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The strange case of the corporate mastermind

The first sentence of an article in the New York Times today echoes the question I asked a few days ago, regarding recent accounting scandals: "What were they thinking?"

The article doesn't come very close to an answer, unfortunately, though I did find one source's remark somewhat insightful:

Robert Solomon, a consultant on business ethics and professor of business and philosophy at the University of Texas at Austin, explains it by saying: "People assiduously avoid the risks they readily envision and remain all but oblivious to those they don't. It's easy for a C.E.O. to envision losing his job or losing face among his peers but all but unthinkable that he would get indicted, much less go to jail."

The question remains, of course, why was the possibility of getting caught so inconceivable to them? How could these individuals possibly think they could get away with lying about such large amounts of money?

Another article in today's Times quotes Andrew Grove, chairman of the relatively solid, well-managed Intel Corp., who says he is "embarrassed and ashamed" by other executives' ill behavior:

"The same way the market sentiment shifted toward an unbridled exuberance, the values of a lot of people managing companies in this market environment drifted toward 'me, me, me.' "

Perhaps part of the answer's in there. Did some top corporate executives, with their inflated salaries, massive stock-option grants and untold corporate perks, come to think they were simply untouchable — that the only people they had to worry about were the board members who approved their use of the corporate jet?

Armchair psychology, of course, is generally fruitless. But this so-far inexplicable behavior is costly, not just to the corporations whose executives succumb to it, but to the economy as a whole. Hopefully there is some explanation waiting to be found — and hopefully it's something that company directors can do something about.

July 1, 2002 1:44 PM

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Copyright ©2001-2003 Matt Pfeffer


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