The Corporate Criminals or Why Good People Do Bad Things
In the past few years we have seen a rise in the number of entrepreneurs and business leaders caught with their hands in the cookie jar. What makes everyday people commit extraordinary crimes of fraud and deceit?
Bernie Ebbers, the former chief executive of WorldCom, was sentenced to twenty-five years in jail for orchestrating an $11 billion fraud, the biggest in U.S. corporate history, at the once high-flying U.S. telecommunications company.
U.S. district Judge BarbaraS. Jones said the sentence reflected the gravity of the crime.“Although I know this will probably mean Ebbers will spend the rest of his life in prison, sentencing him to anything less would not reflect the seriousness of the crime.”
Ebber’s sentence is one of the most severe to be handed down for a white-collar crime.Robert Mintz, a lawyer with McCarter & English, called the sentence staggering. “This sends a very chilling message that if you get convicted of these large-scale financial frauds, you’re going to be looking at a sentence that a Mafia kingpin or a drug lord wouldface,” he said.
Is the Era of Imperial CEOs Over?
What’s the mark of a great conman – he’s arrogant, cocky,brazen, and he loves his work!
Jennifer Reingold wrote in Fast Company in October, 2003 that there is a new era of accountability. Most of the nation’s worst performing bosses have been shown the door.“The death certificates have been signed. The eulogies have been written. The bagpipes have sounded. That’s right, folks. The era of the imperial CEO is officially over" or so we thought till this past weekend on Wall Street.
Thanks to the humiliating collapse of the fraud-riddled likes of Enron, HEALTHSOUTH,Tyco, and WorldCom, chief executives today are about as respected as, oh, Internet stock analysts.”Another prominent departure three years ago was American Airlines chief Donald Carty, forced out after neglecting to mention the special bonus pool for top executives while he was asking stewardesses and pilots to take massive pay cuts.
And this was just the tip of the iceberg. Many CEOs were knocked off their lofty perch for accounting irregularities, manipulation of annual reports, insider trading, and lavish perks, like Dennis Koslowski of Tyco and his$4 million dollar paintings for his $18 million apartment on fifth avenue, (plus another six residences valued at over $30 million,all at shareholder’s and employees expense). Bernie Ebbers of WorldCom received a severance package of $1.5 million a year for the rest of his life, plus the use of the WorldCom jet for 30 hours ayear, plus numerous other benefits. Keep in mind that Ebbers had already received $44 million in pay, but claimed he didn’t understand that WorldCom had defrauded investors of $7 billion.
• The CEOs of twenty-three large companies under investigation by the Securities and Exchange Commission (SEC) and other agencies earned 70 percent more than the average CEO, banking a collective $1.4 billion in two years, while the market value of these twenty -three companies in January 2001 nose-divedby over $500 billion (or about 73 percent) and 160,000 employees were laid off.
• Enron’s CEO Kenneth Lay pulled in over $100 million, while100 executives and energy traders collected more than $300million-in the year before the company filed for bankruptcy,with a $68 billion loss in market value, the loss of jobs for 5,000 employees, and $800 million lost from their pension funds.
Politics and Corporate Crime
Thirty-one corporate criminals gave more than $9 million to the Democratic and Republican parties during the 2002 election cycle, according to a report released by Corporate Crime Reporter.Corporate criminals gave $7.2 million to Republicans (77 percent)
and $2.1 million to Democrats (23 percent), the report found.
The Republicans and Democrats are awash in dirty money,” said Russell Mokhiber, the editor of the Corporate Crime Reporter.“They took in more than $9 million from convicted criminals. When the heat was up on WorldCom and Enron, politicians from all stripes returned campaign contributions from these two tainted entities or sent them on to charity. The parties should do the same.”
Daniel Pink spoke to Charles Lewis, a former high profile broadcaster about Wall Street and Washington – strange bedfellows in the rising tide of corporate greed.
Pink says:“There are no guarantees in business and in life. Luck is always a factor, and the dice can roll against you. But that does not change the fact that those who go about their lives and work with the passion to create and build in pursuit of self-created goals are the only ones who will find meaning in the end – regardless of whether the dice roll their way. The fact of the matter is that life is short, and we only carry to our graves the inner integrity of
our efforts. Only we know how we lived our lives, whether we cut corners, whether we did anything of value – or whether we took the built-to-flip approach to life.”
