Greed is good. Greed is right. Greed works.Originally published in the University of Pennsylvania Journal of Business Law
By T. Leigh Anenson, J.D., LL.M. and
Donald O. Mayer, J.D., LL.M
At the top of the corporate pyramid sits the chief executive officer (“CEO”). Along with the board of directors, the CEO is primarily responsible for the success of the company. When companies fail due to a breakdown in governance or financial misconduct, shareholders lose. Other stakeholders lose as well, including competitors, employees, and ultimately the public at large.
It turns out that naked greed is not so good or right. The economic and social costs of unmitigated greed include the failure of some of the largest financial and insurance institutions in the world, government bailouts on a scale previously unimaginable, crisis in the credit markets, numerous corporate bankruptcies, and a badly demoralized stock market.
Over-leveraged and unregulated risk taking, fueled by greed, has become business as usual for some of the most revered companies in the United States. The fall of these publicly traded companies has crippled the U.S. economy and spawned a worldwide recession.
The “culture of corporate greed” decried almost a decade ago by then Federal Reserve Board Chairman Alan Greenspan following the collapse of Enron has continued unchecked. Then, as now, management irresponsibility produced a ripple effect on multiple stakeholders. At that time, innumerable news headlines revealed corporate fraud, accounting scandals, restatements of corporate earnings, and a shaken market.
Yet the greed precipitating the demise of Arthur Andersen, Tyco, Merrill Lynch, Adelphia, and other failures in governance and ethics were but a shadow of things to come.
History repeated itself despite corporate corrections and claims of moral and social obligations. Promises of ethical administration, however, were often honored in their breach.
Management deviance was likewise not deterred by the plethora of reforms and high-profile investigations and prosecutions. Neither the changes in the law nor the emphasis on its enforcement were enough to stem the ubiquity of greed. Amidst daily revelations of corporate misdeeds, the ideas of business ethics, good corporate citizenship, and organizational accountability are being addressed with new resolve.