Human greed and the corrupting effect of power

2009-12-04T08:36:00.000-08:00

A proportion of people in every organisational system is easily corrupted by their own power – politics, public service, companies in the capitalist system, leaders in the communist system and even religion – not only paedophile priests but the way that most religious leaders see nothing wrong in strutting around dripping with gold and jewels when there is such poverty in the world. Of course, it is only a proportion of each sector but other than the basic maxim of “all power corrupts and absolute power corrupts absolutely” who will become corrupt or abuse their power seems to be incapable of being predicted.

Maybe the key is how we measure and value things. Companies are measured and valued on their short term profit; it doesn’t matter how they treat the environment or treat their employees or customers; if the bottom line drops shares are sold and CEO’s are dumped. Many people measure and value themselves and others by how much they earn and what material things they posses. The pressure to “keep up with the Joneses” forces people to develop their own tactics for increasing their earnings and status that are not necessarily aligned with the good of the organisation... and the more you move up the ladder the more you are confronted with even richer Joneses to keep up with.

Of course, the capitalist system works because often the results of incentives for personal success also benefit employers and therefore society. But no matter how much we regulate it, it is still vulnerable to those with their hands on the levers of power who put magnifying their own wealth ahead of the good of the organisation, or of it's stakeholders. Often they are able to get away with it because they bully and/or bribe those around them, stifle the whistle blowers and fool the auditors and regulators. If we are to defeat them we have to find some new weapons for our armoury... and we should start by abolishing the mindless culture of form filling, box ticking and meaningless KPI's that does little more than give us false confidence and enable politicians and others to claim have it all under control.

Handcuffing someone doesn't make them trustworthy

2009-10-23T09:31:00.000-07:00

So, only 25% of Americans think that banks are honest and trustworthy. As the whole of our banking, indeed financial system, depends on trust, there is much debate about how much regulation, control and restructuring is needed to restore that trust. But I think that's the wrong question. We can trust a jail full of criminals as long as they're securely locked up - but where does that get us?

Those at the top of many financial institutions have shown that their ethical standards are virtually non-existent and that they will get away with whatever they can to line their own pockets. And it wasn't just for personal gain - it was for personal survival. The pressures to take unacceptable risks and put their profits before their customer's best interests came from shareholders as much as from their own greed. So, just as the internet fraudster focusses on working around whatever new technical barriers are put in place, dishonest bankers will find a way around whatever new regulations are introduced.

I think that the key question is whether ethical/moral standards can ever be compatible with running a successful financial institution... and if they can be, how will the public recognise who to trust? It won't be in the fine words that they chose because they all use top flight PR agencies. It won't be compliance with a regulation or code because it's easy to pay lip service. What we need is a way of judging corporate culture and the tone from the top, and making potential investors accept that a slightly lower return from banks with genuine ethical standards is preferable to the alternative.