) might say, there’s actually considerable wiggle room in the law that allows a CEO to do the right thing. But of course, he (or she) has to want to. The mythology of shareholder “value” and the corporate excuse of fiduciary duty as a reason to make really dumb and selfish decisions to turn a quick buck has long been a pet peeve of mine. The idea that companies should be explicitly managed for the benefit of shareholders, and shareholders alone, to the exclusion of anyone or anything else, is an odd system in the global context. Most firms in Germany, China, France, and Scandinavia, along with many others in countries like India and Brazil, aren’t primarily managed this way. Indeed, it took quite a while for American business leaders to buy into the idea, despite the fact that it was being pushed vigorously in both business schools and the markets. As recently as 1990, the Business Roundtable, a group of CEOs from America’s largest and most powerful companies, said in its mission statement that it was “the directors’ responsibility to carefully weigh the interests of all stakeholders as part of their responsibility to the corporation or to the long-term interests of its shareholders.” Seven years later, though, the group had finally caved, rewriting the statement to say that “the paramount duty of management and of boards of directors is to the corporation’s stockholders; the interests of other stakeholders are relevant as a derivative of the duty to stockholders.” Today, whether they believe it or not, it’s rare to find a CEO of a public company who doesn’t publicly buy into the idea of shareholder value. Indeed, the only leaders who can openly question this notion and get away with it tend to be high-profile founder-owners who have a certain cult of personality (think Jack Ma, or Howard Schultz—and even they get plenty of blowback). Yet shareholder value isn’t value if it involves doing things that eventually put companies into bankruptcy. Executives have a fiduciary responsibility to create shared value – not just hike quarterly profits – because this is the only way to create any value at all over the long term, which is what shareholder value is supposed to be about. What’s more, fiduciary duty is about taking care of others. When it comes to Trump and his businesses, one thing is very clear – others always end up with the short end of the stick.

Google, Facebook and More Join Forces for Ethical AI - Fortune

Google, Facebook and More Join Forces for Ethical AI

Posted: 29 Sep 2016 07:30 AM PDT

Five tech giants announced on Wednesday that they are launching a nonprofit to “advance public understanding” of artificial intelligence and to formulate “best practices on the challenges and opportunities within the field.”
The Partnership on Artificial Intelligence to Benefit People and Society is being formed by Amazon, Facebook, Google, IBM, and Microsoft, each of which will have a representative on the group’s 10-member board.
The partnership will conduct research and recommend best practices relating to “ethics, fairness and inclusivity; transparency, privacy, and interoperability; collaboration between people and AI systems; and the trustworthiness, reliability and robustness of the technology,” according to the announcement. “It does not intend to lobby government or other policymaking bodies.”

“We’re in a golden age of machine learning and AI,” said Ralf Herbrich, the director of machine learning at Amazon, in a prepared statement. “This partnership will ensure we’re including the best and the brightest in this space in the conversation to improve customer trust and benefit society.” (Herbrich will be Amazon’s representative on the board.)
The remainder of the board will be filled with representatives from academia and the non-profit world, according to a press release, which also indicates that the group is already in discussions with the Association for the Advancement of Artificial Intelligence and the Allen Institute for Artificial Intelligence. Additional corporate participants are also expected, it noted. (Google’s representative on the board will come from its London-based AI unit DeepMind, which developed software that, this past March, defeated the world champion in the ancient Chinese game of Go.)
In the past five years, technological progress and optimism about AI has been exploding, in part due to breakthroughs in a subfield known as deep learning—or, more properly, deep neural networks. Neural networks are software constructs, originally inspired by the way the brain works, that enable machines to teach themselves how to recognize complex patterns. They have already been responsible for enormous strides in machine translation, natural language processing, image recognition, and computer vision, unleashing among other things progress toward making self-driving cars a reality. They’re also the technology that has made speech recognition—which powers Amazon’s Alexa to Apple’s Siri to Microsoft’s Cortana to Google Now—dramatically better than it used to be.
The new partnership comes as its members increasingly use artificial intelligence to compete with one another in categories such as consumer electronics and business productivity software. It appears to be aimed, at least in part, at dispelling and defusing public concerns about artificial intelligence, a phrase that often inspires both rational and irrational fears. The rational ones include the prospect of economic dislocation and loss of jobs, while irrational ones—or at least premature ones—embrace science-fiction scenarios, in which robots rule the earth or society confronts the so-called singularity. (The singularity is the hypothesized point at which machines with superhuman intelligence begin to upgrade themselves without human oversight, starting a runaway cycle that leaves lowly humans ever farther in the dust.)
Earlier this year, Tesla and Space X CEO Elon Musk expressed his concerns that robo-investors could start wars as a way to maximize profits in Lo and Behold, the latest film by German filmmaker Werner Herzog.
“As researchers in industry, we take very seriously the trust people have in us to ensure advances are made with utmost consideration for human values,” Facebook’s Yann LeCun said in another statement accompanying the press release. LeCun, the director of Facebook’s AI research and its representative on the new partnership’s board, is a pioneer in the field of deep learning.
The recent upsurge of interest in AI has been reflected in burgeoning investment in AI-focused startups. Equity funding of such startups reached an all-time high last quarter of more than $1 billion, according to the CB Insights research firm. More than $7.5 billion has been sunk into such startups since 2011—with more than $6 billion of that coming since 2014.
This article originally appeared on Fortune.com

