Corporate Greed and Pathology

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The Times November 11, 2002

Snakes in suits and how to spot them
By Giles Whittell
Cold-blooded, remorseless egomaniacs in the boardroom are a hidden threat to your job, your savings and your investments. But our correspondent says the good news is that a new psychological test can flush them out


HERE ARE SOME facts: Andrew Fastow, formerly of Enron, stands accused by an American court of taking $30 million (£20 million) in kickbacks from the company while its shareholders lost more than $70 billion. Bernie Ebbers, formerly of WorldCom, is said to have arranged for his telecommunications firm to lend him $408 million as it slid towards bankruptcy. John Rigas, founder of the Adelphia cable TV giant, built himself a $13 million private golf course and, it is claimed, “borrowed” more than $3 billion from company accounts for his family while his shareholders saw $60 billion wiped from their investments. And here is a perfectly sober conclusion: if guilty, they are all psychopaths. Not killers. Not rapists. Not necessarily even criminals. Just cold-blooded, remorseless, egomaniacal psychopaths.


It’s a tricky word. Being a psychopath is not something that ordinary people aspire to, but neither does it have to involve face-eating cannibalism (Hannibal Lecter probably wasn’t a psychopath at all). The central qualification is to show no conscience; to fail to empathise.

Fastow, Rigas and the other stars of the great corporate meltdown showed little sign of conscience before — or since — being accused by the lumbering US court system, and they share other symptoms of psychopathy. They radiated charisma and authority, but hid much about themselves and their organisations. They revelled in risk, took no account of its potential cost to others or themselves, and rose to power during a time of chaos and upheaval.

When their worlds imploded, the markets staggered in disbelief. Hundreds of thousands of employees and investors lost pensions, savings and money they could ill-afford to have gambled. The bosses expressed scant regret and most of them continue to insist that they have done nothing wrong. Meanwhile, regulators, FBI agents and forensic psychologists, not to mention the fleeced American middle class, continue to scratch their heads and wonder how these apparent shysters got to where they did.

A diffident-sounding Canadian academic with a trim grey beard has an answer; possibly the answer. He first voiced it publicly to an audience of Canadian police officers in Newfoundland in August. At the end of a talk on organised crime, Dr Robert Hare mentioned his belief that some of the year’s worst accounting scandals could have been avoided if all chief executives were screened for psychopathic tendencies. He was quoted everywhere, not so much because of the sensational implication that some of America’s best-known companies had been run for most of the 1990s by people with a major mental disorder, as because of who he is.

Hare defined psychopathy for modern scientists with an exhaustive questionnaire, sold only to clinicians, called the Psychopathy Checklist, or PCL-R. It was introduced in 1980 and has become an internationally recognised instrument for identifying psychopaths. It means that when a subject scores 30 (out of a possible 40) in a prison in Dundee, an expert in Detroit will have a good idea of his proclivities. That’s the good news. The bad news is that the PCL-R revealed that psychopaths are everywhere. Most are non-violent, but all leave a trail of havoc through their families and work environments, using and abusing colleagues and loved ones, endlessly manipulating others, constantly reinventing themselves. Hare puts the average North American incidence of psychopathy at 1 per cent of the population, but the damage they inflict on society is out of all proportion to their numbers, not least because they gravitate to high-profile professions that offer the promise of control over others, such as law, politics, business management ... and journalism.

By the Hare definition there are 300,000 in Canada alone. There are at least as many in Britain— easily enough for you to know one; indeed, enough for you (3,500 of The Times’ 700,000 buyers) to be one.

Despite this, spotting psychopaths is hard, though it may be about to get easier. Next year Hare and a New York-based colleague, Dr Paul Babiak, will publish a book called Snakes in Suits: When Psychopaths Go To Work, that will at least alert the average office worker to the possibility that her amusing but exasperating — and, frankly, narcissistic and untrustworthy — colleague may be clinically psychopathic. Hare and Babiak will also produce a new diagnostic tool based on the PCL-R but designed to help businesses to keep their recruits and senior management psychopath-free.

Enter the B-Scan. It won’t be available to everyone, and it won’t be free. Slightly jarringly, one is reminded that its authors are businessmen as well as academics. But they insist that it will do a better job of raising warning flags than traditional screening techniques such as CVs (routinely falsified and seldom checked) and interviews and role-playing (“Psychopaths love this stuff,” Hare says. “It’s like a game to them.”).

If you are B-Scanned, it won’t be you answering the questions. It will be your colleagues, grading your personal style, interpersonal relations, organisational maturity and antisocial tendencies according to 16 buzz words, none of them uplifting. They include the following: insincere, arrogant, insensitive, remorseless, shallow, impatient, erratic, unreliable, unfocused, parasitic, dramatic, unethical and bullying.

Yikes. Who isn’t most of these things, at least some of the time?

I meet Dr Hare in a London hotel and find him used to such anxieties. “I know, I know,” he says. “People read this stuff and suddenly everyone around them is a psychopath. They pick up on three or four of the characteristics and say ‘yeah, he’s one’. But it’s not like that. It’s a medical syndrome. You’ve got to have the whole package.”

And when you do, what does it look like? Hare gives an example, and not just any example. He first gave it to Nicole Kidman in a private meeting requested by her to help her prepare for her memorably chilly role in Malice.

“I gave her a scene,” he says. “You’re walking down the street and there’s been an accident. A child has been hit by a car and is lying on the ground. There’s a crowd around him. The mother’s kneeling down there crying and emoting. You’re curious but not appalled. You look at the child momentarily and then you look at the mother. You walk towards her, step in some blood and then study the mother’s facial expressions for a minute or two. Then you walk back to your apartment or hotel room, walk into the bathroom and stand in front of the mirror practising those expressions. I said, ‘If you did that, people would see that you don’t understand emotion, you have no idea at all, you’re a colour-blind person trying to explain colour’. They didn’t use the scene, but they could have.”

In the workplace such a person might resemble “Dave”, a real individual studied by Babiak who cut a swath of disruption through a highly profitable American electronics company in the mid-1990s. Dave was good-looking, wellspoken and impressive in the interview that led to his recruitment. He was also a skilled and shameless liar, rude to subordinates, scheming towards his boss and quickly friendly with the firm’s top management. Already on his third marriage by his mid-thirties, he was shorttempered, happy to ignore assignments that he felt were beneath him, and quick to change the subject if challenged on a lie or asked to produce some real evidence of work.

When his boss summoned the courage and evidence to make a complaint to the company president, he found that Dave had got there first and secured for himself the status of “high-potential employee”.

The boss ended up sidelined. Dave ended up promoted, swaggering and “in love with himself”. He scored 19 on the PCL-R, lower than you would expect for a psychopathic murderer but much higher than your average working non-psychopath. He or she would score a 5 at most.

People such as Dave can be spotted early. Babiak recommends checking CVs exhaustively and auditing expenses — psychopaths like to indulge. It all seems obvious, but for the past 10 or 12 years, for most of corporate America, it hasn’t been. These have been tumultuous years in the world of business, with dot-coms booming and collapsing, older firms merging or shrinking to catch up, and hierarchies everywhere flattening faster than the boss can say: “Hey, c’mon in, my door is always open.” In short, it has been a high old time for psychopaths.

“When you see what has happened with Enron and WorldCom and all these other big corporations, and you ask how the hell could this guy get in that position, well, there are answers,” Hare says. “When the structure’s not there, when charisma is extremely important and style wins over substance, and one person ends up with three or four hundred million pounds in an offshore bank account, I start to get suspicious. And when the whole thing breaks and people are losing their pensions and livelihoods, these people give nothing back.

“Many of the high-level executives now being charged knew exactly what they were doing. They had no concern for anybody else, and you have to say they aren’t warm, loving guys.”

Likewise in politics. “Think what happened in the former Soviet Union and the former Yugoslavia. The old rules went by the board. Structure vanished and all the ethnic tension that had been held in check by central government began to emerge. It was the perfect set-up for an opportunist, a thug or a psychopath to enter and take over.”

