In an interesting editorial in today’s Chicago Tribune (reg. req’d), my friend Professor David Skeel of the University of Pennsylvania Law School discusses the use of faith as a defense to criminal charges by several prominent CEOs, including Bernard Ebbers of WorldCom Inc., Richard Scrushy of HealthSouth Corp., and Kenneth Lay of Enron Corp. David wonders, “How did it turn out that the leaders of three of the most scandal-ridden companies all publicly professed their faith?”
David briefly discusses the re-engagement of evangelicals with mainstream society from the mid-1900s on, the importance of the South as a locus of economic activity, and a third factor that he calls “the worm in the apple–persecution as confirmation.” David writes:
As Christian Smith pointed out in his book “American Evangelicalism,” we evangelicals tend to thrive when we feel surrounded and embattled. The sense of opposition can sharpen one’s faith–Christ himself said, “blessed are those who are persecuted for my name’s sake.” But it can be dangerous if used for self-justification, to treat even legitimate criticism as persecution to be resisted–as when Ebbers insisted he hadn’t done anything wrong and his principal concern was that “my witness for Jesus Christ will not be jeopardized.”
The practice of resisting even legitimate criticism is not reserved to evangelical CEOs. This was arguably the cause of Carly’s downfall at HP. But the problems at WorldCom, HealthSouth, and Enron went beyond bad business strategy. The executives in those companies (allegedly) lied, cheated, and stole in service of their vision. And this prompts me to wonder about the issue that David is keen to avoid:
I don’t mean to suggest that Christian CEOs are uniquely susceptible to ethical failure. The reality is that the executives who climb to the top of the corporate ladder–Christian or not–are invariably decisive, self-confident and willing to eschew conventional wisdom. The very qualities that make them successful can cause them to ignore warning signs when a once-successful company starts to falter. The point is that even CEOs who seem to have strong moral values aren’t immune from this risk–a fact we would do well to underscore in the ethics classes every business student takes in business school.
Obviously, David is right that “even CEOs who seem to have strong moral values aren’t immune from this risk,” but what about the possibility “that Christian CEOs are uniquely susceptible to ethical failure”? Aren’t people who are driven by a supposed higher calling even more dangerous in some ways than people who are driven by avarice? We understand avarice, and we think we know how to combat it (threaten loss of wealth for cheating). Evangelical ferver, on the other hand, does not respond well to worldly constraints. Indeed, if David is right, such fervor is only strengthened and justified by attempts to constrain. The same fears we feel about Islamic terrorists — that they are irrational and will not respond to the usual incentives — arise in this context, don’t they?
Thanks to Christine for the tip.
Gordon: I suspect that there are very few CEOs who are driven by anything like pure avarice. It seems to me that CEOs, particularlly successful CEOs, are driven more by a desire to excell and control than by a simple desire for money. Money is important because it is a sign of power, prestige, and success, rather than an end in itself. I think that the motives of talented and successful businessmen and women tend to be as complicated as the motives of the rest of us. Enron, I think, is a good example. Without the fraud that went into that company, Enron would probably still be with us and would be regarded as an innovative and successful corporation. I don’t think that it was a simple desire for money that drove Enron CEOs. Rather, I think it was a desire to be thought magical and truely excellent and supreme. The ultimate model is not Midas but Achilles. I suspect that this is true of most CEOs.
Nate, I agree completely, but avarice seemed like a catchy shorthand for “worldly desires,” which I wanted to contrast with “higher callings.” Even here, of course, the lines are pretty difficult to discern. Most of us have mixed motives, even at our best. So the root issue is whether people who think of themselves as having a higher calling are more or less likely to cheat than people who merely want to “be thought magical and truly excellent and supreme.”
Nate, if you’re going to discount mere avarice and chalk up ethical failures to “a desire to excel and control,” you are also laying the groundwork to extend the analysis to any corporate power structure, whether in religion, government, military, or education. I would agree, and note that one finds similar susceptibility to ethical failure by leaders in those fields. The best comparison to the referenced article would probably be well-known ethical lapses of Christian televangelists (who also raise their faith as a shield), although college football coaches might give them a run for their money.
When you consider the incessant drumbeat of warning about “getting gain” in our restored scripture you could make a pretty good case that the faithful are in fact more susceptible to these lapses in order to succeed. The mantra is all around us: “why don’t we have more Mormons at the top of this field or that field”? If Mormons or other religious folk become convinced that God himself wants them to be at the top it seems not unlikely that they may choose to help God out a bit when things start to slip. There are lots of cases of rules being bent in the scriptures that one could justify himself with.
Dave makes a good point about the same basic principle applying to all sorts of organizations — including large hierarchal churches (like ours).
