(FROM 2011) Weaponized Charisma: The Danger of Business Cult Leaders

Published on: October 8, 2015

Filled Under: Blog, Common Sense Economics, Common Sense Policy

Views: 1765

THIS IS A BLAST FROM THE PAST FROM MAY, 2011 originally published with Jim Harberson in Rick Lazio’s Ignite Blog (http://ignitewithricklazio.com/page/42) . . .

I like the term “Weaponized Charisma” and thought it had application to our current roster of presidential candidates from both parties . . . think about it as you watch the debates and the candidates’ reactions to intense scrutiny.

Bernie Madoff

Would you have invested with this man?   Better question:  Would you have voted for him?

Weaponized Charisma: The Danger of Business Cult Leaders

Harvard Business School recently quashed rumors that ponzi-schemer Bernie Madoff would offer its students ethics lectures. Madoff systematically stole billions of dollars from hundreds of investors and is serving a 150-year prison term. Many would condemn the idea of letting Madoff teach anything, given that Americans are culturally-hardwired to relish public humiliation of the guilty.

That’s unfortunate. Bernie Madoff, Marc Dreier (an accomplished fraudster currently doing 20 years in federal prison for stealing hundreds of millions of dollars from hedge funds) and other famous chicaners present ideal educational opportunities in our increasingly rapacious, winner-takes-all business culture. Unfortunately, most budding professionals don’t receive real world experience in dealing with frauds.

Business and law schools have been fortifying their ethics curricula since 2002, after Enron Corp., a Houston-based energy trading firm, engineered one of the greatest financial frauds in history with dubious accounting. This debacle left hundreds jobless and broke and occasioned corporate self-reflection concerning what deceptions are and aren’t ethical.

However, amplified ethical education requirements and increased regulations haven’t stopped American business people from operating with ethical boundaries strictly and perversely defined through cost-benefit analysis. The lessons of Enron, WorldCom and Global Crossing in 2002 haven’t stuck.

Recent examples evidence greed’s perilous triumph over prudence. Witness Goldman Sachs’ 2009 revelation that it peddled “sh**** deals” (its employee’s words in testimony to Congress) to less desirable clients to enrich more desirable ones. Notably, Goldman responded to this disclosure by banning expletives in firm communications. While such conduct may be illegal, it hardly seems ethical. However, to truly jump over the broom, take billionaire Galleon Group hedge fund founder Raj Rajaratnam, just convicted of 14 counts of securities fraud related to insider trading.

We live in a culture that is increasingly not just winner-takes-all but also winner-eats-losers. Such is the extreme consequence of modernity’s exaltation of individualism. As the prescient Harvard sociologist Daniel Bell observed in The Cultural Contradictions of Capitalism, “the axial principle of modern culture is the expression and remaking of the ‘self’ in order to achieve self-realization and self-fulfillment. And in its search, there is a denial of any limits or boundaries to experience. It is a reaching out for all experience; nothing is forbidden, all is to be explored.”

Madoff, Dreier and Jeffrey Skilling and Andy Fastow of Enron are disciples of this unchecked individualism, white collar crime’s rock stars. They would provide bracing discussion of the occult motives and rationalizations attending criminal enterprises; moreover, they could explain how massive frauds often start small and that the pressure to make sales or revenue expectations incentivizes people to hide a loss or manufacture occasional gains. These are the exact situations MBA’s and JD’s inevitably face.

Imagine hearing Andy Fastow describe how he used small revenue smoothing gestures to mask liabilities, until eventually Enron hid billions in debts in off-balance sheet partnerships while declaring itself profitable. This exemplifies how venial offenses metastasize into mortal ones, how self-deception enables the offender, and how a charming and intelligent executive can make those who should know better forget the rules.

It is also important for students to recognize that educational pedigree does not equal good character. Most of these men represent smart squarejohns with good credentials gone bad. Dreier went to Yale and Harvard Law School and partnered at a reputable law firm before using fraudulent securities to finance his own firm and an orgy of Robb Report indulgences. Skilling and Fastow were millionaire officers at Enron and respective graduates of Harvard and Kellogg (Northwestern) Business Schools. Rajaratnam received his MBA from Wharton (Penn).

Moreover, students could learn much simply by interacting with these men. For, it is their charm, charisma and other intangibles that won them success in business and crime. Business success often depends upon developing a cult of personality (see Steve Jobs, Bill Gates and Warren Buffett), and such charisma can be weaponized to accomplish malevolent ends. It’s important for students to see what magicians of fraud and feel-good look like to beware them going forward.

Another upside to our proposal is that fees charged for their presentations could offset the restitution each owes his victims. Their incentive would be prison-term reduction.

A vocal, cantankerous minority would oppose this arrangement, wrongly. It is reported that Mr. Madoff is popular in prison among his fellow inmates. Is it really punishment for him to be so glorified? Moreover, what utility besides some ephemeral sense of justice do victims gain by the swindlers’ imprisonment? Most would likely prefer payment.

Remember, in America, the bottom line is the bottom line.

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