That takeover usually has three stages. First, the psychopath identifies those who can help him and cultivates them with all his considerable charm. Then he pinpoints those who can harm him and outflanks them or stabs them in the back. Finally he makes a sycophantic but ultimately devastating beeline towards the source of power (one thinks of Hitler and Hindenburg, but also of the irrepressible Eve Harrington in All About Eve).

Psychopaths necessarily have victims, and Hare’s drive to expose the “subcriminal” ones in our midst is at least partly personal. He speaks of an old college friend, now gravely ill, who lost $500,000 in a mortgage scam to a white-collar crook who got off with a $100,000 fine and a six-month trading ban. Society still labels such people rogues at worst. Hare calls them natural- born predators.

There is a difficulty approaching all this from outside academe: it can seem as if the experts are using jargon to force a thousand shades of grey — for there are surely at least that many degrees of psychopathy — into convenient boxes for personnel managers, employment tribunals and courts.

Babiak certainly counsels caution. Being psychopathic is not a sin, let alone a ground on its own for dismissal. But underpinning the PCL-R is hard science, hard to ignore. Before he published it, Hare performed two now-famous studies which suggest that psychopaths really are different from the rest of us. In the first, subjects were told to watch a timer counting down to zero, at which point they felt a harmless but painful electric shock. Non-psychopaths showed mounting anxiety and fear. Psychopaths didn’t even sweat.

In the second, the two groups had their brain activity and response time measured when asked to react to groups of letters, some forming words, some not. Words such as “rape” and “cancer” triggered mental jolts in nonpsychopaths. In psychopaths they triggered precisely nothing.

That research is decades old now. The man behind it, instead of retiring, tours the world helping to nail the psychopaths among us and trying to make sure that his instruments are not misused. Part of his mission is to stay serious. He won’t appear on Oprah, and he won’t name names. Instead, when he sees someone in the news he thinks might be a psychopath, he says: “I’d sure as hell like to study this guy.”

“Have you heard of Jeffrey Archer?” I ask.

“Yes.”

“Is he a psychopath?”

“No comment. But it would be interesting to take a closer look.”

http://www.timesonline.co.uk/printFrien ... 77,00.html

[admin]

The Daily Show with Jon Stewart Newsletter #682 Tuesday, February 7, 2006 http://www.comedycentral.com/shows/the_ ... ndex.jhtml


============== "Daily" Quote ==============

Jon on the Enron trial:
"The trial of Enron chiefs Jeffrey Skilling and Ken Lay began four-and-a-half years after perpetrating -- allegedly -- the fraud that led to the second largest bankruptcy in American history. Why four-and-a-half years? Because apparently it's harder to bring Ken Lay to trial than it is to invade two countries."

(here in Canada, we cannot invade countries (fortunately) and we do not prosecute our white collar criminals)

[admin]

Nortel has agreed to settle the Class Action lawsuit. This will distribute some reimbursement to some investors burned by the Nortel debacle. The recovery for individual investors is expected to be minimal and anyone who has suffered significant loss is unlikely to gain satisfactory restitution. Investors with significant loss would probably be better with individual lawsuits.

For others who have no alternative hope for recovery, the Class Action solution may provide some compensation if you qualify. Therefore if you have been effected by Nortel's share value collapse you may wish to contact the legal firms participating in the class action.

A press release from a year ago is appended and it includes contact information.

If only we could make the executives and accountants who are responsible for this devastating debacle to pay the price rather than having current shareholders pay for past sins of Nortel while the looters of the company have gone with the gold.

Stan I. Buell
Small Investor Protection Association
P.O.Box 325, Markham, ON, L3P 3J8
Tel: 905-471-2911
e-mail: stanbuell@sipa.to
website: www.sipa.ca

[admin]

SEC puts spotlight on executive pay

Diane Francis
Financial Post


Saturday, February 18, 2006


NEW YORK CITY - The Securities & Exchange Commission is circulating for comment tougher rules to crack down on excessive executive compensation. Among reforms will be the requirement that companies disclose on one page in plain English the complete tally sheet paid to their top brass.

"The rules are about wage clarity and not wage controls ... and not to impose salary caps," SEC's new chairman Christopher Cox told newspapers when the rules were announced.

Reviews have been mixed but predictable. Wall Streeters, corporate law firms and Republicans have complained about the imposition of more red tape.

But investors, money managers and pension funds have been clamouring for years to arrest the greed that has gripped executive suites and that continues despite scandals.

But even defenders of the status quo had to be shocked by a recent, "eye popping" study by Harvard Law School Professor Lucien Bebchuk. In 2003, he said the top five executives in all public companies received a collective compensation which was equivalent to 10% of their companies' combined profits.

That magnitude of profit skimming should worry free enterprisers as well as investors.

It should also worry the Ontario Securities Commission which must adopt these draconian new rules.

The SEC is circulating its 370-page policy proposal for comments and plans to impose them in time for the 2007 proxy season.

Highlights include more true independence and more professionalism when making decisions on the part of corporate compensation committee members.

Cronies are often embedded in these committees and approve piecemeal perks, which, under these rules, will have to be fully disclosed every year in total.

Disclosure will extend from salary, bonuses and stock options profits to retirement bonuses, pension entitlements, other incentives, discharge packages and other perquisites.

Regulators hope to zero in on the two most egregious, hidden benefits:

- Entertainment budgets. There's abuse here and the public would be shocked at the amounts involved.

- Use of private jets. It's an open secret that executives give "free rides" to friends and family. This is justified, by executives, on the basis that the plane was flying from A to B anyway with empty seats. But that's unacceptable.

And even when compensation is paid, it's inadequate. They usually reimburse the company the equivalent of a first-class ticket. But a chartered round trip on a four-seat jet between Toronto and Miami would cost at least US$25,000. First-class tickets for four return would cost a fraction of that.

Which brings up another point. Securities regulators are not the only persons who should be weighing in on this. The Internal Revenue Service and Canada Revenue Agency should require corporations to disclose entertainment and jet perks because they are "taxable" benefits to executives that aren't being taxed.

Executives using jets for any personal use should pay the full cost -- or, at the very least, be taxed on the difference between what they defray and the true cost to the corporation.

One New York money manager, who asked to remain anonymous said in an interview jets determine his investing choices: "When a public company gets a corporate jet for the CEO I consider it a sell."

The call for a crackdown has increased along with the amount of greed. A recent study showed that median executive compensation among the Standard & Poor's 500 increased from US$2-million in 1993 to US$6.6-million in 2003, according to accounting professors from Wharton University in Pennsylvania and Vanderbilt University in Tennessee.

Watchdog organization, the Corporate Library in Portland Me., said executive compensation increased 15% in 2003 and 30% in 2004 or "about 10 times the inflation rate."

Besides full disclosure, the SEC is cracking down on the cronyism rampant in compensation committees. Some expect these committees will be shaken up as much as Sarbanes-Oxley has shaken up audit committees.

These links, between cronies on boards and compensation, is the root of the problem. In a 2005 study by Wharton accounting professors called Back Door Links between Directors and Executive Compensation, the issue was quantified.

A total of 22,074 directors working at 3,114 companies were asked about their business or social associations. Where associated, executives reaped an average of US$450,000 more per year from their boards.

"Directors who serve on multiple boards may look like outsiders, but they are not really outsiders and may indulge in mutual back scratching," said Scott Richardson, Wharton Accounting professor.

Canadian regulators should also crack down on cronyism and hidden compensation in step with the SEC's reforms in order to protect the market's integrity north of the border too.