The whole idea reminds me of a documentary I saw on Napoleon. He always believed he had a guiding star that made him destined to greatness. It gave him the “faith” to rise much further than those around him but it didn’t make him a good man. Improper application of religious faith can have that effect on men as well.
BTW – There are some other interesting conversations regarding the relationship between worldly wealth and righteousness here and here
If Ebbers is truly concerned that his “witness for Jesus Christ” “not be jeopardized,” perhaps he should consider turning the monetary cheek & voluntarily surrendering the money in dispute.
I don’t find it surprising that faith, or anything else, is used as a defense tactic. Remember, these are folks who are dedicated to proving their innocence by any tactic, theory, etc. possible. If faith is seen as a quality that promotes a defendants character for truth & honesty by jurors…then it would be almost malpractice for a defense lawyer to not bring this into the trial.
I’ll take worldly avarice over pious greed any day. I am firmly aligned with Holden Caulfield on this one. The wealthy undertaker who encouraged the boys at chapel to “Pray to Jesus” is probably still sitting in his Cadillac at a red light somewhere, praying to Jesus to send him some more stiffs.
I wonder if the problem is less faith than how we view our faith? i.e. the issue of faith vs. works. There is also the question of whether in a faithful community whether when you fall you tend to fall farther than someone in a less faithful community where one sin doesn’t necessarily “justify” the rest.
By that I mean that say among Mormons if someone has done something bad, they often figure, well why not sex, alcohol and the rest? That is rather than considering each act in its own terms we tend to look at it as a collection. Screw up and you’ve screwed up via all.
Don’t get me wrong. I’m not saying that makes sense in the least. But I have seen it quite regularly among members struggling with faith. If a non-member decides to have sex they are far less likely it seems to start associating other behaviors with it. It can be seen as just sex with ones boyfriend or girlfriend. When a Mormon does it, it often undermines their worldview and feeling of self-worth.
None of that is to justify in the least excusing sins. Indeed I often think that tying everything together means that those able to handle it perform better. However it does seem that many (not all or even necessarily the majority) when they fall, fall much farther. Thus once you do a few lies, why not do a bunch?
That may account for many of the statistics about behaviors within religious communities which sometimes show many antisocial behaviors at higher rates than less religious communities.
Gordon,
I was wondering this myself. I saw a recent article about how Adelphia has started putting pronographic programming now. Under the prior CEO, that was definitely forbidden, sa he said that his Christian beliefs would not support it. Of course, he is also accused of essentially looting the company for his own personal gain. So it’s out with the treasury-looter and in with the porn — is that a good trade? I’m not sure.
Reminds me of the immortal words of Gordon Gecko from the movie Wall Street:
“The point is ladies and gentlemen that greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through and captures the essence of the evolutionary spirit. Greed, in all of it’s forms – greed for life, for money, knowledge – has marked the upward surge of mankind and greed – you mark my words – will not only save Teldar Paper but that other malfunctioning corporation called the USA.”
Some amount of virtue is required in order for business to function at all. From the bank teller to the mailman to the mid-level manager who knows some trade secrets to the CEO, all productive members of the workforce must have some minimal level of integrity in order for business to function. This does not, of course, make all productive workers good people. Moreover, bank tellers, mailmen, mid-level managers, and CEO’s have all, from time to time, been known to cook up (more or less) successful schemes to defraud their employers.
Nor does it matter that many of these defrauders are charming, dote on their children, or have a something resembling a religious life. We must demand that those with whom we interact behave honorably. Too many Mormons strenuously object when people take the Lord’s name in vain or use words like “chick” or “dyke” in polite conversation, but stand idly by when people really do bad things, because confronting real evil actually involves risk. We must do everything we can to ensure that corrupt men do not distort the system for their own gains. Integrity demands nothing less, even though it may often involve great personal sacrifice.
Is simple greed preferable to fanatical evil? Sure. But greed isn’t good enough either, and we should lose no opportunity to say so.
Brian: Actually, of the Wallstree morality tales churned out by Hollywood and Broadway during the 1980s, I much prefer “Other People’s Money” to “Wallstreet.” Da Vitto is wonderful as Larry the Liquidator and the movie actually talks about corporate law in a moderately intelligent way. (Although the idea that a target company wouldn’t reicorporate in Delaware because “We are a Rhode Island corporation. We have always been a Rhode Island corporation.’ is a bit far fetched.) Larry’s speech to the stock holders about creative destruction — “I bet the last company to make buggy whips made the best damn buggy whips you ever saw! How’d ya like to own stock in that corporation?” — unlike Stone’s monologues actually evidences some real understanding of the tradeoffs involved. Also, Larry’s line — “I am Robin Hood. I take from the rich and give to the middle class. Well, upper middle class.” — is classic.