In 1989, Charles Lewis left the world of high-profile broadcast journalism to invent the world of what he calls “public-servicejournalism.” Lewis, who was awarded a Macarthur Fellowship in1998, founded the Center for Public Integrity in 1990 to pursue investigative projects that the major media were neglecting.
During the past 17 years, the center has produced 10 books and more than 100 reports documenting the often-sordid ties between bigmoney and big politics.
When Lewis was asked whether the problem was based on a few bad apples, Lewis’s response was:
“Not unless the whole world is your orchard. That’s a lot of apples, folks! More companies are restating their earnings now than at any time in U.S. history. And by the way: They have dumped hundreds of millions of dollars into the political process to weaken any laws that might exist to curb the excesses.
You can’t look at Wall Street without looking at Washington.They’re joined at the hip. Congress and the politicians were the enablers for those scandals. They needed the campaign cash.The corporate executives needed certain favors. Everyone got what they wanted – except, of course, investors and the public.
Ninety-six percent of Americans don’t contribute to political campaigns at all. The wealthiest elements of this country are sustaining and sponsoring the political process and its actors.
What that means is that you get a government that’s essentially bought and paid for by the powerful interests affected by those decisions. Sometimes it does feel like we’re trying to force people to drink castor oil. People don’t really want to get bad news. But information is power. Until you find out the truth, you can’t dig yourself out of the mess.”
Lewis was asked who you can trust today to tell us the truth. “It’s a very short list,” he says, “Everyone has been discredited. We have a situation where we don’t trust our government or our capitalist system. The level of distrust right now is probably unparalleled since the 1930s."
So how do we build that trust you might ask, well based on Lewis’s theories, we need to set tougher standards, and then to everyone’s amazement you actually enforce them. There is an urgent need in America right now for transparency. That should be the case for all governments in power, but more so in America where lying has become commonplace. There needs to be openness and a set of rules. It’s indeed time for zenlightened leadership, in the boardroom,the oval office and on Capitol Hill.
Failure is Not an Option
How tough is it to be honest these days – really tough? As a child you may have been taught that to fib is okay; a “little white lie”has never hurt anybody. How about that little fib when you didn’t declare that new suit you bought across the border. They’ll never find out, I’ll just wear it. Or how about when you made excuses to the teacher when you didn’t do your homework. Any excuse to avoid the preconceived notion that the result of the truth would mean a terrible punishment or reprimand – in the mind of an eight-year old, a fate too gruesome to imagine.
The fear of discovery is far greater than the unknown consequence of the truth. As a society we are driven to succeed in virtually everything we live our lives for. In public school, in university, in sports, in our marriages, in our businesses, and in our relationships with our children, everything is measured by success.
This need for success is the single most destructive force operating in our free enterprise system.
If you doubt this, just look at the self-help section of any bookstore, where shelves are lined with books on “How to Succeed” in everything from business, sales, your marriage and relationships, to your golf game, your tennis game, your poker game, and your life. It seems every new workshop or seminar has a Tony Robbins look-alike telling you he or she has the seven secrets of highly successful people and for $1000 he’ll tell you the secrets so you no longer have to walk around with your head down wondering how you became such a failure.
I know the game because I played it. I am a recovering Tony Robbins franchise owner. Many men and women who have risen to the top inwardly feel like imposters. If asked, they may reveal that their biggest fear is being found out.
In Robbins’ book, Ultimate Power, “Fake it till you make it” is his war cry. It’s okay to pretend for a while; just never admit that you are afraid, or that you don’t know yourself. Fear of failure corrupts the mind. Because we are programmed to avoid it at any cost, it makes us do things we would not ordinarly do without thought or remorse.
Failure is not an option is the mantra of many young entrepreneurs who have just started their new business, while in the background ring the incessant voices of the fallen, the dot-com failures, and the overnight millionaires who have now gone bankrupt and taken tens of thousands of unfortunate with them.
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