© National Post 2006

(advocate asks of some of these corporate exec's who have figured the system well enough to pay themselves over ten percent of the "take" at some companies............are they serving the corporation, or are they serving themselves by "preying" on the corporation? Is there a possible failure of fiduciary duty to ones employer in some of these cases? It is an interesting possible discussion point)

[admin]

CORPORATE ETHICS
Ex-CEO calls executives overpaid, greedy
Zimmerman says banks are the 'princes'
By JANET MCFARLAND

Friday, October 28, 2005 Page B4



A decline in personal standards of morality and an increase in greedy executive compensation lie behind the corporate scandals that have emerged in recent years, according to one of the most outspoken members of Canada's corporate elite.
Adam Zimmerman, retired CEO of Noranda Forest Inc. and a former director on numerous major Canadian boards, told a business audience in Toronto yesterday that he is "anguished" by the excessive levels of compensation he sees today, citing a recent example of Citigroup chairman Sanford Weill, who earned a total of almost $1-billion over the past decade.

"These huge remuneration schemes are the root cause of all that is going wrong in the world," Mr. Zimmerman said in a speech to the Toronto CFA Society.

Mr. Zimmerman says boards are under a misperception that they have to reward their CEOs excessively because they are the only people qualified to run their companies.

"It's a real false belief there's only one guy who can run any one of these big companies. There are a lot of good people out there."

Mr. Zimmerman said he blames disclosure rules that require companies to reveal the compensation of their top executives, saying they caused executives to begin competing for higher salaries. He said the major banks are the "princes" of the compensation world, and other companies have followed them.

"The end of it is that it's not at all indecent to produce any amount of money provided the company has the cash," he said.

Mr. Zimmerman suggested executives should be required to also disclose their charitable donations, and said CEO pay should be put into perspective with the salaries of normal employees at their companies.

"Were it not that they do it within the law, I would think executives are stealing money," he said.

Mr. Zimmerman said many recent corporate governance initiatives are little more than an attempt to create systems to control human nature, which is difficult to do. Many new standards are based on the simple idea that honesty is the best policy, he said.

"There was a time when individual ethics governed behaviour . . . There was trust and honour. Business, however, has become much more complicated . . . Personal morality has been bent out of shape, and every company thinks it's unique."

Also yesterday, securities lawyer and corporate director Peter Dey told the CFA Society that most complaints he hears about corporate governance going too far are based on concerns that directors have a limited amount of time and are wasting it on due diligence and technical compliance issues.

He said governance hasn't gone too far, but boards haven't done enough to find more efficient processes to free up time to focus on their main task. He said part of good governance is finding ways to resolve this dilemma.

He added that many new governance requirements demand a great deal of time as new systems are being created, but much less once they are in place.

"It's very important to have fun as a director. And the most fun as a director is not receiving legal advice . . . The most fun as a director is understanding a company's strategy and being able to contribute to the development of the strategy."

[admin]

In the continuing saga of Lord Conrad, the stories of interest keep coming out. I personally have nothing against this man, have never met him. I do, however find him a fascinating study in how ego and entitlement can apparently ruin a person.

Today's globe and mail resports that Lord Black is being sued by Sotheby's Auction for not paying them the commission of $557,000 owed to them on the sale of his Park Ave appartment.

I find the stories like this, along with the comments coming from the Enron trial underway quite telling. They indicate a strong tendency towards pathalogical behavior among some of the upper echelons of society. It seems that humans will say and do almost anything in order to get on top or to remain there.

Fascinating stuff.

[admin]

from FORBES Business Mag
http://www.forbes.com/business/free_for ... 3/111.html

Why Not?
When the Blind See Better
Ian Ayres & Barry Nalebuff, 02.13.06, 12:00 AM ET


Power To The People
Tech's Top Dealmakers
Norfolk Southern
Foreign Bailouts For U.S. Airlines?
GM: Its Death Is Exaggerated


The combined compensation for the heads of America's 500 biggest companies increased by 54% in 2004. Harvard professor Lucian Bebchuk's calculations show that the top five executives now collect 10% of the average big firm's net income, double the percentage a decade ago. This is a problem that affects not just morale but competitiveness.

It's devilishly difficult to figure out how much bosses should be paid. Pay too little and your company will not attract quality leadership. Pay too much and you shrink the bottom line.

We don't want Stalinist central planning. But this is an area where the invisible hand of the market works poorly. Executive compensation is determined by a compensation committee of the board. In practice, the committee subcontracts the work to a compensation consultant. Consultants only make matters worse. Although they are supposed to be independent, the reality is that they are more likely to be rehired when the chief executive is happy with the result. Every firm likes to think its boss, like the children of Lake Wobegon, is above average. Thus the compensation consultant is more likely than not to find that the client has an above-average performer in the corner office.

The problem is that when most firms pay an above-average wage, the average skyrockets. Even in a world where half of the firms think that the chairman deserves just the average but the other half pays more than the average, then average pay will explode. If this year's numbers are between $1 million and $3 million, and next year everyone gets at least the average, then the bottom half will all jump to $2 million, a 33% increase for the worst performers.

There is a solution to this mess. To increase the objectivity of compensation consultants, we should give them less information. The consultants should be hired blind. They would be independent because they wouldn't know which side of their bread was buttered.

The compensation committee would arrange for a law firm to hire the consultant without disclosing the client. The consultant would be given a list of ten firms in the industry. The consultant would be asked to rank the executives' performance and suggest salaries for each. Half the chief executives would be ranked in the bottom half and presumably would be paid accordingly.

Indeed, the Securities & Exchange Commission could mandate that compensation studies be made public. Shareholders might like to know if the other consultants consistently rank their chief executive below average.

Not that it would be any cause for alarm if half of publicly traded firms discovered that their chief executive officer falls in the bottom half. Remember the old joke about what they call the person who graduates at the bottom of the class at Harvard Medical School? The answer is "doctor."

Consultants will complain that they can't do their job without insider access to a firm. But that's a problem that biases the current system because they only get insider access to the client. Maybe the comparable bosses also look better the closer you look.

We know that blind evaluations work from our own experience. The late economist James Tobin convinced Yale to adopt this approach for evaluating professors. When Yale wants to hire a senior professor from a different university, we ask outside reviewers to rank a list of ten famous professors in the field. It may well be the case that some of the names are not interested in the job. But the reviewers don't know who is a live candidate and who isn't. It's hard to play favorites when the reviewer doesn't know who you are looking at.

We also grade exam papers with code numbers replacing students' names. Nowadays orchestra auditions take place with the player behind a screen. Blind auditions have miraculously increased the probability that women will be hired. Since the introduction of screened auditions in the early Eighties, the percentage of female players has increased fivefold in the top U.S. orchestras.

Just maybe, screened evaluations of chief executive officers could spur an analogous revolution in executive pay.

Labor economists Claudia Golden and Cecilia Rouse at Harvard and Princeton, respectively, have studied the effect of blind auditions on orchestras; their paper can be found by Googling "blind auditions." You can get a FORBES scorecard on executive pay versus performance by going to Forbes.com/lists and clicking on Top-Earning CEOs.

Ian Ayres and Barry Nalebuff are professors at Yale Law School and Yale School of Management.

[admin]

Coxe skewers Wall Street swindlers
Book blames 'shills, mountebanks' for stock bubble

Jonathan Chevreau
Financial Post


Saturday, June 07, 2003

Shills and mountebanks, beware -- after 31 years in the investment business, veteran investment strategist and columnist Don Coxe has published his first book.

Out this week, The New Reality of Wall Street [McGraw Hill, New York, 2003] is a highly literate recap of the events leading to the great U.S. stock market bubble which burst in 2000. It also offers investors a cogent strategy for enduring the aftermath that's still very much with us.

Coxe, 67, is chairman and chief strategist of Chicago-based Harris Investment Management, part of the Bank of Montreal. To describe those responsible for "the ethical lapse of the century," he coins the colourful phrase "shills and mountebanks." We'll shorten that to S&M henceforth, as Coxe does in the book.

"Shill" is a well known term investor advocate Joe Killoran uses to describe some investment seminar speakers. Technically, a "shill" is an accomplice posing at public events as an enthusiastic customer to entice potential buyers or gamblers. Shills may pose as apparently unbiased advocates while pushing an audience to a particular point of view, or a financial product in the case of seminar shills.

Mountebanks are outright swindlers or charlatans, and presumably pay the shills their soul-compromising stipends.