Lawmakers Slam Wells Fargo CEO at House Financial Services Committee Hearing - TIME Business

Lawmakers Slam Wells Fargo CEO at House Financial Services Committee Hearing

Posted: 29 Sep 2016 09:26 AM PDT

WASHINGTON — Angry lawmakers heaped another round of blistering criticism on Wells Fargo’s CEO, pressing Thursday for details about what senior managers knew about allegedly illegal sales practices and when any concerns were disclosed.
Chief Executive John Stumpf, newly stripped of tens of millions in compensation, told the House Financial Services Committee that the bank is expanding its review of accounts and will evaluate executives’ roles. But as during the grilling he received last week from a Senate panel, Stumpf remained on the defensive.
Several lawmakers, both Republican and Democrat, alleged that Wells Fargo’s sales practices may have violated federal laws, including the federal racketeering laws, which would constitute a criminal offense. Federal regulators have not said if they have referred the Wells Fargo case to the Department of Justice.

“Fraud is fraud. Theft is theft,” committee head Rep. Jeb Hensarling, R-Texas, told Stumpf.
Stumpf reiterated his words of last week, that he was “deeply sorry.” He said the bank was looking at accounts further back, to 2009, and that bank executives’ roles will be reviewed “across the board” in an inquiry by Wells Fargo’s outside directors.
U.S. and California regulators have fined San Francisco-based Wells Fargo $185 million, saying bank employees trying to meet sales targets, opened up to 2 million fake deposit and credit card accounts without customers’ knowledge. Regulators said they issued and activated debit cards, and signed people up for online banking without permission. The abuses are said to have gone on for years, unchecked by senior management.
Stumpf came under a sustained assault from lawmakers, who face re-election in a little over a month. He insisted that Wells Fargo had taken actions prior to 2013 to bolster its legal compliance and maintain high ethical standards. He bristled at depictions of the culture of Wells Fargo — a bank with origins in the California gold rush — as elevating sales and profits at the expense of ethics.
“This is the behavior of people that we found, that we did not want,” Stumpf insisted.
For many of the angered lawmakers, the scandal is personal. They hold accounts with Wells Fargo or have taken out mortgages. “If I could, I’d pay it back,” said Hensarling.
Republican Rep. Patrick McHenry, who represents North Carolina — where Wells has a large presence due to its purchase of Wachovia in 2008 — was particularly incensed. “You have broken long-standing ethical standards inside the company.” McHenry said.
Stumpf noted new leadership at the retail bank business and the accelerated elimination of sales goals. He said no executives above the branch manager level appeared to be aware of the misconduct.
He also cited the compensation he must return. The Wells Fargo board said it is stripping Stumpf and the executive who ran the retail banking division of millions of dollars in pay. Stumpf, who earned $19.3 million last year, will forfeit $41 million in stock awards.
He also is giving up any bonuses for this year, as is Carrie Tolstedt, the former head of the retail operation. Tolstedt is forfeiting $19 million of her stock awards, and her planned departure was made immediate.
Members of Congress also raised question whether other banks had similar toxic sales cultures like Wells. “We have Wells Fargo before me, but I don’t think you should be alone in this joyous experience,” said Rep. Brad Sherman, D-California.
Stumpf insisted customers’ loyalty to Wells Fargo remains as strong as ever. He also defended his dual roles as chief executive and chairman, positions that some critics have suggested should be split.
Members of Congress also pushed Stumpf on when he informed Wells Fargo’s board about the sales practice scandal, and whether Wells may have violated Securities and Exchange Commission regulations by not informing investors.
Rep. Carolyn Maloney, a New York Democrat, asked Stumpf about his personal sales of company shares at a time when she said he apparently had learned about the fake-account sales practices. Stumpf said he sold the stock with the proper ethics approvals and “with no view” of any misconduct at the bank.
Stumpf also said Wells did not put language in their regulatory filings until this summer, three years after a Los Angeles Times investigation and a year after a Los Angeles City Attorney’s lawsuit.
Stumpf again promised action to make things right for customers who were affected. Customers already have been refunded $2.6 million in fees slapped on unauthorized products, the bank says.
The consumer banking giant, which is also the biggest U.S. mortgage lender, fired about 5,300 employees starting in 2011 in connection with the sales practices. Stumpf said all of the terminated employees were fired because of unethical conduct — not because they failed to meet sales goals.
Whether the unusual takeback from his compensation will be enough to save Stumpf’s job is hard to say.
It was “a step in the right direction, but there are still dozens of unanswered questions,” said Sen. Sherrod Brown of Ohio, the Senate Banking Committee’s senior Democrat. He and the other Democrats on the panel asked Stumpf on Wednesday to answer a series of 58 questions, including nearly two dozen that they said he failed to answer at the hearing last week or for which he promised to provide fuller information.
Few top bank executives have had their compensation clawed back in the years since the financial crisis starting in 2008. While unusual, the move by the board “was the right thing to do,” said Charles Elson, a professor and director of the Weinberg Center for Corporate Governance at the University of Delaware.