Corporate Social Responsibility - Part 3 - Fannie Mae

Fannie Mae is one example that can be used to assess Corporate Social Responsibility and has been studied by many when looking ethical business behavior.  In 2004, Fannie Mae was named the most ethical company in the United States by Business Ethics Magazine (Jennings, 2012, p. 121). 

At that time, no one would have predicted that they would be at the center of a financial crisis that threatened the entire United States economy.  Daniel Mudd, who was the chief operating officer during this time period said that he was “as shocked as anyone” about the financial practices within Fannie Mae (Jennings, 2012, p. 126).

That is, unless you want to talk about Roger Barnes, an employee in the Controller’s Office at the company.  He left his job before the investigation because he could not get a response from the Office of Auditing.  No one, not even the Ethics and Compliance Office, took any steps to follow up on his detailed concerns about accounting policies (Jennings, 2012, p. 127). 

In fact, interviews revealed that, not only had many employees expressed concerns that were never investigated, Daniel Mudd listened to these concerns in 2003 but also made no effort to resolve or investigate them (Jennings, 2012, p. 127).  Maybe Mr. Mudd was not quite as shocked as he seemed when he testified at those congressional hearings.

Fannie Mae was recognized as an ethical company because it scored well in areas that indicated that it was treating a variety of stakeholder’s well (Jennings, 2012, p. 121).  By scoring well with minority and women’s groups, putting low-income families in homes and having a diverse board of directors, they appeared to be behaving in a social responsible way (Jennings, 2012, p. 122).

However, having Corporate Social Responsibility is more, as we discussed in Part 2.  When it came time to ask the questions that Entine and Jennings posed, such as examining whether the company has a sense of propriety, being forthcoming with information and how they react when faced with negative disclosure, it is clear that Fannie Mae falls short (Jennings, 2012, p. 104). 

Ironically, Franklin Raines, the CEO of Fannie Mae in 2002, testified before Congress about the passage of Sarbanes-Oxley and said, “It is wholly irresponsible and unacceptable for corporate leaders to say they did not know – or suggest that it was not their duty to know – about the operations and activities of their company.”  He went on to talk about how the responsibility of management is to know how the company is making the money and to ensure that it is operating in an ethical fashion (Jennings, 2012, p. 128).