I had to consult the Oxford Dictionary for a precise definition of mountebank. It's derived from the Italian montambanco, which means "climb on bench." That's an historical reference to itinerant quacks who mounted platforms to pitch snake oil.

What galls Coxe is the S&M crowd largely got away with their dastardly deeds. He's disgusted by the slap on the wrist U.S. regulators gave them recently. Compared to the US$10-trillion of investor wealth wiped out, the US$1.4-billion in fines paid by Wall Street's major investment banks is chicken feed: essentially the cost of doing business.

"Never in the history of major stock markets were the rewards so skewed to insiders at the expense of outsiders," he writes.

In an interview, he says some Wall Street leaders "are clearly shameless," with many still employed.

"Mountebanks have more job security than any other occupation. They're paid obscene amounts of money and they behave obscenely."

He sees his book as a form of "j'accuse" and hopes it stimulates long overdue reform. Because he's not an academic but an industry practitioner, "it's hard for them to brush me aside ... The emperor really did have no clothes."

Comparing modern Wall Street to history's robber barons is unfair, he says, since the latter actually created wealth and industrial infrastructure. Instead, Wall Street forged an unholy alliance with Silicon Valley, enriching insiders with stock options at the expense of ordinary shareholders.


jchevreau@nationalpost.com

[admin]

this book appears to have a set of "rules to live by", for thise aspiring to be corporate greats...........or corporate Dilberts, whichever you prefer.

It does, however explain a great deal of the "without conscience" types of pathalogical thinking and behaviors that get some of those willing to do anything to gain power, into power.

The 48 Laws of Power
From Wikipedia, the free encyclopedia
http://en.wikipedia.org/wiki/The_48_Laws_of_Power
The 48 Laws of Power is a seminal book by Robert Greene and Joost Elffers. It is a manual which provides rules, or laws, for those who seek to increase their power in life. The book ascribes to a simple premise: "certain actions always increase one's power ... while others decrease it and even ruin us."

The book uses ancedotes from notable historical figures such as Machiavelli, Talleyrand, Bismarck, Catherine the Great, Mao, Haile Selassie, Lola Montes and various con artists in order to give meaning and examples to the 48 rules.

Published in September 1998, the book has been compared to Sun-Tzu's The Art of War, another manual which provides rules to live ones life by.


Laws of Power
The laws of power given in the book are:

1. Never Outshine The Master

Always make those above you feel comfortably superior. In your desire to please or impress them, do not go to far in displaying your talents or you might accomplish the opposite – inspire fear and insecurity. Make your masters appear more brilliant than they are and you will attain the heights of power.

2. Never Put Too Much Trust In Friends, Learn How To Use Enemies

Be wary of friends – they will betray you more quickly, for they are easily aroused to envy. They also become spoiled and tyrannical. But hire a former enemy and he will be more loyal than a friend, because he has more to prove. In fact, you have more to fear from friends than from enemies. If you have no enemies, find a way to make them.

3. Conceal Your Intentions

Keep people off balance and in the dark by never revealing the purpose behind your actions. If they have no clue what you are up to, they cannot prepare a defense. Guide them far enough down the wrong path, envelop them in enough smoke, and by the time they realize your intentions, it will be too late.

4. Always Say Less Than Necessary

When you are trying to impress people with words, the more you say, the more common you appear, and the less in control. Even if you are saying something banal, it will seem original if you make it vague, open ended, and sphinx like. Powerful people impress and intimidate by saying less. The more you say, the more likely you are to say something foolish.

5. So Much Depends On Reputation – Guard It With Your Life

Reputation is the cornerstone of power. Through reputation alone you can intimidate and win; once it slips, however, you are vulnerable, and will be attacked on all sides. Make your reputation unassailable. Always be alert to potential attacks and thwart them before they happen. Meanwhile, learn to destroy your enemies by opening holes in their own reputations. Then stand aside and let public opinion hang them.

6. Court Attention At All Cost

Everything is judged by its appearance; what is unseen counts for nothing. Never let yourself get lost in the crowd, then, or buried in oblivion. Stand out. Be conspicuous, at all cost. Make yourself a magnet of attention by appearing larger, more colorful, more mysterious than the bland and timid masses.

7. Get Others To Do The Work For You, But Always Take The Credit

Use the wisdom, knowledge, and legwork of other people to further your own cause. Not only will such assistance save you valuable time and energy, it will give you godlike aura of efficiency and speed. In the end your helpers will be forgotten and you will be remembered. Never do yourself what others can do for you.

8. Make Other People Come To You – Use Bait If Necessary

When you force the other person to act, you are the one in control. It is always better to make your opponent come to you, abandoning his own plans in the process. Lure him with valuable gains – then attack. You hold the cards.

9. Win Through Your Actions, Never Through Argument

Any momentary triumph you think you have gained through argument is really a Pyrrhic victory: The resentment and ill will you stir up is stronger and last longer than any momentary change of opinion. It is much more powerful to get others to agree with you through your actions, without saying a word. Demonstrate, do not explicate.

10. Infection: Avoid The Unlucky And The Unhappy

You can die from someone else’s misery – emotional states are as infectious as diseases. You may feel you are helping the drowning man but you are only precipitating your own disaster: The unfortunate sometimes draw misfortune on themselves; they will also draw it on you. Associate with the happy and fortunate instead.

11. Learn To Keep People Dependant Of You

To maintain your independence you must always be needed and wanted. The more you are relied upon, the more freedom you have. Make people dependent on you for their happiness and prosperity and you have nothing to fear. Never teach them enough so that they can do without you.

12. Use Selective Honesty And Generosity To Disarm Your Victim

One sincere and honest move will cover over dozens of dishonest ones. Open – hearted gestures of honesty and generosity bring down the guard of even the most suspicious people. Once your selective honesty opens a hole in their armor, you can deceive and manipulate then all at will. A timely gift – a Trojan horse – will serve the same purpose.

13. When Asking For Help, Appeal To People’s Self Interest, Never To Their Mercy Or Gratitude

If you need to turn to an ally for help, do not bother to remind him of your past assistance and good deeds. He will find a way to ignore you. Instead, uncover something in your request, or in your alliance with him, that will benefit him, and emphasize it out of all proportion. He will respond enthusiastically when he sees something to be gained for himself.

14. Pose As A Friend, Work As A Spy

Knowing about your rival is critical. Use spies to gather valuable information that will help you a step ahead. Better still: Play the spy yourself. In polite social encounters, learn to probe. Ask indirect questions to get people to reveal their weaknesses and intentions. There is no occasion that is not an opportunity for artful spying.

15. Crush Your Enemy Totally

All great leaders since Moses have known that a feared enemy must be crushed completely. (Sometimes they have learned this the hard way) If one ember is left alight, no matter how dimly it smolders, a fire will eventually break out. More is lost through stopping halfway than through total annihilation: The enemy will recover, and will seek revenge. Crush him, not only in body but in spirit.

16. Use Absence To Increase Respect And Honor

Too much circulation makes the price go down: The more you are seen and heard from, the more common you appear. If you are already established in a group, temporary withdrawal from it will make you more talked about, even more admired. You must learn when to leave. Create value through scarcity.

17. Keep Others In Suspended Terror: Cultivate An Air Of Unpredictability

Humans are creatures of habit with an insatiable need to see familiarity in other people’s actions. Your predictability gives them a sense of control. Turn the tables: Be deliberately unpredictable. Behavior that seems to have no consistency or purpose will keep them off-balance, and they will wear themselves out trying to explain your moves. Taken to an extreme, this strategy can intimidate and terrorize.

18. Do Not Build Fortresses To Protect Yourself – Isolation Is Dangerous

The world is dangerous and enemies are everywhere – everyone has to protect themselves. A fortress seems the safest. But isolation exposes you to more dangers than it protects you from – it cuts you off from valuable information, it makes you conspicuous and an easy target. Better to circulate among people, find allies, mingle. You are shielded from your enemies by the crowd.