The issue of avarice is brought up in Joseph Heller’s famous novel Cacth-22. By using the character Milo Minderbender, Heller criticizes how capitalism can hijack good chracter traits and use them towards a selfish end. In the book Milo is described as an epitomy of solid clean character. He was sexless, full of integrity even tempered, and hardworking.He was very child like. Yosario, the books antagonist, feared him (Wel, he feared everybody in the book,) Milio starts this huge black market sydicate all thoughout the world. He is able to justify the bombing of his own men becasue it was good for the syndicate. What’s good for the sydicate was good for all who were a part of it. In the end his operation gets so big that it collapses. All he has left is egyptian cotton and chocolate. He is able to convince himself that chocolate covered cotton tastes good and that there is a market for it. His own ideal traits disillusion him.
Mild Miderbender parrallels today’s CEOs. Although they may have great character traits that make them appear as good Christian men, these same traits can blind them to the ill effects of some of their actions.
Yossarian had good reason to be afraid of everyone (including Milo Minderbinder). Everyone was trying to kill him.
Nate,
Great reference to Catch-22, one of my favorite books (and movies). You forget, however, that Milo’s syndicate did not collapse due to his oversupply of Egyptian cotton. The Germans agreed to buy his cotton in exchange for having Yosarrian’s squadron bomb its own airbase — which accidentally killed Milo and Yossarian’s friend Nately. Later, Milo is riding in a procession through the streets of Rome standing up in a jeep like Julius Caesar, king of all he surveys. Yossarian climbs into the jeep and complains to Milo that he caused Nately’s death. Milo responded:
Milo: Nately died a wealthy man, Yossarian. He had over sixty shares in the syndicate.
Yossarian: What difference does that make? He’s dead.
Milo: Then his family will get it.
Yossarian: He didn’t have time to have a family.
Milo: Then his parents will get it.
Yossarian: They don’t need it, they’re rich.
Milo Minderbinder: Then they’ll understand.
Sorry Brett, didn’t mean to call you Nate.
“Sorry Brett, didn’t mean to call you Nate.”
I can think of no great ignomy…
Nate (really),
I got a kick out of your post on OPM also. As much as people are critical of CEO’s “blind” pursuit of profits, they need to remember that the CEO really is entrusted with growing “other people’s money.” It’s easy to say that CEOs should give more of their company’s money to charity, or that they should avoid certain lines of business, even if extremely profitable. But in the end, the CEO has an obligation to pursue (within reason) the best financial interests of the shareholders — not to make decisions based on his own moral agenda, except where doing the “right” or “moral” thing (i.e., public charitable contributions) ultimately benefits the company by improving its image, etc. Sometimes that means breaking up a company. If the shareholders don’t agree with the company’s philosophy, then they should sell their stock and invest in a different company. I don’t mean to imply that any officer is justified in any behavior that is illegal, tortious, or that breaches his or her fiduciary duty to the corporation — that should be aggressively condemned and punished.
Brian: For what it is worth the fiduciary duty for CEOs and other corporate officers consists mainly in the obligation to avoid stealing, conflicts of interest, and gross incompetence. There is precatory language in the case law about the best interests of the shareholders, but in actual legal practice this does not amount to a legally enforceable duty to maximize shareholder value. At least that is the position that — for arcane reasons related to the philosophy of contract law — I find myself arguing for in an article that I am currently working on, so I am sticking to it.
Gordon is the real expert in this area, but I think that he would agree that a CEO giving money to charity or refusing to shut down an unprofitable plant in order to save the workers is not tortious or illegal.
Yes, I’m an attorney myself and know all about the discretion built into the business judgment rule. All I meant to say was that the CEO must have at least a colorable argument that the action he took was in his reasonable judgment good for the company. For example, the CEO can (and in my view should) make even large public contributions to charitable causes because they arguably benefit the company’s public image. However, if a CEO were to anonymously donate $10 million of the company’s profits to charity, I think he or she would be in hot water. The example of refusing to shut down an unprofitable factory to save the workers’ jobs is a tougher case, but if the factory loses loads of money every year for ten straight years, and there is no prospect for improvement, and yet the CEO still refuses to shut it down because he doesn’t want to put anyone out of work, it may even fall outside the BJR. (that’s what derivative suits are for)
I guess what I’m saying is that while there is no duty, as such, to maximize shareholder value in every circumstance, I believe there is and ought to be an obligation for the CEO not to make decisions based on his own interests (or moral views) while ignoring and acting contrary to the interests of the shareholders. In fact, this actually sounds more like a duty of loyalty issue.