A conversation with Francine McKenna - Hunger Games, fraud and change in the new abnormal

Profile picture for user gonzodaddy By Den Howlett April 9, 2020
An incisive conversation into the problems faced by the US system and what needs to happen for there to be good outcomes.

Francine McKenna
Francine McKenna (via the author)

Francine McKenna is known for her work monitoring and reporting on transparency, particularly in the field of audit and corporate accountability.

McKenna takes a forensic approach to this topic, drawing upon many years experience as consultant and internal auditor and, since 2006, as a journalist, most recently at MarketWatch. She and I have known each other since 2007 and while we don't speak with each other often, when we do, it's always a great conversation. 

In this discussion, I wanted to get her take on how COVID-19 is currently impacting healthcare, what she sees as the risks and her view on what happens next. I also wanted to gain a better understanding as to how the US markets are vewing COVID-19 and whether there is an expectation of a reset in the economy or whether it is viewed as little more than an exaggerated recession. 

When I lived in San Diego but also traveled around the US, I became very aware that while the coutnry is called the United States of America, it is in fact 50 different sovereign entities, loosely held together by a federal system. It's fine when that system works but as we are seeing, that same system is breaking down, especially in healthcare. 

Now we're seeing this stress on the various systems and your access to healthcare is depending on what your tax bases and your political situation is. It's really deteriorated and broken down even to the extent that there's these accusations of the federal government arranging for supplies of various equipment, medical equipment, and selling it to private vendors who are then causing the states to have to compete with each other. It's absolutely ludicrous to have the states in a form of Hunger Games competing with each other to provide basic medical equipment and supplies.

I expect that once COVID-19 has passed that in the UK, we'll see a refunded National Health Service. There is no equivalent in the US and, according to McKenna, no real talk about such a system:

There's still a pretty strong opposition to any kind of what what is being called Medicare for all. I'm for universal health care, not universal insurance and a lot of the plans that are being proposed are about comprehensive insurance coverage.

I then commented about the efforts made by some of the nation's wealthiest to help out. McKenna agrees that this is all good but argues that it is only short term andn that fiunding solutions is far from straightforward. 

Where were they on a day to day basis? When you're talking about more long term solutions, even medium term solutions to these problems, you see heavy duty lobbying against those things. So yes, it's very nice that people are altruistic when the when the need arises, but it would be much better all the way around. If we had a sustained effort to have organized ways of delivering these things. 

One of the problems with what's happening right now in the United States, is we have an enormous enormous opportunity for graft and, and fraud, for bribery for self interest for an enormous amount of corruption. And it's to such an extent here in the United States that immediately when you hear the President talking about let's say, this medication solution, immediately we have to run to the potential that he or someone close to him has a financial interest in it. We are so destroyed in terms of our trust or in the in the integrity of our political figures, not just in terms of the current administration, but on all sides. That's the first question: what's in it for them? Why are they doing this? They can't possibly be doing this just because they think it might actually help. And this is the sad, sad truth that we're in right now. 

McKenna is not alone. In today's New York Times, the editorial board painted a similar picture, arguing that the mnarket economics approach developed over the last 30-odd years needs to change. 

Moving on, we expanded the conversatino to discuss what this means for corporate reporting. This month will see the start of the reporting season and I wondered whether COVID-19 represents a good opportunity for companies to clean out their balance sheets. 

You have an opportunity to distract people with one thing and do something else in the background especially complex stuff. Things like changing accounting estimates or relieving reserves or writing off goodwill or other kinds of intangible assets. Those things usually go unnoticed anyway. And they certainly will go on noticed if a company is otherwise suffering or can say that the poor results are the result of basically having the store shut or the or the plant shut.

McKenna is equally concerned about how the bail outs are working:

The companies were paying every dollar out to shareholders and then turning around and now telling the federal government, they can't survive a month. Whatever happened to the times where companies like in the automotive or the airlines used to have strikes? Did they go bankrupt immediately because they had a labor strike? No, they knew that that was part of their business model.

So when you asked me will this change some hearts and minds in terms of planning better for the medium or the long term? I don't think so. I think they're going to continue to find loopholes. When are we going to get back to, quote unquote, normal. Instead, let's take advantage of this opportunity, and make the argument to keep doing what we're doing, because we don't want anything to change.

That strikes me as a dangerous mindset and lacking logic because sooner or later, someone has to pay. In McKenna's world there is resistance to going all in on providing assistance, largely because the political system is dominated by those who prefer a market model with minimal federal intervention. So in the US, the government is buying up corporate and municipal bonds, not with a view to making profit, but as a way of supporting business first on the assumption that eventually, things will turn around. But getting any real activity from government is nigh on impossible because Congress is in recess. This leaves a vacuum in oversight. 

Given the global nature of COVID-19, I asked whether McKenna agrees that we will see fundamental changes in work patterns and whether remote working will become more of a fixture in the economy. Referring to the fact that all her classes at the university where she teaches and all her in person speaking engaments have been cencelled, McKenna said there's a clear desire to keep those things going and that remote teaching is happening now. But she also sees difficulties. 

Many of my friends and colleagues in media, this is the first time that they ever had to get a home office setup. It's insane when you have a job that can easily be done from anywhere that's actually better if done from anywhere rather than sitting at a desk. And this was the first time that many media organizations figured out how would they operate, if they had the majority of their reporters and editors not sitting all in a big newsroom. They were not prepared. They did not have the technology. And I think about something we've talked about over the years ;contingency planning. I went through the Y2K contingency planning with JP Morgan in Latin America. We were planning for the possibility that the whole trade floors would be taken out. What happened to contingency planning?

That's a great question and one that I think will resurface as a major component in corporate discussions that will change both processes and how we manage people. McKenna hopes that firms will see this as a positive opportunity to rethink the nature of work but worries that resistance to change will continue until it becomes clear that the impacts from COVID-19 are here to stay. Even then though, silo thinking remains. Citing her experiuence as an online adjunct professor, she said that when COVID-19 forced lockdown, other parts of the university were not interested in picking up the technology that the online team uses, preferring instead to roll their own solutions.

Education has a reputation of being very bureaucratic. But I think a lot of big organizations have the same problem. You have people doing innovative things on one side, and then you have other people who have no idea that that's going on. And unless you have strong leadership, you're not going to have that opportunity for people to learn from that experience. It's about the tone at the top, that says we have to talk to each other, we have to break down these barriers, it's absolutely essential, it's mission critical. 

While McKenna sees many problems, she remains hopeful:

Despite being a little bit pessimistic about some things. One thing I always have is faith in the individual spirit. And so hopefully that all those individual spirits collectively will move us forward once this cloud is gone.

And that was a good place to stop.