19. Know Who You Are Dealing With – Do Not Offend The Wrong Person

There are many different kinds of people in this world, and you can never assume that everyone will react to your strategies in the same way. Deceive or outmaneuver some people and they will spent the rest of their lives seeking revenge. They are wolves in lamb’s clothing. Choose your victims and opponents carefully, then – never offend or deceive the wrong person.

20. Do Not Commit To Anyone

It is the fool that always rushes to take sides. Do not commit to any side or cause but yourself. By maintaining your independence, you become the master of others – playing people against one another, make them pursue you.

21. Play A Sucker To Catch A Sucker – Seem Dumber Than Your Mark

No one likes feeling stupider than the next person. The trick, then, is to make your victims feel smart – and not just smart, but smarter than you are. Once convinced of this, they will never suspect that you may have ulterior motives.

22. Use The Surrender Tactic: Transform Weakness Into Power

When you are weaker, never fight for honor’s sake; choose surrender instead. Surrender gives you time to recover, time to torment and irritate your conqueror, time to wait for his power to wane. Do not give him the satisfaction of fighting and defeating you – surrender first. By turning the other cheek you infuriate and unsettle him. Make surrender a tool of power.

23. Concentrate Your Forces

Conserve your forces and energies by keeping them concentrated at their strongest point. You gain more by finding a rich mine and mining it deeper, than by flitting from one shallow mine to another – intensity defeats extensity every time. When looking for sources of power to elevate you, find the only key patron, the fat cow who will give you milk for a long time to come.

24. Play The Perfect Courtier

The perfect courtier thrives in a world where everything resolves around power and political dexterity. He has mastered the art of indirection; he flatters, yield to superiors, and asserts power over other in the most oblique and graceful manner. Learn and apply the laws of courtiership and there will be no limit to how far you can rise in the court.

25. Re-Create Yourself

Do not accept the role that society foists on you. Re-create yourself by forcing a new identity, one that commands attention and never bores the audience. Be the master of your own image rather than letting others define it for you. Incorporate dramatic devices into your public gestures and actions – your power will be enhanced and your character will seem larger than life.

26. Keep Your Hands Clean

You must seem a paragon of civility and efficiency: Your hands are never soiled by mistakes and nasty deeds. Maintain such a spotless appearance by using others as scapegoats and cat’s – paws to disguise your involvement.

27. Play On People’s Need To Believe To Create A Cult-Like Following

People have an overwhelming desire to believe in something. Become the focal point of such desire by offering them a cause, a new faith to follow. Keep your words vague but full of promise; emphasize enthusiasm over rationality and clear thinking. Give your new disciples rituals to perform, ask them to make sacrifices on your behalf. In the absence of organized religion and grand causes, your new belief system will bring you untold power.

28. Enter Action With Boldness

If you are unsure about a course of action, do not attempt it. Your doubt and hesitations will infect your execution. Timidity is dangerous: Better to enter with boldness. Any mistakes you commit through audacity are easily corrected with more audacity. Everyone admires the bold; no one honors the timid.

29. Plan All The Way To The End

The ending is everything. Plan all the way to it, taking into account all the possible consequences, obstacles’ and twists of fortune that might reverse your hard work and give the glory to others. By planning to the end you will not be overwhelmed by circumstances and you will know when to stop. Gently guide fortune and help determine the future by thinking far ahead.

30. Make Your Accomplishments Seem Effortless

Your actions must seem natural and executed with ease. All the toil and practice that go into them, and also all the clever tricks, must be concealed. When you act, act effortlessly, as if you could do much more. Avoid the temptation of revealing how hard you work – it only raises questions. Teach no one your tricks or they will be used against you.

31. Control The Options: Get Others To Play With The Cards You Deal

The best deceptions are the ones that seem to give the other person a choice: Your victims feel they are in control, but are actually your puppets. Give people options that come out in your favor whichever one they choose. Force them to make choices between the lesser of the two evils, both of which serve your purpose. Put them on the horns of a dilemma: They are gored wherever they turn.

32. Play The People’s Fantasies

The truth is often avoided because it is ugly and unpleasant. Never appeal to truth and reality unless you are prepared for the anger that comes from disenchantment. Life is so harsh and distressing that people who can manufacture romance or conjure up fantasy are like oases in the desert: Everyone flocks to them. There is great power in tapping into the fantasies of the masses.

33. Discover Each Man’s Thumbscrew

Everyone has a weakness, a gap in the castle wall. That weakness is usually insecurity, an uncontrollable emotion or need; it can also be a small secret pleasure. Either way, once found, it is a thumbscrew you can turn to your advantage.

34. Be Royal In Your Own Fashion: Act Like A King To Be Treated Like One

The way you carry yourself will often determine how you are treated: In the long run, appearing vulgar or common will make people disrespect you. For a king respects himself and inspires the same sentiment in others. By acting regally and confident of your powers, you make yourself seem destined to wear a crown.

35. Master The Art Of Timing

Never seem to be in a hurry – hurrying betrays a lack of control over yourself, and over time. Always seem patient, as if you know that everything will come to you eventually. Become a detective of the right moment; sniff out the spirit of the times, the trends that will carry you to power. Learn to stand back when the time is not yet ripe, and to strike fiercely when it has reached fruition.

36. Disdain Things You Cannot Have: Ignoring Them Is The Best Revenge

By acknowledging a petty problem you give it existence and credibility. The more attention you pay an enemy, the stronger you make him; and a small mistake is often made worse and more visible when you try to fix it. It is sometimes best to leave things alone. If there is something you want but cannot have, show contempt with it. The less interest you reveal, the more superior you seem.

37. Create Compelling Spectacles

Striking imaginary and grand symbolic gestures create the aura of power – everyone responds to them. Stage spectacles for those around you, then, full of arresting visuals and radiant symbols that heighten your presence. Dazzled by appearances, no one will notice what you are really doing.

38. Think As You Like But Behave Like Others

If you make a show of going against the times, flaunting your unconventional ideas and unorthodox ways, people will think that you only want attention and that you look down upon them. They will find a way to punish you for making them feel inferior. It is far safer to blend in and nurture the common touch. Share your originality only with tolerant friends and those that are sure to appreciate your uniqueness.

39. Stir Up Waters To Catch Fish

Anger and emotion are strategically counterproductive. You must always stay calm and objective. But if you can make your enemies angry while staying calm yourself, you gain a decided advantage. Put your enemies off-balance: Find the chink in their vanity through which you can rattle them and you hold the strings.

40. Despise The Free Lunch

What is offered for free is dangerous – it usually involves either a trick or a hidden obligation. What has worth is worth paying for. By paying your own way you stay clear of gratitude, guilt, and deceit. It is also often wise to pay the full price – there is no cutting corners with excellence. Be lavish with your money and keep it circulating, for generosity is a sign and a magnet for power.

41. Avoid Stepping Into A Great Man’s Shoes

What happens first always appears better and more original than what comes after. If you succeed a great man or have a famous parent, you will have to accomplish double their achievements to outshine them. Do not get lost in their shadow, or stuck in a past not of your own making: Establish your own name and identity by changing course. Slay the overbearing father, disparage his legacy, and gain power by shining in your own way.

42. Strike The Shepard And The Sheep Will Scatter

Trouble can often be traced to a single strong individual – the stirrer, the arrogant underling, the poisoner of goodwill. If you allow such people room to operate, others will succumb to their influence. Do not wait for the troubles they cause to multiply, do not try to negotiate with them – they are irredeemable. Neutralize their influence by isolating or banishing them. Strike at the source of the trouble and the sheep will scatter.

43. Work On The Hearts And Minds Of Others

Coercion creates a reaction that will eventually work against you. You must seduce others into wanting to move in your direction. A person you have seduced becomes your loyal pawn. And the way to seduce others is to operate on their individual psychologies and weaknesses. Soften up the resistant by working on their emotions, playing on what they hold dear and what they fear. Ignore the hearts and minds of others and they will grow to hate you.

