You want to win elections, you bang on the jailable class. You build prisons and fill them with people for selling dime bags and stealing CD players. But for stealing a billion dollars? For fraud that puts a million people into foreclosure? Pass… make them pay a fine instead. But don’t make them pay it out of their own pockets, and don’t ask them to give back the money they stole. In fact, let them profit from their collective crimes, to the tune of a record $135 billion in pay and benefits last year. What’s next? Taxpayer-funded massages for every Wall Street executive guilty of fraud?
The mental stumbling block, for most Americans, is that financial crimes don’t feel real; you don’t see the culprits waving guns in liquor stores or dragging coeds into bushes. But these frauds are worse than common robberies. They’re crimes of intellectual choice, made by people who are already rich and who have every conceivable social advantage, acting on a simple, cynical calculation: Let’s steal whatever we can, then dare the victims to find the juice to reclaim their money through a captive bureaucracy. They’re attacking the very definition of property — which, after all, depends in part on a legal system that defends everyone’s claims of ownership equally… — this whole American Dream thing recedes even further from reality.
(Why Isn’t Wall Street in Jail? | Rolling Stone Politics, Mat Taibbi, 2/16/2011) Between 2007 and 2009, Wall Street profits were up 720%, unemployment was up 102% and the value of home equity in American went down by 35%. According to the Congressional Budget Office, average household income for the top1% has risen from about $500,000 to almost $2 million. For most of us, it has been relatively flat.
According to Jacob Hacker and Paul Pierson, politicians don’t respond to the concerns of voters, they respond to the relative power of the organizations that represent them. Labor has been on the decline, while the power of the Business Roundtable and the Chamber of Commerce has surged.
An article published by The Economist titled The psychology of power: Absolutely looked at a series of experiments that confirm Lord Acton’s dictum that “Power tends to corrupt, and absolute power corrupts absolutely.” “The powerful do indeed behave hypocritically, condemning the transgressions of others more than they condemn their own… It is not just that they abuse the system; they also seem to feel entitled to abuse it.”
Researchers conclude that “people with power that they think is justified break rules not only because they can get away with it, but also because they feel at some intuitive level that they are entitled to take what they want.”
Alan Downs 1997 book describing corporate narcissism (Beyond the Looking Glass: Overcoming the Seductive Culture of Corporate Narcissism) found that high-profile corporate leaders such as “Chainsaw” Al Dunlap literally have only one thing on their minds: profits. According to Downs, such narrow focus may bring short-term benefits, but it ultimately drags down employees and companies… as well as entire countries, at least that would be my take.
Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs by Rakesh Khurana pointed to another thread in the same cloth of American capitalism, charisma and reputation have begun replacing management experience and industry expertise as the primary qualities we search for in a CEO. Succession planning at many corporations is weak. Boards often only take any real action after deterioration has begun to set in. When the the recruiting process begins, they are pressured to take decisive action, seeking an outside savior.
Investors may have contributed to the problem. By insisting on “independent” outside directors (I prefer my directors “dependent” on shareowners through nomination and election), we now have boards with little knowledge specific to the business itself. Recruiting has changed from getting a real fit between the companies needs and the CEO’s talents to one of attracting a high class celebrity with charisma, generally one with plenty of bargaining power to match.
Yet, we know corporate saviors are few in number. Steady progress, building from the inside without all the glamor is much more likely to pay off and is the more prudent model, as documented in Good to Great by Jim Collins. Companies that far outperformed their competitors were generally those where CEOs weren’t charismatic and were recruited from within based on their known capabilities.
We seem to be betting the farm on charismatic bankers and CEOs who offer the promise of easy money. What happened to hard work and middle class values? They’re disappearing, along with the middle class itself.