44. Disarm And Infuriate With The Mirror Effect

The mirror reflects reality, but is also the perfect tool for deception: When you mirror your enemies, doing exactly as they do, they cannot figure out your strategy. The Mirror Effect mocks and humiliates them, making them overreact. By holding up a mirror to their psyches, you seduce them with the illusion that you share their values; by holding up a mirror to their actions, you teach them a lesson. Few can resist the power of the Mirror Effect.

45. Preach The Need For Change, But Never Reform Too Much At Once

Everyone understands the need for change in the abstract, but in the day-to-day level people are creatures of habit. Too much innovation is traumatic, and will lead to revolt. If you are new to a position of power, or an outsider trying to build a power base, make a show of respecting the old way of doing things. If change is necessary, make it feel like a gentle improvement on the past.

46. Never Appear Too Perfect

Appearing better than others is always dangerous, but most dangerous of all is to appear to have no faults or weaknesses. Envy creates silent enemies. It is smart to occasionally display defects, and admit to harmless vices, in order to deflect envy and appear more human and approachable. Only gods and the dead can seem perfect with impunity.

47. Do Not Go Past The Mark You Aimed For; In Victory, Learn When To Stop

The moment of victory is often the moment of greatest peril. In the heat of victory, arrogance and overconfidence can push you past the goal you had aimed for, and by going too far, you make more enemies than you defeat. Do not allow success to go to your head. There is no substitute for strategy and careful planning. Set a goal and when you reach it, stop.

48. Assume Formlessness

By taking a shape, by having a visible plan, you open yourself to attack. Instead of taking a form for your enemy to grasp, keep yourself adaptable and on the move. Accept the fact the nothing is certain and no law is fixed. The best way to protect yourself is to be as fluid and formless as water, never bet on stability or lasting order. Everything changes.

[admin]

After Enron, Corporate Wrongdoing Still Thrives
by Ben Stein


Monday, May 29, 2006

Many years ago, I spent the majority of my time studying the works of the Drexel Burnham Lambert and its evil junk bond empire. One part of the empire was insurance companies, which Drexel used as a blood bank to buy its overvalued (but by no means valueless) securities.

The money these Drexel guys made was stupendous. I was envious. I wanted to be rich, too. It occurred to me that I, who had a tiny amount of money put by, might be able along with some others to buy a small insurance company, loot it the way I had seen the Drexel people do it (they, of course, disputed that they did it ), and then I would be rich.


After all, I had studied closely how it was done, and I was fairly sure I could do it and become financially independent for life. Yes, I would surely be sued, but I would settle for pennies on the dollar and walk away still a rich man.


"How Could You Look Yourself in the Mirror Every Morning?"


I told one of my closest friends, a brilliant lawyer named Daniel Mogin, my idea. He agreed that it would work, but then he said, "I know you. You're not that kind of a guy. You wouldn't be able to live with yourself knowing you had looted innocent people out of their insurance policies and cheating people who had never done anything but trust you."


He was right, and his words were like the script of one of those old movies where a wavering soldier is slapped in the face by his superior, and the waverer then says, "Thanks. I needed that." I needed to realize that my wanting to be rich is a pretty damned selfish, ridiculously unethical, and trivial matter compared with betraying the trust of people in America who had been so good to me and to my family. I never thought of it again, and I hope I never will.


But the memory comes to mind as I watched TV and saw the conviction on May 25 of Enron's Kenneth Lay and Jeffrey Skilling on many counts of looting their company, fraud, insider trading, and other illegal acts.


What I kept thinking was, "Mr. Lay and Mr. Skilling, the people you were looting were men and women at your company who had their life savings in Enron stock. They were men and women who you passed by in the hall every day. They were the people who made your coffee and brought you your mail and parked your car. They were people who were proud to work at Enron and thought they were at a heads-up deal. They trusted you with -- quite literally -- their lives. They never did a bad thing to you, and yet you ruined their lives and their hopes. You sold Enron stock while telling them to buy it. You knew the company was a shell game, and yet you urged totally innocent people to buy still more of it for their retirement accounts. How could you look yourself in the mirror every morning?"


More Looting


Now, it would be nice if the Lay and Skilling convictions marked the end of this kind of fraud. The terrible part is that it's still going on in a huge way. Lately, investigative reporters at "The Wall Street Journal," aided by university professors, are discovering that top executives at some of the biggest companies in the nation are looting their companies in an almost unbelievably brazen way.


This is how it was carried out: Companies often issue stock options to executives as part of their compensation. These options allow managers to buy stock at a certain price, supposedly chosen based on an average stock market price for a period or some other similar metric. If the stock price rises above that option "strike" price, the boss makes money. If the stock falls below it, he doesn't.


But the men in these recently uncovered deals were apparently secretly and fraudulently back-dating the strike price to be the lowest price of the year or the quarter long after the stock had risen dramatically from that price. Thus, a huge profit was built into the deal, a kind of profit totally unavailable to executives at honestly run companies -- and to ordinary stockholders.



That is, suppose a company's stock price had fluctuated between $10 and $50 per share over a year. At the end of the year, the compensation committee of the board of directors would find the day the stock was $10 and make that the strike price, designating the week that price occurred as the week when the options were granted. The men who had these options were guaranteed to make money -- lots of money. One of the men in question, at huge HMO, had made more than a billion dollars (yes, with a B) on his options.


For Rich Guys, Isn't It Ever Enough?


As I see it, this is the most explicit kind of insider trading (a felony), fraud in that it was not disclosed in the companies' filings, which gave no hint that the strike prices were rigged (also a felony), looting of corporate property in that this behavior is going to trigger immense accounting liability for the company and likely large federal penalties (possibly also a felony). I see it as plain stealing the stockholders blind.


What I keep thinking is, "Isn't there ever enough for you guys? You're already rich in every single case. You already have immense corporate perks. Isn't that enough? Do you also have to steal?"

The stockholders of these companies bought in good faith. They trusted management with their financial futures. What kind of people would rob from men and women who had already paid them immense wages and perks and had never done a mean thing to these guys?


Just by the law of large numbers, some of the people who were being ripped off in these cases and at Enron were soldiers now fighting in Iraq or Afghanistan, firemen risking their lives to save children in burning houses, teachers struggling to teach children without fathers. How could these executives steal from such people?


An Insane Executive-Compensation Culture


Now, we have a big challenge in America. Will we prosecute these people to the fullest extent of the law? Or will we let them off with civil penalties that are paid by insurance companies or the stockholders themselves in any event?


In many U.S. states, if you rob a convenience store with a gun and get $40, you go to prison for 20 years and you should. If you sell marijuana and are caught three times, you go to prison in some states for life -- even if no one was really injured. If you're a black kid who steals a bicycle, you go to jail in many places.


But what if you use cunning stock-option plays to unethically make hundreds of millions? Then, you get a Gulfstream Jet, ski chalets, and nine-figure bank accounts.


This is a national disgrace. We absolutely have to make an example of these corporate wrongdoers and the boards of directors that let it happen. And the example I gave about phony stock-option prices is only one of many. The whole executive-compensation culture has become insane, with corporate executives draining the lifeblood of the nation while worker salaries stagnate, and employees lose their jobs and their pensions (just talk to the people at United Airlines or Delphi).


This country is at war. It's an outrage that while we're at war, executives who are already fabulously rich are stealing and are at liberty. America is humiliated by its brightest and most ambitious looting it, while its young men and women die for it.


If these people have no shame, if they had no Dan Mogin to slap them and wake them up to their duty to their neighbors, maybe the Graybar Hotel will be a wake-up call to the next generation who consider that theft is just a part of their compensation package.


President Bush is looking for an agenda at home. How about a simple one? Justice for all.

[admin]

No. 178A No 178A
ISSN 1180-2987
Legislative Assembly of Ontario
Second Session, 38th Parliament
Official Report Journal of Debates (Hansard)
Tuesday 29 May 2007
Speaker Honourable Michael A. Brown
Clerk Deborah Deller
9057 LEGISLATIVE ASSEMBLY OF ONTARIO 29 MAY 2007
Mr. Michael Prue (Beaches–East York): On a point of order, Mr. Speaker: I rise today to introduce
and welcome supporters of my new private member’s bill. Those people being present are: Stan Buell,
president of the Small Investor Protection Association; Art Field, president of the National Pensioners
and Senior Citizens Federation; Judy Muzzi, past president of the United Senior Citizens of Ontario;
and Pamela Reeve, a member of the investor advisory committee of the Ontario Secur-ities
Commission. They are here to see the Legislature in its full flower. Welcome.
9058 LEGISLATIVE ASSEMBLY OF ONTARIO 29 MAY 2007
CONRAD BLACK EXECUTIVE COMPENSATION ABUSE ACT, 2007
Mr. Prue moved first reading of the following bill:
Bill 230, An Act to amend the Business Corporations Act to provide protections against executive
compensation abuse / Projet de loi 230, Loi modifiant la Loi sur les sociétés par actions afin de prévoir
des protections contre l’indemnisation abusive des membres de la direction.
The Speaker (Hon. Michael A. Brown): Is it the pleasure of the House that the motion carry? Carried.
The member may wish to make a brief statement.
Mr. Michael Prue (Beaches–East York): The Business Corporations Act, also called the
Conrad Black act in short, is amended to add provisions respecting compensation of executives.
Provisions are added requiring that a vote on executive compensation be held at every annual
meeting of shareholders of a company that offers securities to the public. The act is also
amended to provide that if certain executives do not meet any job performance standards to
which their compensation is related, they must pay back a portion of that compensation.

[admin]

interesting comments today from Lord Black of whatever-he-lords-over, as written in the globe, June 8, 07 by Paul Waldie, "BLACK LASHES OUT OVER STATE OF CRUMBLING EMPIRE".

In it he is quoted as referring to his former crumbling companies under the stewardship of receivers........"Charlatans", he refers to them as.

The article goes on to quote, "there is no possible justification for the fees they have charged".

Is it just me me or is there some irony in a guy who appears to have lived the life of some kind of .......well, LORD, not only in his mind, but in his lifestyle, using corporate homes, jets, salaries and his position to do so, to be criticizing other for allegedly doing much the same??

The article goes on to state that some of the expense of his former crumbling companies is about $79 mil in legal fees paid for Mr. Black.

“The salary of a chief executive of a large
corporation is not a market award for
achievement. It is frequently in the nature
of a warm personal gesture by the
individual to himself.”
- John Kenneth Galbraith

Lord Black might someday be found out to be totally innocent........or he might on the other hand be found out to be a very, very generous man. (When using other peoples assets)

I cannot wait for the day when psychopathic profiling is a well accepted concept for corporate, government and other such "leaders", or those who gravitate to those kinds of roles. It will be fascinating to follow with these kinds of scientific tools, and it may explain some of the madness and entitlement of some in the headlines of late.

[admin]

Black mark
High-profile executive's guilty verdict sends powerful message about arrogance

Sat Jul 28 2007
Barbara Bowes - Working World



THE decision is in, the news is out. Another high-profile corporate executive in the name of Conrad Black has bit the dust. Guilty of mail fraud and guilty of obstruction of justice. What a tumble from the ranks of success! What a shame!

Yet, while the crackdown on corporate fraud has been ongoing for at least five years and there's been a demand to fix things through new legislation or accounting rules, there hasn't been much fuss about one of the key underlying elements of corporate fraud: that of extreme arrogance or hubris.

As evidenced by this recent example of complex, self-serving behind-the-scenes transactions, executive arrogance is much more than just a faulty personality. You now know it will inevitably hurt your corporate image and your bottom line. In fact, this behaviour can literally drive your company to ruin.

Thinking they are above the law, arrogant executives often see more regulation and rules as simply new opportunities to look for loopholes and devise clever corporate opportunities to continue funneling resources to their own pockets.

But what is arrogance? The Merriam-Webster dictionary suggests the term stretches back to the 12th century and refers to having or displaying excessive self-esteem such that individuals show scorn and disdain for those they consider inferior. It suggests conceit and a contemptuous haughtiness that often results in tyrannical, controlling behaviour.

In layman's language, we might say that arrogant individuals think nothing of "thumbing their nose" at the law, sincerely believing that any corporate system of checks and balances do not apply to them. If Harry Potter, the young lad from the famous Hogwarts School of Witchcraft and Wizardry were asked his opinion, he might say that instead of fighting against evil, these arrogant executives have created a dangerous cauldron of brew that poisons the goodwill of shareholders, the employees and the public alike.

Where do these arrogant "dragons" come from anyway? Some psychologists say these individuals grew up constantly being compared to impossible standards and harbour serious self doubts about their worthiness. Their personal power and security comes from needing to know it all or having it all.

According to Wilson Banwell, a leading human services organization, individuals build their arrogance on a foundation of either truth or illusion. They strive to escape their insecurity by seeking some kind of higher status that will show the world they are more than just ordinary. They seek to gain power through special qualities or possessions such as money, intellect, education, lineage, title or job status, good looks or athleticism. They then use these attributes to align themselves with some kind of exclusive status group.

But no matter what the source of arrogance, their assumed superiority soon bleeds into their assumptions about themselves as a whole. Similar to Conrad Black -- who strove so hard to gain a lordship -- once they have gained this status, they feel they have finally "arrived" in the land of the privilege and exclusivity. They literally believe they are invulnerable or untouchable and treat others with a condescending attitude and measured humiliation.

Can you imagine the impact of extreme arrogant behaviour on the culture of an organization or on the morale and productivity of employees? No matter which way you look at it, neurotic executive behaviour styles such as this create dysfunctional behaviours throughout the workplace. Employees live in fear of management and experience frustration, anger, confusion and powerlessness. Employee turnover is typically high, not only at the front line level, but also at the senior level of the organization as well, because no one will tell "the emperor he has no clothes." They don't dare; the executive won't listen; instead, the employee will leave.

It has taken a long time and some high-profile punishments, but companies of all sizes are finally recognizing that arrogant leadership behaviours do not make for a successful venture. With such a shortage of top talent in the marketplace and demands from shareholders for transparency and effective leadership, companies are finally taking action. They are putting ethical policies and practices in place, employing ethics officers or ombudsmen and are seeking out leaders who demonstrate open and honest leadership. They are determined to drive unrepentant, twisted, arrogant thinkers out of their company.

Companies are also ensuring that their vendors and suppliers are above reproach. They are seeking long-term relationships where uncompromising integrity is adhered to in every day practices. They are training employees on ethical decision-making standards, interpersonal conflict management and relationship building. And they are implementing tough measures to deal with any behaviour that puts their company at risk.

University researchers are beginning to weigh in on the issue as well. At Ohio's University of Akron Summit College, for instance, Dean Stan Silverman, in conjunction with several colleagues, recently released a report on a groundbreaking research study called Arrogance: A Formula For Failure which studied the relationship between arrogance and corporate performance. In addition, they have now designed a special Workplace Arrogance Scale (WARS) that will help to acquire empirical data on this issue. Once this is perfected, I can only see that corporations will quickly add this valuable tool to their repertoire of candidate assessment products.

At the same time, I hope arrogant executives, no matter whether they are in large or small organizations, will also sit up and pay attention. You need to listen to the key messages of Black's guilty verdict. You need to seriously take notice that your job, your career, your public image, your personal security and perhaps your wealth is at stake. Society won't stand for it any more. And, keep in mind, no one is above the law.

Source: Wilson Banwell, Arrogance, Vitality, 1998, Merriam-Webster online dictionary, Landmark Study Investigates Arrogance, Physorg.com.

Barbara J. Bowes, FCHRP, CMC is president of BowesHR and vice president of Legacy Executive Search Partners, Man. Inc. She can be reached at barb@bowesgroup.com.

[admin]

From DARK AGE AHEAD, by Jane Jacobs

"Like children, professionals need to be taught right and wrong, and why"

[admin]

CIBC Pays Executives C$575 Million Over 9 Years, Analyst Says

By Sean B. Pasternak

Jan. 31 (Bloomberg) -- Canadian Imperial Bank of Commerce, which has had more writedowns and charges than any Canadian bank this decade, paid its top executives about C$575 million ($573 million) over the last nine years, a study by an independent analyst shows.

The report by Diane Urquhart lists total compensation for 12 current and former executives, including Chief Executive Officer Gerald McCaughey, who was awarded C$102.9 million over the period, according to Urquhart's calculations.

Urquhart, a former director of equity research at Scotia Capital and Burns Fry Ltd., said the Toronto-based bank rewarded senior executives even as it recorded debt writedowns and other costs.

Charges taken by the bank include $2.4 billion in 2005 to settle claims related to energy trader Enron Corp., a record one-time cost for a Canadian bank. The lender has also announced about $3.2 billion in pretax writedowns on investments tied to the U.S. subprime mortgage market.

``There are no significant financial consequences for CIBC top executive officers supervising excessively risky activities which cause massive losses,'' Urquhart wrote in a report dated Feb. 1.

In her study, Urquhart made assumptions about parts of McCaughey's 2007 compensation, such as bonuses, which won't be determined until the end of the fiscal year. In 2006, his first full year as CEO, he was awarded C$9.05 million in salary, bonus and stock-based compensation, CIBC said yesterday.

McCaughey was the third-highest paid bank CEO in Canada that year, trailing Gordon Nixon at Royal Bank of Canada and Edmund Clark at Toronto-Dominion Bank, according to bank filings.

Merchant Banking Compensation for some CIBC executives included about C$140 million awarded from the bank's now-defunct ``Special Incentive Plan'' that paid out a share of profit from merchant-banking positions, Urquhart said.

CIBC spokesman Rob McLeod referred to a bank filing yesterday, stating the firm ``is committed to providing competitive compensation, for both the executive and broader employee populations, that is competitive with market practice and adjusted as appropriate to align with performance.''

Urquhart hasn't done a similar study for any other Canadian bank. Canadian Imperial is Canada's fifth-biggest bank by assets.

Canadian Imperial rose 98 cents, or 1.4 percent, to C$69.68 at 2:46 p.m. trading on the Toronto Stock Exchange, and has fallen by almost a third in the past year, the worst performer among Canadian bank stocks.

To contact the reporter on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net .

Last Updated: January 31, 2008 14:53 EST




CORPORATE ETHICS

Ex-CEO calls executives overpaid, greedy

Zimmerman says banks are the 'princes'

By JANET MCFARLAND

Friday, October 28, 2005 Page B4

A decline in personal standards of morality and an increase in greedy executive compensation lie behind the corporate scandals that have emerged in recent years, according to one of the most outspoken members of Canada's corporate elite.
Adam Zimmerman, retired CEO of Noranda Forest Inc. and a former director on numerous major Canadian boards, told a business audience in Toronto yesterday that he is "anguished" by the excessive levels of compensation he sees today, citing a recent example of Citigroup chairman Sanford Weill, who earned a total of almost $1-billion over the past decade.

"These huge remuneration schemes are the root cause of all that is going wrong in the world," Mr. Zimmerman said in a speech to the Toronto CFA Society.

Mr. Zimmerman says boards are under a misperception that they have to reward their CEOs excessively because they are the only people qualified to run their companies.

"It's a real false belief there's only one guy who can run any one of these big companies. There are a lot of good people out there."

Mr. Zimmerman said he blames disclosure rules that require companies to reveal the compensation of their top executives, saying they caused executives to begin competing for higher salaries. He said the major banks are the "princes" of the compensation world, and other companies have followed them.

"The end of it is that it's not at all indecent to produce any amount of money provided the company has the cash," he said.

Mr. Zimmerman suggested executives should be required to also disclose their charitable donations, and said CEO pay should be put into perspective with the salaries of normal employees at their companies.

"Were it not that they do it within the law, I would think executives are stealing money," he said.

Mr. Zimmerman said many recent corporate governance initiatives are little more than an attempt to create systems to control human nature, which is difficult to do. Many new standards are based on the simple idea that honesty is the best policy, he said.

"There was a time when individual ethics governed behaviour . . . There was trust and honour. Business, however, has become much more complicated . . . Personal morality has been bent out of shape, and every company thinks it's unique."

Also yesterday, securities lawyer and corporate director Peter Dey told the CFA Society that most complaints he hears about corporate governance going too far are based on concerns that directors have a limited amount of time and are wasting it on due diligence and technical compliance issues.

He said governance hasn't gone too far, but boards haven't done enough to find more efficient processes to free up time to focus on their main task. He said part of good governance is finding ways to resolve this dilemma.

He added that many new governance requirements demand a great deal of time as new systems are being created, but much less once they are in place.

"It's very important to have fun as a director. And the most fun as a director is not receiving legal advice . . . The most fun as a director is understanding a company's strategy and being able to contribute to the development of the strategy."





EXECUTIVE COMPENSATION

CIBC chief took home millions

TARA PERKINS AND JANET MCFARLAND

January 31, 2008

Canadian Imperial Bank of Commerce chief executive officer Gerry McCaughey made $9.4-million in 2006, the bank disclosed yesterday in its shareholder proxy circular.

CIBC, which is the first of the Big Five banks to report compensation numbers this year, sets the CEO's compensation on a retroactive basis, and has not yet determined Mr. McCaughey's bonus or share awards for fiscal 2007, which ended Oct. 31.

His base salary remains $1-million, the bank said. In 2006, Mr. McCaughey was awarded a bonus of $3.07-million and restricted shares worth $4.23-million.

He became CEO of the bank in August, 2005, just as it took a $2.4-billion (U.S.) charge to settle legal matters related to Enron Corp.
In fiscal 2007, the bank took $777-million in writedowns as a result of subprime mortgage losses, and has since announced $2.46-billion in writedowns that are being booked in fiscal 2008.

The bank's compensation committee, "on behalf of the board, has full confidence in the leadership of the chief executive officer and his ability to execute on CIBC's strategy to deliver consistent and sustainable performance over the long term," the proxy circular states.

Meanwhile yesterday, a new report by independent analyst Diane Urquhart estimates nine top CIBC executives made at least $120.5-million (Canadian) from a special incentive plan created in 2000 to link executive pay to merchant banking investments. She believes the plan was likely related to the bank's lucrative investment in U.S. technology company Global Crossing Ltd.

Ms. Urquhart estimates former CIBC chief executive officer John Hunkin earned a total of $90.4-million between 1999 and his retirement in 2005, including $27.4-million on shares awarded under the special incentive plan.

She estimates current CEO McCaughey has made $102.9-million, including shares worth $22.3-million he received under the incentive plan that he still holds. Those calculations are based on valuations at the end of fiscal 2007.

Her analysis also estimates top executives at CIBC have reaped more than $500-million in compensation - including options and shares - since 1999, even though the bank has stumbled through a series of costly mistakes.

The report argues the compensation totals have been "egregious" given the "reckless risk-taking" that has hurt CIBC's share price, including the subprime mortgage crisis, Enron settlements and a writedown of the bank's investment in the Amicus electronic bank.

Ms. Urquhart calculates shares awarded under the special incentive program were worth about $92-million when they vested in 2003.

She used insider trading filings to calculate that the shares were ultimately worth at least $120.5-million by the time executives sold them. Some executives still own the shares or left the bank before selling them and no longer have to file insider trading reports.

She estimated the total gains for those individuals based on the assumption they still owned the shares as of Jan. 25 and had not sold them.

Also yesterday, Bank of Montreal said its CEO, Bill Downe, earned $5.83-million last year, not counting $3.8-million that the bank put toward his future pension costs.

It was Mr. Downe's first year on the job as CEO. In light of the bank's financial performance, and consistent with Mr. Downe's own recommendation, he did not receive a bonus, BMO said.

The bank's earnings per share fell 20 per cent in 2007, as it suffered hundreds of millions of dollars in losses from its commodity trading operations.